Arm Q2 Revenue Tops $1.38B Guidance at $1.44B; Royalties Slip to $670M

Arm Holdings said on Nov. 4 that fiscal second-quarter revenue rose 27% to $1.443 billion, above the top of its $1.38 billion plus-or-minus $50 million guidance, according to its shareholder letter filed with the SEC.

Licensing did the lifting. License and other revenue grew 50% to $773 million, from $515 million a year earlier, while royalty revenue rose 8% to $670 million, from $620 million. Revenue from external customers was $1,019 million, against $713 million in the year-earlier quarter, and revenue from related parties was $424 million. Non-GAAP earnings per share came in at $0.52, above the $0.47 plus-or-minus $0.04 Arm had guided and up from $0.39 a year ago. GAAP earnings per share fell to $0.12 from $0.22. Reuters said the LSEG average analyst estimates were $1.38 billion for revenue and 47 cents for adjusted earnings.

Royalties Slip From the First Quarter While Licensing Jumps

The mix is the real story. Royalties are the steadier line, and Arm's first-quarter letter put them at $715 million, up 22% year over year, so the second-quarter figure of $670 million is about 6% lower than the quarter before. Reuters said analysts had expected royalties of $720.8 million. Licensing, by contrast, was $773 million against estimates of $625.1 million, and it made up about 54% of the quarter's revenue. Arm attributed the licensing jump partly to the timing and size of multiple high-value license agreements, which means it can swing from quarter to quarter.

Arm said royalties were helped by higher rates per chip on the Armv9 architecture and its compute subsystems, and by more Arm chips in data centers, but partly offset by the effect of memory pricing on the smartphone market. Data center royalties doubled from a year earlier, the company said.

For data-center operators, the useful number is Arm's claim about share. The company said Arm-based servers went from 15% of the top hyperscalers' server market in calendar 2024 to more than 50% in calendar 2025, and it expects more than 60% by the end of calendar 2026, based on ramps of Google Axion, AWS Graviton, Microsoft Cobalt and NVIDIA platforms. That fits what Voltgrid has tracked on NVIDIA's Arm-based Vera CPU and on how Arm is competing with x86 inside Oracle's cloud. The pitch is power: Arm cited independent testing by Signal65 showing its AGI CPU delivering roughly twice the performance per rack of AMD's EPYC 9755. That is Arm's account of a third-party test, not a Voltgrid measurement.

Third-Quarter Guidance Sits Just Above Consensus

Arm guided third-quarter revenue to $1.54 billion, plus or minus $50 million, with non-GAAP operating expenses of about $825 million and non-GAAP earnings per share of $0.56, plus or minus $0.04. The midpoint is about 6.7% above the second-quarter result, by Voltgrid's arithmetic. Reuters put the average analyst estimate for revenue at $1.53 billion and said the forecast disappointed investors, with the shares down about 3.5% in extended trading.

Arm has beaten its own guide before: the first-quarter guide was $1.26 billion plus or minus $50 million, and the result was $1.289 billion.

Arm AGI CPU and What Comes Next

The other number is silicon. Arm said it has purchase orders from multiple customers for its AGI CPU extending through calendar 2027, with first commercial deliveries on track for fiscal Q4 of FY27, and that its confidence in up to $2 billion of AGI CPU revenue across fiscal 2027 and 2028 has increased. Chief Executive Rene Haas told Reuters the target is "now very achievable" and that Arm has secured enough supply, including memory, to build it. Oracle Cloud Infrastructure plans to offer AGI CPU instances in 2027, the letter said.

Not yet confirmed: Arm does not report AGI CPU revenue as a separate line, so none of that $2 billion shows in this quarter's numbers. Arm also said it expects royalty growth to accelerate as new designs enter production, which is a forecast, not a result. Separately, Reuters noted that a Delaware jury last month found Arm breached parts of its licensing agreement with Qualcomm but awarded $2 in damages, leaving royalty and licensing terms to a judge.