What ARM (ARM) Said on Its Q2 Earnings Call

Key Points

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• Arm reported record Q2 fiscal 2027 revenue of $1.44 billion, up 27% year over year, while non-GAAP EPS rose 33% to $0.52. Licensing revenue surged 50% to $773 million, exceeding expectations by about $100 million.

• Arm raised its confidence in generating up to $2 billion in AGI CPU revenue across fiscal 2027 and 2028, citing customer orders and secured supplier capacity. First commercial deliveries remain on track for fiscal Q4 2027.

• Data center royalties doubled year over year, helping offset smartphone-related pressure, and Arm expects strong cloud demand to support further growth. For fiscal Q3, it forecast revenue of $1.54 billion, plus or minus $50 million, and non-GAAP EPS of $0.56, plus or minus $0.04.

ARM (NASDAQ:ARM) reported record second-quarter fiscal 2027 revenue as licensing demand and data center royalties grew, while executives said they had greater confidence in the sales potential of the company’s forthcoming Arm AGI CPU.

Revenue rose 27% year over year to $1.44 billion, marking Arm’s fifth consecutive quarter of growth above 20%, Chief Executive Officer Rene Haas said. Non-GAAP earnings per share increased 33% to $0.52.

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Licensing and other revenue rose 50% to $773 million, while royalty revenue increased 8% to $670 million. Data center royalties doubled from a year earlier, offsetting roughly flat edge AI royalties amid pressure on smartphone sales.

Licensing demand exceeds expectations

Chief Financial Officer Jason Child said licensing revenue came in about $100 million above Arm’s expectations as customers accelerated long-term commitments to access its technology. The company signed three new Arm Total Access agreements, bringing active subscriptions to more than 60, and four additional compute subsystem licenses: two for data center chips and two for smartphones.

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Arm’s technology licensing and design services agreement with SoftBank contributed $209 million of the quarter’s licensing revenue, up 17% year over year. Child said he expects the quarterly run rate from that agreement to remain around that level for the rest of the fiscal year.

Annualized contract value grew 12%. Child said that measure helps show underlying licensing trends because revenue can vary significantly between quarters depending on the timing and accounting treatment of large agreements.

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Non-GAAP operating expenses rose 19% to $774 million as Arm expanded engineering capacity and invested in new platforms and products. Non-GAAP operating income climbed 37% to $638 million, and…