Arm’s third-quarter revenue forecast above estimates but investors unimpressed
It expects to sell US$2 billion worth of its CPU, the AGI CPU, in fiscal 2027 and 2028
On November 4, Arm Holdings forecasted third-quarter revenue slightly above Wall Street estimates, yet investors remained unimpressed and the chip company's stock dropped around 3.5 percent in extended trading. The demand for Arm-based technology surged due to the AI boom, with major cloud companies creating custom processors for data-center workloads.
Arm's architecture is valued for its power efficiency, a crucial factor as operators aim to reduce energy and cooling expenses for large AI models. Arm CEO Rene Haas stated in a Reuters interview, "We’re just seeing huge pickup for all technology around the datacentre space."
The company now projects it will sell $2 billion worth of its central processing unit (CPU), the AGI CPU, in fiscal years 2027 and 2028. Arm has collaborated with Taiwan's TSMC and other chip suppliers to secure sufficient raw materials for production, with Haas adding, "We think the two (billion) is now very achievable."
Arm, unlike traditional chipmakers, licenses its processor architecture and generates revenue primarily from royalties on shipped chips. Its server-chip architecture accounted for more than 50 percent of deployments at major cloud providers in 2025 and is expected to surpass 60 percent by year-end 2026. Royalty revenue from shipped chips increased by 8 percent to $670 million in the second quarter, surpassing analysts' estimates of $720.8 million.
Licensing revenue, including upfront fees for technology access, reached $773 million, exceeding expectations of $625.1 million. The second-quarter revenue of $1.44 billion exceeded analysts' average estimate of $1.38 billion, according to LSEG data.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
