Arm Revenue Rises 27% to $1.44 Billion as Licensing Jumps and Royalties Lag

Licence and other revenue reached $773 million, up from $515 million a year earlier, the company said in its quarterly shareholder letter. Royalty revenue rose to $670 million from $620 million. Arm said royalties from data centre chips doubled from a year earlier, but higher memory prices hurt smartphones, its largest market, and partly offset that gain.

The gap between the two lines matters because royalties track how many Arm-based chips are actually sold, while licence fees reflect what customers are committing to build. Arm is also trying to become a chip seller in its own right. It said growing customer commitments give it "even greater confidence in achieving up to $2 billion in Arm AGI CPU revenue across fiscal 2027 and 2028", the period running to March 2028.

According to the letter, purchase orders for the AGI CPU, Arm's own data centre processor, extend through calendar 2027, and the first commercial deliveries are on track for the fourth quarter of the current fiscal year, which ends in March. Arm said Oracle plans to offer AGI CPU instances in 2027. It also cited tests by Signal65 at the Open Compute Project summit, which found the chip delivered about twice the performance per rack of AMD's EPYC 9755.

As the business shifts towards production silicon, Arm said it will stop reporting remaining performance obligations and licence counts, two figures investors have used to gauge future licensing income.

"Arm delivered its fifth consecutive quarter of revenue growth above 20%," chief executive Rene Haas said in the letter. He added that "demand for our silicon business continues to accelerate."

Non-GAAP operating income rose 37 per cent to $638 million, and the non-GAAP operating margin widened to 44.2 per cent from 41.1 per cent. On a GAAP basis, net income fell 45 per cent to $130 million and diluted earnings per share fell to $0.12 from $0.22. The year-earlier quarter included a $131 million gain from a business divestiture. Non-GAAP diluted earnings per share rose 33 per cent to $0.52.

Free cash flow fell to $110 million from $411 million in the year-earlier quarter. During the quarter Arm made $249 million in acquisition payments and recorded $376 million of share-based compensation. It ended September with $3.621 billion in cash and short-term investments. Annualised contract value rose 12 per cent to $1.79 billion.

The company also gave figures on how far its architecture has spread. It said Arm-based chips' share of servers at the top hyperscalers rose from 15 per cent in calendar 2024 to more than 50 per cent in 2025, and it expects that share to pass 60 per cent by the end of 2026. Arm-based PCs make up about 20 per cent of global shipments, and partners shipped more than 10 billion Arm-based chips in the quarter, 1.5 billion more than a year earlier. Royalty revenue from what Arm calls physical AI, which covers robotics and automotive, grew 50 per cent.

For the December quarter, Arm forecast revenue of $1.54 billion, plus or minus $50 million, and non-GAAP diluted earnings per share of $0.56, plus or minus $0.04. It expects non-GAAP operating expenses of about $825 million. Executives were due to discuss the results on a webcast at 14:00 Pacific time on Wednesday.