I agree with Stringreen that both are excellent preamps.
I own the K-1xe also, while my friend owns the ARC Ref. 3 preamp. I have not compared them in the same system, but I am familiar enough with his system to try to offer my opinions as to each unit's strengths and weaknesses.
First up, the Ayre, (as I know that unit intimately, having used it for about five years, and I have no intention of moving beyond it for the foreseeable future!)
Strengths:
Very transparent, excellent dynamics, and very revealing. The frequency response is flat and well extended on both ends. Soundstaging and imaging are very, very good. It has lots of inputs and outputs. It has a very, very good (optional) phono stage, (almost, but not quite to the great level), that makes the Ayre K-1xe one of the best full function preamps on the market, (IMHO of course!) ;-)
Weaknesses:
Designed and built to be used with fully balanced cables and other balanced equipment. (Which is okay by me, as that is exactly the way I use it!) This is not really a weakness, unless you prefer to run single ended. Even the phono boards use balanced inputs, which again, is fine by me!
Also, it is neutral to the point of "almost" being lean sounding in the mid-range to some people. (Notice I said "almost", because it is my belief that it is not lean at all, it is just that some people prefer the sound of tube preamplifiers, because they like that touch of tube bloom in the mid-range. And, since being an audiophile is all about taste, there is absolutely nothing wrong with liking a bit of tube bloom in the mid-range. I love Koetsu cartridges for exactly that same reason, as I love the warmth in the mid-range that they provide!)
Again, this is not really a weakness, unless you like a touch of tube bloom in the mid-range.
The only true weakness that the Ayre has (IMHO) is the remote control unit. First, Charles spared no expense in coming up with the absolute best remote control device that has virtually no impact at all on the sonics of the unit. (In speaking with Ken Stevens of CAT fame, he completely agreed with me about the Ayre's remote control. And this is why he refuses to put a remote control unit in his units, as they are too complex!) However, because of this almost Rube Goldberg (ie. complex) mechanism, the motors in the unit are rather clunky sounding when in use. One can not hear anything over normal music, but if changing volumes while muted, or during quiet passages, one can hear the unit from one's listening position. In addition, the remote control only controls volume and muting. It will not allow one to switch inputs or control the balance, (and in fact there is no balance control, due to the complex remote control unit).
In addition, there is no LED or any sort of digital display on the unit itself, so you actually have to look closely to see where position the volume control is pointing, and in the dark, you can't tell at all. (Although, to be honest, I kind of like that the unit is so Spartan, and I have enough lights on my equipment as it is, plus, there is just that much less to go wrong with it.)
Next up, the ARC Ref. 3:
Strengths:
Very transparent, excellent dynamics, and very revealing.
The frequency response is flat and well extended on both ends. The soundstaging and imaging are very good, and possibly slightly better than the Ayre. (It is difficult for me to tell absolutely about this, as the rest of my friend's system is somewhat better than my own.)
For a tubed preamp, this unit is very quiet. Much quieter than the ARC Ref. 2, which I found to be slightly noisy for my tastes. (But then again, I abhor tube rushing, and gave up on tubed preamps for exactly that reason. But, I could easily live with the Ref. 3.)
It has a remote control that will do just about everything, you could ask of it, including volume control, muting, switching inputs, etc. (I tried asking it for a latte the other day, and it only brought me a cup of coffee though!) :-)
This is an excellent line stage preamp.
Weaknesses
None really, so I am going to nit-pick!
It is a tubed unit, hence it requires tube replacement occasionally.
Also, it is only a line stage preamp, which if that is all that you are looking for, is not a weakness. (However, for me it would be a weakness, as I could not afford this preamp and a separate phono preamp of the same quality as the Ayre's phono boards.)
The unit, while a tubed unit, is not very tubey sounding. There is a touch of tube bloom in the mid-range, but only a slight touch, and less than some people who really like tubes would want. (Those people would find the Ayre K-1xe lean through the mid-range, whereas people who like the ARC Ref. 3, would find the Ayre K-1xe neutral sounding.)
So which is better you ask?
Well, I think that is like asking which is better, a fine two seat sports car that slightly out handles a sports sedan, but can only carry two passengers. Versus the sports sedan which can carry four passengers, but takes an extra tenth of second in the quarter mile slalom.
My answer is they both are great at what they do best.
One is a great line stage preamp, while the other is a great full function preamp.
My two cents worth anyway.
