Arm Holdings plc Q2 FY26 Earnings Analysis

- Arm projects reaching $15 billion in revenue by fiscal year 2031 driven by AGI CPU and IP businesses (Page 11). - Demand for Arm AGI CPU has doubled since March 2024 to over $2 billion over the next two years, surpassing previous $1 billion estimates (Page 11). - The IP business with Neoverse IP and CSS doubled year-on-year and is projected to double again, targeting $10 billion by fiscal ’31 (Pages 9,11). - Overall licensing revenue expected to grow at high single-digit to low double-digit rates long-term, with this year targeting 20%+ growth due to AI-related investment (Pages 9,7). - CPU core counts expected to increase significantly (potentially 2x or 4x), driving higher average selling prices and total addressable market growth up to $100-$120 billion over 5 years (Pages 7,9). - Royalty revenues driven by Cloud AI and data center networking are expected to continue strong growth, despite challenges in mobile market (Pages 5,3).

- Arm expects to achieve $15 billion in AGI CPU revenue by fiscal year 2031, with an additional $10 billion from IP revenue, totaling $25 billion. - Operating margins: IP business projected to reach ~65% operating/EBITDA margin by 2031; chip business around 35%. - Fiscal 2026 non-GAAP EPS was a record $1.77; Q4 non-GAAP EPS was $0.60. - Q1 guidance projects non-GAAP EPS of $0.40 ± $0.04, with revenues expected to grow ~20% YoY. - Long-term license revenue growth expected at least 10% YoY. - Operating expenses to grow slower than revenue, delivering incremental margin improvement by year-end. - Arm foresees "more than $9 in EPS" by fiscal year 2031 reflecting sustained long-term growth driven by expanding AI demand and product portfolio. - Strong R&D investments underpin future innovation and growth in next-gen architectures and AGI CPU offerings.

- Arm is investing heavily in R&D, with non-GAAP operating expenses up 30% year-on-year, reflecting strong engineering expansion to support demand for next-gen architectures, compute subsystems, and the Arm AGI CPU product family (Page 3). - Significant investments in customer support infrastructure for silicon products, including low-level code, firmware, and hardware support, are baked into OpEx guidance (Page 6). - Arm is leveraging partnerships with foundries and memory suppliers to secure supply chain capacity to meet growing demand, including doubling chip demand for fiscal ’27 and ’28 (Pages 4, 10). - Arm projects the Arm AGI CPU business to grow to $15 billion in revenue by fiscal 2031, contributing to strategic growth (Page 11). - The company expects operating margins of about 65% for the IP business and 35% for the chip business by 2031, with profitability improving as revenue scales (Page 10).

- The transcript on page 11 and surrounding pages does not mention any current or planned fundraising activities through debt or equity. - The focus is on strong revenue growth, with no indication of raising capital via debt or equity markets. - Arm is emphasizing organic growth driven by customer demand, particularly for their Arm AGI CPU and IP business. - There is no discussion of new financing, capital raises, or issuance of shares/debt in this earnings call. - The company is managing growth through operational activities and supply chain efforts rather than through external fundraising.

- As of March 2024, Arm had $1 billion of demand for AGI CPU products. - Over the subsequent weeks, demand has doubled to over $2 billion for the next two fiscal years (FY ’27 and ’28). - The company is actively working to secure additional supply from foundry and memory partners to meet this increased demand. - Current supply supports $1 billion of demand, with efforts underway to address the $2 billion demand level. - Customers include both existing and new ones, with some increasing forecasts and others newly interested. - Supply chain constraints like wafers and memory availability are being managed to fulfill orders. - First revenues from production chip sales are expected in Q4 of the current fiscal year. - On track to achieve $15 billion in AGI CPU revenue by fiscal 2031.