Key Highlights

  • The stock ended the session at USD 166.72 after a 13.08% fall on November 5, 2026, despite fiscal second-quarter sales that grew 27% to USD 1.44 billion.
  • Licensing income climbed 50% to USD 773 million, whereas royalties hit USD 670 million, a rise of about 8% per published coverage that labelled the result a shortfall.
  • Adjusted Earnings Per Share reached USD 0.52 against USD 0.47 expected, and third-quarter guidance of USD 1.54 billion (USD 50 million either way) lands close to forecasts.
  • Data center royalties about doubled, and Arm anticipates its share of server processors at leading hyperscalers passing 60% by year-end 2026.

Second-Quarter Sales Record Meets a Sharp Selloff

Arm Holdings (NASDAQ:ARM) is a UK firm that licenses chip blueprints to semiconductor and device makers. It published results for the period that closed September 30, 2026, on November 4. Sales of USD 1.44 billion grew 27% and beat the USD 1.38 billion consensus by about 4.3% (calculated), while adjusted EPS of USD 0.52 also cleared USD 0.47. Management described the quarter as its strongest second quarter on Revenue ever. Even so, the Equity finished at USD 166.72 on November 5, which points to a prior close around USD 191.82 (calculated). Published market data showed a roughly 18% weekly decline by midday Thursday, so the selloff built on an existing slide.

Royalties Trail a Licensing Jump

Arm generates income through up-front licensing payments when clients adopt its designs, and through royalties on each chip that ships. Royalties are paid per unit, so they follow device volumes more closely than one-time fees do. Licensing and other revenue surged 50% to USD 773 million, a figure management views as a forward signal for royalties. Royalties themselves reached USD 670 million; published coverage estimated 8% growth and said the number disappointed. Licensing accounted for roughly 53.7% of revenue and royalties for about 46.5% (calculated). Royalties from smartphones stayed flat, one report linked that to weak memory prices in phones, whereas Data Center royalties roughly doubled and Physical AI royalties grew 50%.

Thin Guidance Cushion and the AGI CPU Bet

Guidance points to USD 1.54 billion in third-quarter revenue, give or take USD 50 million, against a USD 1.53 billion consensus. Adjusted EPS is guided to USD 0.56, plus or minus USD 0.04, versus USD 0.55 in forecasts. Midpoint revenue guidance sits only about 0.7% over consensus (calculated). Arm is also entering chip sales with the AGI CPU, a server processor for which early customer shipments are planned in the fourth fiscal quarter, and as much as USD 2 billion in revenue could arrive over fiscal 2027 and 2028, according to management. That adds execution and cost exposure to a model built on licensing. Qualcomm and other chipmakers fell as well that day, so sector weakness explains part of the decline.

Where Things Stand

Arm Holdings (NASDAQ:ARM) lost 13.08% because investors zeroed in on royalties, the steadier revenue stream, and on outlook figures that barely exceeded forecasts, as a wide chip selloff piled on. Quarter numbers were still ahead of estimates: revenue and EPS both beat, and data center royalties doubled. Given that licensing outpaced royalties this quarter, buyers appear to be demanding faster progress in Royalty income. Attention shifts to smartphone royalty trends, AGI CPU timing, the third-quarter report and whether chip shares level off. This is not a forecast.