Arm Holdings reported fiscal second-quarter revenue of $1.44 billion on 4 November, above analysts’ $1.38 billion average estimate, Reuters reported. The UK-based chip-design company’s results, released after the US market close, reflected licensing fees from customers using its technology in AI-related computing products.
Key points
- Licensing revenue reached $773 million, against an estimate of $625.1 million.
- Royalty revenue rose 8% to $670 million, below an estimate of $720.8 million.
- Adjusted profit was 52 cents per share, compared with an estimate of 47 cents.
- Arm projected third-quarter revenue of $1.54 billion, against an analyst average of $1.53 billion.
Arm’s $773 million licensing quarter
Arm earns upfront fees when customers license its processor architecture. It also collects royalties when chips built with that technology are shipped. Those two sources of income gave the quarter different readings: licensing beat forecasts, while royalties missed them despite growing from a year earlier.
Licensing revenue of $773 million was above the $625.1 million estimate. Revenue from royalties increased 8% to $670 million, against a forecast of $720.8 million. Arm’s adjusted profit of 52 cents per share also exceeded the 47-cent estimate.
Before the results, TradingKey reported that Arm had guided to second-quarter revenue of $1.38 billion, plus or minus $50 million. The financial analysis site put revenue in the preceding quarter at $1.289 billion, including $574 million from licensing and other revenue and $715 million from royalties. It reported that data-centre royalty revenue had more than doubled from a year earlier in that preceding quarter.
Licences and royalties reach Arm at different stages of a customer’s chip programme. Finimize, a financial-news publisher, said new AI and data-centre projects can contribute licensing revenue before they generate royalties, provided the resulting chips enter high-volume production. Royalties are tied to shipments of chips using Arm’s technology.
Cloud deployments and Arm’s royalty base
Major cloud providers are developing custom processors for data-centre workloads using Arm-based technology. Power use matters to operators running large AI models because it affects energy and cooling costs. Arm licenses the designs used in those processors rather than manufacturing the chips itself.
Arm said that in 2025, major cloud providers used its server-chip designs for more than 50% of their deployments. Arm expects that proportion to exceed 60% by the end of 2026. The deployment figures are the company’s measure of its position with those customers; its royalty revenue depends on chips shipped using its technology.
TradingKey reported before the earnings release that Armv9 accounted for about one-third of Arm’s royalty revenue. It said royalties associated with Compute Subsystems were roughly twice those for standalone Armv9 processor licensing. The publication described chip shipments and the royalty earned per chip as separate factors in Arm’s data-centre revenue growth.
Arm projects $1.54 billion for third quarter
Arm projected third-quarter revenue of $1.54 billion, close to the average analyst estimate of $1.53 billion. Its shares fell about 2% in extended trading following the second-quarter release.
Arm also faces a licensing dispute with Qualcomm. A Delaware jury found in October that Arm had breached parts of its agreement with the chipmaker and interfered with Qualcomm’s relationship with Meta, Reuters reported. The jury awarded $2 in damages, leaving disputes over royalties and future licensing terms for a judge to decide.
