Arm steps up its AI investments as it cashes in on another billion-dollar quarter

By Britney Nguyen and Emily Bary

Arm says its rising revenue allows it to spend on research and development that helps meet growing customer demand

Arm's stock rose about 3.5% in after-hours trading Wednesday.

Shares of Arm Holdings PLC were climbing in Wednesday's extended session after the chip maker reported its third consecutive quarter of more than $1 billion in revenue.

The chip designer reported revenue of $1.14 billion for the second quarter of fiscal year 2026, reflecting a 34% increase from the year before, and topping estimates for $1.06 billion on FactSet. Its royalty revenue grew 21% from last year to $620 million, also topping the FactSet consensus for $587 million.

Arm (ARM) attributed growth in that segment, which includes the smartphone, data-center and automotive markets, to "continued adoption of Arm technology with higher royalty rates per chip," and higher uptake in data centers.

"In the data center, access to power has now become the bottleneck," which has fueled increased demand for Arm products, CEO Rene Haas said on the earnings call.

Meanwhile, Arm's licensing revenue was $515 million, representing 56% growth from the previous year.

"Demand for the Arm platform is strong as more leading companies signed high-value licenses for next-generation technologies," the company said in a shareholder letter.

Arm also delivered upbeat guidance for the current quarter, projecting $1.225 billion in revenue and 41 cents in adjusted earnings per share, whereas analysts were modeling $1.111 billion and 35 cents, respectively.

Consistent with past messaging, Haas indicated that Arm is "continuing to explore the possibility of moving beyond our current platform into additional compute subsystems, chiplets or complex SOCs," meaning systems on chips.

That's meant "accelerating investment in our R&D as we are seeing increased demand from our customers," he continued. CFO Jason Child added that because Arm is delivering higher revenue, it's able to both make these investments and still pass through some top-line performance to the bottom line.

That said, Arm's adjusted earnings per share fell to 22 cents in the most recent quarter from 30 cents a year before, and the company's outlook implies another drop in the current quarter.

"We will continue investing aggressively in R&D to capture these opportunities and ensure that AI runs on Arm," Child said.

Arm's stock rose 3.5% in after-hours trading on Wednesday.

-Britney Nguyen -Emily Bary

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11-05-25 2015ET