Citigroup: Arm still has strong growth momentum and growth stock characteristics, target price lowered to $190.

Citigroup's report stated that Arm, a chip design company under SoftBank, slightly exceeded expectations in terms of revenue and profit for the third quarter of the 2026 fiscal year ending in December. The bank believes that Arm still has strong growth momentum and growth stock characteristics, with revenue and earnings per share compound annual growth rates of over 20% and 25%, respectively, which are enough to support its premium valuation. The report pointed out that the market is currently concerned with two main issues: the impact of memory price/supply fluctuations on Arm's mobile patent fees, and the investment required to drive Arm's entry into the physical chip field. Regarding the memory risk, Arm estimates that the impact on patent fees for the 2027 fiscal year is only in the low single-digit percentage, which can be offset by the data center business. Based on the overall potential market size growth for cloud-based AI and the widespread adoption of CSS technology, the bank has raised its revenue forecasts for Arm for the 2026 and 2027 fiscal years by 1% each, with expected revenue achieving strong growth of 23% and 21%, respectively. The target price has been revised from $200 to $190 with a rating of "buy".