Arm Holdings (NASDAQ:ARM | ARM Price Prediction) enters Wednesday’s Q1 FY2027 earnings with its stock down nearly 28% over the past month. Meanwhile, the company has already booked more than $2 billion in demand for its new AGI data center CPU across fiscal 2027 and 2028, giving investors a measurable catalyst behind the next phase of growth.
Arm Has Already Booked $2 Billion in AI CPU Demand
On the Q4 earnings call, CEO Rene Haas confirmed “more than $2 billion of customer demand across fiscal 2027 and fiscal 2028″ for the Arm AGI CPU, double what was announced at launch six weeks earlier. Meta is the lead co-developer.
OpenAI, Cerebras, SAP, and Cloudflare are integrating. The data center CPU TAM is expected to be over $100 billion by 2030, and Arm currently holds roughly 50% CPU compute share among top hyperscalers. Data center royalty more than doubled year-over-year in FY2026 and is expected to double again in FY2027.
With 27 buy ratings against 2 sells and an average analyst price target of $300.73, $ARM appears to offer upside from its current price of $254.50.
Free Cash Flow Nearly Quintupled Last Year
FY2026 free cash flow reached $882 million, up 395.51% year-over-year, with operating cash flow of $1.524 billion (+283.88%) and gross margin at 92.48%. This is Arm’s third consecutive year of 20%+ revenue growth, with $4.92 billion in FY2026 revenue (+22.79% YoY). ACV climbed 22% YoY to $1.66 billion, giving forward visibility on the licensing base before royalties compound.
Why Nvidia’s AI Growth Also Benefits Arm
NVIDIA’s (NASDAQ:NVDA) next-generation Vera CPU is Arm-based, so every Vera rack pays Arm a royalty. NVIDIA already trades at a premium valuation, meaning that a marginal dollar of AI infrastructure spend is more valuable on Arm’s smaller $277.71 billion market cap.
Qualcomm (NASDAQ:QCOM) looks cheaper than ARM at a lower P/E multiple, but revenue fell 3.5% in its most recent quarter, and QCOM has a gross margin of 55.4% versus Arm’s 92%.
Lower Margins Are Funding Arm’s Next Growth Engine
Arm’s higher R&D spending is pressuring near-term margins, but it is also funding a data center business that management expects to reach $15 billion in annual revenue by FY2031. With free cash flow up nearly 400%, more than $2 billion in AGI CPU demand already booked, and the stock down 28% in one month, Wednesday’s earnings could reveal whether the pullback has created a buying opportunity.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks