Arm (ARM) Q2 2026 earnings summary

Executive summary

• Total revenue for Q2 reached $1.14 billion, up 34% year-on-year, marking the third consecutive billion-dollar quarter and reflecting strong growth in both royalty and license revenues.

• Royalty revenue hit a record $620 million, up 21% year-on-year, with growth across data center, smartphones, automotive, and IoT.

• Licensing revenue rose 56% to $515 million, driven by demand for next-generation architectures and high-value agreements.

• Net income more than doubled to $238 million, with non-GAAP net income at $417 million and diluted EPS of $0.39.

• The company completed the sale of its Artisan foundation IP business, recognizing a $131 million pre-tax gain, and entered into an agreement to acquire DreamBig Semiconductor for $265 million.

Financial highlights

• Non-GAAP operating income was $467 million, up 43% year-on-year, with a 41.1% operating margin; non-GAAP gross margin was 98%.

• Operating income for the quarter was $163 million, up from $64 million a year ago, and operating margin improved to 14%.

• Non-GAAP net income for the quarter was $417 million, and trailing 12 months non-GAAP free cash flow reached $1,073 million.

• Diluted EPS for the quarter was $0.22, compared to $0.10 in the prior year period; non-GAAP EPS was $0.39, $0.06 above guidance midpoint.

• Research and development expenses rose 36% to $691 million, reflecting continued investment in next-generation products.

Outlook and guidance

• Q3 revenue expected at $1.225 billion ±$50 million, representing ~25% year-on-year growth.

• Royalties projected to grow just over 20% year-on-year; licensing up 25%-30% year-on-year.

• Non-GAAP operating expense expected at $720 million; non-GAAP EPS at $0.41 ±$0.04.

• Management expects continued strong demand for advanced compute platforms, with ongoing investments in AI and next-generation technologies.

• The company believes its cash and short-term investments of $3.26 billion are sufficient to meet liquidity needs for at least the next 12 months.