Post by : Badri Ariffin

Arm Holdings upgraded its outlook for the current fiscal quarter after delivering results that exceeded expectations, citing a surge in demand for AI computing and stronger chip royalties.

The UK-based chip-architecture company now foresees third-quarter revenue of about $1.23 billion, above Wall Street's roughly $1.1 billion projection. Shares initially jumped nearly 5% before settling about 3% higher in late trading.

In the second quarter, Arm posted $1.14 billion in revenue, a 34% increase from the prior year and ahead of analysts' forecasts. Adjusted earnings were $0.39 per share, beating the $0.33 estimate.

Much of the momentum came from Arm's Compute Subsystems (CSS) — full chip designs that speed development and carry larger royalties. CEO Rene Haas said broader CSS adoption and stronger AI compute demand have bolstered the company's outlook.

Arm generates revenue by licensing its chip designs and collecting royalties on every chip built using its technology. Traditionally known for energy-efficient mobile architectures, its designs are gaining traction in data centres historically dominated by Intel and AMD. The firm expects its share of CPUs used by top cloud providers to approach 50% by 2025.

Royalty revenue climbed 21% to $620 million in the quarter, while licensing revenue rose 56% to $515 million, driven by several high-value contracts. Growth was diverse, spanning smartphones, data-centre servers and automotive chips.

Alphabet's Google has already adopted Arm architecture for its Axion processors, claiming about 60% better energy efficiency compared with traditional x86-based chips.

Looking forward, Arm said it will allocate more profits toward building its own chips — a strategic shift from being solely an IP licensor — aimed at accelerating innovation and shortening customers' routes from design to production.

With AI workloads reshaping the semiconductor landscape, Arm's results underline its expanding influence beyond mobile devices and its readiness to power the next generation of intelligent hardware.

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