Arm Holdings
| CURRENT PRICE | PROBABILITY-WEIGHTED FAIR VALUE | FAIR VALUE RANGE |
|---|---|---|
| $220 | ~$225 | $150 – $290 |
| May 2026 | Bull 25% / Base 50% / Bear 25% | Approximately fair; rich multiple |
Verdict: ARM reported fiscal Q4 revenue of $1.49B (Licensing +29% to $819M; Royalty +11% to $671M) and EPS of $0.60 beating cons[1]. FY26 revenue was $4.92B (+22.8%). Stock slid 7.25% on Q4 print despite the beat, on supply commentary[2]. Data center royalties more than doubled YoY — AI CPU customer demand jumped to $20B in 6 weeks, with supply only locked for the first $1B. Long-term FY31 targets of $25B revenue and $9+ EPS imply double-digit CAGR. At ~130x forward P/E, valuation is stretched. Bull case requires sustained royalty growth and AI compute share gain; bear case is multiple compression on growth deceleration.
CURRENT SNAPSHOT
| Metric | Value | Notes / Source |
|---|---|---|
| Stock price | $220.10 | 5/7/26 close [2] |
| Q4 FY26 revenue | $1.49B | Licensing $819M (+29%); Royalty $671M (+11%) [1] |
| Q4 FY26 EPS | $0.60 | Beat consensus [1] |
| FY26 revenue | $4.92B (+22.8%) | [3] |
| Data center royalties | +>100% YoY | AI CPU traction [2] |
| AGI CPU customer demand | $20B / $1B locked | Supply-constrained [2] |
| FY31 revenue target | $25B / $9+ EPS | Long-term [2] |
| Forward P/E | ~130x | Stretched by peer comparison [2] |
BULL / BASE / BEAR SCENARIOS
| Scenario (weight) | Assumptions | Fair Value |
|---|---|---|
| Bull (25%) | Royalty + licensing both compound 25%+, AI CPU royalty inflection, multiple stays premium | $290 |
| Base (50%) | FY27 +20% revenue, multiple compresses to 100x forward | $225 |
| Bear (25%) | Smartphone royalty plateau, AI CPU share contested, multiple compresses to 65x | $150 |
| Probability-weighted | IP licensing premium; valuation rich, supply-constrained AI demand is the swing factor. | ~$225 |
Key Risks
- Smartphone saturation: Mobile royalties (~60% of mix) growth-limited.
- Custom Arm (NVIDIA): NVIDIA Cosmos / Grace CPU could partially internalize Arm architecture.
- RISC-V competition: Open-source RISC-V architecture gaining traction in some segments.
- Multiple compression: 130x forward P/E leaves limited margin for execution misses.
- SoftBank overhang: Majority shareholder; secondary offerings can pressure stock.
What Would Change Our View
- Upside: AI CPU royalty disclosure, Arm Server share gain, FY27 guide raise.
- Downside: FY27 guide cut, customer loss, RISC-V breakthrough, SoftBank sale.
Sources
[1] https://www.sec.gov/Archives/edgar/data/0001973239/000197323926000062/exhibit992fye26q431-marx26.htm
[2] https://www.heygotrade.com/en/news/arm-holdings-record-revenue-stock-slides-supply-cap/
[3] https://stockanalysis.com/stocks/arm/
Disclaimer
This output is for informational and research-assistance purposes only. It does not constitute investment, legal, tax, accounting, or other professional advice, and it is not a recommendation to buy, sell, or hold any security. Verify material facts independently and consult qualified advisors before making decisions.