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    ARM HOLDINGS PLC /UK (ARM)

    Q4 2025 Earnings Summary

    Reported on May 8, 2025
    Pre-Earnings PriceN/ADate unavailable
    Post-Earnings PriceN/ADate unavailable
    Price ChangeN/A
    • 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.
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    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

    TopicPrevious MentionsCurrent PeriodTrend

    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

    1. 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.

    2. 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.

    3. 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.

    4. 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.

    5. 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.

    6. 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.

    7. 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.

    8. 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.

    9. 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.

    10. 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.