British chip design company Arm Holdings (ARM.US) released its fiscal 2027 second quarter earnings report for the period ending September 30, 2026, after the market close on Wednesday.
The company reported quarterly revenue of $1.443 billion, up 27% year-over-year, surpassing market expectations and marking its best second quarter performance in history.
This represents Arm's fifth consecutive quarter of year-over-year revenue growth exceeding 20%.
Driven by the comprehensive surge in artificial intelligence computing demand, Arm's licensing and other revenue for the quarter reached $773 million, jumping 50% year-over-year, while royalty revenue came in at $670 million, up 8% year-over-year, with data center royalty revenue doubling compared to the same period last year.
On a non-GAAP basis, the company's diluted earnings per share for the quarter were $0.52, up 33% year-over-year, also beating market expectations.
"Arm delivered its fifth consecutive quarter of over 20% revenue growth, reflecting the strong momentum in our business driven by AI-driven computing demand," said Arm CEO Rene Haas.
"The 50% growth in licensing revenue demonstrates that customers are increasing their investment in high-efficiency Arm computing platforms, which will drive higher royalty growth in the future. At the same time, demand for our own chip business continues to accelerate, with growing customer commitments, giving us greater confidence in achieving our target of up to $2 billion in Arm AGI CPU revenue for fiscal 2027 and 2028. Arm is becoming the preferred computing platform across various markets in the AI transformation."
Data Center Share Leap, Custom Chip Orders Stretch to 2027
Earnings data shows that Arm's share in the data center market is rapidly increasing.
The share of servers based on Arm architecture among leading hyperscale cloud providers has climbed from approximately 15% in calendar year 2024 to over 50% in calendar year 2025, and the company expects this share to exceed 60% by the end of 2026.
Amazon AWS disclosed that its Graviton chip revenue commitments grew more than 20-fold year-over-year, Microsoft emphasized strong adoption of its Arm-based Cobalt CPU, and Google listed its Arm-based Axion chip as a key component of its AI infrastructure.
Nvidia's Arm-based Vera CPU platform is now generally available on Oracle Cloud Infrastructure (OCI) and has been deployed in production at OpenAI.
On the custom chip front, demand for Arm's AGI CPU, announced in March of this year, continues to strengthen, with multiple customer orders already in hand extending into calendar year 2027, and first commercial deliveries on track for the fourth quarter of fiscal 2027.
Oracle Cloud plans to offer Arm AGI CPU instances in 2027.
Scale Milestone: Quarterly Shipments Surpass 10 Billion Units for the First Time
In the current quarter, Arm's partners reported that Arm-based chip shipments exceeded 10 billion units in a single quarter for the first time, an increase of 1.5 billion units year-over-year.
Arm-based PCs now account for approximately 20% of global shipments; physical AI (automotive and robotics) royalty revenue grew 50% year-over-year.
Solid Guidance Ahead, but Concerns Remain
Arm expects fiscal 2027 third quarter revenue of $1.54 billion (plus or minus $50 million), implying approximately 7% sequential growth; non-GAAP diluted earnings per share of $0.56 (plus or minus $0.04); and non-GAAP operating expenses of approximately $825 million.
However, the earnings report also revealed concerns: affected by memory price increases squeezing the smartphone market, mobile-related business is under pressure; free cash flow for the quarter was $110 million, down 73% year-over-year (trailing twelve-month free cash flow of $1.096 billion remained stable); on a US GAAP basis, the company's net income for the quarter was $130 million, down 45% year-over-year, primarily due to a one-time gain of $131 million from a business disposal included in the same period last year.
Following the earnings release, Arm shares fell 0.4% after hours.
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