ARM Holdings PLC ADR (ARM) Q2 2027 Earnings Report

The call was strongly positive, supported by record quarterly revenue, 27% year-over-year growth, 50% licensing growth, doubled data center royalties, improved operating margin, strong cash generation, expanding Arm-based market share, and increased confidence in up to $2 billion of Arm AGI CPU revenue across fiscal 2027 and 2028. The primary challenges were smartphone-related pressure on edge AI royalties, tight supply and cost pressure for the AGI CPU, a first-version gross margin in the high 30%s to low 40% range, and the fact that AGI CPU shipments begin primarily in fiscal Q4 2027. Highlights significantly outweigh the lowlights.

Arm expects Q3 revenue of $1.54 billion, $±50 million, representing growth of approximately 24% year-on-year at the midpoint; license and other revenue is expected to be up a little over 50% year-on-year, royalty revenue is expected to grow low teens sequentially and low single digits year-on-year, non-GAAP operating expenses are expected to be approximately $825 million, and non-GAAP EPS is expected to be $0.56, $±0.04. Arm expects first commercial deliveries of the Arm AGI CPU in fiscal Q4 2027 and has increased confidence in achieving up to $2 billion across fiscal 2027 and 2028; for the first version, gross margin is expected to be in the 30%-40% range, while mobile growth next year is expected to be at least being in the kind of double digits plus in growth rate.