Arm NASDAQ: ARM reported record results for the fourth quarter of fiscal 2026 and the full fiscal year, pointing to accelerating momentum in cloud AI and growing customer interest in its recently launched Arm AGI CPU product family.
Record quarter and full-year results
CEO Rene Haas said Arm “delivered a record quarter and record fiscal year,” with fourth-quarter revenue of $1.49 billion, up 20% year-over-year and above the midpoint of guidance. Haas said licensing revenue rose 29% to $819 million, while royalty revenue increased 11% to $671 million, helping drive record non-GAAP EPS of $0.60.
For fiscal 2026, Haas said revenue reached a record $4.92 billion, up 23% year-on-year. He cited royalty revenue of $2.61 billion (up 21%) and licensing revenue of $2.31 billion (up 25%). Non-GAAP EPS for the year was a record $1.77.
CFO Jason Child also emphasized the milestone nature of the quarter, calling the Q4 revenue figure “nearly $250 million higher than our previous records.” He said Q4 non-GAAP operating expenses were $734 million, about $10 million below guidance and up 30% year-over-year due to R&D investment. Non-GAAP operating income was $731 million and non-GAAP operating margin was “about 49%,” according to Child.
Cloud AI and data center royalties continue to ramp
Management repeatedly pointed to cloud AI as the primary driver of royalty growth. Child said the “biggest contribution” to Q4 royalty growth came from cloud AI, adding that data center royalty revenue “continues to more than double year-over-year.” He attributed the trend to the ramp of Arm-based server chips at major hyperscalers and expanding deployments of data center networking chips, including DPUs and SmartNICs, where Child said Arm has “close to 100% market share.”
Haas highlighted a series of customer and partner developments that, in his view, demonstrate Arm’s expanding role in AI infrastructure. Among the examples he cited:
- At Google Cloud Next, Google announced TPU 8t (training) and TPU 8i (inference), pairing those accelerators with custom Arm Axion CPUs instead of x86 host processors, which Haas said enabled “an 80% improvement” versus the previous x86 approach while using “50% less power.”
- AWS continues scaling Arm-based Graviton alongside Trainium and Nitro.
- Microsoft is advancing Arm-based “Cobalt” for Azure workloads.
- At Nvidia GTC, Nvidia announced “Vera,” an Arm-based CPU, and a standalone rack integrating 256 Vera CPUs.
In Q&A, Haas said Neoverse-based data center royalties “have doubled year-on-year,” and added that he expected them “to double year-on-year again” this year.
Arm AGI CPU demand expands; supply chain the gating factor
Haas framed agentic AI as a shift that expands the role of CPUs in coordinating tasks, moving data, managing memory, enforcing security, and orchestrating work around accelerators. He said Arm estimates data centers will require “more than 4 times today’s CPU capacity,” creating a CPU market opportunity of “more than $100 billion by 2030.”
Arm’s Arm AGI CPU, introduced at its Arm Everywhere event, is positioned to address that need. Haas said Arm’s “first production silicon product for the data center” is expected to deliver “more than 2 times the performance per rack compared with x86 platforms,” with the potential to reduce AI data center capital expenditure “by up to $10 billion per gigawatt.” He named Meta as a “lead partner and co-developer” working with Arm on a “multi-generation roadmap.”
On customer traction, Haas said demand has increased materially since the March launch. “We now have more than $2 billion of customer demand across fiscal 2027 and fiscal 2028,” he said, calling it “more than double” what Arm stated at launch. Child reiterated that Arm has “line of sight” to that demand, but said the company is maintaining its outlook of $1 billion while it works to secure supply chain capacity. Child said the first revenues from “production shipped sales” are still expected to land in Q4 of fiscal 2027.
Asked about what changed in the last six weeks, Haas said demand is coming from both existing launch customers increasing forecasts and new customers who “didn’t talk about” at the event. He also noted a pathway for faster deployment through finished racks from partners such as Supermicro, Lenovo, and ASRock, which he said can reduce friction because many customers already have Arm software work completed.
Child said Arm is not changing the Q4 target discussed at the Arm Everywhere event, which he described as “$90-ish million” in Q4. He said the company would provide further updates as it progresses through the year and give a “much firmer estimate” in Q3.
Licensing trends, ACV growth, and operating outlook
On licensing, Child said Q4 license and other revenue rose 29% to $819 million, driven by demand for next-generation architectures and “deeper strategic engagements.” He cited a long-term strategic partnership with the Indonesian government and said Arm signed two next-generation compute subsystem (CSS) licenses—one for smartphone chips and one for data center networking chips.
Child also noted that SoftBank’s technology licensing and design services agreement contributed $200 million of licensing revenue in the quarter, “flat with the prior quarter.” He emphasized that licensing can vary quarter-to-quarter due to deal timing and size, and pointed to annualized contract value (ACV) as a key indicator. Child said ACV grew 22% year-over-year and remained above Arm’s long-term expectations.
Looking to fiscal 2027, Child said he expects royalty growth to be “roughly 20% for the year,” with quarterly results “relatively close” to that range. He said licensing would likely be back-end weighted, “about 60%” in the second half and “40%” in the first half. On expenses, Child said non-GAAP OpEx is expected to grow sequentially each quarter by “a few%,” with the company expecting to grow expenses less than revenue by year-end and show incremental margin improvement throughout the year.
Guidance and long-term targets reiterated
For Q1, Child guided to revenue of $1.26 billion ± $50 million, implying about 20% year-over-year growth at the midpoint. He said both royalty revenue and license and other revenue are expected to be up “around 20%” year-over-year. Arm expects non-GAAP operating expense of approximately $760 million and non-GAAP EPS of $0.40 ± $0.04.
Child also reiterated longer-term targets shared at the Arm Everywhere event: by FY 2031, Arm expects to generate $15 billion in AGI CPU revenue and $10 billion in IP revenue, for a total of $25 billion, translating to “more than $9 in EPS.”
In closing remarks, Haas said Arm is seeing “unprecedented compute demand” and described two growth vectors: the Arm AGI CPU business and its IP/CSS-driven royalty business. He said the IP business around Neoverse and CSS “has doubled year-on-year,” and that Arm is “projecting it to double again year-on-year,” while customer demand for the AGI CPU has risen above $2 billion over the next two years.
About ARM NASDAQ: 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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