Arm Q2 Profit Soars 122%, Boosts Chip Strategy
On November 5, Arm Holdings released its financial results for the second quarter of fiscal year 2026, ending September 30, 2025. The semiconductor IP leader reported a 34% year-over-year revenue increase to $1.14 billion, surpassing analyst expectations of $1.06 billion. This marks the third consecutive quarter that Arm's revenue has exceeded the $1 billion threshold.
GAAP net income surged 122% to $238 million, while non-GAAP net profit climbed 32% to $417 million. Operating income on a non-GAAP basis reached $467 million, outperforming the estimated $385 million. Non-GAAP earnings per share were $0.39, topping market expectations of $0.33. The company's gross margin also impressed, reaching 98.2%, higher than analysts' forecast of 97.9%.
Arm's strong quarterly results were fueled by growth across its key markets — smartphones, data centers, and automotive applications. Royalty revenue rose 21% year over year to $620 million, driven by wider adoption of advanced Arm technologies like Armv9 and the Arm Compute Subsystem (CSS). Demand for Arm-based processors in data centers continued to expand, underscoring the company's increasing relevance in high-performance and AI-driven computing.
License revenue also saw a remarkable 56% increase to $515 million, thanks to several high-value agreements signed during the quarter. Arm entered into three new CSS licensing deals across smartphones, tablets, and data centers, bringing the total number of CSS-related licenses to 19, involving 11 companies. Notably, five clients have begun shipping CSS-based chips, including Samsung, which is integrating the technology into its Exynos series. With this, all of the top four Android smartphone makers are now deploying devices powered by Arm's CSS technology.
Arm's ecosystem is expanding rapidly within data centers as major cloud providers — including Amazon, Google, Alibaba, and Microsoft — continue developing in-house server CPUs based on Arm architecture. The company revealed that shipments of its Neoverse CPU cores have surpassed 1 billion units, powering large-scale workloads and next-generation AI applications.
In the latest quarter, Google migrated over 30,000 cloud applications — including Gmail and YouTube — to Arm architecture, with plans to transition most of its 100,000+ apps. Microsoft expanded the rollout of its Arm-based Cobalt 100 chips to 29 regions worldwide, while NVIDIA secured over $500 billion in projected orders through 2026 for its Grace Blackwell superchips, reflecting robust market demand for Arm-powered AI computing. Additionally, five new Stargate AI data centers have chosen Arm as their strategic computing platform, reinforcing its growing influence in large-scale artificial intelligence infrastructure.
In October, Arm also announced a strategic partnership with Meta, showcasing the full range of Arm's computing solutions — from AI-enabled wearables to data centers powered by Neoverse CPU cores, which support Meta's recommendation engines for Facebook and Instagram.
Looking ahead, Arm expects Q3 FY2026 revenue of around $1.225 billion (±$50 million), with a midpoint of $1.23 billion, exceeding analysts' average forecast of $1.1 billion. The company projects non-GAAP EPS of $0.41 (±$0.04) as it continues to strengthen its leadership in AI-driven computing.
By 2025, Arm anticipates that nearly half of all CPUs deployed in data centers at major cloud providers will be based on its architecture — a milestone that would firmly establish Arm as a cornerstone of next-generation AI infrastructure.
