Last-second thoughts

Q1 FY26 Outlook (April–June 2025):

• Revenue: $1.00B–$1.10B → Midpoint = +12% YoY

• Royalty growth: Starting strong at 25–30% YoY

• Non-GAAP OpEx: ~$625M (includes Q4 spillover)

• Non-GAAP EPS: $0.30–$0.38

Even the low end of guidance would mark Arm’s second-best quarter ever.

However, No full-year guidance issued, citing:

• Trade macro uncertainty (e.g., tariffs)

• Limited indirect visibility into end demand

Management seems cautiously optimistic but not overcommitting.

ARM share price is down 8.46% after earnings after weak guidance and margin compressions, despite record quarter.

Arm Holdings, $ARM, Q4-FY25. Results:
🔴 -8.6% Post-Market

📊 Adj. EPS: $0.55 🟢
💰 Revenue: $1.24B 🟢
🔎 Record-breaking quarter with revenue surpassing $1B for the first time, driven by strong Armv9 chip demand across cloud, mobile, and AI infrastructure. pic.twitter.com/DuI7eoGlha

— EarningsTime (@Earnings_Time) May 7, 2025

Bull Case:
ARM’s bulls are anchored by its position at the center of the AI chip ecosystem. With record revenue in 3 of the last 4 quarters, a $147 mean target price, and high-profile deals like Project Stargate with OpenAI and SoftBank, bulls argue ARM is still in early innings. Royalty revenue has grown thanks to Armv9 adoption, and the Compute Subsystem (CSS) is expanding the TAM by offering turnkey silicon solutions. Long-term EPS growth is forecast at 31%.

Bear Case:
Bears cite ARM’s lofty 30x+ sales multiple and the risk that AI revenue growth is not yet flowing through royalty lines fast enough. Licensing revenue fell sequentially in 2024, and some analysts worry about overdependence on smartphone royalties and softness in China. With target prices ranging from $73 to $203, the Street sees a wide dispersion of outcomes

Arm Holdings (NASDAQ: ARM) is riding a wave of structural tailwinds into its Q1 2025 earnings report, fueled by rising demand for its AI-ready chip architectures. The company is forecast to post $875M in revenue and $0.32 EPS, but the real market-moving catalyst will be licensing activity and royalty growth.

Last quarter, Arm posted strong double-digit growth in royalty revenues, driven largely by adoption of Armv9 architecture—optimized for AI acceleration across mobile, cloud, and edge. The company’s emerging Compute Subsystem (CSS) offering is also drawing investor attention. By providing turnkey chip designs, CSS shortens customers’ time-to-market and adds a new layer of monetization to Arm’s already sticky business model.

CEO Rene Haas has positioned Arm as the “plumbing of the AI revolution,” and hyperscalers seem to agree. The company’s designs now sit at the heart of leading AI chips used by Amazon, Microsoft, and even AI-centric startups developing custom silicon.

With the stock trading at premium multiples, any miss on margin expansion or licensing velocity could create turbulence. But if Arm surprises to the upside—especially in software-defined infrastructure—it could cement its role as the stealth winner in the AI chip arms race.

Arm’s Q4 FY2024 print is expected to close out the year with modest top-line acceleration and margin stabilization, following a volatile fiscal stretch.

• Q4 FY2024 Revenue Estimate: $875.4 million

• Q4 FY2024 EPS Estimate: $0.30

• Full-Year Revenue Estimate (FY2025): $3.9–4.1 billion

• FY Gross Margin Guide: ~95%, consistent with licensing business

• YoY Royalty Growth Target: Low double digits, dependent on v9 ramp and China

Arm trades at a steep multiple, so the Street will be focused on royalty ASPs, China mix stability, and any early signs of AI inference royalty uplift from new verticals. The risk isn’t a bad quarter — it’s whether the numbers are good enough to support a $128B market cap with a 159x P/E.

1. Arm China Sidestep – Signs of Success?
Investors will be listening for signs that ARM is successfully bypassing its messy Arm China JV. If they’re seeing traction from direct licensing to Chinese firms, that would reduce a major overhang.

2. Royalty Uplift – Early Wins from Armv9?
Armv9’s higher royalty structure is a margin lever. Expect questions about what % of mobile chips now use Armv9—and how that’s trending QoQ.

3. Cloud CPU Share – Is Nvidia Driving the Bus?
Any mentions of Nvidia, Microsoft, or Amazon using custom Arm-based silicon could be a bombshell. ARM’s deeper presence in cloud workloads might be the “hidden” growth engine of this cycle.

Arm Holdings enters today trading flat before earnings after the market closes but we will keep an eye on how it fluctuates during the day.

With a market cap of $128.5B and a sky-high P/E ratio of 159.7, Arm multiple suggests plenty of growth ahead . The company’s core value proposition — licensing architecture to nearly every smartphone, IoT, and AI chip maker — remains intact. But the real narrative lies in its pivot to higher-value workloads, especially in data center and AI inference.

Investors are focused on how well Arm monetizes v9 architecture rollouts, the resilience of licensing demand in China, and progress in automotive compute. While handset royalties remain under pressure, expanding content per chip and Neoverse traction have supported growth.

Today’s earnings will be judged on whether Arm can keep converting its ubiquitous footprint into premium pricing power — and whether that’s enough to justify one of the most expensive multiples in the semiconductor world.