Arm Holdings Reports Record Revenue Amid Stock Price Dip

Arm Holdings experiences a stock price decline despite a record fiscal Q3 revenue of $983 million, up 19% year over year. Adjusted EPS jumped 26%, leading to discussions of potential buying opportunities in the market.

Date: 09-02-2025

AI Rating: 7

Overview of Financial Performance

Arm Holdings reported a record fiscal Q3 revenue of $983 million, a 19% increase year over year, demonstrating strong revenue growth. Additionally, adjusted EPS rose by 26% to $0.39, surpassing analyst expectations of $0.34. This performance highlights the company's robust financial health despite recent stock price declines.

Revenue Growth

The strong year-over-year revenue growth signals a positive trend. This growth is fueled by several factors, including the adoption of Arm's newer Armv9 technology, which has a higher royalty rate. Royalty revenue surged by 23% to $580 million, driven by market demand in smartphones and data centers.

Earnings Per Share (EPS)

The adjusted EPS of $0.39 reflects strong operational performance and exceeds prior forecasts. Looking forward, the company has narrowed its full-year guidance for adjusted EPS to between $1.56 and $1.64, a modest upgrade from previous estimates.

License Revenue

License revenue also rose by 14% to $403 million, indicating the strength of Arm's licensing model and its appeal to new customers, as evidenced by multiple signings in its intellectual property programs. This growing client base bodes well for future earnings streams.

Future Prospects

The company's focus on innovative designs and strategic partnerships, such as the Stargate data center project and collaborations with major tech companies, provides it with significant opportunities for expansion. Remaining performance obligations (RPO) at $2.33 billion signal a strong backlog, although a 3% sequential decline could raise questions about future revenue recognition.

In summary, while Arm Holdings has encountered a slip in share price, its remarkable revenue gains, strong EPS growth, and higher royalty revenues indicate a potentially favorable long-term investment outlook, signaling overall positivity in its financial health.

Stocks: ARM