Arm Stock Plunges -- Smartphone Business Delivers a Major Disappointment
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Arm Stock Plunges -- Smartphone Business Delivers a Major Disappointment Nauman Khan Thu, November 5, 2026 at 10:05 AM EST 1 min read ARM -12.16% AAPL -0.17% This article first appeared on GuruFocus . Arm Holdings ( ARM ) delivered better-than-expected quarterly earnings, but weaker royalty growth highlighted the challenges facing its smartphone business, according to its fiscal second-quarter earnings release. The chip designer reported adjusted earnings of 52 cents per share on revenue of $1.44 billion, beating analyst estimates of 48 cents and $1.38 billion, respectively. Data center royalties doubled from a year earlier, reflecting growing demand for Arm technology outside mobile devices. Warning! GuruFocus has detected 2 Warning Sign with ARM. Is ARM fairly valued? Test your thesis with our free DCF calculator. However, royalty revenue increased just 8% to $670 million, falling short of the $705 million analysts had expected. Arm attributed the slower growth to limited memory availability and higher prices, which have weighed on smartphone production among Apple ( AAPL ) and Android device partners. Royalty payments are fees Arm collects when customers use its technology in chips shipped inside devices. That makes smartphone production trends important to its revenue. The pressure extends beyond Arm, as Qualcomm ( QCOM ) has also flagged challenges involving Android and Apple modem-related revenue. Arm shares recently traded near $177.20, with investors also weighing the stock's valuation of more than 196 times earnings.
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