Arm Holdings (ARM.US) Q2 results beat expectations, licensing revenue surges 50%, data center royalties double.

British chip design company Arm Holdings (ARM.US) released its fiscal 2027 second-quarter results after the bell on Wednesday, for the period ended September 30, 2026. The company reported revenue of US$1.443 billion for the quarter, up 27% year-over-year, beating market expectations and marking its best second quarter ever. This is the fifth consecutive quarter in which Arm's revenue grew more than 20% year-over-year. Driven by the full-scale surge in AI computing demand, Arm's licensing and other revenue reached US$773 million for the quarter, up 50% year-over-year; royalty revenue was US$670 million, up 8% year-over-year, with data center royalty revenue doubling year-over-year. On a non-GAAP basis, diluted earnings per share were US$0.52 for the quarter, up 33% year-over-year, also beating market expectations. "Arm delivered its fifth consecutive quarter of more than 20% revenue growth, reflecting the strong momentum in our business amid AI-driven computing demand," said Arm CEO Rene Haas. "The 50% growth in licensing revenue shows customers are stepping up investment in high-efficiency Arm computing platforms, which will drive higher royalty growth in the future. At the same time, demand for our own chip business continues to accelerate and customer commitments continue to strengthen, giving us greater confidence in our goal of achieving up to US$2 billion in Arm AGI CPU revenue in fiscal 2027 and 2028. Arm is becoming the computing platform of choice across markets undergoing the AI transformation." Data center share leaps; own-chip orders extend to 2027 The results show that Arm's share of the data center market is rising rapidly. The share of servers based on the Arm architecture at leading hyperscale cloud providers has climbed from about 15% in calendar 2024 to more than 50% in calendar 2025, and the company expects that share to exceed 60% by the end of calendar 2026. Amazon.com, Inc. AWS disclosed that revenue commitments for its Graviton chips grew more than 20-fold year-over-year, Microsoft Corporation emphasized strong adoption of its Arm-based Cobalt CPU, and Alphabet Inc. Class C listed its Arm-based Axion chips as a key component of its AI infrastructure. NVIDIA Corporation's Arm-based Vera CPU platform is now generally available on Oracle Corporation cloud (OCI) and in production deployment at OpenAI. On the own-chip front, demand for the AGI CPU Arm launched in March this year continues to strengthen, with multiple customer orders already in hand extending into calendar 2027, and the first commercial deliveries on track for the fourth quarter of fiscal 2027. Oracle Corporation cloud plans to offer Arm AGI CPU instances in 2027. Scale milestone: quarterly shipments top 10 billion for the first time In the quarter, Arm partners reported Arm-architecture chip shipments exceeding 10 billion units in a single quarter for the first time, an increase of 1.5 billion units year-over-year. Arm-based PCs now account for about 20% of global shipments; physical AI (automotive and Siasun Robot&Automation) royalty revenue grew 50% year-over-year. Solid guidance for next quarter, though concerns remain Arm expects fiscal 2027 third-quarter revenue of US$1.54 billion (plus or minus US$50 million), implying roughly 7% sequential growth; non-GAAP diluted earnings per share of US$0.56 (plus or minus US$0.04); and non-GAAP operating expenses of about US$825 million. However, the results also showed concerns: smartphone-related business is under pressure as memory price increases squeeze the smartphone market; free cash flow for the quarter was US$110 million, down 73% year-over-year (free cash flow over the past 12 months was US$1.096 billion, remaining stable); on a US GAAP basis, net income for the quarter was US$130 million, down 45% year-over-year, mainly because the year-ago period included a one-time gain of US$131 million from a business disposal. After the results were published, Arm fell 0.4% in after-hours trading.