Abstract
ARM Holdings will release fiscal second-quarter results on November 4, 2026 Post-Mkt; current projections point to revenue near 1.38 billion US dollars and adjusted EPS around 0.48, with investor focus on the balance of licensing momentum and royalty trends from data center demand.
Market Forecast
Consensus for the current fiscal quarter centers on revenue of 1.38 billion US dollars, up 29.57% year over year, EPS of 0.475, up 42.21% year over year, and EBIT of 0.57 billion US dollars, up 47.69% year over year.
The company’s prior communication implied a continuation of licensing strength and sustained royalty growth from newer architectures, with no formal margin outlook provided for the quarter. In the core business, steady licensing activity and healthy royalty shipments continue to support the top line, with management attention on armv9 and compute subsystems adoption; the most promising area is data center royalty, which more than doubled year over year within the 0.72 billion US dollars royalty base in the last reported quarter.
Last Quarter Review
ARM Holdings reported prior-quarter revenue of 1.29 billion US dollars, up 22.41% year over year, a gross profit margin of 97.21%, GAAP net profit attributable to shareholders of 0.27 billion US dollars with a net profit margin of 20.95%, and adjusted EPS of 0.45, up 28.57% year over year. Operating profitability was a highlight: EBIT reached 0.53 billion US dollars, up 28.88% year over year and above the prior estimate by 12.17%. By business mix, licensing revenue was about 0.57 billion US dollars, up approximately 23% year over year, while royalty revenue was about 0.72 billion US dollars, up approximately 22% year over year; the company also recorded revenue from external customers of 0.90 billion US dollars (69.90% of total) and from related parties of 0.39 billion US dollars (30.10% of total). The quarter-on-quarter change in net profit was -13.74%, reflecting phasing effects after a strong sequential run-up.
Current Quarter Outlook
Licensing and royalty engine heading into fiscal Q2
The near-term growth setup revolves around a familiar mix: a licensing pipeline that has remained active through the last two quarters and a royalty base that is benefiting from higher value content and new architecture penetration. The annual contract value stood at about 1.73 billion US dollars as of the last report period, indicating solid forward license demand after a multi-quarter cadence of design wins and compute subsystem traction. As adoption of the company’s newer IP and compute subsystems expands across customers, the implied royalty per unit continues to trend higher, creating a favorable revenue mix when volumes stabilize or improve. This quarter’s revenue estimate of 1.38 billion US dollars and EPS of 0.48 embed mid- to high-20s growth in licensing and low- to mid-teens growth in aggregate royalty, a pattern that aligns with the company’s prior quarter commentary and the observed shift toward higher-priced content. If licensing closes remain robust, EBIT could outpace revenue again due to the operating leverage inherent in the IP model; the EBIT estimate of 0.57 billion US dollars implies continued margin resilience even without an explicit gross margin forecast.
Data center royalty momentum and armv9/CSS adoption
Within the royalty line, data center shipments stood out last quarter, with management indicating that data center-related royalties more than doubled year over year inside the 0.72 billion US dollars royalty base. That momentum is tied to expanding deployment of next-generation CPUs designed on the company’s latest architecture and compute subsystems, which lift realized royalty rates. The current-quarter setup hinges on whether new deployments and scale-out programs continue at a similar pace; the revenue forecast implies that data center remains an outsized contributor to growth despite variability in some end markets. The company’s mix benefit from armv9 and compute subsystems should keep royalty yields elevated relative to older nodes, which helps offset potential softness in units in parts of the broader device ecosystem. As a result, even a modest improvement in volumes could translate into a disproportionate uplift in royalties, while stable volumes at a richer mix can sustain double-digit growth on a larger base.
Stock-price sensitivities: mobile royalties, AI capex signals, and execution
This quarter’s share-price reaction will likely be tied to the balance between data center-driven upside and the trajectory of mobile and edge royalties. On one hand, the last quarter confirmed double-digit royalty growth overall and a step-up in the value mix; on the other, unit softness in certain consumer categories, partly due to bill-of-material pressures such as elevated memory pricing, can intermittently weigh on shipment-based royalties. Investors will also parse signals from large AI and cloud spend, as recent headlines around AI demand normalization sparked sector-wide volatility and a sharp single-day decline in many chip-related equities, including ARM Holdings. Clear commentary on license bookings, the cadence of compute subsystem deals, and visibility into the next wave of architecture transitions would be supportive for sentiment, especially if management frames the magnitude and timing of royalty uplift expected from designs already in production or about to scale. Finally, execution against expense plans and operating leverage remains in view; maintaining high-90s gross margin while driving EPS in line with or above the 0.48 estimate would reinforce confidence in the company’s ability to convert incremental revenue into earnings.
Analyst Opinions
Bullish views dominate the recent period, with the reviewed set comprising multiple positive recommendations and initiations and no explicit bearish ratings; bullish opinions accounted for the clear majority against a small number of neutral stances. Several well-known institutions emphasized durable growth in licensing and structurally stronger royalties tied to next-generation architectures and compute subsystems. Analysts at Mizuho Securities reiterated Buy ratings with price targets ranging from 360 to 425 US dollars, highlighting the earnings trajectory implied by continued design wins and expanding high-value royalty streams. Citigroup analysts, including Andrew Gardiner and Pavan Daswani, maintained Buy ratings with 300 US dollars targets and pointed to the company’s multi-pronged monetization model—upfront licensing combined with recurring royalties—positioned to deliver above-market top-line growth and improving EPS conversion as the mix shifts toward armv9 designs. Piper Sandler initiated with an Overweight rating, citing upside from the ramp of newer CPU platforms, while Bernstein initiated with an Outperform view, outlining the three-revenue-stream framework in which licensing, royalties, and system-level offerings (including compute subsystems) together expand the total revenue opportunity per customer program.
The majority view expects the upcoming release to validate both the revenue growth estimate of 1.38 billion US dollars and the earnings estimate of 0.48 per share, with an eye to how management frames the durability of licensing pipelines into the second half of the fiscal year. Analysts see room for EBIT to meet or slightly exceed the 0.57 billion US dollars estimate if operating expenses stay in line with plan and if the quarter closes on the upper half of the revenue range supported by license activity. On royalties, the consensus expects double-digit growth to persist, with the largest incremental contribution still coming from data center-linked shipments and designs that carry higher royalty rates due to architecture and subsystem upgrades. Most bullish notes also underscore that even modest unit improvement in consumer adjacencies could be additive, given the higher attach rates of advanced IP into those devices compared with prior cycles.
In synthesizing these views, the crux of the bullish stance is that the company’s model is showing two concurrent drivers—an elevated pace of licensing that supports near-term revenue conversion and a shift in the royalty base toward higher-value content that compounds over time. This dynamic underpins the forecasted 29.57% year-over-year revenue growth and 42.21% EPS growth for the current quarter. The degree of upside relative to estimates may come down to the timing of license closures in the quarter and the breadth of royalty mix benefits across data center and edge shipments. Should management affirm continued momentum in compute subsystems and provide qualitative color on the pipeline that suggests sustained high-20s or better growth in licensing, bulls argue the stock could see estimates move incrementally higher for the fiscal year. Conversely, any sign of near-term pushouts in certain customer segments would likely shift the debate toward the pace of conversion rather than the scale of the opportunity, which the bullish camp still sees as intact.
Overall, the majority of institutions maintain optimistic expectations into the report, grounded in last quarter’s outperformance on EBIT and EPS, the sustained lift in royalty value per unit, and the company’s indicated path for the current quarter. With the date set for November 4, 2026 Post-Mkt, the key deliverables investors expect are: revenue around 1.38 billion US dollars, adjusted EPS around 0.48, qualitative reinforcement of data center royalty momentum, and confirmation that licensing strength remains on track to support double-digit growth and improving earnings leverage across the remainder of the fiscal year.
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