ARM Stock Forecast & Price Target

ARM Holdings has demonstrated substantial growth, with license and other revenue increasing by 25% year-over-year to $505 million, driven by robust demand for next-generation architectures and strategic partnerships. Additionally, royalty revenue surged by 27% year-over-year to $737 million, bolstered by higher royalty rates and significant growth in data center royalties, particularly from custom chips for hyperscalers and AI data center networking silicon. The company maintains a solid financial foundation, with cash and cash equivalents totaling $3.54 billion, reflecting a healthy increase and an ongoing emphasis on growth beyond long-term targets in licensing.

The financial outlook for Arm Holdings is clouded by slowing royalty growth, with FY27 projections estimating only an 18.5% increase, a notable decline from the 21-24% growth range observed in recent years. This decline has led to investor concerns, evidenced by an 8% drop in share price following the release of modest results and guidance, highlighting apprehensions over the company's premium valuation amid expected low-teens royalty growth in Q4. Additionally, management has indicated potential headwinds from supply constraints and a maturing mobile market, which may further suppress growth due to stagnant product turnover and elongating replacement cycles.