Arm Holdings PLC (NASDAQ:ARM), the semiconductor manufacturer, is expected to experience higher sales and profits over the medium term because of new deals in China and payments from Apple, analysts reckon.
Morgan Stanley (NYSE:MS) lifted Arm’s 2026 sales guidance from US$4.85 billion to US$4.92 billion, while also raising earnings per share estimates from US$2.15 to US$2.18.
The US bank believes the demand for compute subsystems (CSS) will start to extend from just data centres to include deals with Chinese clients, automakers and even the mobile industry.
Morgan Stanley said: “This will carry an outsized royalty impact given the higher rates attached. We have not yet modelled for these royalties given the uncertainty on timing and ramp.”
Back in September, Apple inked a long-term deal extending past 2040 with Arm to use its chip technology.
However, analysts are aware that any big payments from this multi-year deal have yet to hit the semiconductor group’s profit and loss account.
One of Arm’s biggest attractions for investors is likely to be the use of its Neoverse V2 cores in Nvidia’s Grace CPU, but Morgan Stanley is cautious about the cash this partnership will bring.
Rather than taking an overall cut of any overall ‘block’ price, which is believed to be between US$30,000 and US$40,000, analysts believe Arm will receive US$35 per CPU.