Arm Holdings forecast third-quarter revenue of about $1.54 billion on Wednesday, only slightly above Wall Street estimates, and the shares fell as investors wanted a bigger payoff from the boom in AI spending.
Arm Holdings said sales would be about $1.54 billion in the quarter running through December, plus or minus $50 million. Analysts surveyed by Bloomberg had expected $1.53 billion on average, although some projections neared $1.7 billion.
Arm also expected adjusted earnings of 56 cents a share, plus or minus 4 cents, for the quarter. The shares fell about 1 percent in extended trading as the call with analysts began, and later traded about 5 percent lower after hours. The muted forecast disappointed investors who had hoped the company’s push into AI data centres would deliver a bigger payoff.
Arm Holdings beats second-quarter estimates
Arm Holdings reported second-quarter revenue of $1.44 billion, beating analysts’ average estimate of $1.38 billion, according to data compiled by LSEG. Adjusted profit of 52 cents per share beat estimates of 47 cents.
Licensing revenue, which includes upfront fees for access to Arm’s technology, was $773 million, against estimates of $625.1 million. Revenue from royalties, collected on each chip shipped using Arm technology, rose 8 percent to $670 million, below estimates of $720.8 million. The shortfall in royalties was the one weak spot in an otherwise strong quarter.
Unlike chipmakers that manufacture semiconductors, Arm licenses its processor architecture and earns royalties on chips shipped using its technology. Licensing fees and royalty payments are the company’s main sources of revenue.
Demand for Arm-based technology has benefited from the AI boom, as major cloud companies develop custom processors for data centre workloads. Arm’s architecture is prized for its power efficiency, which matters more as operators try to rein in the energy and cooling costs of running large AI models. Major cloud companies are building their own processors to cut costs and reduce reliance on outside suppliers, and Arm’s designs sit at the centre of that shift.
Arm Holdings sets a modest third-quarter forecast
Chief executive Rene Haas said the company is seeing strong demand for all technology around the data centre. ‘We’re just seeing huge pickup for all technology around the datacenter space,’ Haas said in an interview with Reuters.
Arm Holdings now expects to sell $2 billion worth of its AGI central processing unit, its data centre processor, in fiscal years 2027 and 2028. The company has worked with Taiwan’s TSMC and other chip suppliers to secure enough raw materials to produce that volume.
Purchase orders for the AGI CPU now extend through calendar 2027, and first commercial deliveries remain on track for the fourth quarter. Arm announced in March that it was moving into the complete chip business, and it had $1 billion worth of orders for the AGI CPU at launch.
A memory shortage has gripped the chip industry this year, but Haas said Arm secured enough supply to make the $2 billion worth of AGI CPUs, which use a fast form of dynamic random access memory. ‘We think the two (billion) is now very achievable,’ Haas said.
Arm Holdings gains ground in data centres
Arm Holdings said its server-chip architecture accounted for more than 50 percent of deployments at major cloud providers in 2025 and is expected to exceed 60 percent by the end of 2026. The company is taking market share from x86-based designs made by Intel and Advanced Micro Devices in standard CPU server racks.
Arm-based designs are also capturing more of the market because CPUs are needed inside AI chip servers to help manage data flow, and a larger number of those servers are turning to designs based on Arm technology. Google has begun using its Arm-based Axion chips in its tensor processing unit AI systems.
Last month, a Delaware jury found Arm Holdings breached parts of its licensing agreement with Qualcomm and interfered with the latter’s relationship with Meta, but awarded only $2 in damages. The ruling left disputes over royalties and future licensing terms to be decided by a judge.
Arm’s push into complete chips marks a change from its past, when it only sold designs. The AGI CPU is the first product of that shift, and the $2 billion sales target for fiscal 2027 and 2028 is the measure Arm Holdings investors will watch.