TLDR
- Arm Holdings (ARM) closed at $191.80 on Wednesday, down 5.28%.
- Q2 revenue of $1.44B and EPS of 52 cents topped estimates.
- Royalties of $670M missed the $720.8M estimate, but licensing hit $773M.
- Arm expects $2B in AGI CPU sales across fiscal 2027 and 2028.
- The stock fell more than 3% in premarket trading Thursday.
Arm Holdings (ARM) stock closed Wednesday at $191.80, down 5.28%, just ahead of its fiscal second-quarter report. The stock was already hurting after a drop of nearly 29% in October.
Arm Holdings plc American Depositary Shares, ARM
Arm then delivered a beat. Revenue was $1.44 billion, against the $1.38 billion analysts wanted.
Adjusted profit was 52 cents per share, compared with a 47 cent estimate. The chip designer cleared both bars.
The catch sat in the guidance. Arm sees third-quarter revenue of $1.54 billion, plus or minus $50 million, versus a $1.53 billion consensus.
Adjusted profit is projected at 56 cents per share, plus or minus 4 cents. Analysts had penciled in 55 cents.
Two Revenue Lines, Two Different Stories
Royalties rose 8% to $670 million. Wall Street had expected $720.8 million.
Licensing did the heavy lifting at $773 million. The estimate was $625.1 million.
Arm earns royalties on each chip shipped, so investors watch that line closely. HSBC called server royalties the key earnings catalyst over the next 12 months.
Data center royalties doubled from a year ago, the company said. Server share at top cloud providers rose from 15% in 2024 to more than 50% in 2025.
Management expects that share to top 60% by the end of 2026. It cited ramps at Google Axion, AWS Graviton, Microsoft Cobalt and NVIDIA.
Arm Bets on Its Own Chip
CEO Rene Haas now expects $2 billion in AGI CPU sales across fiscal 2027 and 2028. “We think the two (billion) is now very achievable,” he said.
Arm launched the chip in March with $1 billion in orders. It was the company’s first step from selling designs into making complete chips.
A memory shortage has squeezed the industry this year. Haas said Arm lined up enough supply, including fast DRAM, with TSMC and other partners.
Raymond James said management sounds more confident on supply and customer commitments. The firm said it is staying conservative until it sees firmer trends.
Last month, a Delaware jury found Arm breached parts of its Qualcomm licensing deal. It awarded just $2 in damages, and a judge will decide royalty and future licensing terms.
Arm stock slipped about 1% in extended trading as the analyst call began. On Thursday, it fell more than 3% in premarket trading to around $185.40.
