To The Moon

$ARM Holdings(ARM)$ is scheduled to report its fiscal Q1 2026 earnings on Wednesday, July 30, 2025, after market close.

EPS (Earnings Per Share): The Zacks Consensus Estimate for EPS is $0.34, which would represent a 15% year-over-year decline. Other sources indicate an estimate of $0.16 or $0.25 depending on whether it's GAAP or normalized, or the specific analyst pool.

Revenue: The consensus mark for revenues is pegged at approximately $1.04 billion, indicating an 11% year-over-year increase. Some forecasts also show a consensus around $1.06 billion or $792.76 million.

ARM Holdings (ARM) released its fiscal Q4 2025 earnings on May 7, 2025, marking a record-breaking close to a strong fiscal year.

Fiscal Q4 2025 Earnings Summary:

Record Revenue: ARM reported revenue of $1.24 billion, exceeding the $1 billion quarterly milestone for the first time in its history. This beat analyst expectations and was at the high end of their own guided range.

Strong Growth: Total revenue was up 34% year-over-year.

Royalty Revenue: Hit a record $607 million, up 18% year-over-year, driven by increased adoption of Armv9 and Compute Subsystems (CSS) in flagship smartphone launches. This also benefited from growth across all major markets: data center, automotive, smartphones, and IoT.

Licensing Revenue: Reached an all-time high of $634 million, surging over 50% year-over-year. This was driven by new deals, including a multi-year AI partnership with the Malaysian government, and strong demand for Armv9 and AI technologies.

Profitability: Non-GAAP operating profit was a record $655 million, with non-GAAP EPS of $0.55, which was at the high end of their guidance and beat analyst consensus.

Full Fiscal Year 2025: Revenue topped $4 billion, and royalty revenue surpassed $2 billion, both firsts for the company.

Guidance for Fiscal Q1 2026 and Lessons Learned:

Despite the strong Q4 results, ARM's guidance for fiscal Q1 2026 was softer than anticipated, leading to a notable stock price drop (around 8-9% in after-hours trading) immediately following the announcement.

Q1 2026 Guidance:

Revenue: Expected between $1.0 billion and $1.1 billion. At the midpoint, this represents a 12% year-over-year growth, but it fell short of analyst estimates which were closer to $1.09 billion for the midpoint.

Non-GAAP EPS: Forecasted between $0.30 and $0.38, missing analyst estimates of around $0.42.

Strong Royalty Growth Expected: Despite the overall softer revenue guidance, ARM still projected strong 25% to 30% royalty growth for Q1 2026. The difficult year-over-year comparison was mainly due to a very strong licensing quarter in Q1 2025.

No Full-Year Fiscal 2026 Guidance: Crucially, ARM declined to provide full-year guidance for fiscal 2026. CFO Jason Child stated, "Given the uncertainty of the global trade and economic picture, we have lower visibility than is traditional to start the year. As a result, we do not consider it prudent to issue full-year guidance."

Lessons Learned from the Guidance:

Market Demands Strong Forward Guidance: Even with an impressive beat on current quarter results, the market prioritizes a clear and optimistic outlook. For high-growth, high-valuation stocks like ARM, any perceived uncertainty or caution in guidance can lead to a significant negative reaction.

Geopolitical and Macroeconomic Factors are Key: ARM's decision to withhold full-year guidance explicitly cited "uncertainty of the global trade and economic picture." This highlights how external, non-operational factors (like trade tensions, particularly concerning China, and general economic slowdowns) can heavily influence a company's outlook and, consequently, investor sentiment, even for a fundamental technology provider.

Valuation Matters: ARM trades at a premium valuation. This means that investors have very high expectations built into the stock price. When guidance doesn't meet these elevated expectations, even if it's still for growth, the stock is prone to sharp pullbacks as it reprices for perceived lower future growth or higher risk.

Licensing Volatility: The nature of licensing deals can lead to quarter-to-quarter revenue fluctuations. While royalty revenue provides a more consistent indicator of adoption, licensing can be lumpy, making year-over-year comparisons challenging and sometimes contributing to softer immediate guidance following a particularly strong licensing quarter.

AI Momentum Is Not a Panacea (for immediate stock reaction): While ARM continues to emphasize strong demand for AI compute from cloud to edge and increasing adoption of Armv9 and CSS, this positive underlying trend was overshadowed by the conservative near-term financial outlook. Investors want to see AI translated directly into robust, predictable growth numbers.

In essence, the lesson from ARM's Q4 2025 earnings guidance was that "strong results are good, but strong and clear future guidance is paramount, especially for richly valued growth stocks operating in a volatile global economic environment."

Key Metrics Investors Should Watch For ARM Fiscal Q1 2026 Earnings

Licensing Revenue: This represents the upfront fees ARM charges for its intellectual property (IP). Strong licensing growth indicates continued demand for ARM's architecture across various new designs.

Royalty Revenue: This is the recurring revenue ARM earns from every chip shipped that uses its IP. This is a crucial indicator of the widespread adoption of ARM-based chips and their market penetration, particularly for newer, higher-royalty-rate architectures like v9.

V9 Adoption: Pay close attention to the commentary around the adoption rate of the v9 architecture, especially in high-end smartphones, data centers, and automotive segments, as it carries significantly higher royalty rates than its predecessor (v8).

Guidance for Q2 2026 and Fiscal Year 2026: Forward-looking guidance is often more impactful than past results for a growth-oriented stock like ARM. Investors will be keen to see if management provides clear and optimistic projections, especially after previous instances where guidance was tempered due to macroeconomic or geopolitical uncertainty (e.g., tariff concerns impacting 2026 guidance previously).

Segment Performance:

Data Center: ARM is actively expanding its presence in the data center market, traditionally dominated by x86 architecture. Progress in this segment, driven by power efficiency advantages, will be a key growth driver.

Automotive: The transition to electric vehicles and increased demand for advanced in-car computing are tailwinds for ARM. Strong performance here is important.

IoT (Internet of Things): Continued proliferation of connected devices relies heavily on ARM's low-power designs.

Gross Margins and Profitability: As a licensing and IP company, ARM typically has high margins. Maintaining or expanding these margins reflects efficient operations and strong pricing power.

Competitive Landscape (RISC-V): While not an immediate threat, any commentary on the competitive impact of open-source RISC-V architecture will be relevant for long-term outlook.

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 $144.74 with a high forecast of $210.00 and a low forecast of $76.54. The average price target represents a -11.94% change from the last price of $164.37.

Opportunities for Short-Term Trading Post-Earnings:

ARM's stock has shown significant volatility around earnings reports. Historically:

Pre-Earnings Trend: ARM has historically moved higher leading into earnings, with an average gain of 3.3% in the two weeks prior to the report (based on recent data).

Post-Earnings Reaction: However, ARM shares have moved lower in the immediate aftermath of earnings in 5 out of 7 previous reports, with an average loss of -0.7% one day after. This suggests that the market often has very high expectations, and even a "beat" may not be enough to satisfy investors if guidance is not exceptionally strong or if there are any signs of caution.

High Valuation: Many analysts consider ARM to be highly valued, trading at significant premiums to its sector peers. This elevated valuation means the stock is particularly susceptible to downside if earnings or guidance fall even slightly short of high expectations.

Technical Analysis - Exponential Moving Average (EMA)

ARM continue to trade with strong positive momentum and we can see that the bulls are clearly in control, and we should be seeing the AI demand making some impact on ARM earnings.

But how the AI translate directly into robust, predictable growth numbers would be crucial for ARM to provide a breakout if we can see a strong and clear future guidance, and also if earnings beats, then we could see a nice surge post earnings.

Short-term trading considerations:

Risk of "Sell the News" Event: Given the historical pattern and high valuation, there's a significant risk of a "sell the news" reaction, even if ARM reports decent results.

Guidance is Key: Any weakness or ambiguity in Q2 2026 or full-year 2026 guidance could trigger a sharp sell-off. Conversely, a very strong, confident outlook could provide an upside surprise.

Option Volatility: Implied volatility in ARM options is likely to be high leading into earnings, reflecting the market's expectation of a large price swing. This can make options trading expensive but also offers opportunities for strategies that capitalize on volatility shifts.

Technical Levels: Watch for key support and resistance levels. A strong break above resistance on positive news, or a break below support on negative news, could signal further short-term movement.

Summary

ARM's fiscal Q1 2026 earnings will be closely scrutinized for continued growth in licensing and royalty revenue, especially from its higher-value v9 architecture, and robust forward guidance. While pre-earnings optimism is common, the stock has often pulled back post-earnings, likely due to its lofty valuation and demanding market expectations. Traders should prepare for potential volatility and focus on management's outlook.

Analysts anticipate cautious guidance following the prior quarter's omission of full-year 2026 forecasts due to macroeconomic and trade uncertainties. Investors will closely watch royalty revenue growth, particularly from higher-value Armv9 adoption, and licensing revenue, which can be lumpy. Commentary on AI-driven demand in data centers, automotive, and IoT, alongside any color on future guidance, will be crucial. High valuation means the stock is sensitive to outlook.

I hold position for ARM for long-term portfolio, and I have been adding ARM when there is any significant pullback.

Appreciate if you could share your thoughts in the comment section whether you think ARM would be able to provide a stronger revenue growth due to strong AI-drive demand and also a stronger guidance to watch.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire 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.