Arm shares jumped 7% in after-hours trading Wednesday after the company reported $1.14 billion in second-quarter revenue and said it expects to hit $1.23 billion in the third quarter. The company also projected 41 cents per share in profit, ahead of the average Wall Street forecast of 35 cents. The stock had closed at $160.19 in New York before the spike. Arm is now clearly pulling cash from a new direction: AI data centers. The company said demand is rising for more advanced chip designs built for AI computing. That shift is showing up in the numbers and in CEO Rene Haas’ strategy. Haas is steering the company beyond its original mobile chip blueprint business and turning it into a broader design provider for everything from wearables to supercomputers. Arm beats Q2 estimates as licensing, royalty revenue rise For the fiscal second quarter, which ended in September, revenue rose 34% year over year. Arm reported profit of 39 cents per share, just two cents below next quarter’s forecast. Out of that $1.14 billion in revenue, $515 million came from licensing, easily beating the $472 million average analyst estimate. Royalties brought in $620 million, also above the forecast of $586 million. Arm gets paid in two ways: it charges for licenses to use its chip designs and collects a royalty each time one of those chips is shipped. That dual model has now become more valuable as companies pour cash into AI infrastructure. Despite the strong beat, Arm is still locked in a legal fight with Qualcomm. The company’s push into full-stack chip design has turned it into a competitor for some of its longtime customers, which has also meant higher engineering expenses, which have put pressure on its margins. Still, Arm isn’t slowing down. “Fiscal Q3 revenue will be about $1.23 billion, with profit of 41 cents per share,” the company said in its earnings release. Analysts had expected $1.1 billion and 35 cents, so this guidance sent investors scrambling to buy. Arm’s parent company SoftBank is also chasing the AI wave. It’s reportedly part of OpenAI’s Stargate project, trying to plant itself in the middle of the global AI gold rush. While Haas confirmed that Arm products would play a role, he didn’t say what kind of chips it plans to deliver. AI chips in phones, PCs, cars drive Arm expansion The company’s strategy is now to go far beyond smartphones. Arm chips are showing up in everything from Google’s Pixel 10 to Tesla’s future vehicles. Pixel 10 runs on the Arm-based Tensor G5, which Google says makes Gemini run 2.6x faster and twice as efficient compared to past chips. On the PC side, NVIDIA’s DGX Spark, a desktop AI supercomputer, is now shipping with Arm-based processors. That hardware is being used for model training, fine-tuning, and inference; on the desk, not in the cloud. Over in automotive, a flagship EV from a major automaker is now running entirely on Arm’s platform. And Tesla’s next-gen AI5 chip, built for both cars and robots, is based on Arm. Tesla says it delivers 40x the AI performance of the chip it replaces. In October, Arm signed a strategic deal with Meta. That partnership links Neoverse CPU cores to Meta’s AI backbone, including Facebook and Instagram’s recommendation engines. Meta and Arm are now co-designing chips across the entire stack—from smart glasses to server farms. Arm says the growing power demands in AI data centers match its legacy strength in low-power mobile chips. The company believes its energy-efficient designs will now scale from milliwatts in wearables to megawatts in AI server farms. And Arm is already building custom designs for Amazon and Google, who are expanding their AI infrastructure. Sign up to Bybit and start trading with $30,050 in welcome gifts
