Q4 2025 Earnings Summary
- OEM Partnerships & Custom Silicon Demand: Executives highlighted a trend of OEMs working directly with ARM for customized silicon, especially in automotive and hyperscale markets. This strategic approach enhances product differentiation while driving recurring revenue.
- Accelerated Data Center & Cloud Adoption: Discussion pointed to strong growth in data center infrastructure with expectations of 50% of new server chip designs being ARM-based and record smartphone royalty growth, reinforcing ARM’s expanding role in critical growth markets.
- Chiplet & CSS Integration as a Value Driver: ARM’s role in enabling chiplet-based designs and its advanced CSS architecture were noted as key value propositions, ensuring ARM remains central in evolving, complex SoC ecosystems.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q4 2025 | no prior guidance | Expected to be between $1.175 billion and $1.275 billion, representing a midpoint growth of 32% year-on-year | no prior guidance |
Non-GAAP Operating Expense | Q4 2025 | no prior guidance | Expected to be approximately $590 million | no prior guidance |
Non-GAAP EPS | Q4 2025 | no prior guidance | Expected to be in the range of $0.48 to $0.56 | no prior guidance |
Revenue | FY 2025 | no prior guidance | Midpoint guidance increased to around $4 billion, representing approximately 24% year-on-year growth | no prior guidance |
Royalty Revenue Growth | FY 2025 | no prior guidance | Expected to grow in the high teens year-on-year | no prior guidance |
License Revenue Growth | FY 2025 | no prior guidance | Expected to grow around 30% year-on-year | no prior guidance |
Non-GAAP Operating Expenses | FY 2025 | no prior guidance | Expected to be about $2.1 billion, representing a 21% year-on-year increase | no prior guidance |
Non-GAAP EPS | FY 2025 | no prior guidance | Expected to be between $1.56 and $1.64 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Data Center & Cloud Adoption | Q1–Q3 discussions emphasized strong adoption with highlights around AWS Graviton, Google Axion, NeoVerse, and early signs of partnerships with hyperscalers and cloud providers | Q4 featured a record-breaking quarter with revenue exceeding $1 billion, broad-based demand across data center, automotive, smartphones, and IoT, and increased share of Arm-based chips in servers | Consistent and strengthening adoption with expanding market penetration |
ARM Version9 Adoption | Q1 noted v9 contributing 25% of royalty mix and rapid uptake (with v9 royalty rates higher than v8); Q2 reported significant growth from 10% to 25%; Q3 mentioned expectations of reaching 60–70% eventually | Q4 reported an increase in the adoption rate to north of 30%, driven by rising CSS integration and improved pricing dynamics | Accelerating transition from v8 to v9 with positive future outlook |
Chiplet & Compute Subsystem (CSS) Integration | Q1 launched CSS initiatives with active engagements; Q2 highlighted doubling of CSS licenses and MediaTek’s adoption; Q3 detailed strong demand for CSS and chiplet-based architectures | Q4 emphasized further integration with 13 CSS customers, pricing benefits, and its role in driving higher royalties | Steady acceleration and deeper market penetration in critical design segmentation |
AI Initiatives & AI-Driven Compute Demand | Q1 focused on AI-driven licensing, enhanced compute platforms for cloud and edge; Q2 and Q3 discussed advanced AI projects (Stargate, agentic AI) and growing compute needs across sectors | Q4 showcased record revenue driven by power-efficient AI compute across markets, expanding ecosystem partnerships (including a multiyear AI deal) and introduction of an Edge AI platform | Continuous deepening of AI integration with expanding partnerships and ecosystem investments |
PC Market Expansion | Q1 and Q2 emphasized ambitious targets (e.g., aiming for 50% PC market share and improved Windows ecosystem integration) | No specific mention of PC market expansion was found in the Q4 call | Topic no longer mentioned in Q4, suggesting a possible shift in focus |
Legal & Litigation Challenges | Q2 addressed Qualcomm litigation and contract disputes; Q3 mentioned a contract expiration dispute with a partner | Q4 did not mention any legal or litigation challenges | Decreased focus on legal issues, indicating reduced emphasis or resolution |
OEM Partnerships & Custom Silicon Demand | Q1 highlighted custom silicon for AI data centers and OEM collaborations in China; Q2 detailed MediaTek’s Dimensity 9400 launch with CSS; Q3 focused on OEM partnerships in flagship devices and custom silicon trends | Q4 reinforced the trend with a focus on increasing customization (especially in automotive and hyperscalers) as a value driver for OEM partnerships | Consistently growing focus on custom silicon demand and deepening OEM relationships |
Dependence on Arm China & Geopolitical Risks | Q3 noted Arm China contributed around 25% of royalties with a forecasted decline in its relative share; Q1 and Q2 had no commentary on this topic | Q4 did not include specific commentary on Arm China or geopolitical risks | Reduced emphasis in Q4 compared to Q3, indicating a lower current focus on these issues |
Weakness in IoT, Networking, and Industrial Sectors | Q1 reported persistent weakness in IoT, networking, and industrial sectors due to inventory corrections; Q2 mentioned expected recovery in networking while IoT lagged; Q3 showed signs of IoT recovery but no specific mention of networking or industrial challenges | Q4 noted that IoT remains slow to recover with uncertain timing, some recovery in networking, and no reference made to the industrial sector | Ongoing challenges in IoT with modest improvements in networking while industrial concerns remain unaddressed |
Reduced Royalty Revenue Growth Expectations | Q1 revised full‐year royalty revenue growth from mid‐20% to the low‐20% range due to inventory and sector issues; Q2 further adjusted expectations to high teens; Q3, however, reported record royalty revenue with strong growth | Q4 reported an 18% year‐on‐year royalty growth along with guidance for 25–30% growth in Q1 2026, reflecting an improved outlook | Improvement from earlier downwards revisions, indicating a rebound in royalty growth expectations |
-
Fiscal Guidance
Q: Full-year guidance omitted for fiscal '26?
A: Management refrained from issuing full-year guidance due to heightened macro uncertainty and potential tariff impacts, aiming to avoid an overly wide range in forecasts. -
Royalty Trends
Q: Key drivers of royalty growth?
A: Management emphasized that smartphone royalties grew approximately 30% and anticipates 10%-15% sequential growth in later quarters from strong performance in mobile, infrastructure, and automotive segments. -
Tariff Impact
Q: Are tariffs materially affecting costs?
A: Management stated that tariffs currently have no direct effect on cost or revenue, with any impacts being indirect and limited—especially in the U.S. segment. -
V9 Adoption
Q: Has the V9 adoption rate improved?
A: Management confirmed that the V9 adoption rate has risen from 25% to over 30%, driven by increased uptake in both smartphones and CSS solutions. -
OEM Strategy
Q: Will ARM deepen OEM partnerships?
A: Management indicated a clear trend towards stronger direct relationships with OEMs for customized silicon, complementing traditional IP licensing without sidelining fabless partners. -
Licensing Dynamics
Q: What powered Q4 licensing performance?
A: Management highlighted that licensing revenue reached a record $634 million, driven by robust CSS demand and accelerated product refreshes in data center and AI areas, forecasting mid-to-high single-digit growth further. -
Royalty Pipeline
Q: How does the royalty pipeline look seasonally?
A: Management expects solid royalty progression, with seasonal softness in Q2 followed by 10%-15% sequential growth in the latter quarters as legacy transitions like Grace to Vera unfold. -
CSS Split
Q: How are the CSS deals distributed?
A: Management explained that the latest 13 CSS deals are roughly split evenly—with about half in mobile (client) and the remainder in infrastructure, plus one auto deal—demonstrating diversified momentum. -
Growth Roadmap
Q: What lies ahead for licensing and royalties?
A: Management expressed enthusiasm over long-term projects like Stargate, with evolving partnerships driving increased compute demand, underscoring a promising future without disclosing extensive details. -
Chiplet Strategy
Q: What is the role of chiplets in ARM strategy?
A: Management sees chiplets as essential for integrating multi-chip SoCs, reinforcing Arm’s IP positioning in the CSS space without signaling a shift toward in-house chip manufacturing.
Research analysts covering ARM HOLDINGS PLC /UK.