Arm Holdings forecasts quarterly revenue above estimates as AI chip demand accelerates

Arm Holdings Beats Estimates as AI Demand Drives Growth

Arm Holdings delivered a strong earnings beat for its first quarter of fiscal 2027, posting revenue of $1.29 billion against analyst expectations of $1.26 billion1

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. Adjusted earnings per share reached $0.45, comfortably exceeding the consensus estimate of $0.404

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. The British chip designer's quarterly revenue above estimates signals robust AI-driven chip demand across data centers and cloud infrastructure. Looking ahead, Arm Holdings projected second-quarter revenue of $1.38 billion, above Wall Street's forecast of $1.34 billion, with adjusted earnings expected at 47 cents per share versus the 43 cents analysts anticipated3

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Royalty Revenue Surges on Data Center Adoption

Royalty revenue, which Arm Holdings collects on each chip shipped using its technology, jumped 22% year-over-year to $715 million in the first quarter1

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. Licensing revenue climbed 23% to $574 million during the same period5

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. JPMorgan analysts highlighted that data center royalty growth exceeded 100% year-over-year for a second consecutive quarter as hyperscalers continue deploying server CPUs at scale4

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. This acceleration reflects the growing adoption of Arm's low-power chip architectures by major technology companies including Alphabet and Amazon, which are developing in-house AI chips based on Arm's designs3

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AI Infrastructure Fuels Licensing and Architecture Adoption

The surge in AI demand has positioned Arm Holdings as a critical supplier of energy-efficient chip designs for AI infrastructure. Companies prize Arm's chip designs for their power efficiency, a crucial advantage for data center operators managing soaring energy costs and heat generated by massive AI models1

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. During the quarter, Nvidia's Vera CPU, built on Arm architecture, entered full production, while AWS announced a multi-year agreement with Meta to deploy tens of millions of Arm-based Graviton5 cores for AI workloads2

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. Shipments of Arm's Neoverse data center processors have now surpassed 1.5 billion cores, with approximately 30% of those shipments occurring during the last nine months3

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AGI CPU Exceeds Expectations with $2 Billion Demand

Arm's AGI CPU, a new AI chip unveiled in March, is outperforming initial projections. Customer demand for the processor now exceeds $2 billion across fiscal years 2027 and 2028, and the company has already delivered the product to multiple customers1

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. Oracle has agreed to purchase the new chip, CEO Rene Haas confirmed in an interview with Reuters, though he did not disclose the contract value1

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. Haas noted that Arm has secured new customers in North America and China, and the company can now secure supply for more than $1 billion worth of chips5

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. Jefferies analysts project AGI CPU sales could reach $18 billion in fiscal 2031, surpassing Arm's own forecast of $15 billion1

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Smartphone Royalty Growth Concerns Temper Market Reaction

Despite the earnings beat estimates and strong AI outlook, Arm Holdings shares fell nearly 7% in after-hours trading following the earnings announcement3

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. Investors reacted negatively after the company indicated that smartphone royalty growth would soften in the current quarter, with expectations of roughly 10% to 15% growth3

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. Management pointed to memory shortages affecting handset production as a contributing factor to the sequential decline in smartphone royalties. However, the stock later surged 18% in afternoon trading as analyst conviction around data center royalty revenue and the broader semiconductor sector rally provided a powerful tailwind4

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