ARM's low-power processor designs are used in nearly all smartphones and it has consistently outperformed the market as it has found new uses for its technology, such as tablets.

It has designed processors for servers and is now making inroads into a market dominated by Intel, which last week cut its growth forecast.

Chief Financial Officer Chris Kennedy said ARM had posted 17 percent compound annual growth in royalties for the last two years, helped by increasing adoption of its V8 processors.

"(That) is a trajectory we believe we'll be able to deliver in the long term," he told reporters on Wednesday.

He said some forecasts for global smartphone growth had come down slightly, but ARM was confident it would continue to outperform the wider market by at least 15 percentage points.

Research group Gartner said earlier this month that worldwide semiconductor sales were expected to fall 0.8 percent this year, the first drop since 2012, because it was not seeing the typical ramp-up ahead of the holiday season.

Meanwhile, contract chipmaker Taiwan Semiconductor Manufacturing Co Ltd, a customer of ARM, cut its 2015 outlook for industry growth last week, partly on sluggish demand in China.

But shares in the Cambridge-based company rose more than 8 percent on Wednesday as worries about any impact of a wider slowdown on ARM were cast aside. The stock topped the gainers in the FTSE 100 index and the rise put it on track for its best day for two and half years.

Analysts at Investec hailed ARM's strong growth in royalties, and said that while licensing was slightly lower than expected, it was not a material miss.

"We see ARM as a standout long-term quality play, with materially underpinned royalty value ahead," they said.

ARM'S processor royalty revenue increased 37 percent year-on-year to $185.6 million (120 million pounds), as its new technology won share in an overall market that saw revenue decline by 2 percent in the corresponding period.

Processor licensing revenue grew 5 percent year-on-year to $125.9 million.

The order backlog for licensing was down 7 percent sequentially, but Kennedy said the pipeline was "robust" across a whole range of technologies and guidance of 5-10 percent annual licensing growth was unchanged.

ARM said its revenue, measured in dollars, rose 17 percent to $375.5 million, with pretax profit coming in at 128.4 million pounds.

It said its full-year revenue would be line with market forecasts, which stand at $1.48 billion according to Thomson Reuters data.

(Editing by Sarah Young and Elaine Hardcastle)

By Paul Sandle