ARM Holdings PLC ADR (ARM) AI Stock Analysis

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ARM Holdings PLC ADR

(NASDAQ:ARM)

Rating:70Outperform

Price Target:

$172.00

▲(9.74%Upside)

ARM Holdings PLC's overall score is bolstered by strong financial performance and strategic advancements in AI and data centers. However, high valuation, overbought technical indicators, and macroeconomic uncertainties from the earnings call weigh down the score.

Positive Factors

Growth Opportunities

The company's diverse revenue streams, strategic partnerships, and focus on innovation position it well for future growth, as its royalty rates expand exponentially across its newest, rapidly adopted platforms.

Market Position

Arm holds a significant position in the semiconductor ecosystem, shipping approximately 8 billion chips per quarter, with a 99% share of the mobile phone market, and a rapid expansion into IoT, automotive, consumer electronics, and infrastructure/cloud segments.

Negative Factors

Revenue Challenges

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

Valuation Concerns

Despite Arm's strengths, its premium valuation is considered high, trading at 59 times its FY27 estimates, the highest among its peers.

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

Market Cap

$165.67B

Dividend YieldN/A

Average Volume (3M)4.62M

Price to Earnings (P/E)210.4

Beta (1Y)3.09

Revenue Growth23.94%

EPS Growth156.53%

CountryUS

Employees8,330

SectorTechnology

Sector Strength94

IndustrySemiconductors

Share Statistics

EPS (TTM)0.55

Shares Outstanding1,059,264,000

10 Day Avg. Volume4,984,770

30 Day Avg. Volume4,617,612

Financial Highlights & Ratios

PEG Ratio-75.92

Price to Book (P/B)22.84

Price to Sales (P/S)0.00

P/FCF Ratio965.92

Enterprise Value/Market Cap0.93

Enterprise Value/Revenue10.44

Enterprise Value/Gross Profit40.04

Enterprise Value/Ebitda66.80

Forecast

1Y Price Target

$156.69

Price Target Upside-0.03% Downside

Rating ConsensusModerate Buy

Number of Analyst Covering21

ARM Holdings PLC ADR Business Overview & Revenue Model

Company DescriptionARM Holdings PLC ADR (ARM) is a leading semiconductor and software design company specializing in the development of microprocessors, graphics processors, and related technologies. Headquartered in Cambridge, England, ARM operates in the technology sector and licenses its intellectual property to a global network of partners. The company's core products include processor designs, software tools, and system-on-chip (SoC) designs that power a wide range of electronic devices, from smartphones and tablets to automotive systems and wearables.

How the Company Makes MoneyARM Holdings makes money primarily through licensing and royalties. The company licenses its processor designs and related technologies to semiconductor companies and original equipment manufacturers (OEMs) who integrate these designs into their own products. Licensing agreements typically involve an upfront fee for access to ARM's intellectual property, followed by ongoing royalties based on the number of devices sold that incorporate ARM's technologies. This business model allows ARM to scale its revenue without the need for significant manufacturing investments. Additionally, ARM generates revenue from support, maintenance, and training services offered to its licensees. Strategic partnerships with major technology companies also contribute to ARM's earnings, as these collaborations often lead to the development of new technologies and expansion into emerging markets.

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: 26.21%|

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 demonstrates robust financial performance with strong revenue growth and high profitability margins. The balance sheet shows low leverage, contributing to stability. However, the decline in operating cash flow poses a potential risk.

Income Statement

Very Positive

ARM Holdings PLC has demonstrated strong revenue growth with an impressive increase from $3.23 billion in 2024 to $4.01 billion in 2025, marking a growth rate of approximately 23.9%. The company also maintains high gross profit margins, consistently above 90% over the years. The net profit margin has improved significantly, increasing from 9.5% in 2024 to 19.8% in 2025, indicating enhanced profitability. EBIT and EBITDA margins have also shown strong performance, contributing to the robust financial health of the company.

Balance Sheet

Very Positive

The company's balance sheet reflects a healthy equity position with a debt-to-equity ratio of 0.05, showing low leverage and financial risk. The return on equity (ROE) improved from 5.8% in 2024 to 11.6% in 2025, indicating effective utilization of shareholders' equity to generate earnings. The equity ratio remains strong at 76.5%, suggesting stability and the ability to sustain operations and growth.

Cash Flow

Positive

ARM Holdings PLC's cash flow statement shows a decline in operating cash flow from $1.09 billion in 2024 to $397 million in 2025. However, the free cash flow remains positive at $178 million, though it has decreased significantly from $947 million in the previous year. The free cash flow to net income ratio indicates the company is generating sufficient cash relative to its net income, but the decline in operating cash flow is a concern and should be monitored.

Breakdown	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	4.01B	3.23B	2.68B	2.70B	2.03B
Gross Profit	3.80B	3.08B	2.57B	2.57B	1.88B
EBITDA	902.90M	279.00M	855.00M	865.00M	443.00M
Net Income	792.00M	306.00M	524.00M	549.00M	388.00M
Balance Sheet
Total Assets	8.93B	7.93B	6.87B	6.51B	0.00
Cash, Cash Equivalents and Short-Term Investments	2.83B	2.92B	2.21B	1.64B	0.00
Total Debt	356.00M	226.00M	219.00M	261.00M	0.00
Total Liabilities	2.09B	2.63B	2.81B	2.96B	0.00
Stockholders Equity	6.84B	5.29B	4.05B	3.55B	0.00
Cash Flow
Free Cash Flow	178.00M	947.00M	646.00M	383.00M	1.07B
Operating Cash Flow	397.00M	1.09B	739.00M	458.00M	1.23B
Investing Cash Flow	-35.00M	-516.00M	-138.00M	-619.00M	-340.00M
Financing Cash Flow	-202.00M	-208.00M	-42.00M	-32.00M	-789.00M

ARM Holdings PLC ADR Technical Analysis

Technical Analysis Sentiment

Positive

Last Price156.74

Price Trends

50DMA

140.26

Positive

100DMA

126.67

Positive

200DMA

135.96

Positive

Market Momentum

MACD

3.49

Positive

RSI

61.94

Neutral

STOCH

80.70

Negative

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 156.74 is above the 20-day moving average (MA) of 152.81, above the 50-day MA of 140.26, and above the 200-day MA of 135.96, indicating a bullish trend. The MACD of 3.49 indicates Positive momentum. The RSI at 61.94 is Neutral, neither overbought nor oversold. The STOCH value of 80.70 is Negative, 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 87 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 1 New Risks

Our development of CSS, chiplets, and complete end chip solutions as well as other more integrated compute products may subject us to new or enhanced competitive, brand, technological, regulatory and financial risks. Q1, 2025

ARM Holdings PLC ADR Peers Comparison

Overall Rating

UnderperformOutperform

Sector (50)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ADI	81 Outperform	$120.02B	65.84	5.21%	1.96%	-6.17%	-14.16%
AMD	80 Outperform	$254.54B	115.08	3.90%	―	21.71%	99.00%
TSM	77 Outperform	$1.02T	27.37	33.29%	1.31%	38.65%	―
QCOM	76 Outperform	$169.97B	15.76	42.21%	2.22%	16.15%	32.28%
ARM	70 Outperform	$165.67B	210.36	13.05%	―	23.94%	156.53%
INTC	56 Neutral	$100.76B	―	-18.66%	2.16%	-3.97%	-562.40%
Sector *	50 Neutral	C$3.11B	2.00	-63.12%	2.91%	4.49%	-6.07%

* Technology Sector Average

Performance Comparison

ARM

ARM Holdings PLC ADR

156.74

-6.81

-4.16%

AMD

Advanced Micro Devices

156.99

1.12

0.72%

ADI

Analog Devices

241.85

5.87

2.49%

INTC

Intel

23.10

-10.06

-30.34%

QCOM

Qualcomm

154.80

-35.98

-18.86%

TSM

TSMC

240.40

72.94

43.56%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jun 25, 2025