Arm Earnings Beat on AI Demand
Arm earnings topped estimates as AI demand lifted licensing and data center royalties, pushing traders to reweight exposure to server-focused names.
KEY TAKEAWAYS
- Arm reported record Q2 revenue of $1.4 billion driven by AI licensing and doubled data-center royalties.
- Non-GAAP EPS was $0.52 and non-GAAP operating margin rose to 44.2%.
- Company guided fiscal Q3 revenue to $1.5 billion plus or minus $50 million, citing hyperscaler ramps.
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Arm Holdings plc (ARM) reported fiscal second-quarter revenue of $1.44 billion for the quarter ended Sept. 30, 2026, a 27% year-over-year increase and the company’s highest second-quarter total, the company said in a Nov. 4, 2026, news release. The results reflected strong demand for AI infrastructure, which boosted licensing and royalties.
Record Revenue and Profitability
License and other revenue rose 50% to $773 million, with management describing licensing momentum as a sign of future royalty growth as customer designs enter production. Royalty revenue increased 8% to $670 million, while data-center royalties doubled year over year. Partners shipped more than 10 billion Arm-based chips during the quarter, 1.5 billion more than a year earlier.
On a non-GAAP basis, Arm reported diluted earnings per share (EPS) of $0.52, up 33% from a year earlier. Non-GAAP operating income was $638 million, with a 44.2% operating margin, a 300-basis-point improvement. Operating expenses rose 19% to $774 million, reflecting continued investment in engineering, next-generation platforms, compute subsystems, and the Arm AGI CPU product family, according to the earnings-call transcript.
The company’s results exceeded consensus estimates, which had forecast roughly $1.38 billion in revenue and adjusted EPS near $0.47–$0.48.
Guidance and AI Drivers
Arm projected fiscal third-quarter revenue of $1.54 billion, plus or minus $50 million, and non-GAAP EPS of $0.56, plus or minus $0.04, modestly surpassing prior expectations. Management said customer commitments increased confidence in reaching up to $2 billion in Arm AGI CPU revenue across fiscal 2027 and 2028.
The company attributed the results and outlook to AI infrastructure demand and production ramps for Arm-based server platforms. It noted that server market share at leading hyperscalers rose from 15% in calendar 2024 to more than 50% in 2025 and is expected to exceed 60% by the end of 2026, driven by deployments involving Google Axion, AWS Graviton, Microsoft Cobalt, and Nvidia platforms.
The outlook is stated on a non-GAAP basis where specified and depends on customer design activity, production ramps, adoption of Arm-based platforms, and continued AI-related infrastructure investment. The shareholder letter was furnished to the U.S. Securities and Exchange Commission on Form 6-K.
