TLDR
- ARM shares jumped 8% to $115.69 on Wednesday with 4.32 million shares traded
- Susquehanna upgraded ARM to Positive rating with $150 price target on AI chip plans and higher device fees
- Company beat Q2 earnings with $0.39 EPS versus $0.33 estimate and $1.14 billion revenue, up 34.5% year-over-year
- ARM is working with SoftBank and Broadcom on OpenAI’s custom AI chip Titan-1, expected to ramp in late 2026
- New v9 architecture carries double the royalty rate compared to v8, with adoption still below peak levels
ARM Holdings shares climbed 8% during Wednesday trading, reaching $115.69 after hitting an intraday high of $117.28. The rally came as Susquehanna upgraded the stock to Positive with a $150 price target.
Arm Holdings plc American Depositary Shares, ARM
Trading volume reached 4.32 million shares, about 23% below the stock’s average daily activity. The stock closed the previous session at $107.17.
Susquehanna’s upgrade focuses on ARM’s expanding role in AI chip development and rising fees from its newer architecture. The firm sees opportunity despite near-term headwinds in the company’s core smartphone and PC markets.
The stock has dropped 30% over the past six months as investors worried about weaker demand for phones and PCs. Memory price increases have added pressure on these markets. Analysts believe these concerns are now reflected in the current price.
ARM is reportedly working on a custom AI chip for OpenAI called Titan-1. The project involves collaboration with SoftBank and Broadcom. This marks ARM’s first major push into AI accelerators beyond its traditional central processor business.
The first version of Titan-1 is expected to begin production in late 2026. Follow-on versions should drive higher volumes through the end of the decade. Susquehanna estimates the OpenAI program could eventually generate over $1 billion annually in royalty revenue. That compares to roughly $2.5 billion in total company royalties expected this year.
Data Center Growth Accelerates
Major cloud companies are deploying new in-house chips built on ARM designs. These chips feature higher core counts that translate into larger royalty payments per unit. ARM is also developing a custom server processor for Meta, according to reports.
This Meta project represents a shift from ARM’s traditional licensing model. Instead of just licensing designs, ARM would sell finished chips. That change would allow the company to capture a bigger share of profits from each sale.
Higher Fees Per Smartphone Device
ARM is charging more per smartphone even as unit volumes soften. Chipmakers are switching from ARM’s older v8 architecture to the newer v9 standard. The v9 architecture carries approximately double the royalty rate of v8.
Current adoption of v9 remains well below the peak levels seen with v8. This gap leaves room for continued growth in 2026. ARM is also promoting a more integrated chip design approach that commands even higher fees.
Samsung, MediaTek and Xiaomi have already adopted this integrated approach in premium phones. The strategy helps ARM offset weaker overall smartphone demand.
The company reported strong Q2 results in November. Earnings per share came in at $0.39, beating the $0.33 consensus estimate by $0.06. Revenue reached $1.14 billion compared to analyst expectations of $1.06 billion. That represented 34.5% growth year-over-year.
ARM set Q3 2026 guidance of $0.37 to $0.45 earnings per share. Analysts expect about $0.90 EPS for the full year. The company’s market capitalization stands at $120.81 billion.
Analyst ratings remain mixed on the stock. MarketBeat shows a consensus rating of Moderate Buy with an average price target of $175.50. UBS recently trimmed its target to $195 from $200 while maintaining a buy rating. Citigroup downgraded the stock from buy to hold on January 13.
Institutional investors have been active in the stock. Rathbones Group raised its stake by 4,638.8% in the fourth quarter, now holding 500,043 shares valued at $54.66 million. Newbridge Financial Services Group increased its position by 54% to 90,145 shares worth $9.85 million.
ARM’s 50-day moving average sits at $123.53 while the 200-day moving average stands at $141.46.
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