Arm Holdings (NASDAQ:ARM) reported quarterly earnings and guidance that surpassed Wall Street expectations, while highlighting strong customer demand for its recently launched artificial intelligence-focused data center processor.
Despite the upbeat results, U.S.-listed shares of the British semiconductor designer reversed sharp after-hours gains and fell 5% by 04:00 EST (08:00 GMT), after initially climbing as much as 13%.
The decline followed comments during the company’s earnings call suggesting Arm has not yet secured enough supply capacity to satisfy an additional $1 billion in demand tied to its new AGI CPU.
“Supply constraints led management to withhold raising its revenue forecast,” Raymond James analyst Simon Leopold wrote in a note.
Growing role in AI infrastructure
Arm is a major force in the semiconductor industry, with its chip architectures used by companies including Qualcomm, Apple, and Samsung in smartphone processors, as well as by cloud and hyperscale firms such as Amazon Web Services, Microsoft, Alphabet, and Meta.
The company generates revenue by licensing its chip technology and collecting royalty fees on products built using its designs.
Arm’s technology has become increasingly important in the development of AI-oriented server processors. In March, the company expanded its strategy beyond intellectual property licensing and compute subsystems by entering the silicon products market directly.
As part of that push, Arm introduced the Arm AGI CPU, a central processing unit built specifically for AI data centers.
Demand for AGI CPU more than doubles
“Customer response to Arm AGI CPU has been strong. We now have more than $2 billion of customer demand across fiscal 2027 and fiscal 2028, more than double what we stated at launch,” ARM top boss Rene Haas and finance chief Jason Child said in a shareholder letter.
However, management clarified during the earnings call that supply commitments have only been secured for the first $1 billion in demand, adding, “For the $2 billion [of demand] we are now in the process of securing supply to support that.”
“We are on track towards our forecast of $15 billion in this business as stated at our Arm Everywhere event last quarter, and soon the data center will be Arm’s largest business. The direction is clear: customers want Arm at the center of the AI data center,” the executives added.
AI demand expands beyond GPUs
Arm’s results arrive as AI inference workloads and agentic AI applications fuel rising demand for CPU-based server chips, broadening the AI infrastructure market beyond graphics processing units.
The trend has also been reflected in recent quarterly reports from Intel and AMD, highlighting growing interest in CPUs as part of AI data center deployments.
Quarterly results top analyst forecasts
For fiscal fourth quarter 2026, Arm posted adjusted earnings of 60 cents per share on revenue of $1.49 billion, beating analyst expectations of 58 cents per share and revenue of $1.47 billion.
The Cambridge, England-based company said licensing and related revenue climbed 29% year-over-year to $819 million, while royalty revenue increased 11% to $671 million.
Guidance edges above consensus
Looking ahead, Arm forecast fiscal first-quarter 2027 adjusted earnings of 40 cents per share, plus or minus 4 cents, on revenue of approximately $1.26 billion, with a variance of plus or minus $50 million.
Analysts had projected revenue of roughly $1.25 billion for the period.
More about Arm
Arm is a semiconductor design company known for developing energy-efficient processor architectures used across smartphones, cloud infrastructure, automotive systems, and AI data centers. Rather than manufacturing chips itself, Arm licenses its designs and intellectual property to technology companies worldwide, generating revenue through licensing agreements and royalties on shipped products.