Arm Lifts Forecast on AI Boom, Revenue Surges 34%

Arm Holdings has raised its outlook for the current fiscal quarter after posting stronger-than-expected results, fueled by soaring demand for artificial intelligence (AI) computing and higher chip royalties.

The UK-based chip technology provider said it expects third-quarter revenue of about $1.23 billion, topping Wall Street’s estimate of $1.1 billion. Shares rose nearly 5% after the announcement before settling up around 3% in late trading.

For the second quarter, Arm reported revenue of $1.14 billion, a 34% jump from a year earlier and above analyst projections. Adjusted earnings came in at 39 cents per share, surpassing expectations of 33 cents.

A major driver of growth was Arm’s Compute Subsystems (CSS) products — complete chip designs that speed up production and carry higher royalties. CEO Rene Haas said the growing number of customers adopting CSS and the surge in AI computing demand have strengthened the company’s outlook.

Arm earns money from licensing its chip designs and collecting royalties on every chip sold using its technology. Known for energy-efficient architectures, Arm’s designs are now gaining traction in data centers, a market long dominated by Intel and AMD. The company said it expects its share of CPUs deployed by top cloud providers to reach nearly 50% by 2025.

The second quarter also saw royalty revenue rise 21% to $620 million, while licensing revenue jumped 56% to $515 million, driven by major high-value contracts. Growth was broad-based, spanning smartphones, data centers, and automotive chips.

Alphabet’s Google has already integrated Arm’s architecture into its Axion processors, claiming 60% better energy efficiency compared to traditional x86-based chips.

Looking ahead, Arm plans to invest more of its profits into developing its own chips, marking a shift from its long-held role as an intellectual property provider. The move aims to accelerate innovation and give customers a faster path from design to production.

With AI computing continuing to reshape the semiconductor landscape, Arm’s latest results underline its growing influence far beyond smartphones — and its readiness to power the next wave of intelligent devices.