Arm Earnings: Beats Guidance and Guides for 12% Sequential Acceleration; Shares Overvalued

Wide-moat Arm Holdings reported solid results, once again, with fiscal second-quarter revenue of $844 million, above management’s guided range of $780 million-$830 million. Investors likely viewed the $920 million-$970 million revenue guidance for next quarter as slightly weak as shares declined 6% in aftermarket trading. At the $945 million midpoint, this implies a 12% sequential acceleration. Full-year 2025 guidance now implies that Arm will see strong sequential acceleration in the fourth quarter too, supported by strong licensing activity and growth in royalties. We maintain our $66 fair value estimate.