Quick Overview
Arm Holdings will release its fourth-quarter financial results on Wednesday afternoon, drawing significant attention from the investment community.
Wall Street consensus expects adjusted earnings per share of $0.58, up from $0.55 in the same period last year. Revenue is projected to be $1.47 billion, representing a 19% increase compared to the same period in 2025.
Currently, ARM's forward P/E ratio stands at 93, significantly higher than the S&P 500's 21 times. This premium valuation reflects the market's strong expectations for its future growth.
Ahead of the earnings report, several institutions have raised their target prices. Susquehanna increased its target from $170 to $210 while maintaining a “Buy” rating. Wells Fargo raised its target from $175 to $220. Morgan Stanley adjusted its target from $150 to $191 but kept a “Hold” rating.
The analyst consensus target price is $185.67, indicating a potential downside of about 9.6% from current trading levels. The overall market rating remains a “Strong Buy,” based on 19 buy ratings, 4 hold ratings, and 1 sell rating over the past three months.
Susquehanna anticipates that CPU royalties based on Arm architecture will offset weakness in the mobile market, while demand for AI and AGI may keep earnings per share above $10 in the foreseeable future. Morgan Stanley also predicts that cloud computing AI will drive royalty growth and expects strong licensing performance.
Arm's Strategic Data Center Layout
A more significant development is Arm's entry into direct chip manufacturing. Breaking from tradition, Arm is producing its own data center processors—Arm AGI CPUs—positioning itself as a competitor to its licensed customers.
Arm expects AGI CPU sales to reach $15 billion by fiscal year 2031. To put this into perspective, Arm's total revenue over the past 12 months was $4.7 billion. Company leadership stated that the contribution from AGI CPUs will not be significant before fiscal year 2031.
Key Metrics to Watch
Wells Fargo noted that the recent rise in the stock could pose challenges. Management may only confirm its existing revenue guidance for fiscal year 2027, which aligns with Wall Street's annual growth expectations of about 20%.
This confirmation alone may not satisfy market participants. The market may demand concrete evidence of accelerated AI royalty growth, strong cloud licensing numbers, and substantial updates on AGI CPU deployments.
Options market positioning indicates that traders expect the stock price to fluctuate by 11.36% following the earnings release.
Arm's architecture has become the foundation for processors in Apple Mac computers, Windows-based PCs, and cloud infrastructures like AWS, Microsoft Azure, and Google Cloud. Each Nvidia AI server contains 36 Arm-based processors.