Arm Sinks 9% as Royalty Growth Slows to “Low Single Digits” on Smartphone Weakness

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Arm shares fell 9% after royalty revenue grew just 8%, though revenue and earnings beat guidance. A 26% drop in a big phone chipmaker’s handset revenue suggests Arm’s phone slump is industry-wide. Data-center royalties doubled, and Nvidia’s Nov. 17 report is the next read. The drop leaves Arm’s forward P/E below its three-year average. Arm Holdings ( ARM ) sank 9% this morning after its fiscal second-quarter royalties grew just 8%. Arm blamed memory prices squeezing the smartphone market, the same squeeze the biggest phone chipmaker reported Wednesday afternoon. The offset: data-center royalties doubled, as Arm-based chips from Nvidia ( NVDA ) and the big cloud companies keep spreading. Revenue rose 27% to $1.44 billion, above Arm’s guided range. Non-GAAP EPS was $0.52, against guidance of $0.47. License and other revenue jumped 50% to $773 million. Royalty revenue grew 8% to $670 million, short of the roughly 13% guided in July . Chief Financial Officer Jason Child guided December-quarter royalty growth to “low single digits year on year” on Arm’s earnings call. Smartphone chips made up about 43% of Arm’s fiscal 2026 royalty revenue. At Qualcomm ( QCOM ) , handset chip revenue fell 26% in its September quarter, as it flagged rising input costs, memory included. Qualcomm was also about $443 million of Arm’s revenue in fiscal 2026 . I don’t expect Arm’s phone royalties to recover before Qualcomm’s handset guidance does. Arm says Nvidia’s Arm-based Vera CPU is now in production with OpenAI, and Nvidia’s data-center revenue more than doubled to $89.0 billion in its July quarter. What Nvidia says about Vera on Nov. 17 is the next read on Arm’s fastest-growing royalty stream. TIKR tracks 43 analysts on Arm Holdings. How many say “Buy”? See the full breakdown of Buy, Hold, and Sell ratings on Arm Holdings, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Arm Holdings’ Analyst Ratings Going into the report, analysts expected normalized EPS to climb to $2.23 this fiscal year and $3.06 in fiscal 2028: This year looks within reach, with $0.97 earned in the first half and $0.56 guided for the December quarter. For fiscal 2028, analysts need royalties to speed back up. Arm’s multiple is now below its usual level: Arm traded at 82x forward earnings at the last close, against a three-year average of 85x. At today’s price, it’s about 76x. The market is pricing a phone cycle Qualcomm shares as if it were Arm’s alone, while data-center royalties doubled. I’d lean toward buying this dip. Of course, if royalties are still stuck in the low single digits at Arm’s early-February report, investors won’t see 76x as cheap. TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Arm could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use. Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!

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