Arm's license and other revenue rises 50% to $773 million in fiscal second quarter

What Arm reported

Arm published the results on 4 November. Revenue beat its own guidance of $1.38 billion plus or minus $50 million and compared with $1.135 billion a year earlier. License and other revenue rose from $515 million, and royalty revenue, the line tied to chip shipments, rose 8% to $670 million from $620 million.

Arm said the quarter marked its fifth consecutive quarter of year-over-year growth above 20%. Chief executive Rene Haas cited that figure on the earnings call. Chief financial officer Jason Child said licensing came in about $100 million above Arm's own expectations. Customers signed long-term commitments rather than simply renewing. Annualized contract value rose 12% to $1.79 billion from $1.60 billion. Arm defines that value as committed license fees for active agreements. Data center royalties doubled year over year. Arm said its share of server CPUs at top hyperscalers went from 15% in calendar 2024 to more than 50% in calendar 2025. It expects that share to exceed 60% by the end of calendar 2026.

GAAP net income fell 45% to $130 million from $238 million. Operating margin slipped to 13.9% from 14.4%. Arm attributed part of the net income drop to a $131 million year-earlier gain on the Artisan foundation IP sale.

The royalty dispute

Qualcomm, one of Arm's largest customers, wants a Delaware judge to let it stop paying royalties for up to five years, under a clause that could be worth about $1.5 billion. Qualcomm accounted for roughly 9% of Arm's $4.92 billion revenue in the fiscal year ended 31 March 2026, about $443 million, nearly half of Arm's $900 million operating income that year.

A Delaware federal jury found on 14 October that Arm breached Section 5 of its Architecture License Agreement with Qualcomm and awarded Qualcomm two dollars in damages. The verdict form, D.I. 1024, shows six claims: Qualcomm won two and Arm won four.

At closing arguments on 20 October, Qualcomm's lawyer Karen Dunn called Arm's proposed v10 royalties "exorbitant", in some cases 15 times the roughly $1.88 per chip Qualcomm pays for most units. Arm's counsel Gregg LoCascio said the v10 rates are based in part on what Google and Microsoft pay. Judge Maryellen Noreika called Qualcomm's bid to force negotiations "very, very drastic" and said a written ruling would follow final briefs.

What happens next

Arm guided fiscal third-quarter revenue to $1.54 billion plus or minus $50 million and non-GAAP earnings per share to $0.56 plus or minus $0.04. Child said licensing "will step up in Q3 and Q4". Arm said first commercial deliveries of its own Arm AGI CPU are on track for fiscal Q4 2027, and that its confidence in reaching up to $2 billion of AGI CPU revenue across fiscal 2027 and 2028 had increased.