Qualcomm and Arm: We View Arm’s Proposed License Cancellation as Unlikely to Come to Fruition

We maintain our $180 fair value estimate for narrow-moat Qualcomm and $66 fair value estimate for wide-moat Arm Holdings despite a report from Bloomberg suggesting that Arm, Qualcomm’s longtime and critical intellectual property supplier, has given Qualcomm a 60-day notice of cancellation of their joint architectural license. We’re still skeptical that a full cancellation of their licenses is the most likely outcome of their joint dispute, so we maintain our base-case estimates for both firms.