Arm Holdings recently saw its fair value estimate adjusted from approximately US$164.85 to approximately US$163.25 per share, accompanied by a slight increase in the discount rate from 11.25% to approximately 11.28% and a slight increase in modeled revenue growth from 22.13% to approximately 22.17%.
This fine-tuning reflects a market that weighs positive signals around licensing strength, AI-driven projects and design wins against new questions about execution risk and how the changing mix of Arm’s business could affect returns over time.
As you read on, you’ll see how these opposing factors reshape the story around Arm and how you can stay informed about future narrative changes as they happen.
Several companies, including Loop Capital, Morgan Stanley, TD Cowen and JPMorgan, are highlighting strong recent earnings, with comments pointing to higher licensing and royalty revenues and what they describe as solid momentum stemming from the latest quarter.
Loop Capital, Morgan Stanley, TD Cowen and JPMorgan all raised their price targets to the US$180-$190 range, linking their more constructive stance aimed at gaining traction in end markets and what they see as growing AI-related activity from edge to cloud.
Analysts at these companies generally praise Arm for its execution on licensing, increasing DC and AI-related royalties, and its willingness to increase operating expenses to pursue more AI projects, while highlighting what they view as strong cost discipline overall.
Some optimistic research also highlights higher value capture from royalties as a positive for long-term growth prospects, particularly if AI-related workloads keep Arm-based designs front and center in data center and edge use cases.
🐻 Bearish Takeaways
Raymond James undertook coverage with a Market Perform rating and no price target, signaling a more conservative stance compared to companies that raised their targets.
The Raymond James analyst sees Arm’s exploration of further evolution in the fabless semiconductor sector as a major risk, suggesting that while it could enable higher profits, the transition period could lead the market to penalize Arm’s valuation multiple.
The cautious commentary focuses on the execution risk associated with this potential change in business and the idea that in any transition, some of the upside that bullish analysts see in AI and licensing strength could be tempered by uncertainty around returns and consistency of performance.
Arm has announced a new physics AI division focused on robotics, introduced as part of a broader reorganization highlighted at CES. The move aims to provide chips and designs for humanoid and other physical robots, according to Reuters.
South Korea’s antitrust regulator, the Korea Fair Trade Commission, inspected Arm’s offices in Seoul as part of an investigation into its licensing practices. The inspection followed a complaint from Qualcomm alleging that Arm was restricting access to its technology and affecting competition, Bloomberg reported.
SoftBank is reportedly exploring a possible takeover of Marvell and considering combining Marvell with Arm. However, the discussions did not result in an agreement on the terms, according to Bloomberg.
OpenAI is reportedly working with Arm on a processor to pair with an AI chip that OpenAI is developing with Broadcom, with TSMC expected to manufacture the chip. This highlights Arm’s role in AI-focused computing projects, The Information reported.
The fair value decreased slightly from approximately US$164.85 to approximately US$163.25 per share.
The discount rate increased slightly from 11.25% to around 11.28%, implying a slightly higher required return in the model.
Revenue growth was adjusted slightly from 22.13% to approximately 22.17% under forward-looking assumptions.
The net profit margin increased from approximately 30.79% to approximately 30.93% in the updated estimates.
The forward P/E was reduced slightly from approximately 99.24x to approximately 97.84x, reflecting a slightly lower assumed premium multiple.
Stories on Simply Wall St allow you to connect the story you believe about a company to the numbers behind it, linking Arm’s business outlook to estimates of future revenues, profits and margins, and then to a fair value. Hosted on the Community Page used by millions of investors, Stories help you decide how to act by comparing that fair value with the current stock price, and they automatically update as new news or earnings information arrives.
Visit the Simply Wall St Community and follow the story on Arm Holdings to stay up to date with the developing story and numbers:
How AI licensing royalties, custom silicon and physical AI projects are reflected in Arm’s revenue, profit and margin forecasts.
What consensus assumptions imply for 2028 earnings, profit margins, future P/E and analysts’ current price target versus today’s price.
Risks related to new IT segments, smartphone exposure, increased R&D spending and China are most likely to change the fair value range.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
