ARM First Take: Results this quarter were in line, with revenue and GPM broadly meeting Street expectations. License continued to grow >20%, while Royalty slowed to around 10% amid a soft smartphone market.
Helped by revenue growth and margin expansion, net profit reached $300 mn. More than the print, investors focused on three core items: guidance, ACV, and RPO.
1) Guidance: muted. The company guides next-quarter revenue of $1.21–1.31 bn, roughly in line with the Street ($1.25 bn).
Both License and Royalty are guided to grow about 20% YoY.
2) ACV: a leading indicator for next-quarter revenue. ACV was $1.66 bn, up 2.5% QoQ.
Based on this quarter’s revenue, Dolphin Research estimates roughly $400 mn from backlog recognition, while 'newly signed contracts recognized this quarter + Royalty' totaled about $1.09 bn.
3) RPO: RPO was $2.07 bn, below the Street’s $2.67 bn.
The ACV/RPO ratio suggests a more short-cycle order mix, consistent with urgent AI demand.
Overall, near-term results were simply in line and fairly ordinary. The drag came from smartphones, while next-gen ARM-architecture chips from players like NVIDIA are set to add visible contributions in 2H, making current results look comparatively soft.
Beyond the near term, the Street is focused on Royalty rate uplift, CSS (Compute Subsystems) penetration, and in-house AI CPU as medium/long-term drivers.
Notably, the three major AI chip stacks—NVIDIA Vera/Grace, Google TPU, and Amazon Trainium—largely adopt ARM’s architecture. As these next-gen chips ramp in 2H, revenue should see a more pronounced lift.
ARM’s newly launched in-house AI CPU also targets the hottest CPU track, expanding the upside narrative.
For more, stay tuned for Dolphin Research’s follow-up commentary and Trans. $Arm(ARM.US)
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