British chip designer Arm has reported record second-quarter revenue of $1.44 billion, helped by booming licensing agreements and growing demand for its server processor technology.
The SoftBank-owned outfit increased revenue 27 per cent during the quarter ending 30 September 2026, beating Wall Street’s forecast of approximately $1.38 billion. It marked Arm’s fifth consecutive quarter of annual revenue growth exceeding 20 per cent.
Licensing revenue was particularly strong, increasing 50 per cent to $773 million as customers purchased access to newer processor designs and more complex computing platforms.
However, royalty revenue grew just eight per cent to $670 million, missing analysts’ expectations of $720.8 million. That is a less impressive performance for a company whose business has traditionally depended on collecting money whenever somebody ships a chip containing its technology.
Arm blamed part of the weakness on rising memory prices, which have been making life difficult for smartphone manufacturers. The company expects customers adopting its Armv9 architecture and Compute Subsystems technology to pay higher royalties when their products reach production.
Arm chief executive Rene Haas said demand for the company’s technology was increasing as customers sought more computing performance without sending their electricity bills into orbit. The company’s data centre royalty revenue doubled during the quarter, reflecting growing adoption of Arm-based processors by major cloud operators.
Arm claims its architecture accounted for more than half of server deployments at leading hyperscale cloud providers during 2025, up from 15 per cent in 2024. It expects that share to exceed 60 per cent by the end of 2026.
Amazon has been expanding its Graviton processors, while Google is deploying Axion chips and Microsoft is pushing its Cobalt server family. Nvidia is another important customer through its Arm-based Vera processor.
These developments are putting increasing pressure on Intel and AMD, which have traditionally dominated the server processor business. The outfit has ambitions beyond selling intellectual property. Its AGI CPU programme marks a major strategic shift, with the company developing complete processors and selling them directly to customers. That could prove uncomfortable for some existing licensees, which have spent years paying Arm for processor designs before building their competing products.
Haas said the company had secured AGI CPU purchase orders from several customers extending through calendar 2027. The first commercial deliveries are expected during the final quarter of Arm’s fiscal 2027, which ends in March. Oracle has already announced plans to offer cloud instances using the processors during 2027.
Arm is sticking to its forecast of up to $2 billion in AGI CPU revenue across fiscal 2027 and 2028, with management expressing greater confidence after securing additional supply. The move into selling completed silicon could change Arm’s financial structure. Its existing licensing business produces exceptionally high margins because it does not have to manufacture the processors that customers eventually sell.
Arm reported a GAAP gross margin of 97.1 per cent during the quarter, compared with 97.4 per cent a year earlier. Selling finished chips introduces manufacturing and supply costs that its traditional licensing operation avoids. The company is continuing to spend heavily on research and development, with GAAP expenditure increasing 24 per cent to $857 million. Operating expenses climbed 27 per cent to $1.2 billion, while reported operating income increased 23 per cent to $201 million.
Reported net income was less impressive, falling 45 per cent to $130 million. Earnings per share declined from $0.22 to $0.12, demonstrating that record revenue does not necessarily mean record profits. Arm’s preferred non-GAAP figures were more attractive, with adjusted net income rising 36 per cent to $566 million and earnings per share increasing from $0.39 to $0.52.
The company said its partners shipped more than 10 billion Arm-based chips during the quarter for the first time, up about 1.5 billion from the previous year.
Arm believes its designs are making further progress in personal computers, saying Arm-based systems now represent about 20 per cent of worldwide PC shipments.
For the current fiscal quarter, the company expects revenue of approximately $1.54 billion, with adjusted earnings of $0.56 per share. Operating expenses, excluding specified items, are forecast to rise to about $825 million as Arm continues investing in its processor development business.
