Arm Stock Heads Into Q2 Earnings With a Smartphone Problem and an AI Opportunity

Arm Holdings plc (NASDAQ:ARM) expects royalty growth to slow as smartphone sales weaken, and its fiscal second-quarter report Thursday will show whether artificial intelligence demand can keep overall growth on track.

Royalty Growth Guided to Slow

Arm told analysts on its July earnings call that royalty growth would slow after rising 22% in the fiscal first quarter.

Data center royalties more than doubled from a year earlier, and cloud AI drove most of the overall royalty growth, but CFO Jason Child said higher memory prices were hurting smartphone sales.

Arm said full-year royalty growth would likely come in “closer to the high teens,” down from the roughly 20% it had expected earlier, and guided second-quarter royalties up in the low teens.

It expects licensing, guided up about 30%, to make up at least as much as any royalty weakness in the second quarter.

Analysts Forecast for Q2

Arm guided second-quarter revenue to $1.38 billion, plus or minus $50 million, and earnings of 47 cents a share, plus or minus 4 cents.

Analysts expect revenue of $1.38 billion and earnings of 42 cents, according to Benzinga Pro data.

Arm has topped analyst earnings estimates in each of its past eight quarters.

In the first quarter, Arm reported earnings of 45 cents a share, above Wall Street’s 36-cent estimate, while revenue was $1.29 billion, above the $1.27 billion estimate.

Arm Shares Rally in 2026

Year to date, Arm’s shares are up more than 82%, and they have gained about 20% over the past year.

Most analysts are bullish on the stock, with 16 of 22 rating it a Buy, five a Hold, and one a Sell, as per Benzinga Pro. The average price target of $272 points to 32.7% upside.

ARM Price Action: On Tuesday, the stock climbed 2.9% to close at $202.49 and rose 2.54% to $207.63 in early premarket trading on Wednesday.

Benzinga Edge rankings indicate Arm’s stock has a Momentum score in the 43rd percentile and a Value score in the 2nd percentile.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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