Arm forecasts third-quarter revenue above estimates on AI spending boom

Arm Holdings has forecasted third-quarter revenue modestly higher than Wall Street expectations, causing a 3.5% dip in the chip company's stock following trading. The surge in demand for Arm-based technology owes much to the AI boom, with large cloud firms seeking out custom processors to run data-center workloads. Arm's architecture is renowned for its energy efficiency, a crucial consideration as operators aim to curb energy and cooling expenses in large AI model operations.

Speaking to Reuters, Arm CEO Rene Haas highlighted the booming technology landscape surrounding data centers, and noted that the company anticipates selling $2 billion worth of its AGI CPU central processing unit during fiscal years 2027 and 2028. TSMC and other chipmakers have backed Arm's production efforts to meet this goal, which Haas described as "very achievable."

In contrast to previous years when Arm only offered designs, the company entered the full chip business in March and had secured $1 billion in orders for the AGI CPU at launch. In comparison to semiconductor manufacturers, Arm licenses its processor architecture, earning revenue through licensing fees and royalties on chips employing its technology.

Server-chip architecture accounted for more than 50% of deployments at major cloud providers in 2025, with projections indicating it will surpass 60% by the end of 2026. Royalties from chips shipped using Arm's technology rose 8% to $670 million during the second quarter, surpassing analysts' estimates of $720.8 million. Licensing revenue, which integrates upfront fees for technology access, amounted to $773 million, exceeding estimates of $625.1 million.

Arm's second-quarter revenue of $1.44 billion beat analysts' average forecast of $1.38 billion, as per data from LSEG. Adjusted profit for the quarter stood at 52 cents per share, outpacing estimates of 47 cents per share. In a Delaware courtroom, Arm was found guilty of breaching certain aspects of its licensing agreement with Qualcomm and interfering with the latter's relationship with Meta, but the jury only awarded $2 in damages, leaving several disputes over royalties and future licensing terms to be resolved by a judge.