Start here if you're new
what it is
Arm designs the core instructions other companies use to build chips, then gets paid upfront and again when those chips ship.
how it gets paid
Last year Arm made $4.0B in revenue. United States was the main engine at $1.72B, or 43% of sales.
why it's growing
Revenue grew 23.9% last year. Despite higher-than-anticipated r&d expenditures, earnings per share of $0.39 were above management's targeted $0.29 to $0.37 range.
what just happened
The quarter came with a consensus EPS miss, even as reported revenue reached $3.4B and gross margin stayed near software levels.
At a glance
B++ balance sheet — above average — nothing keeping you up at night
67.2x trailing p/e — you're paying up for this one
43.0% return on capital — every dollar works hard here
$2.80 fy2027 eps est
$12B fy2029 rev est
xvary composite: 60/100 — average
What they do
Arm designs the core instructions other companies use to build chips, then gets paid upfront and again when those chips ship.
Arm does not build chips. It sells the blueprint and collects tolls when other companies ship silicon. That model turned $4.0B of trailing revenue into a 97.4% gross margin and a 43.0% return on capital, so your money is backing design rights, not expensive factories.
How they make money
$4.0B
annual revenue · their business grew +23.9% last year
United States
$1.72B
China
$0.76B
Taiwan
$0.64B
Korea
$0.32B
Other
$0.56B
The products that matter
licenses cpu architecture ip
cpu architecture licenses
$4.0B revenue model
it underpins the full $4.0B business: Arm gets paid upfront to license designs, then collects royalties when customers ship the chips. one design win can throw off revenue for years.
royalty engine
portfolio-wide ip subscription
arm total access
2 new deals in q3 fy2026
management signed 2 new arm total access agreements in the latest quarter. that matters because it pulls more of Arm's catalog into a broader customer relationship instead of a one-off license sale.
expansion lever
pre-integrated chip subsystems
css licenses
2 new css licenses in q3
Arm signed 2 new css licenses in the quarter, inside the $1.5B license and other revenue bucket. this is the move up the value chain: sell more of the system, not only the core.
higher-value ip
Key numbers
97.4%
gross margin
Gross margin → money left after direct costs → so what: Arm sells ideas, not factories, and ideas are cheaper to scale.
43.0%
return on capital
Return on capital → profit earned on the money used in the business → so what: Arm gets a lot of earnings from a relatively light asset base.
67.2x
trailing p/e
P/E → price versus past earnings → so what: you are paying today for years of growth that have not happened yet.
$12B
FY2029 revenue
The fiscal 2029 revenue estimate is triple today's $4.0B trailing sales, which tells you how much future growth is already in the story.
Financial health
B++
strength
- balance sheet grade B++ — above average financial health
- risk rank 3 — safer than 50% of stocks
- net profit margin 43.5% — keeps 44 cents of every dollar in revenue
- return on equity 43% — $0.43 profit for every $1 investors have put in
B++ — functional but not a standout on the balance sheet.
Total return vs. market
Return history isn't available for ARM right now.
source: institutional data · return history unavailable
What just happened
missed estimates
The quarter came with a consensus EPS miss, even as reported revenue reached $3.4B and gross margin stayed near software levels.
Consensus data shows last earnings at $0.21 versus a $0.43 estimate, a 51.16% miss. The hard revenue figure provided was $3.4B, up 176% vs. prior year, which is the kind of mismatch that reminds you how noisy this story is quarter to quarter.
$3.4B
revenue
$0.21
eps
97.4%
gross margin
the number that mattered
97.4% gross margin matters most because it shows Arm is still selling intellectual property at software economics, not chip-manufacturing economics.
-
arm holdings' second-quarter results sequentially improved. (fiscal 2025 ends march 31, 2026.) revenues rose 34% above the year-ago level to $1.14 billion, exceeding our $1.075 billion estimate.despite higher-than-anticipated r&d expenditures, earnings per share of $0.39 were above management's targeted $0.29 to $0.37 range.
-
this followed a negative vs. prior year earnings comparison in the june stanza.
-
arm's asset-light model should continue to produce enormous cash flows.
-
the entire top line comes from royalty and licensing deals.
-
chip developers seek arm's proprietary technology, which provides superior performance with lower power usage than conventional processors.
source: company earnings report, 2026
Get this snapshot in your inbox
This page, delivered free — plus weekly updates when the numbers change. plain english, no spam.
weekly updates
earnings alerts
plain english
no spam
What could go wrong
the #1 risk is smartphone-led royalty growth slowing before data center and ai royalties are large enough to take over.
med
smartphone royalty dependence
royalty revenue was $620M in q3 fy2026 and $2.5B annually. that is the recurring center of the story. if mature handset demand limits unit growth or content gains, Arm feels it exactly where the model is supposed to be most durable.
at 67.2x earnings, a slowdown in a good business can still hit the stock hard because the multiple is already doing a lot of optimistic work.
med
international trade and currency exposure
65% of revenue comes from outside the U.S. that is roughly $2.6B of annual sales exposed to foreign exchange moves, export controls, and cross-border policy friction.
global reach is part of the moat. global policy risk is part of the bill.
med
risc-v pricing pressure
RISC-V is the clearest long-term threat to Arm's licensing model because it gives customers a royalty-free architecture option. this snapshot does not include adoption data, so we are not going to fake precision where the evidence is thin.
if open architectures gain share in cost-sensitive devices, Arm's pricing power gets tested where it has looked automatic for years.
about $2.5B of annual royalty revenue and roughly $2.6B of international sales sit at the center of the risk picture.
source: institutional data · regulatory filings · risk analysis
Pay attention to
metric
royalty revenue growth
$620M and +21% was the latest marker. if that pace drops below what a 67.2x multiple implies, you will likely feel it in sentiment before you see it in reported profit.
calendar
q4 fy2026 earnings
you want to see whether royalties stay strong enough to defend the valuation and whether management keeps adding higher-value licenses on top.
trend
css and arm total access deal flow
q3 brought 2 new arm total access agreements and 2 new css licenses. if those counts stall, the move up the stack starts looking more promised than proven.
risk
mobile concentration versus ai narrative
the stock trades like ai and data center will matter a lot more next. your risk is that mobile stays the economic center longer than the valuation can comfortably tolerate.
Analyst rankings
risk profile
average
stability score 3. in human-speak: middle of the pack. not fragile, not defensive.
source: institutional data
Institutional activity
230 buyers vs. 237 sellers in 4q2025. total institutional holdings: 74.3M shares.
source: institutional data
Price targets
3-5 year target range
$89
$217
$118
current price
$153
target midpoint · +30% from current · 3-5yr high: $280 (+140% · 24% ann'l return)
Want the deeper analysis?
The full deep dive: dcf model, scenario analysis, competitive moat breakdown, and quarterly tracking — everything on this page, taken further.
see plans from $5/moThe deep dive