Arm Q2 revenue rises 27% to $1.44 billion; royalties miss estimates

What Arm reported

Arm Holdings plc (Nasdaq: ARM) reported revenue of $1.443 billion for its fiscal second quarter, which ended Sept. 30, 2026, up 27% from $1.135 billion a year earlier. The company published the results on Nov. 4, 2026, in a shareholder letter furnished to the SEC. Non-GAAP earnings per share were $0.52, up 33% from $0.39, and the company guided fiscal third-quarter revenue to $1.54 billion, plus or minus $50 million.^[1][2]

Arm said it was its fifth consecutive quarter of year-over-year revenue growth above 20%. Reuters reported that revenue beat the $1.38 billion average analyst estimate compiled by LSEG, and that adjusted earnings of 52 cents per share topped the 47 cents analysts expected. MT Newswires, using FactSet, put the revenue estimate at the same $1.38 billion.^[1][3][4]

Licensing grew faster than royalties

License and other revenue rose 50% to $773 million, from $515 million a year earlier. Arm attributed the increase to demand for its chip designs and to the timing and size of several high-value license agreements. Reuters reported analysts had expected licensing revenue of $625.1 million.^[1][3]

Royalty revenue, which Arm collects on each chip shipped with its technology, rose 8% to $670 million from $620 million. Reuters reported the estimate was $720.8 million, which makes the reported figure about 7% lower. Arm said higher royalty rates per chip and data center deployments were partly offset by the effect of memory pricing on the smartphone market. Data center royalties doubled from a year earlier, Arm said.^[1][3]

By the Signal Edition's calculation from the company's figures, royalties were 46.4% of revenue ($670 million of $1.443 billion), down from 54.6% a year earlier ($620 million of $1.135 billion). Arm said partners shipped more than 10 billion Arm-based chips in the quarter, 1.5 billion more than a year earlier.^[1]

Profit, margins and cash flow

Non-GAAP operating income rose 37% to $638 million, and the non-GAAP operating margin was 44.2% against 41.1% a year earlier. Non-GAAP operating expenses grew 19% to $774 million, below the roughly $780 million Arm had forecast.^[1]

Under GAAP accounting, net income fell 45% to $130 million from $238 million, and diluted earnings per share were $0.12 against $0.22. GAAP operating expenses rose 27% to $1.2 billion, from $943 million. Net cash from operating activities was $207 million against $567 million a year earlier, and non-GAAP free cash flow for the quarter was $110 million against $411 million. Trailing twelve-month free cash flow was $1.096 billion, 2% higher. Cash and short-term investments totaled $3.621 billion.^[1]

Arm's silicon business and data center claims

Arm said it has purchase orders for its Arm AGI CPU from multiple customers extending through calendar 2027, with first commercial deliveries on track for the fiscal fourth quarter, which ends March 31, 2027. The company said its confidence in reaching up to $2 billion of Arm AGI CPU revenue over fiscal 2027 and 2028 has increased over the past 90 days.^[1]

Arm also said its share of server processors at the top cloud providers rose from 15% in calendar 2024 to more than 50% in calendar 2025, and it expects the figure to exceed 60% by the end of calendar 2026. These share figures are Arm's own estimates and the letter does not publish the underlying data. Chief Executive Rene Haas said licensing growth shows "increasing investment in the power efficient Arm compute platform."^[1]

Outlook and what happens next

For the fiscal third quarter, which ends Dec. 31, 2026, Arm guided 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 6.7% above the second-quarter figure, by calculation from the reported revenue. Reuters cited an average analyst estimate of $1.53 billion, and MT Newswires cited a FactSet estimate of $1.52 billion.^[1][3][4]

Reuters reported shares fell about 2% in extended trading after the release. It did not give a time or a source for the figure. Reuters also noted that a Delaware jury found last month that Arm breached parts of its licensing agreement with Qualcomm, but awarded only $2 in damages. The fiscal third quarter ends Dec. 31, 2026, and Arm will report it in its next results.^[3]