Arm (ARM) Q1 2026 earnings summary

Executive summary

• Fiscal Q1 2026 revenue reached $1.053 billion, up 12% year-over-year, driven by a 25% increase in royalty revenue and strong AI demand across all markets.

• Royalty revenue hit a record $585 million, with growth in smartphones, data center, automotive, and IoT, while licensing revenue was $468 million, down 1% year-over-year.

• Over 70,000 enterprises now run AI workloads on Neoverse chips, a 40% increase year-over-year, and Neoverse CPUs are expected to reach nearly 50% market share at top hyperscalers.

• Arm continues to expand its ecosystem, with over 325 billion chips shipped since inception and strong adoption in data center and cloud markets.

• Net income was $130 million, down from $223 million in the prior year quarter, reflecting higher R&D and administrative expenses.

Financial highlights

• Total revenue of $1.053 billion exceeded guidance midpoint and marked the best Q1 ever, with royalty revenue up 25% to $585 million.

• Licensing and other revenue decreased 1% year-over-year, as expected.

• Non-GAAP operating profit was $412 million; non-GAAP EPS was $0.35, above guidance midpoint despite a $0.01 FX headwind.

• Non-GAAP gross margin was 98%, and non-GAAP operating margin was 39%.

• Net cash provided by operating activities was $332 million, a significant increase from a $290 million outflow in the prior year quarter.

Outlook and guidance

• Q2 revenue guidance is $1.01–$1.11 billion, implying about 25% year-over-year growth at the midpoint.

• Royalties and licensing expected to be flat sequentially in Q2, with non-GAAP operating expense expected at $655 million.

• Non-GAAP EPS guidance for Q2 is $0.29–$0.37.

• Management expects continued investment in R&D to support long-term growth, particularly in AI and advanced compute solutions.

• Cash and liquidity are considered sufficient to meet operational and strategic needs for at least the next 12 months.