Arm’s 113x Forward P/E Leaves No Room for an Ordinary Quarter

That wraps up our initial coverage of ARM’s Q1 results. Thank you for stopping by!

Arm expects fiscal Q2 revenue of $1.38 billion, plus or minus $50 million, which would represent another company record at the midpoint. Management also guided adjusted EPS to $0.47, plus or minus $0.04.

The outlook follows 22% Q1 revenue growth to $1.29 billion and a 29% increase in adjusted EPS to $0.45. Adjusted operating margin expanded to 41.2% from 39.1%, while free cash flow surged 343% to $665 million.

Despite the strong quarter and outlook, shares are down about 1% after falling 8% intraday. With Arm carrying an exceptionally high valuation, investors appear to have expected an even larger beat or more aggressive guidance.

Arm’s data center royalty revenue more than doubled year over year as hyperscalers continued adopting its Neoverse technology. Total royalty revenue increased 22% to $715 million, supported by higher-value Armv9 and Compute Subsystems designs.

Arm Neoverse shipments have now surpassed 1.5 billion cores. The latest 500 million shipped in only nine months, compared with six years for the first billion.

Momentum spans the largest AI infrastructure companies. NVIDIA’s Arm-based Vera CPU has entered full production, while Google, AWS, Microsoft, Meta, and Qualcomm are expanding Arm-based data center deployments.

Arm Holdings’ new AGI CPU is generating substantially stronger demand than management initially expected. Customer demand now exceeds $2 billion across fiscal 2027 and fiscal 2028, doubling the $1 billion opportunity outlined last quarter.

Arm has delivered initial products to multiple customers and added new customers across the United States and China. The company has already secured enough manufacturing capacity to support the original $1 billion target and is working with supply-chain partners to expand further.

The early response strengthens Arm’s push beyond intellectual property licensing and into production silicon, potentially opening a major new source of revenue.

Arm Holdings (NASDAQ:ARM) just reported earnings, with shares initially down 2% following the release. Here are the key numbers:

• Revenue: $1.289 billion vs. $1.27 billion expected
• Adjusted EPS: $0.45 vs. $0.40 expected

Quick Read:

Arm beat revenue estimates by roughly 1% and EPS expectations by 13%, with revenue rising 22% and earnings growing 29% year over year.

However, revenue declined 13% sequentially while EPS fell 25%. The initial drop suggests Arm’s lofty valuation demanded a stronger beat or a more compelling forward outlook.

What Guidance Would Actually Move the Stock

Tonight, investors are going to be watching the company’s full-year framing. Wall Street’s Q1 FY27 consensus sits at $1.27 billion in revenue and $0.36 EPS, just above management’s own guide of $1.26 billion ± $50 million and $0.40 ± $0.04.

Arm Holdings (NASDAQ:ARM) typically guides conservatively in ranges and has beaten revenue while occasionally missing EPS as R&D climbed 43% YoY to $1,911 million.

Investors want commentary on royalty growth (Jason Child flagged “roughly 20-ish percent for the year”), AGI CPU customer commitments above $2 billion, and operating margin after compression from 52.8% to 49.1%.

Bullish: a raised FY27 outlook and expanded hyperscaler wins.

Bearish: soft Q2 guide, deeper margin compression, or another RPO decline beyond 7%.

With Arm Holdings (NASDAQ:ARM) down 26.78% over the past month and Polymarket pricing a 94.6% beat probability, here are some of the top questions analysts might have for management.

Top 5 Analyst Questions

• Why does Q1 guidance imply a sequential drop to $1.26 billion from Q4’s $1.49B?
• Update on $2 billion AGI CPU demand and the Meta co-development roadmap?
• Royalty rate trajectory as Armv9 and CSS ramp?
• When does R&D (+43% YoY) stop compressing operating margin?
• Qualcomm/Nuvia trial exposure and China revenue visibility?

Key Topics to Address

• RPO declining 7% YoY
• DreamBig integration and silicon strategy
• Hyperscaler share (~50%) and Google Axion, Microsoft Cobalt, NVIDIA Vera ramps

Buzzwords to Listen For

• Agentic AI, AGI CPU, Neoverse, CSS, hyperscaler, silicon business

Red Flags

• Margin compression without royalty acceleration
• Soft FY2027 commentary
• Full-chain put/call ratio at 1.26 signals hedging

This live blog is being updated by Thomas Richmond, a 24/7 Wall St. contributor. You’ll get expert analysis of ARM’s earnings.

Simply stay on this page, and new updates will appear below automatically. We expect Arm Holdings to release earnings shortly after 4:05 p.m. ET.