Arm Holdings reported record revenue and strong growth in royalty revenue for Q3 2025.
From Nasdaq: 2025-02-05 19:45:17
Arm Holdings reported record total revenue and all-time high royalty revenue for Q3 of fiscal year 2025. Total revenue grew 19% year-on-year to $983 million, with royalty revenue reaching $580 million, a 23% increase. The growth was driven by adoption of Armv9 and CSS technologies for AI applications, including new flagship smartphones from OPPO and vivo. Arm is gaining share in the data center with chips like AWS Graviton and NVIDIA’s Grace. The company remains optimistic about the future of AI computing and its role in driving growth across various industries. Arm reported strong royalty revenue from chips for smartphones, data centers, networking equipment, and automotive, with IoT showing signs of recovery. Licensing revenue increased 14% year on year to $403 million, with ACV up 9% year on year. Non-GAAP operating costs hit $522 million, leading to near-record operating profit of $442 million. Guidance for Q4 includes revenue between $1.175 billion and $1.275 billion, and full-year ’25 revenue around $4 billion. Arm is excited to be the CPU of choice for the Stargate project, a significant infrastructure initiative in the U.S. that will include $100 billion in immediate investment. Arm is seeing a significant opportunity in AI workloads running on all endpoints, with a focus on Arm platforms. License revenue is up about $27 million, driven by AI and CSS contracts. The company expects license revenue to grow by around 60% year on year. Partner demand for CSS is stronger than expected, contributing to a record $500 million in royalty revenue. Despite the Qualcomm lawsuit, Arm is forecasting continued royalty payments. RMB contribution remains consistent at 25% of total royalties. V9 adoption is growing, with v9 dollars increasing from 15% to 25% this quarter. The royalty growth rate for v9 is expected to reach 67% to 70% of total royalties, indicating a longer runway for future growth. Transitioning to v9 is driven by OEM product introductions, with MediaTek 9400 designed into OPPO and vivo phones. Royalties are projected to grow in the mid-20% range for FY ’26, driven by v9 adoption and CSS. CSS rates increase year-on-year, contributing to overall growth. Licensing revenue timelines vary based on contract complexity, with new contracts taking longer for approval. AWS success with Graviton and Arm IP is strong, with Cobalt 100 progress deferred to Microsoft statements. Vijay Rakesh, an analyst, notes increased momentum for Microsoft’s products in the cloud. Arm’s transition to Grace Blackwell GB200 is boosting Arm’s presence in data centers. CFO Jason Child expects related party revenue to remain consistent. Analyst Andrew Gardiner asks about Arm’s potential move into the silicon space and M&A. CEO Rene Haas discusses the pressure of AI evolution on the ecosystem and Arm’s focus on solving customer problems. Analyst Harlan Sur highlights the demand for Arm’s Chiplet System Architecture and monetization strategy. Arm is seeing an acceleration in demand for CSS in major markets and is working with partners to develop chiplets. The focus is on helping products get to market faster amidst increasing compute demands. During a recent earnings call, an analyst questioned the stalled growth of v9 adoption by Arm Holdings, which has remained at 25% for several quarters. The CFO explained that while the growth has slowed, it provides insight into future growth potential, with expectations of reaching 60-70% adoption. Despite the slower v9 growth, overall royalty numbers have met or exceeded expectations, indicating a positive trend for the company.
Meanwhile, Arm’s CEO discussed the impact of training optimization on AI opportunities, particularly with DeepSeek’s efficiency in inference. Lowering costs and increasing efficiency in AI workloads benefits the industry as a whole and positions Arm well in areas with power constraints. While there is still room for improvement in AI capabilities, the advancements in training optimization are seen as a positive development for Arm’s future prospects. Arm’s Chief Executive Officer Rene Haas and Chief Financial Officer Jason Child provided insights on the company’s growth prospects during a recent earnings call. They discussed the Accelerated Compute Vision (ACV) growth deceleration and the impact of AI on licenses and royalties. Arm China contributes around 20-25% of the ACV. CSS licenses are expected to see strong demand in data centers and handsets, with chiplet architecture becoming pervasive in SoCs. The company reported a record quarter with revenue nearing $1 billion and royalty reaching $580 million, guiding to well over $1 billion in the next quarter. Arm reported record revenues for the quarter and projected to exceed them in the next quarter. The company is excited about future opportunities with v9, CSS, Stargate, and Cristal intelligence. Arm executives expressed gratitude for investor interest and look forward to the next quarter. This article is a transcript of the conference call and may contain errors or inaccuracies. The Motley Fool has no position in the stocks mentioned and encourages readers to do their own research. Nasdaq, Inc. does not necessarily reflect the author’s views and opinions.
Read more at Nasdaq: Arm Holdings (ARM) Q3 2025 Earnings Call Transcript