Smartphone Demand Slump is Impacting Arm, but Wall Street Sees an AI Server Boom

What happened

Arm reported revenue of $1.443 billion, up 27% year over year, with licensing revenue up 50% and royalty revenue up 8%. Rosenblatt analyst Kevin Cassidy maintained a Buy rating and a $250 price forecast, citing data-center demand and Arm’s planned AGI server CPU.

Confirmed

Global impact / market context

Stronger licensing and data-center royalties could help Arm offset weaker smartphone demand, while a new server CPU may add another revenue source. If hyperscaler adoption continues, Arm could gain more server business, though deliveries are not expected to begin until fiscal Q4 2027.

Analyst inference

The article describes a split outlook: smartphone weakness is weighing on near-term demand, while analysts see growth from data centers and an upcoming server CPU. Arm’s reported revenue and earnings exceeded cited estimates, but future growth depends on customer adoption and product delivery.

Analyst inference

What to watch

1. Watch whether data-center royalties continue growing and whether Arm-based CPUs reach the company’s stated expectation of more than 60% share at leading hyperscalers by end-2026. Analyst inference
2. Track whether the AGI server CPU stays on schedule for initial commercial deliveries in fiscal Q4 2027; delays could push expected sales further out. Analyst inference
3. Assess whether licensing and royalty growth can offset smartphone weakness, since a slowdown in either server demand or phone demand would change the revenue mix. Analyst inference

Evidence

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