Arm Just Shipped 10 Billion Chips in a Single Quarter for the First Time
Arm's partners moved a record number of chips, yet the royalty check barely budged. Behind a quarterly beat sits a gap between units and dollars, and a pricey stock that leaves little room for error.
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Chips built on technology from Arm Holdings (NASDAQ:ARM | ARM Price Prediction) reached a count that no earlier quarter had hit. On November 4, 2026, Chief Executive Rene Haas said on the earnings call, and the shareholder letter repeated, that partners reported shipping more than 10 billion Arm-based chips in a single quarter for the first time.
Haas said that was 1.5 billion more than a year earlier, which, by our estimate, puts the year-earlier count at about 8.5 billion. He also said more than 30 million developers support the ecosystem.
Fiscal second-quarter revenue rose 27% to $1.443 billion, beating the $1.38 billion consensus. GAAP EPS of $0.12 missed the $0.48 estimate.
The stock closed at $191.80 after a 5.28% regular-session decline that came before the report. It then slid 1.83% to $188.29 by 7:59 p.m. ET.
Arm licenses chip designs and collects a royalty on each chip its partners build. The problem for shareholders is that the record unit count came with just 8% royalty growth.
What 10 Billion Chips Really Measures
The count comes from partner reports, and Arm gave no exact total. It measures reach and switching costs, because once device makers write software for Arm, moving off Arm is expensive.
Royalty revenue reached $670 million, which Chief Financial Officer Jason Child called a second-quarter record. That was up from $620 million a year earlier.
The gap between units and dollars comes from mix. Higher memory prices pressured smartphone unit sales and left edge AI royalties roughly flat, while data center royalties doubled and physical AI royalties grew 50%. For the December quarter, Child guided royalties to grow in the low teens sequentially and in the low single digits year over year.
Licensing Carried the Beat
Licensing and other revenue rose 50% to $773 million from $515 million. Management said licensing came in about $100 million above plan as customers rushed to sign long-term commitments.
Licensing revenue swings from quarter to quarter because large deals are booked when they are signed. Annualized contract value, a steadier measure of the licensing trend, rose 12% to $1.79 billion.
Non-GAAP EPS climbed 33% to $0.52. GAAP EPS fell to $0.12 from $0.22, partly because of $46.6 million in fair-value losses on stakes in listed companies.
December-quarter guidance calls for revenue of $1.54 billion, plus or minus $50 million, and non-GAAP EPS of $0.56, plus or minus $0.04. That is slightly ahead of the $1.52 billion and $0.55 consensus.
Server Gains Bring Silicon Risk
Haas said Arm’s server share at the top hyperscalers rose from 15% in calendar 2024 to more than 50% in calendar 2025. He expects share above 60% by the end of calendar 2026, a forecast that covers only the largest cloud operators, and the expansion behind those numbers runs through power, cooling, and networking suppliers we profiled in a free report on seven AI infrastructure names that aren’t chipmakers.
The AGI CPU is a chip Arm designs and sells itself. Child said purchase orders from multiple customers, plus supply agreements, raised Arm’s confidence that it can reach up to $2 billion in revenue across fiscal 2027 and 2028 combined. First commercial deliveries are on track for the fourth quarter of fiscal 2027.
The chip competes with companies that license Arm designs. Management expects the first version to carry gross margin in the high-30s to low-40% range, compared with 92.48% for the company as a whole.
What ARM’s Valuation Means for Investors Now
ARM trades at 227 times trailing earnings. Arm’s own December-quarter royalty guidance shows little of the growth that price assumes.
By our estimate, the shares are up about 75% for 2026. They also sit roughly 56% below the June 18, 2026 peak close of $439.46, also our estimate, and the valuation is still high after that drop.
The quarter’s beat relied on licensing that came in above plan. The AGI CPU will also pull down margins before it adds meaningful scale.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
