ARM Q1 Earnings Call Highlights

Record Q1 performance: Revenue rose 22% year over year to $1.29 billion, while non-GAAP EPS increased 29% to $0.45, exceeding the high end of guidance. Licensing and royalty revenue both reached records. Cloud AI drives growth: Data-center royalty revenue more than doubled as hyperscalers expanded Arm-based deployments, including products from NVIDIA, Google, AWS and Microsoft. However, smartphone weakness and elevated memory prices led Arm to reduce its full-year royalty-growth outlook to the high teens. AGI CPU opportunity expands: Demand for Arm’s new AGI CPU has exceeded $2 billion, more than double the company’s initial fiscal 2027–2028 opportunity estimate of $1 billion, though supply constraints remain across wafers, substrates, testing and memory.

ARM NASDAQ: ARM reported record first-quarter fiscal 2027 results, with revenue rising 22% year over year to $1.29 billion as demand for its computing platform expanded across cloud AI infrastructure, edge devices and physical AI applications. Chief Executive Officer Rene Haas said the company delivered record first-quarter licensing and royalty revenue. Royalty revenue increased 22% to $715 million, while licensing revenue rose 23% to $574 million. Non-GAAP earnings per share increased 29% to $0.45, above the high end of the company’s guidance.

“AI is changing where and how compute happens,” Haas said, pointing to the continued transition toward Arm-based systems in data centers as well as growing applications in PCs, smartphones, vehicles, robotics and industrial systems. Data Center Momentum Drives Royalty Growth Chief Financial Officer Jason Child said cloud AI remained the largest driver of royalty growth, with data center royalty revenue more than doubling year over year. The company cited continued deployments of Arm-based server chips by hyperscale customers, along with networking products such as data processing units and SmartNICs.

Arm said Neoverse shipments have surpassed 1.5 billion cores, with the latest 500 million cores shipping in nine months, compared with six years for the first 1 billion. Haas highlighted several customer developments, including NVIDIA bringing its Arm-based Vera CPU into production, Google’s use of its Arm-based Axion CPU in AI infrastructure and AWS plans to deploy tens of millions of Graviton5 cores for agentic AI workloads. Microsoft expanded Azure Cobalt 200 virtual machines built on Arm Neoverse Compute Subsystems, while Qualcomm announced plans to enter the AI data center CPU market with its Arm-based Dragonfly C1000, according to Haas.

Child said edge AI royalty revenue continued to grow despite softness in the smartphone market. The company has benefited from higher royalty rates as Armv9 and Compute Subsystems gain greater penetration in smartphones, tablets and other consumer electronics. However, management said elevated memory prices have pressured handset demand across market segments. Haas said Arm has been partially insulated from weaker unit sales because a larger share of customers are using Armv9 and Compute Subsystems, which carry higher royalty rates. Child said the company now expects full-year royalty growth to be closer to the high teens, versus prior expectations of about 20%, while maintaining that cloud AI growth is helping offset smartphone weakness. For the second quarter, Arm expects royalty revenue growth in the low teens.

Arm also updated investors on its Arm AGI CPU business, introduced in March as another way for customers to deploy the Arm compute platform. Haas said initial pr...