TLDR
- Arm reports Q4 earnings Wednesday; analysts expect EPS of $0.58 and revenue of $1.47 billion, up 19% year-over-year
- Multiple analysts raised price targets ahead of results, including Wells Fargo to $220 and Susquehanna to $210
- Arm is building its own data center CPU, the AGI CPU, shipping with Meta’s MTIA chip — but material revenue not expected until fiscal 2028
- Data center royalties grew over 100% year-over-year last quarter; investors will want to see that momentum continue
- Options traders are pricing in an 11.36% move in either direction after earnings
Arm Holdings reports its fourth-quarter earnings Wednesday afternoon, and Wall Street is watching closely.
Arm Holdings plc American Depositary Shares, ARM
Analysts expect adjusted EPS of $0.58, up from $0.55 a year ago. Revenue is forecast at $1.47 billion, a 19% rise from the same period in 2025.
ARM stock currently trades at a forward price-to-earnings ratio of 93 — compared to 21 for the S&P 500. That’s a lot of expectation baked in.
Ahead of results, several analysts lifted their price targets. Susquehanna moved its target to $210 from $170, keeping a Buy rating. Wells Fargo raised its target to $220 from $175. Morgan Stanley went to $191 from $150 but held its Hold rating.
The average analyst price target sits at $185.67, which actually implies around 9.6% downside from current levels. Wall Street’s consensus is Strong Buy, based on 19 Buys, four Holds, and one Sell over the past three months.
The key question this quarter is whether growth in AI and cloud can make up for softer smartphone royalty revenue. Last quarter, Arm posted record royalties and data center royalty growth of over 100% year-over-year. Investors will want to see that trend hold.
Susquehanna believes Arm-based CPU royalties can cushion any mobile weakness, with AI and AGI demand potentially keeping EPS above $10 for years ahead. Morgan Stanley also sees cloud AI supporting royalty growth and expects another strong licensing quarter.
Arm’s Big CPU Bet
The bigger story is Arm’s move into direct chip competition. For the first time, Arm is building its own data center CPU — the Arm AGI CPU — putting it in competition with its own customers.
The chip will ship in servers paired with Meta’s custom AI chip, the MTIA, in a setup similar to what Nvidia and Google already sell. Other customers are reportedly lined up.
Arm projects $15 billion in AGI CPU revenue by fiscal year 2031. For context, Arm’s total revenue over the last 12 months was $4.7 billion. The company has been clear that AGI CPU sales won’t become material until fiscal year 2028.
What Investors Need to See
Wells Fargo flagged that the stock’s recent run could itself become a headwind. Management may simply reaffirm its existing 2027 revenue outlook, which already aligns with Wall Street’s expectation of roughly 20% year-over-year growth.
That may not be enough. Investors will likely need clear signals on AI royalty momentum, cloud licensing strength, and any updates on the AGI CPU rollout.
Options traders are pricing in a move of 11.36% in either direction following the report.
Arm’s instruction set now powers chips inside Apple Macs, Windows PCs, and data centers run by AWS, Microsoft Azure, and Google Cloud. Nvidia’s AI servers use 36 Arm-based CPUs per unit.
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