Arm (ARM) Q1 2025 earnings summary

Executive summary

• Achieved record Q1 revenue of $939 million, up 39% year-over-year, driven by high-value license agreements, AI demand, and Armv9 adoption, with smartphone market recovery supporting growth.

• Non-GAAP operating income reached $448 million with a 47.7% margin; net income more than doubled to $223 million, and non-GAAP net income was $419 million.

• Armv9 architecture now accounts for 25% of total royalty revenue, up from 20% in the prior quarter, mainly from smartphones.

• Largest global software ecosystem with over 20 million developers, enhanced by new AI software libraries.

• Trailing 12 months free cash flow was $709 million, down 2% year-over-year.

Financial highlights

• License and other revenue grew 72% year-over-year to $472 million; royalty revenue rose 17% to $467 million.

• Non-GAAP gross margin was 97%; gross profit margin was 96%, up from 95% a year ago.

• Non-GAAP operating margin was 48%; operating margin was 19%, up from 16% year-over-year.

• Annualized contract value increased to $1,193 million, up 14% year-over-year; remaining performance obligations rose 29% year-over-year but declined sequentially.

• R&D expenses rose 44% to $485 million, driven by headcount growth and share-based compensation.

Outlook and guidance

• Q2 revenue expected between $780 million–$830 million, with Q2 as the low point due to licensing revenue timing.

• Q2 royalty revenue growth projected to accelerate to low 20% range; non-GAAP operating results around $500 million.

• Full-year revenue guidance reiterated at $3.8 billion–$4.1 billion, representing 18%–27% year-over-year growth.

• Full-year royalty revenue growth expected in the low 20% range, slightly below prior mid-20% expectation due to persistent IoT and networking inventory issues.

• Non-GAAP operating expenses forecasted at $2.05 billion, up 19% year-over-year; full-year non-GAAP EPS guidance of $1.45–$1.65.