Arm Holdings Posts Record $1.44B Quarter, AI Chip Demand Grows

Arm Holdings plc reported record second-quarter fiscal 2027 revenue of $1.44 billion on November 4, 2026, up 27% from a year earlier, as licensing revenue jumped 50% and royalty revenue tied to data-center and AI chips kept climbing. The Cambridge, UK-based chip designer also raised its confidence in generating up to $2 billion in revenue from its new "Arm AGI CPU" silicon business across fiscal 2027 and 2028, with first commercial deliveries still on track for the fiscal fourth quarter.

Who Is Arm Holdings?

Arm Holdings plc is a Cambridge, UK-based semiconductor design company that licenses the processor architecture used in the overwhelming majority of the world's smartphones, and increasingly in data-center servers, cars, and AI accelerators. Rather than manufacturing chips itself, Arm has historically earned money by licensing its instruction-set architecture and core designs to chipmakers such as Apple, Qualcomm, and Samsung, then collecting a per-chip royalty when those designs ship in finished silicon. More background on the company's history and structure is available on Wikipedia and Arm's own corporate site. That licensing-plus-royalty model is the lens through which the Q2 fiscal 2027 numbers below should be read.

Record Q2 Revenue: $1.44 Billion, Up 27% Year Over Year

Arm's fiscal second quarter ended September 30, 2026, and the company detailed results in a shareholder letter filed with the U.S. Securities and Exchange Commission on Form 6-K on November 4, 2026. Total revenue reached $1,443 million, compared with $1,135 million in the same quarter a year earlier — a 27% increase. According to the filing, it marked Arm's fifth consecutive quarter of total revenue growth above 20%, a streak CEO Rene Haas highlighted directly in the shareholder letter, noting that "Arm delivered its fifth consecutive quarter of revenue growth above 20%." Arm's official earnings announcement on the newsroom site points to that letter as the source of the full results.

The quarter also extended Arm's push beyond pure intellectual-property licensing. The company said demand for its silicon business "continues to accelerate, with growing customer commitments," a reference to both its royalty-bearing chip designs and its newer, directly sold silicon products.

Licensing vs. Royalty: Where the Growth Came From

Arm's two reporting segments moved in different directions. Licensing and other revenue, which includes upfront fees from new architecture and design agreements, came in at $773 million, up 50% year over year — the larger driver of the quarter's growth. Royalty revenue, which Arm collects as a percentage of the value of chips shipped using its designs, was $670 million, up a more modest 8% year over year.

The filing attributes the licensing jump to "multiple high-value license agreements" signed during the quarter, without naming the customers involved. On the royalty side, the headline growth rate understates how the mix is shifting: while the overall royalty line grew only 8%, the fastest-growing categories inside it — data center and physical AI — grew far faster, as detailed below.

Licensing revenue is inherently lumpy, since it depends on the timing of large, multi-year architecture agreements rather than steady unit shipments. Royalty revenue, by contrast, is a trailing indicator: it reflects chips that shipped this quarter based on designs licensed years earlier, which is why Arm's royalty growth tends to lag well behind the device categories, like AI data-center silicon, where design wins are happening fastest right now. Investors watching for confirmation that today's licensing deals translate into tomorrow's royalty checks typically track that lag over several quarters rather than any single report.

GAAP vs. Non-GAAP: Why the EPS Figures Diverge

Coverage of Arm's results has circulated two very different earnings-per-share numbers, and both are accurate — they just measure different things. On a GAAP basis, Arm reported net income of $130 million and diluted earnings per share of $0.12, down from $0.22 a year earlier. On a non-GAAP basis, which strips out items such as share-based compensation and acquisition-related costs, Arm reported net income of $566 million and diluted EPS of $0.52, up from $0.39 a year earlier.

The gap between GAAP operating income ($201 million) and non-GAAP operating income ($638 million) is driven primarily by stock-based compensation, which Arm, like many semiconductor IP and software companies, excludes from its adjusted figures. Investors and analysts typically focus on the non-GAAP numbers when comparing Arm's results against Wall Street estimates and its own guidance, which is also issued on a non-GAAP basis. The full reconciliation between GAAP and non-GAAP figures, including the specific adjustments Arm makes, is laid out in the earnings press release filed as Exhibit 99.1 to the November 4 Form 6-K.

That GAAP/non-GAAP gap is worth watching over time, not just this quarter. Arm has been issuing increasingly large grants of share-based compensation as part of its push to build out its own silicon engineering teams for projects like the Arm AGI CPU, and that cost shows up fully in GAAP earnings even though it never touches cash. As long as revenue keeps growing faster than the share count, the non-GAAP figures should keep climbing even if GAAP net income stays comparatively flat or declines, as it did this quarter.

Data Center and Physical AI Royalties Surge

Inside the royalty line, Arm singled out two categories growing well ahead of the segment average. Data center royalty revenue roughly doubled year over year, as cloud providers and hyperscalers continue shipping more Arm-based server CPUs. Physical AI royalty revenue — Arm's term for chips used in robotics, autonomous vehicles, and other machine-embedded AI systems — grew 50% year over year.

Arm also disclosed that more than 10 billion Arm-based chips shipped in the quarter, an increase of roughly 1.5 billion units from a year earlier. The company pointed to design wins across its install base, including Xiaomi's adoption of the Mali G2-Ultra NX GPU, OPPO and vivo integrating "Arm CSS for Mobile 2" (which Arm said lifts on-device agentic AI performance by 70%), and automaker Tensor packing more than 400 Arm CPU cores into its Robocar platform.

To support data-center silicon partners more broadly, Arm introduced Neoverse CSS N4, a compute subsystem the company said lets customers build differentiated CPU and networking chips faster, and expanded Arm Total Design for Physical AI, a program the shareholder letter says now includes more than 80 member companies. Full detail on both programs, along with the quarter's complete set of royalty and licensing disclosures, is available in the shareholder letter filed as Exhibit 99.2.

The doubling of data-center royalties is the clearest sign yet that Arm's long push into servers — a market historically dominated by x86 chips from Intel and AMD — is converting into actual shipped volume rather than just design-win announcements. Cloud providers including Amazon, Google, and Microsoft have each built custom Arm-based server CPUs over the past several years, and Arm's royalty line is now large enough that movements in that single category can meaningfully move the overall growth rate, even though data center remains smaller in absolute dollars than smartphone royalties.

Arm AGI CPU: Betting on a $2 Billion Silicon Business

The most closely watched line in the report was Arm's update on the "Arm AGI CPU," the company's first chip designed and sold directly to customers rather than licensed as IP to chipmakers. Arm said its confidence in reaching up to $2 billion in Arm AGI CPU revenue across fiscal 2027 and fiscal 2028 combined "has increased" over the prior 90 days, with purchase orders now extending through calendar 2027 and first commercial deliveries still on track for the fiscal fourth quarter of 2027 (the quarter ending March 2027).

Arm positioned the chip around coordinating AI agent workloads rather than competing head-on with GPU accelerators, describing it as hardware that helps "coordinate work between accelerator invocations." Oracle Cloud Infrastructure is named in the letter as planning to offer Arm AGI CPU instances in 2027. Arm also cited third-party testing from Signal65 showing roughly double the performance per server rack versus an AMD EPYC 9755-based system — a vendor-cited, third-party benchmark rather than an independent review — and argued the efficiency gain "could reduce the projected global power shortfall by half."

The AGI CPU effectively puts Arm in more direct competition with the x86 server incumbents it has spent two decades challenging through licensees instead of its own silicon; readers weighing the broader architecture debate can see how Arm's designs stack up against x86 chips for more background on that rivalry.

Q3 FY2027 Guidance: $1.54 Billion Ahead

For the fiscal third quarter (ending December 31, 2026), Arm guided to revenue of $1.54 billion, plus or minus $50 million, non-GAAP operating expense of approximately $825 million, and non-GAAP diluted EPS of $0.56, plus or minus $0.04. The shareholder letter did not provide full-year fiscal 2027 guidance, consistent with Arm's practice of guiding one quarter at a time.

If Arm hits the midpoint of its Q3 guidance, revenue would rise again sequentially from the record $1.443 billion booked in Q2, continuing the growth streak Haas referenced in the shareholder letter.

Balance Sheet and Cash Flow

Arm ended the quarter with $3.621 billion in cash and short-term investments, made up of $3.251 billion in cash and cash equivalents and $370 million in short-term investments. Non-GAAP free cash flow was $110 million for the quarter, $775 million for the first six months of fiscal 2027, and $1.096 billion on a trailing-twelve-month basis.

Arm's Results Land in a Crowded Chip Earnings Season

Arm's report arrived in the same week as a string of other semiconductor earnings, part of a broader run of results that also included Qualcomm's latest quarterly numbers and Supermicro's fiscal first-quarter results, against a backdrop in which chip stocks had already seen a sharp selloff earlier in the week. That context matters for how Arm's own record quarter gets read: a beat-and-raise report from a company tied closely to both mobile and AI data-center demand lands differently when the broader chip sector is already jittery about AI capital-spending sustainability.

What's Next for Arm

The next major checkpoint is Arm's fiscal third-quarter report, expected in early February 2027, which will show whether the company's $1.54 billion revenue guide and $0.56 non-GAAP EPS target hold up through the holiday-quarter device cycle. Beyond that, the bigger test is execution on the Arm AGI CPU: first commercial deliveries are targeted for fiscal Q4 2027 (the quarter ending March 2027), and the up-to-$2-billion revenue ambition for FY27-FY28 combined will depend on customers like Oracle Cloud Infrastructure actually deploying instances at scale next year rather than just signing purchase orders. Investors will also be watching whether data-center and physical AI royalty growth — the two fastest-growing pieces of Arm's existing licensing business — can keep pace as more hyperscale and robotics customers ship Arm-based silicon in volume.

Written byMara Lindqvist

Mara Lindqvist edits the hardware desk. She covers graphics cards, processors, memory and storage, the foundries and chip designers behind them, and what the numbers on a spec sheet mean for people choosing a PC. Specifications in her stories come from manufacturer spec pages and datasheets.

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