Arm Holdings PLC (ARM)

Price$252.09Cached quoteAs of 2026-09-06 22:43 UTC

AI: Overvalued

Price checkThe shares demand extraordinary growth even after Arm's recent profit and cash improvement.

At the observed price, Arm is worth about $253 billion, roughly 49 times trailing revenue and about 240 times trailing earnings. Trailing free cash flow, meaning cash left after operations and capital spending, is about $1.5 billion, implying roughly 168 times that cash measure. Those valuations require many years of unusually fast growth with strong eventual margins. Arm could deliver that if data-center silicon becomes enormous, but today's proven earnings and cash generation provide too little valuation support for a value investor.

Big pictureRevenue and cash are growing quickly, but licensing timing and new chip spending add volatility.

Fiscal 2026 revenue rose 23% to $4.92 billion, while net income increased 14% to $904 million. Operating cash flow reached $1.52 billion, although fiscal 2025 produced only $397 million, showing that collections and contract timing can move cash sharply between periods. The latest quarter strengthened the picture: revenue rose 22% and operating cash flow reached $902 million, helped by favorable collection and tax timing. Meanwhile capital spending has climbed rapidly as Arm expands beyond licensing into physical data-center chips, making future cash needs less predictable.

Business strengthArm combines powerful royalty economics with ample liquidity, though employee shares remain expensive.

Arm's core licensing model is exceptionally profitable before research costs: fiscal 2026 gross profit was $4.80 billion on $4.92 billion of revenue. Cash reached $3.06 billion by June, current assets were more than five times current liabilities, and reported liabilities were only $2.57 billion, providing substantial downside protection from financial distress. The drawback is dilution and compensation: trailing share-based compensation is about $1.15 billion, exceeding trailing net income, while shares outstanding have risen from 1.04 billion in fiscal 2024 to 1.068 billion. No regular dividend or buyback offsets that issuance.

What could change the storyThe valuation becomes defensible only if data-center chips create a much larger profit engine.

The strongest bull case is Arm's move into complete data-center processors: management says customer demand for its new AGI processor exceeds $2 billion across fiscal 2027 and 2028, while data-center royalties more than doubled in the latest quarter. The bear case is that manufacturing introduces supply, inventory and capital requirements absent from Arm's traditional licensing model, while smartphone royalties remain cyclical. For today's valuation to look reasonable, AGI demand must convert into sustained multibillion-dollar sales and much higher earnings without eroding licensing economics or requiring continued heavy share compensation.

AI: News

Record first-quarter resultsArm beat expectations as data-center royalties surged, but smartphone concerns tempered investor enthusiasm.

On July 29, Arm reported fiscal first-quarter revenue of $1.289 billion, up 22%, with royalty revenue up 22% and licensing revenue up 23%. Data-center royalties more than doubled. Management guided the next quarter to about $1.38 billion of revenue, above prevailing analyst expectations. Reuters reported the shares nevertheless fell nearly 7% after hours, with concern about weaker smartphone royalties. The timing supports an expectations reset, although a single trading move cannot establish one cause.

AGI demand acceleratesCustomer demand for Arm's new data-center processor exceeded early plans, expanding its largest growth opportunity.

By May and June, Arm said demand for its first internally designed data-center processor had surpassed $2 billion across fiscal 2027 and 2028, more than double its launch estimate. Oracle also joined an ecosystem already including Meta, OpenAI and other large technology customers. This matters because selling complete processors could add revenue far beyond Arm's traditional royalty stream. It also changes the risk profile: Arm must now secure manufacturing capacity and execute a hardware supply chain rather than mainly licensing designs.

Silicon strategy launchedArm entered chip production for the first time, raising both its revenue ceiling and execution risk.

On March 24, Arm unveiled the AGI CPU, its first production silicon product, developed with Meta for artificial-intelligence data centers. Arm named customers including OpenAI, Cloudflare and SAP and said broader system availability was expected in the second half of 2026. Reuters reported management's long-range ambition for the product reaching $15 billion of annual revenue within five years. That possibility helps explain a premium valuation, but it depends on manufacturing, customer adoption and economics that Arm has not yet demonstrated over a full cycle.

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Revenue

2022

2023

2024

2025

2026

Net income

2022

2023

2024

2025

2026

Free cash flow

2022

2023

2024

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2026

Total cash / debt

CashTotal debt

2022

2023

2024

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2026

Financial statements

	2026	2025	2024	2023	2022
Revenue	$4.92B	$4.01B	$3.23B	$2.68B	$2.70B
Gross profit	$4.80B	$3.89B	$3.08B	$2.57B	$2.57B
Gross margin	97.54%	96.98%	95.24%	96.04%	95.15%
Research & development	$2.78B	$2.07B	$1.98B	$1.13B	$995.0M
Operating expenses	$3.90B	$3.06B	$2.97B	$1.90B	$1.94B
Operating income	$900.0M	$831.0M	$111.0M	$671.0M	$633.0M
Operating margin	18.29%	20.74%	3.43%	25.05%	23.42%
EBITDA	$1.15B	$1.01B	$273.0M	$841.0M	$818.0M
EBITDA margin	23.35%	25.31%	8.44%	31.39%	30.26%
Net income	$904.0M	$792.0M	$306.0M	$524.0M	$549.0M
Net profit margin	18.37%	19.77%	9.46%	19.56%	20.31%
Basic EPSper basic share	$0.85	$0.75	$0.30	$0.51	$0.54
Diluted EPSper diluted share	$0.85	$0.75	$0.29	$0.51	$0.54

Review official source filings ↗

Owners

Reported shareholders

Reference date Jun 30, 2026

Reported holdings Number of shares

View holders

Top 11 reported holders of ARM
Holder	Shares held
SOFTBANK GROUP CORP.	922.73M
Haas Rene A.	396.01K
Child Jason	174.23K
FISHER RONALD D	35.62K
Abbey William	20.56K
DYKSTRA KAREN E	13.71K
Bartels Laura Kathleen	12.14K
Schooler Rosemary	9.57K
Sine Jeffrey	9.57K
JACOBS PAUL E	7.44K
SOHN YOUNG	2.4K

Bars compare reported share counts. A matching total for this share class and reporting period is unavailable, so percentages are not shown.

Source: SEC Form 3 ↗Updated Sep 29, 2026 · Quarterly data

Insider buys & sells

Jul 1, 2024–Jun 30, 2026

Buys0$0.00 disclosed value

Sells (SEC code S)39$66.38M disclosed value

Transaction	Insider	Type	Shares	Price	Value	Owned after
Jun 2, 2026Form 4	Bartels Laura KathleenChief Accounting Officer	SellOrdinary Shares	11.3K	$392.70	$4.44M	12.1K
Jun 1, 2026Form 4	Abbey WilliamChief Commercial Officer	SellOrdinary Shares	3.9K	$415.52	$1.63M	20.6K
Jun 1, 2026Form 4	Abbey WilliamChief Commercial Officer	SellOrdinary Shares	2.6K	$383.73	$1.01M	24.5K
May 28, 2026Form 4	Abbey WilliamChief Commercial Officer	SellOrdinary Shares	4.2K	$343.81	$1.44M	27.1K
May 22, 2026Form 4	Abbey WilliamChief Commercial Officer	SellOrdinary Shares	2.3K	$305.82	$703.4K	31.3K