Arm sees quarterly revenue above estimates on AI chip demand

• Companies like Alphabet and Amazon are building custom AI chips using Arm's architecture, boosting licensing revenue and royalties as more complex chips ship to data centers
• Oracle has agreed to purchase Arm's new AI data center chip, with total demand now exceeding $2 billion across fiscal years 2027 and 2028, ahead of initial expectations
• Arm projected Q2 revenue of $1.38 billion versus analyst estimates of $1.34 billion, with Jefferies analysts forecasting the new chip could reach $18 billion in sales by fiscal 2031

ARM Holdings Q2 Revenue Forecast Beats Estimates on AI Chip Demand

Key Financial Performance:

Arm Holdings projected second-quarter revenue of $1.38 billion, exceeding analyst estimates of $1.34 billion. First-quarter revenue reached $1.29 billion, with royalty revenue rising 22% to $715 million and licensing revenue growing 23% to $574 million. The company expects second-quarter profit of 47 cents per share.

Main Drivers:

Strong demand for Arm's energy-efficient chip designs is being fueled by AI data center expansion. Major tech companies including Alphabet and Amazon are building custom AI chips using Arm's architecture, driving both licensing fees and royalties from chip shipments.

Product Highlights:

Arm's new AI data center chip, unveiled in March, is significantly outperforming expectations. Demand has now surpassed $2 billion across fiscal years 2027 and 2028, with the company securing supply for over $1 billion worth of chips. Oracle has agreed to purchase the new chip, with additional customers secured in North America and China. Jefferies analysts project sales could reach $18 billion by fiscal 2031, surpassing Arm's own $15 billion forecast.

Market Implications:

Arm's chip designs are particularly valued for power efficiency—a critical advantage as data center operators face soaring energy costs from running massive AI models. The UK-based chip designer's strong performance reflects the broader AI infrastructure buildout, positioning the company as a key beneficiary of the AI boom. CEO Rene Haas expressed improved confidence in supply chain capabilities compared to 90 days prior, though the company maintained existing long-term forecasts.