Company Reports

Arm Holdings has historically not sold chips; rather, it has developed CPU architecture and intellectual property that it has licensed to others. Customers use Arm's designs to build their own chips. Apple, for instance, places Arm-based processors into its own MacBooks and iPhones, while firms like Qualcomm sell its Arm-based chips to other device makers. Arm makes money in two key ways: an upfront licensing fee and a royalty on every chip shipped. If a $1,000 smartphone has $50 of Arm content and Arm charges a 5% royalty rate to that customer, Arm will get 5% of the Arm content, or $2.50 per chip shipped.

Arm's first-quarter results met consensus expectations, but investors were disappointed by the lack of firmer revenue guidance around the Arm AGI CPU and questions looming around Arm’s ability to secure enough supply.

Arm Holdings has historically not sold chips; rather, it has developed CPU architecture and intellectual property that it has licensed to others. Customers use Arm's designs to build their own chips. Apple, for instance, places Arm-based processors into its own MacBooks and iPhones, while firms like Qualcomm sell its Arm-based chips to other device makers. Arm makes money in two key ways: an upfront licensing fee, and a royalty on every chip shipped. If a $1,000 smartphone has $50 of Arm content and Arm charges a 5% royalty rate to that customer, Arm will get 5% of the Arm content, or $2.50 per chip shipped.

Arm Holdings' 2026 fiscal-year results coincided in time with peer AMD doubling its server CPU TAM estimate to $120 billion May 6. AMD’s forecast is not far from Arm’s 2030 $100 billion CPU server TAM unveiled in the Arm Everywhere event in March.

Arm Holdings has historically not sold chips; rather, it developed CPU architecture and intellectual property that it licensed. We believe Arm will remain the dominant architecture in smartphone CPUs, where it has 99% market share, while maintaining high market share in other mobile chips and battery-powered devices. Arm is also making inroads into the data center, where we expect it will gain market share versus x86, sold by Intel and AMD.

After a year of rumors, Arm finally revealed its intentions to move into the chip business, making the transition from an intellectual property provider to a fabless chip company.

Arm Holdings has historically not sold chips; rather, it developed CPU architecture and intellectual property that it licensed. We believe Arm will remain the dominant architecture in smartphone CPUs, where it has 99% market share, while maintaining high market share in other mobile chips and battery-powered devices. Arm is also making inroads into the data center, where we expect it will gain market share versus x86, sold by Intel and AMD.

Investors were disappointed by Arm’s licensing revenue of $505 million in the third fiscal quarter, which came below consensus estimates. However, licensing revenue will accelerate next quarter and could go beyond $750 million.

Arm beat both revenue and adjusted EPS guidance in second-quarter fiscal 2026, reaching $1.14 billion and $0.39, respectively, and guided for revenue of $1.23 billion next quarter, implying an 8% sequential acceleration.

Wide-moat Nvidia and no-moat Intel announced a long-term collaboration for data center and PC products. European chip equipment shares were up on hopes this would be a step to revamping Intel’s foundry business. Arm Holdings’ shares are down 4%, given that this deal strengthens the x86 ecosystem.

Arm’s first-quarter results met guidance, with $1.06 billion in revenue and $0.35 in non-GAAP earnings per share. Next-quarter guidance of $0.33 non-GAAP EPS was below consensus, which sent the shares down 7% in aftermarket trading.

Arm Holdings doesn't sell chips; rather, it develops CPU architecture and intellectual property that it licenses. We believe Arm will remain the dominant architecture in smartphone CPUs, where it has 99% market share, while maintaining high market share in other mobile chips and battery-powered devices. Arm is also making inroads into the data center, where we expect it will gain market share versus x86, sold by Intel and AMD.

Arm reported $0.55 adjusted EPS this quarter, in line with guidance and above FactSet consensus. Next-quarter guidance was weaker than expected though at $1.0 billion-$1.1 billion in revenue and $0.30-$0.38 in adjusted EPS compared with expectations of $1.09 billion and $0.42 per share respectively.

Wide-moat Arm Holdings reported fiscal third-quarter revenue of $983 million, beating guidance of $920 million-$970 million. The firm expects $1.17 billion-$1.28 billion in revenue next quarter, with acceleration mainly coming from a large licensing deal it expects to close, also supported by midteens growth in royalties. Management narrowed its full-year revenue and adjusted earnings per share guidance to $3.94 billion-$4.04 billion and $1.56-$1.64, respectively, in line with our estimates.

Arm Holdings doesn't sell chips; rather, it develops central processing unit architecture and intellectual property that it licenses. We believe Arm will remain the dominant architecture in smartphone CPUs, where it has 99% market share, while maintaining high market share in other mobile chips and battery-powered devices. Arm is also making inroads into the data center, where we expect it will gain market share versus x86, sold by Intel and AMD.

We have consolidated our recent DeepSeek-related coverage in this note. Artificial intelligence affects companies across much of our coverage, including semiconductors, cloud infrastructure, software, utilities, and energy.

European semiconductor shares with AI exposure—including ASML, ASM, BE Semiconductor, and Arm—dropped in the 7% to 10% range following news from DeepSeek’s AI models, which have raised questions about the true cost of AI model training and inference. We are maintaining our fair value estimates for these firms, as this announcement could have a mixed effect, but our base case so far still assumes healthy AI demand in the long term.

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.

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.

Arm Holdings does not sell chips, it develops CPU architecture and IP that it licenses to its clients. We believe Arm will remain the dominant architecture in smartphone CPUs, where it has a 99% market share, while maintaining high market share in other mobile chips and battery-powered devices. Arm is also making inroads into the data center, where we expect it will gain market share versus x86, the dominant architecture.