Arm Holdings Stocks Rise 4.01% as Data Center Royalties Double

What happened

Arm Holdings reported second-quarter revenue of $1.44 billion, up 27% to a record, in results released November 4. Data center royalties doubled year over year; licensing and other revenue rose 50% to $773 million, and royalty revenue reached $670 million.

Confirmed

Global impact / market context

Growing data center royalties suggest Arm is earning more from its designs as demand for server chips expands. If the trend continues, royalty income could support revenue growth; however, GAAP operating income was $201 million, well below non-GAAP income of $638 million, so reported profitability depends on which measure is used.

Analyst inference

The reported share gain came as chip designers rebounded after a selloff, while Arm’s results also highlighted strong licensing and royalty growth. The article’s $197.75 GF Value is a model estimate, not a promised price, and does not establish that shares are undervalued.

Analyst inference

What to watch

1. Check whether Arm-based server share at top hyperscalers exceeds the company’s forecast of 60% by the end of 2026; wider adoption could support royalty revenue. Analyst inference
2. Watch whether Arm converts its expected up to $2 billion in AGI CPU revenue across fiscal 2027 and 2028 into booked sales, rather than relying on forecasts. Analyst inference
3. Track whether new AGI CPU sales upset Arm’s licensing customers, as the article identifies that relationship as a test for turning the product into revenue. Analyst inference

Evidence

• gurufocus.com