Arm Holdings plc American Depositary Shares

Arm reported Q1 fiscal 2027 revenue of $1.29 billion, up 22% year over year. Royalty revenue was $715 million, up 22%, and licensing revenue was $574 million, up 23%; non-GAAP EPS was $0.45, up 29%. Non-GAAP operating expense was $733 million, up 18%, non-GAAP operating income was $531 million, and non-GAAP operating margin was about 41%, up 200 basis points year over year. Free cash flow was $665 million for the quarter and $1.4 billion over the trailing 12 months. For Q2, Arm guided revenue to $1.38 billion plus or minus $50 million, non-GAAP EPS to $0.47 plus or minus $0.04, non-GAAP operating expense to about $780 million, license and other revenue up about 30% year over year, and royalty revenue up in the low teens year over year.

Rene Haas framed the quarter as evidence that Arm is at the center of the AI compute shift across cloud, edge, PCs and physical AI. He emphasized that Neoverse adoption is accelerating, data center royalties are more than doubling again, and customers are increasingly standardizing on Arm across multiple AI infrastructure designs. He also sounded notably more optimistic on the new Arm AGI CPU, saying demand has grown beyond the original $1 billion opportunity and that supply confidence has improved over the past 90 days.

Jason Child highlighted that Q1 revenue, royalty revenue, and license revenue were all record first-quarter figures, with the main royalty driver being cloud AI. He said SoftBank contributed $193 million of the $574 million in license revenue and that the quarterly run rate for the rest of the year should be around $200 million. He also noted non-GAAP OpEx of $733 million came in about $27 million below guidance due to timing, while free cash flow reached $665 million, giving Arm flexibility to keep investing; for Q2 he guided to $1.38 billion in revenue, $780 million in OpEx, and $0.47 of EPS.

Analysts focused heavily on the AGI CPU opportunity, asking what improved the supply outlook and whether Arm could go beyond the original $1 billion target. Management said the improvement was “all of the above,” citing better access across wafers, substrates, test capacity and memory, and noted the demand picture is now north of $2 billion. Questions also probed smartphone weakness, where management said higher memory costs are pressuring the market and may drag royalty growth toward the high teens rather than 20%, though cloud AI strength is helping offset that.