Will Arm's (ARM) Latest Earnings Guidance Reveal More About Its Long-Term AI Growth Potential?

• Arm Holdings reported its financial results for the first quarter ended June 30, 2025, showing revenue of US$1.05 billion, up from US$939 million a year ago, but net income decreased to US$130 million from US$223 million in the prior year.
• While Arm raised its earnings guidance for the next quarter, the updated revenue forecast aligned with, rather than exceeded, analyst expectations despite ongoing enthusiasm for artificial intelligence and the CPU sector.
• We’ll explore how Arm’s new revenue guidance, which matched analyst estimates, affects the company’s investment outlook and future growth assumptions.

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Arm Holdings Investment Narrative Recap

To be a shareholder in Arm Holdings, you need to believe the company will continue to expand its CPU and AI data center presence, leveraging its design expertise and ecosystem partnerships despite cyclicality in licensing royalties. The recent earnings report and unchanged revenue guidance had little immediate effect on the leading short-term catalyst, AI-driven data center adoption, but recurring pressure on net income highlights the key risk that rising R&D costs might outpace royalty growth and squeeze margins if execution falters. Arm's most relevant recent announcement is its new revenue guidance for the upcoming quarter, set at US$1.01 billion to US$1.11 billion. This matches analyst expectations and supports ongoing AI and hyperscaler momentum, though it doesn't dispel concerns about cost controls and margin pressure as Arm invests in next-generation products. In contrast, investors should be aware that heavy smartphone reliance remains a significant risk if premium device growth slows...

Read the full narrative on Arm Holdings (it's free!)

Arm Holdings is forecast to reach $7.4 billion in revenue and $2.3 billion in earnings by 2028. This outlook is based on analysts projecting a 21.7% annual revenue growth rate and an increase in earnings of about $1.6 billion from current earnings of $699 million.

Uncover how Arm Holdings' forecasts yield a $150.89 fair value, a 9% upside to its current price.

Exploring Other Perspectives

Some analysts hold a much more optimistic view: before the latest news, the most bullish forecasts had Arm's revenue growing over 27 percent per year and earnings reaching US$2.7 billion by 2028. While these expectations highlight the potential for much faster compounding growth backed by Arm’s edge AI and high-margin licensing, the risk from alternatives such as open-source architectures may now be more relevant than ever. Your view on Arm’s future can be quite different depending on which risks or growth drivers you put the most weight on.

Explore 20 other fair value estimates on Arm Holdings - why the stock might be worth as much as 52% more than the current price!

Build Your Own Arm Holdings Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Arm Holdings research is our analysis highlighting 2 key rewards that could impact your investment decision.
• Our free Arm Holdings research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Arm Holdings' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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