ARM (NASDAQ:ARM) Trading Up 8% on Earnings Beat

Key Points

• ARM shares jumped 8% after fiscal Q1 adjusted EPS reached $0.45 versus the $0.40 consensus, while revenue rose 22.4% year over year to $1.29 billion.
• AI and data-center demand are driving momentum: Arm reported strong interest in its AI-focused CPU roadmap and issued fiscal Q2 EPS guidance of $0.43–$0.51, above analyst expectations.
• Risks remain despite the upbeat results: royalty growth may slow amid smartphone weakness and memory-price pressure, while ARM’s very high valuation and mixed analyst target revisions leave the stock vulnerable to execution concerns.

ARM Holdings PLC Sponsored ADR (NASDAQ:ARM - Get Free Report) shares shot up 8% on Thursday after the company announced better than expected quarterly earnings. The company traded as high as $268.48 and last traded at $242.8490. Approximately 12,695,921 shares changed hands during mid-day trading, an increase of 48% from the average daily volume of 8,606,067 shares. The stock had previously closed at $224.89.

The company reported $0.45 earnings per share for the quarter, topping analysts' consensus estimates of $0.40 by $0.05. The company had revenue of $1.29 billion during the quarter, compared to analysts' expectations of $1.26 billion. ARM had a net margin of 18.37% and a return on equity of 12.43%. The firm's revenue for the quarter was up 22.4% on a year-over-year basis. During the same period in the prior year, the business posted $0.35 earnings per share.

Key ARM News

Here are the key news stories impacting ARM this week:

• Positive Sentiment: Results exceeded expectations: Fiscal Q1 revenue rose 22.4% year over year to $1.29 billion, topping the approximately $1.26 billion consensus estimate. Adjusted EPS was $0.45 versus expectations of $0.40. ARM Q1 Earnings Call Highlights AI CPU Demand and Data Center Growth
• Positive Sentiment: AI and data-center demand remain powerful growth drivers: Arm reported surging demand for its AI-focused CPU roadmap, while data-center royalty revenue reportedly doubled. Cloud providers’ use of custom chips is supporting licensing and royalty growth. Arm stock jumps as Q1 beats estimates
• Positive Sentiment: Upbeat guidance: ARM issued fiscal Q2 EPS guidance of $0.43–$0.51, above the $0.39 analyst consensus, and forecast revenue above Wall Street expectations. The outlook signals continued customer momentum in AI infrastructure and edge computing. Arm forecasts quarterly revenue above estimates
• Neutral Sentiment: Analyst views are mixed: Needham reaffirmed a Buy rating with a $255 target, while TD Cowen and RBC retained Buy/Outperform ratings but substantially reduced their targets to $350 and $340, respectively. Morgan Stanley maintained Equal Weight and raised its target to $212, below the current trading level.
• Negative Sentiment: Royalty growth and valuation remain risks: Reports indicate fiscal Q2 royalty growth is expected to slow to roughly 13%, partly because of smartphone weakness and memory-price pressure. With ARM trading at a very high earnings multiple, investors remain sensitive to execution and any slowdown in AI-related growth. Memory Prices Hit Arm's Royalties as Stock Falls

Wall Street Analyst Weigh In

ARM has been the subject of several research analyst reports. Benchmark assumed coverage on shares of ARM in a research report on Thursday, July 16th. They set a "hold" rating for the company. Royal Bank Of Canada cut their price objective on ARM from $475.00 to $340.00 and set an "outperform" rating for the company in a research note on Thursday. KeyCorp raised their target price on ARM from $300.00 to $430.00 and gave the company an "overweight" rating in a research report on Tuesday, July 14th. Jefferies Financial Group restated a "buy" rating and issued a $320.00 target price on shares of ARM in a research report on Monday, July 20th. Finally, HSBC cut ARM from a "buy" rating to a "hold" rating and boosted their price target for the stock from $255.00 to $315.00 in a research report on Tuesday, July 14th. Eighteen equities research analysts have rated the stock with a Buy rating, seven have given a Hold rating and one has assigned a Sell rating to the company. According to data from MarketBeat, the company currently has an average rating of "Moderate Buy" and a consensus target price of $286.17.

Insiders Place Their Bets

In related news, CFO Jason Child sold 31,920 shares of ARM stock in a transaction that occurred on Wednesday, May 20th. The stock was sold at an average price of $226.54, for a total transaction of $7,231,156.80. Following the transaction, the chief financial officer owned 174,232 shares in the company, valued at approximately $39,470,517.28. This trade represents a 15.48% decrease in their ownership of the stock. The sale was disclosed in a filing with the SEC, which can be accessed through this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, insider William Abbey sold 10,887 shares of the business's stock in a transaction on Tuesday, May 19th. The stock was sold at an average price of $224.14, for a total value of $2,440,212.18. Following the transaction, the insider directly owned 43,353 shares in the company, valued at $9,717,141.42. This trade represents a 20.07% decrease in their position. The disclosure for this sale is available in the SEC filing. Over the last three months, insiders sold 216,049 shares of company stock worth $52,101,605.

Institutional Investors Weigh In On ARM

A number of institutional investors and hedge funds have recently added to or reduced their stakes in ARM. GAMMA Investing LLC grew its holdings in shares of ARM by 18.7% during the 2nd quarter. GAMMA Investing LLC now owns 406 shares of the company's stock worth $144,000 after purchasing an additional 64 shares during the period. CreativeOne Wealth LLC increased its position in shares of ARM by 5.0% during the fourth quarter. CreativeOne Wealth LLC now owns 1,830 shares of the company's stock valued at $200,000 after acquiring an additional 87 shares during the last quarter. AdvisorNet Financial Inc increased its position in shares of ARM by 6.2% during the first quarter. AdvisorNet Financial Inc now owns 1,681 shares of the company's stock valued at $254,000 after acquiring an additional 98 shares during the last quarter. Moors & Cabot Inc. raised its stake in shares of ARM by 5.3% in the 3rd quarter. Moors & Cabot Inc. now owns 2,050 shares of the company's stock valued at $290,000 after acquiring an additional 103 shares during the period. Finally, Heritage Trust Co raised its stake in shares of ARM by 5.5% in the 4th quarter. Heritage Trust Co now owns 2,045 shares of the company's stock valued at $224,000 after acquiring an additional 107 shares during the period. Hedge funds and other institutional investors own 7.53% of the company's stock.

ARM Trading Up 8.0%

The stock has a market capitalization of $259.38 billion, a price-to-earnings ratio of 289.11, a price-to-earnings-growth ratio of 7.61 and a beta of 3.76. The firm's fifty day moving average price is $331.09 and its 200 day moving average price is $211.79.

About ARM

Arm Limited NASDAQ: ARM is a global semiconductor IP company best known for designing energy-efficient processor architectures and related technologies that underpin a wide range of computing devices. Founded in 1990 as a joint venture between Acorn Computers, Apple and VLSI Technology and headquartered in Cambridge, England, Arm develops the ARM instruction set architectures and core processor designs that chipmakers license and integrate into custom system-on-chip (SoC) products. The company operates a licensing and royalty business model rather than manufacturing chips itself.

Arm's product portfolio includes CPU core families (such as Cortex and Neoverse lines), GPU and multimedia IP (Mali), neural processing units (Ethos) and a suite of system and physical IP blocks.

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