ARM Holdings PLC ADR (ARM) AI Stock Analysis

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ARM Holdings PLC ADR

(NASDAQ:ARM)

Rating:71Outperform

Price Target:―

ARM Holdings PLC ADR has a strong financial foundation with impressive profitability and growth in key areas like AI and data centers. However, technical indicators show mixed signals, and the high P/E ratio raises valuation concerns. The earnings call underscores both strong revenue growth and potential cost pressures, contributing to a balanced outlook.

Positive Factors

Earnings

Arm delivered better revenues, margins, and EPS driven by record licensing and royalty revenues and slightly lower operating expenses.

Growth Potential

Encouragingly, ARMv9 adoption rates increased due to the ramp of new technology, indicating growth potential.

Market Expansion

AI design momentum, as well as broadening of use of Arm in edge AI and design momentum in automotive and data centres, is expected to support growth this coming year.

Negative Factors

Demand Visibility

Limited demand visibility in key markets such as handsets, automotive, and IoT could impact ARM's units and mix.

Licensing Revenue

The disappointing guide is mainly driven by more than expected decline in Licensing revenues, down 28% Y/Y vs. expectation of down 15%.

Operating Expenses

The downside surprise is around OpEx, as the company guided a significant step-up in OpEx in F1Q26.

ARM Holdings PLC ADR (ARM) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$136.93B

Dividend YieldN/A

Average Volume (3M)5.07M

Price to Earnings (P/E)178.6

Beta (1Y)3.11

Revenue Growth25.73%

EPS Growth865.12%

CountryUS

Employees8,330

SectorTechnology

Sector Strength83

IndustrySemiconductors

Share Statistics

EPS (TTM)0.55

Shares Outstanding1,059,264,000

10 Day Avg. Volume4,041,201

30 Day Avg. Volume5,071,848

Financial Highlights & Ratios

PEG Ratio5.76

Price to Book (P/B)18.98

Price to Sales (P/S)0.00

P/FCF Ratio194.97

Enterprise Value/Market Cap0.88

Enterprise Value/Revenue8.62

Enterprise Value/Gross Profit34.39

Enterprise Value/Ebitda65.41

Forecast

1Y Price Target

$146.80

Price Target Upside10.28% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering19

ARM Holdings PLC ADR Business Overview & Revenue Model

Company DescriptionARM Holdings PLC ADR (ARM) is a leading semiconductor and software design company that specializes in the development of intellectual property (IP) for advanced microprocessors. Operating primarily in the technology and semiconductor sectors, ARM is renowned for its ARM architecture, which is widely used in mobile phones, tablets, and increasingly in devices across the Internet of Things (IoT). ARM licenses its technology to a broad range of industries, enabling other companies to produce their own ARM-based chips and devices.

How the Company Makes MoneyARM Holdings makes money primarily through licensing its intellectual property to semiconductor companies and device manufacturers. The company's revenue model is based on licensing fees and royalties. When companies use ARM's architecture to design their chips, they pay an initial license fee, followed by ongoing royalties based on the number of chips produced or sold. ARM's key revenue streams include the mobile and computing markets, where its technology is integral to the function of smartphones, tablets, and increasingly, laptops. Additionally, ARM has significant partnerships with major technology companies and silicon manufacturers, which contribute to its earnings through collaborative design and innovation projects. The company's strategic focus on expanding its presence in the IoT and automotive sectors is also a growing source of revenue.

ARM Holdings PLC ADR Key Performance Indicators (KPIs)

Any

Annualized Contract Value

Annualized Contract Value
Measures the yearly value of all active contracts, highlighting the company's revenue potential and customer commitment levels.

Chart InsightsArm Holdings' Annualized Contract Value has shown consistent growth, particularly in the last year, reflecting strong demand for its AI compute solutions. The recent earnings call underscores this momentum, highlighting record revenues and a significant increase in royalty income, driven by broad market adoption. However, macroeconomic uncertainties and tariff concerns pose potential risks. Despite these challenges, Arm is optimistic about continued growth, especially with the anticipated rise in Arm-based server chips at hyperscalers and robust AI and custom silicon demand.

Data provided by:

Main Street Data

ARM Holdings PLC ADR Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q4-2025)

% Change Since: 7.18%|

Next Earnings Date:Jul 30, 2025

Earnings Call Sentiment Positive

The earnings call highlighted Arm's strong financial performance with record revenues and growth in both royalty and licensing revenue. The company's strategic advancements in AI and data centers were notable. However, macroeconomic uncertainties and the decision to withhold full-year guidance due to limited visibility cast some concerns.

Q4-2025 Updates

Positive Updates

Record-Breaking Revenue and Growth

Q4 revenue exceeded $1 billion for the first time in Arm's history. For the full year, revenue topped $4 billion, with royalty revenue surpassing $2 billion, marking a first for the company.

Strong Royalty Revenue Growth

Arm delivered record royalty revenue of $607 million in Q4, an 18% year-on-year increase, driven by strong demand across all major markets. Smartphone royalties jumped 30% year-on-year.

Significant Licensing Revenue

Licensing revenue hit an all-time high of $634 million in Q4, driven by new deals and a 50% year-on-year increase. This includes a multi-year AI partnership with the Malaysian government.

AI and Data Center Expansion

Arm expects up to 50% of new server chips at hyperscalers to be Arm-based. The company is seeing strong momentum in custom silicon and AI infrastructure.

Negative Updates

Macro Uncertainty and Tariffs

Arm expressed concerns over macro uncertainty and tariffs, which could indirectly impact royalty revenues. The company has limited visibility into the indirect impact on end demand.

Lack of Full Year Guidance

Arm did not issue full year guidance for fiscal 2026 due to uncertainty in the global trade and economic picture, citing less visibility from partners.

Company Guidance

During the Arm Q4 and fiscal year 2025 conference call, the company provided guidance that highlighted record-breaking financial performance driven by strong demand for power-efficient AI compute across various sectors. Arm achieved a milestone with Q4 revenue exceeding $1 billion, contributing to a full-year revenue of over $4 billion, with royalty revenue surpassing $2 billion. The company reported a record royalty of $607 million for Q4, attributing growth to broad-based adoption across major markets such as data center, automotive, smartphones, and IoT. Arm expects up to 50% of new server chips at hyperscalers to be Arm-based in the current year. For Q1 fiscal 2026, Arm anticipates revenue between $1.0 billion and $1.1 billion, with a strong 25% to 30% projected royalty growth. The company is not providing full-year guidance due to macroeconomic uncertainties but remains confident in healthy growth, driven by visibility into customer design pipelines and rising demand for custom silicon and AI solutions.

ARM Holdings PLC ADR Financial Statement Overview

Summary

ARM Holdings PLC ADR showcases strong financial performance, driven by high profit margins and operational efficiency. The balance sheet is robust with minimal leverage and solid equity backing. However, the decline in free cash flow growth rate is a concern and indicates areas for potential improvement.

Income Statement

Very Positive

ARM Holdings PLC ADR demonstrates robust financial performance with a TTM gross profit margin of 94.69% and net profit margin of 21.82%, indicating strong profitability. The revenue growth rate from the previous annual period to TTM is 14.25%, showcasing healthy growth. Both EBIT and EBITDA margins are solid, at 11.99% and 16.65% respectively, reflecting operational efficiency. However, a decline in EBIT margin from the earlier periods suggests rising operational costs or competitive pressures.

Balance Sheet

Positive

The balance sheet reflects a strong financial position with a low debt-to-equity ratio of 0.04, indicating minimal leverage. The equity ratio is high at 75.55%, highlighting financial stability. Return on Equity (ROE) is 12.56%, which is decent but has room for improvement. The company benefits from solid equity backing but should aim to enhance ROE to maximize shareholder value.

Cash Flow

Very Positive

The cash flow analysis shows a stable cash generation with a TTM free cash flow of $626 million. The operating cash flow to net income ratio is 1.00, demonstrating effective conversion of income to cash. The free cash flow to net income ratio stands at 0.78, indicating a significant portion of net income is translated into free cash flow. However, the free cash flow growth rate compared to the previous period is -33.90%, suggesting a need for improvement.

TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Breakdown
Income Statement		Total Revenue
3.69B	3.23B	2.68B	2.70B	2.03B
	Gross Profit
3.50B	3.08B	2.57B	2.57B	1.88B
	EBIT
443.00M	111.00M	671.00M	633.00M	239.00M
	EBITDA
615.00M	279.00M	855.00M	865.00M	443.00M
	Net Income Common Stockholders
806.00M	306.00M	524.00M	549.00M	388.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.67B	2.92B	2.21B	1.64B	0.00
	Total Assets
8.50B	7.93B	6.87B	6.51B	0.00
	Total Debt
271.00M	226.00M	219.00M	261.00M	0.00
	Net Debt
-1.76B	-1.70B	-1.33B	-743.00M	0.00
	Total Liabilities
2.08B	2.63B	2.81B	2.96B	0.00
	Stockholders Equity
6.42B	5.29B	4.05B	3.55B	0.00
Cash Flow		Free Cash Flow
626.00M	947.00M	646.00M	383.00M	1.07B
	Operating Cash Flow
806.00M	1.09B	739.00M	458.00M	1.23B
	Investing Cash Flow
-17.00M	-516.00M	-138.00M	-619.00M	-340.00M
	Financing Cash Flow
-296.00M	-208.00M	-42.00M	-32.00M	-789.00M

ARM Holdings PLC ADR Technical Analysis

Technical Analysis Sentiment

Positive

Last Price133.11

Price Trends

50DMA

116.06

Positive

100DMA

128.59

Positive

200DMA

133.85

Negative

Market Momentum

MACD

3.23

Positive

RSI

59.04

Neutral

STOCH

55.47

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARM, the sentiment is Positive. The current price of 133.11 is above the 20-day moving average (MA) of 129.49, above the 50-day MA of 116.06, and below the 200-day MA of 133.85, indicating a neutral trend. The MACD of 3.23 indicates Positive momentum. The RSI at 59.04 is Neutral, neither overbought nor oversold. The STOCH value of 55.47 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ARM.

ARM Holdings PLC ADR Risk Analysis

ARM Holdings PLC ADR disclosed 88 risk factors in its most recent earnings report. ARM Holdings PLC ADR reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

ARM Holdings PLC ADR Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AMD	81 Outperform	$187.58B	85.17	3.90%	―	21.71%	99.00%
QCOM	81 Outperform	$162.02B	15.03	42.21%	2.28%	16.15%	32.28%
ADI	77 Outperform	$108.20B	59.36	5.21%	1.72%	-6.17%	-14.16%
TSM	77 Outperform	$864.62B	26.16	32.11%	0.94%	35.45%	47.97%
ARM	71 Outperform	$136.93B	178.65	13.05%	―	25.73%	865.12%
Sector *	62 Neutral	$11.80B	10.37	-7.29%	2.91%	7.39%	-7.96%
INTC	45 Neutral	$87.20B	―	-18.66%	2.49%	-3.97%	-562.40%

* Technology Sector Average

Performance Comparison

ARM

ARM Holdings PLC ADR

133.11

-6.80

-4.86%

AMD

Advanced Micro Devices

116.19

-44.15

-27.54%

ADI

Analog Devices

222.26

-9.13

-3.95%

INTC

Intel

20.06

-10.66

-34.70%

QCOM

Qualcomm

149.24

-55.61

-27.15%

TSM

TSMC

205.18

38.85

23.36%

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.