📉 ARM results!
Arm Holdings $ARM has started the 2026 fiscal year on a positive note, but with a caveat. First quarter revenue was $1.05 billion, marking the second best quarter in company history and a record result for Q1. Growth of 12 % year-over-year was driven primarily by royalty (+25 %)primarily driven by faster adoption of Armv9 architecture , higher demand for Arm CSS platforms and expansion into data centers.
However, behind this good growth there are also many challenges!
🧩 Worrying news
Despite solid fee growth, one-time licensing revenue declined by 1 %management attributes this to normal fluctuations in the timing of large contracts. This wouldn't matter so much if the results weren't weighed down by a significant increase in operating expenses.
GAAP net income declined by 42 % to $130 million. USD 130million, while non-GAAP net profit decreased by 11 % to $374 million. USD. The negative market reaction was mainly driven by a jump in non-GAAP operating expenses of 33 % to $619 million. This was mainly due to the expansion of R&D capacity.
Non-GAAP operating margin thus declined from last year's 47,7 % to 39.1%. Earnings per share were 35 cents after adjustments , as expected but down from 40 cents last year .
📉 Shares have fallen by more than 16 %despite the fact that Q2 earnings expectations ($1.01-1.11 billion) in line with analyst estimates (USD 1.05 billion).
🧠 Arm is considering its own chips
CEO Rene Haas confirmed that Arm is considering developing its own off-the-shelf chips, which would represent a major shift from the current model "platform neutral architecture" to a competitive semiconductor player.
⚠️ Analysts warn that this move carries significant risk, especially since most of Arm's customers (e.g. Apple, Qualcomm, Amazon, Microsoft) already build their products on Armtechnology . A move to proprietary chips could make these partners direct competitors.
📈 Strong fundamentals remain: growth in ACV, stable RPO, high cash position
Annualized Contract Value (ACV) grew 28% year-over-year to $1.53 billion
Revenue Commitments (RPO) holds strong at USD 2.23 billion
Approximately 27% of these revenues are expected to be recognized over the next 12 months
Free cash flow. USD 150 MILLION
Cash and short-term investments: USD 2.91 billion
These figures demonstrate that it has Arm sufficient capital for potential strategic investments, whether it be continued architectural development or potential acquisitions.
📱Smartphones disappointed
CFO Jason Child confirmed that chip licensing fees in the smartphone segment have not delivered the expected results. The mobile phone market is slowing down, and since Arm generates a large portion of its revenue from this segment, it will have to look for new sources of growth. One such avenue may be cloud infrastructure and AI chips, where Arm's architecture has proven itself.
What is your opinion of ARM?
Arm is a good company, but making their own chips doesn't make much sense to me.
The company is still on my watchlist, so I'll wait for Monday and probably start a position after the drop.
It's still not an interesting stock for me and those results haven't changed my opinion at all. I'm sticking with $AMD.