Arm Holdings PLC (NASDAQ:ARM) reported solid quarterly results for the fiscal second quarter and issued upbeat guidance, reflecting continued growth in licensing and royalty revenues across devices and data centres.
For the September quarter, revenue rose 34% year-over-year to $1.14 billion, above analyst expectations of $1.06 billion.
Arm’s royalty revenue rose 21% from the year-ago quarter to $620 million, driven by higher adoption of Arm technology and greater use of Arm-based chips in data centers, while licensing and other revenue grew 56% year-over-year to $515 million, supported by high-value agreements and backlog contributions.
Adjusted earnings per share (EPS) came in at $0.39, beating the consensus of $0.33.
Looking ahead, Arm guided fiscal Q3 revenue to a midpoint of $1.225 billion, slightly above analyst estimates of $1.11 billion, with EPS expected between $0.37 and $0.45, above the consensus estimate of $0.35.
“Arm’s Q2 2026 revenue exceeded $1 billion for the third consecutive quarter, with record royalties reflecting a new high in demand for the Arm compute platform,” Arm CEO Rene Haas said in a statement.
“As workload complexity accelerates with every new model and every new agent, Arm is the compute platform for the AI era — delivering high performance, power-efficient AI everywhere.”
Following the report, Jefferies raised its price target for Arm from $173 to $205, pointing to underlying momentum and the expected gains from future chip products.
“While Arm's licensing and royalty revenues are running ahead of expectations and contributing to consistent revenue growth of over 20%, we expect chip revenues to start becoming a material contributor from fiscal year 2027, though this is not currently in forecasts,” they wrote.
According to the firm’s analysts, Q2 licensing revenue of $515 million beat forecasts by 9%, while royalties of $620 million were 6% ahead, boosted by higher adoption of v9 and CSS and a doubling of data center-related royalties.
Licensing growth was further supported by a $52 million quarter-over-quarter increase from SoftBank.
Looking forward, Arm’s Q3 guidance points to continued strength, the analysts believe, with licensing expected to rise 25% to 30% year-over-year and royalties just over 20%. EPS is projected at $0.41, 18% above Jefferies’ forecast despite higher operating expenses.
The analysts highlighted Arm’s strategic partnership with Meta, co-designing chips across the compute stack from data centres to edge devices. Jefferies expects Meta to become one of Arm’s larger customers for AI CPUs in the years ahead.
Arm’s US-listed shares traded down 2.2% at about $156 following its report.