ARM (NASDAQ:ARM) Shares Gap Down - Should You Sell?

Key Points

• ARM shares fell nearly 12%, opening at $172.05 versus the prior close of $191.80, despite reporting better-than-expected quarterly results.
• Fiscal Q2 revenue rose 27% year over year to $1.44 billion and EPS beat estimates; however, weaker smartphone royalty revenue and concerns about valuation and the timing of AI-related growth weighed on investor sentiment.
• Management pointed to longer-term AI and data-center opportunities, including potential AGI CPU revenue, while analysts’ consensus rating remained Moderate Buy with a $293.72 average price target.

Arm Holdings PLC Sponsored ADR (NASDAQ:ARM - Get Free Report)'s share price gapped down before the market opened on Thursday. The stock had previously closed at $191.80, but opened at $172.05. ARM shares last traded at $170.9430, with a volume of 2,622,359 shares changing hands.

ARM News Summary

Here are the key news stories impacting ARM this week:

• Positive Sentiment: Arm reported record fiscal Q2 revenue of $1.44 billion, up 27% year over year, and EPS of $0.52 versus the $0.48 consensus. Licensing revenue rose 50%, data-center royalties more than doubled, and management’s next-quarter revenue outlook was above analyst estimates. Article: Is Arm Holdings a Buy After Its Latest Earnings Report?
• Positive Sentiment: Management highlighted growing demand for Arm’s AGI CPUs, with more than $2 billion in identified potential revenue across fiscal 2027–28. Arm also said its technology powers over half of hyperscaler servers, while Amazon Graviton revenue commitments have grown substantially. These opportunities support the longer-term AI and data-center growth case, though they depend on deployments and chip production. Article: Arm Holdings' Q2 Earnings Call Centers on AGI CPU Expansion
• Neutral Sentiment: Oracle plans to offer Arm AGI CPU instances in 2027, a potential route to broader adoption, but the revenue impact will depend on rollout and customer uptake. Article: Oracle Cloud plans to offer Arm AGI CPU instances in 2027
• Negative Sentiment: Investors are concerned that weaker-than-expected smartphone royalty revenue is offsetting AI and data-center growth. A record number of partner chip shipments did not produce a comparable increase in royalties, raising questions about monetization. Commentary also points to Arm’s demanding valuation and the risk that AGI-related revenue takes time to materialize—factors weighing on the shares despite the earnings beat. Article: Arm stock falls as weak smartphone royalties offset AI data-centre growth

Analyst Ratings Changes

A number of research analysts have issued reports on the company. TD Cowen reiterated a "buy" rating on shares of ARM in a research note on Thursday. Benchmark assumed coverage on ARM in a report on Thursday, July 16th. They set a "hold" rating for the company. Needham & Company LLC reaffirmed a "buy" rating and issued a $255.00 price target on shares of ARM in a research report on Thursday. Wells Fargo & Company dropped their price target on shares of ARM from $280.00 to $255.00 and set an "overweight" rating on the stock in a research note on Thursday. Finally, KeyCorp raised their price objective on shares of ARM from $300.00 to $430.00 and gave the company an "overweight" rating in a research note on Tuesday, July 14th. Nineteen investment analysts have rated the stock with a Buy rating, seven have issued a Hold rating and one has given a Sell rating to the company. Based on data from MarketBeat, the stock presently has a consensus rating of "Moderate Buy" and a consensus price target of $293.72.

ARM Stock Down 11.9%

The business has a 50 day moving average price of $256.08 and a two-hundred day moving average price of $229.28. The stock has a market cap of $180.57 billion, a P/E ratio of 173.95, a price-to-earnings-growth ratio of 5.91 and a beta of 3.93.

ARM (NASDAQ:ARM - Get Free Report) last released its quarterly earnings data on Wednesday, November 4th. The company reported $0.52 EPS for the quarter, beating the consensus estimate of $0.48 by $0.04. ARM had a net margin of 20.25% and a return on equity of 12.24%. The business had revenue of $1.44 billion during the quarter, compared to the consensus estimate of $1.38 billion. During the same quarter in the prior year, the firm earned $0.39 EPS. The business's revenue was up 27.1% on a year-over-year basis. On average, research analysts forecast that Arm Holdings PLC Sponsored ADR will post 1.17 earnings per share for the current year.

Insider Buying and Selling at ARM

In other news, CFO Jason Child sold 10,400 shares of the business's stock in a transaction dated Monday, September 21st. The shares were sold at an average price of $300.00, for a total value of $3,120,000.00. Following the completion of the sale, the chief financial officer owned 153,442 shares in the company, valued at approximately $46,032,600. The trade was a 6.35% decrease in their position. The transaction was disclosed in a document filed with the SEC, which can be accessed through this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan.

Institutional Investors Weigh In On ARM

Institutional investors and hedge funds have recently made changes to their positions in the stock. Arrowstreet Capital Limited Partnership raised its stake in ARM by 1,203.5% in the 1st quarter. Arrowstreet Capital Limited Partnership now owns 945,152 shares of the company's stock worth $142,983,000 after acquiring an additional 872,644 shares during the last quarter. Janus Henderson Group PLC acquired a new stake in ARM during the 1st quarter worth about $116,112,000. Hyperion Asset Management Ltd grew its stake in ARM by 36.9% during the 3rd quarter. Hyperion Asset Management Ltd now owns 727,273 shares of the company's stock valued at $210,662,000 after purchasing an additional 195,942 shares during the last quarter. Mirae Asset Global Investments Co. Ltd. purchased a new stake in ARM during the 3rd quarter valued at about $179,998,000. Finally, Altshuler Shaham Ltd increased its holdings in shares of ARM by 202.6% in the first quarter. Altshuler Shaham Ltd now owns 478,289 shares of the company's stock valued at $72,356,000 after purchasing an additional 320,236 shares during the period. 7.53% of the stock is currently owned by institutional investors and hedge funds.

About ARM

Arm Holdings plc NASDAQ: ARM is a semiconductor and software design company that develops central processing unit (CPU) architectures and related intellectual property. Rather than manufacturing chips itself, Arm licenses its designs and instruction-set architectures to semiconductor companies and technology manufacturers, which incorporate them into their own products.

The company's offerings include CPU processor cores, graphics processing units through its Mali product family, system IP, development tools and software.

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