Nov 4 (Reuters) – Arm Holdings beat Wall Street estimates for second-quarter revenue on Wednesday, driven by higher royalty payments and licensing fees from customers deploying its chip architecture in AI-related computing products.
Unlike chipmakers that manufacture semiconductors, Arm Holdings licenses its processor architecture and earns royalties on chips shipped using its technology, making licensing fees and royalty payments the company’s primary sources of revenue.
Arm said its server-chip architecture accounted for more than 50% of deployments at major cloud providers in 2025 and is expected to exceed 60% by the end of 2026.
Shares of the company fell about 2% in extended trading.
Demand for Arm-based technology has benefited from the AI boom, as major cloud companies develop custom processors for data-center workloads.
Arm’s architecture is prized for its power efficiency, an increasingly important factor as operators seek to rein in the energy and cooling costs of running large AI models.
Revenue from royalties, which Arm collects on each chip shipped using its technology, rose 8% to $670 million for the second quarter, compared with estimates of $720.8 million.
Licensing revenue, which includes upfront fees for access to its technology, was $773 million, compared with estimates of $625.1 million.
The company’s second-quarter revenue of $1.44 billion beat analysts’ average estimate of $1.38 billion, according to data compiled by LSEG.
Arm’s adjusted profit of 52 cents per share surpassed estimates of 47 cents per share.
The company projected third-quarter revenue of $1.54 billion, compared with the average analyst estimate of $1.53 billion.
Last month, a Delaware jury found Arm breached parts of its licensing agreement with Qualcomm and interfered with the latter’s relationship with Meta, but awarded only $2 in damages, leaving key disputes over royalties and future licensing terms to be decided by a judge.
(Reporting by Max A. Cherney in San Francisco and Prathik Jayaprakash in Bengaluru; Editing by Leroy Leo)
