$ARM Holdings(ARM)$ upcoming fiscal Q2 2026 earnings report is scheduled for Wednesday, November 5, 2025, after market close.
ARM's valuation is driven by its pivotal role in the AI revolution and its continued dominance in the mobile/smartphone market. The focus of this report will be how effectively ARM is translating its technological advantages—particularly its high-performance, power-efficient chip architectures—into financial growth and increased market share, especially in newer, high-growth sectors like data centers and edge AI.
Consensus Analyst Expectations
Summary of ARM Holdings (ARM) Fiscal Q1 2026 Earnings
ARM Holdings reported strong overall results for its fiscal Q1 2026, delivering over $1 billion in revenue for the second consecutive quarter.
Total Revenue: $1.05 billion, an increase of 12% year-over-year (Y/Y). This was a record for a first quarter and met the high end of their guidance range.
Non-GAAP EPS: $0.35, which was above the midpoint of the company's guidance range.
Key Driver: Royalty Revenue: Royalty revenue was the strongest segment, reaching a record $585 million (up 25% Y/Y). This was driven by the accelerating adoption of the higher-value Armv9 architecture, the ramp-up of chips using Arm Compute Subsystems (CSS), and the increasing use of Arm-based chips in data centers (Neoverse), automotive, and IoT markets.
Licensing Revenue: Licensing and other revenue was $468 million, a slight decline of 1% Y/Y, which the company attributed to the normal quarterly fluctuations in the timing and size of high-value license agreements.
Operating Expenses: Non-GAAP operating expenses increased significantly (33% Y/Y) to $619 million, driven primarily by accelerated investments in engineering headcount and next-generation technologies. This increase in expenses led to a decline in non-GAAP operating margin.
AI Momentum: The company highlighted its growing role in the AI market, noting that over 70,000 enterprises now run AI workloads on Arm Neoverse data center chips, with Neoverse expected to approach 50% market share among top hyperscalers.
Lesson Learned from Q2 2026 Guidance
While the Q1 results were strong and met expectations, the accompanying guidance for Q2 fiscal 2026 was viewed as a bit cautious or "soft" by Wall Street, leading to a moderate drop in the stock price post-announcement.
The primary lesson learned from the Q2 2026 guidance is the Impact of Accelerated Investment on Near-Term Profitability for High-Growth Stocks.
High Valuation Requires Flawless Execution and Outlook: As a richly valued, high-growth stock, ARM is highly sensitive to its forward-looking guidance. Even a slight miss in the outlook for revenue or EPS (as a result of the lower-than-expected EPS guidance) can trigger a sell-off, as the high valuation leaves little margin for disappointment.
Growth Investment Trumps Near-Term Profit: The key factor tempering the Q2 EPS guidance was the planned sequential increase in Non-GAAP Operating Expenses to approximately $655 million. This reflects the company's strategy to accelerate investments in R&D and engineering (e.g., in new Compute Subsystems (CSS) platforms and next-generation technologies) to secure future high-margin royalty streams. The market often penalizes a near-term profit dip, even if it's due to strategic long-term growth investment.
Lumpiness in Licensing Revenue: The nature of the licensing business, which is subject to fluctuations in the timing and size of high-value deals, introduces a level of quarter-to-quarter variability. The guidance expects both royalty and licensing revenue to be about flat sequentially, highlighting that the strong growth in the royalty segment can be occasionally offset by the lumpy nature of licensing.
In essence, the guidance suggests that the company is prioritizing long-term market share and technology leadership—particularly in AI, Data Center, and Automotive—by making significant R&D investments, even if it pressures near-term profitability (Q2 EPS) and leads to a cautious outlook due to macroeconomic uncertainty.
Key Metrics Investors Should Watch
ARM's revenue is broken into two main segments: Licensing and Royalty. Investors will need to dive into the details of both, as they represent different growth stages for the company.
1. Royalty Revenue (The Core Business)
Royalty revenue is recurring and tied to the volume and average selling price (ASP) of chips shipped by ARM's partners.
Growth from Armv9 Architecture: Investors will look for a significant ramp-up in royalty revenue driven by chips using the newer, higher-royalty-rate Armv9 architecture. Higher adoption of Armv9 is a direct positive for margins.
Non-Mobile Royalty Mix: A key long-term driver is the percentage of royalty revenue coming from high-growth, high-value segments outside of smartphones (e.g., data center servers, automotive, IoT, and edge AI). Strong growth in these non-traditional areas signals successful diversification.
China Exposure: Any color on the performance and outlook from Arm China will be important, as this entity represents a significant portion of chip volume.
2. Licensing Revenue (The Future Pipeline)
Licensing revenue is more volatile, coming from upfront payments for access to ARM's Intellectual Property (IP). It indicates the future pipeline of chip designs.
Design Win Quality: The focus here is not just the dollar amount, but the quality of the new licensing deals. Licensing agreements for flagship server CPUs (e.g., Neoverse designs for cloud providers) or for custom AI accelerators are viewed as high-value catalysts for future royalty streams.
Total Number of Licenses/Agreements: A consistent number of new and renewal agreements shows the health of ARM's ecosystem and its competitive position against RISC-V and other architectures.
3. Forward-Looking Guidance & Commentary
For a high-growth stock like ARM, guidance for Q3 2026 and the full fiscal year 2026 is often more impactful than the past quarter's results.
R&D and Margin Commentary: Investors will look for management's discussion on R&D spending. While high R&D is necessary for future growth (especially in AI), a sharp increase that hits net income without a clear path to high-margin revenue can spook the market. Margins will be a major focus point.
AI Data Center & Custom Silicon: Any new announcements, partnerships, or updated market share expectations regarding the use of ARM's technology in AI data centers or by major hyperscalers building custom AI silicon (like cloud-provider chips) will be a significant catalyst.
ARM Holdings (ARM) Price Target
Based on 31 analysts from Tiger Brokers offering 12 month price targets for ARM Holdings PLC ADR in the last 3 months. The average price target is $154.67 with a high forecast of $210.00 and a low forecast of $80.00. The average price target represents a -8.31% change from the last price of $168.68.
Short-Term Trading Opportunity Post-Earnings
Disclaimer: Short-term trading based on earnings is highly risky and speculative. ARM's high valuation (P/E over 200) suggests the stock has a high-growth premium built in, meaning volatility is almost guaranteed.
Potential Scenarios and Trading Implications:
Implied Volatility (IV): Before the report, options prices will be high due to elevated Implied Volatility. A trade often involves betting on the direction and magnitude of the post-earnings move being greater than what the options market has priced in.
ARM implied volatility (IV) is 65.6, which is in the 78% percentile rank. This means that 78% of the time the IV was lower in the last year than the current level. The current IV (65.6) is -8.6% below its 20 day moving average (71.8) indicating implied volatility is trending lower.
The Guidance Gap: The largest stock movements often occur when forward guidance (the company's outlook) significantly deviates from consensus expectations. A great quarter with a disappointing outlook can lead to a sell-off, and vice-versa.
Technical Analysis - Exponential Moving Average (EMA)
We have seen how ARM have make a decline after we saw the share price rise pretty above 12-EMA, and that was a pullback we saw last week after a short surge up, now we can see that ARM is consolidating ahead of its earnings.
With positive RSI momentum, ARM earnings would be an important indicator together with ARM whether the semiconductor sector could continue to give a strong November, continuing from the strength from October.
Summary
ARM Holdings is scheduled to report its fiscal Q2 2026 results on November 5, 2025, after market close.
Key Expectations & Focus Areas:
Financial Consensus: Analysts broadly anticipate Non-GAAP EPS of approximately $0.34 on revenue of roughly $1.06 billion. This outlook aligns closely with the cautious guidance ARM issued last quarter (midpoint: $1.06 Billion Revenue and $0.33 EPS.
The Investment Trade-Off: The central theme for the quarter remains the tension between top-line growth and short-term profitability. Net income has been under pressure due to accelerated R&D spending and increased engineering headcount, a strategic move to secure future market share in high-value segments.
AI and Royalties: Investors will scrutinize the Royalty Revenue growth, driven by the adoption of higher-value Armv9 architecture and the expansion of its Neoverse platform in the AI-driven data center and automotive markets. Royalty strength is critical as it represents long-term, predictable revenue.
Guidance is Key: Given ARM's premium valuation, its outlook for the third quarter and the rest of the fiscal year will be the most crucial element. Any clarity on how its substantial R&D investments are expected to translate into future revenue growth and margin expansion will heavily influence the stock price.
The core belief for shareholders is ARM’s ability to drive exponential royalty growth by successfully expanding from smartphones into the AI-centric data center and edge computing spheres.
Appreciate if you could share your thoughts in the comment section whether you think ARM could provide a stronger outlook based on strong demand for their architecture, despite the premium valuation.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Comments