ARM Stock Forecast & Price Target

Arm Holdings has demonstrated robust financial performance, with royalty revenue increasing by 21% year-over-year to $620 million, fueled by the growth of Armv9 and CSS-based chip shipments across key markets, including smartphones and IoT devices. The company's licensing revenue also saw a significant rise of 56% year-over-year, reaching $515 million, driven by multiple high-value agreements and an expanding customer base that enhances Arm's revenue generation potential. Furthermore, with cash and cash equivalents rising to $3.26 billion, up from $2.83 billion, Arm's strong balance sheet supports ongoing investments in R&D to foster innovation in new architectures and software ecosystems, further positioning the company for sustained growth in diverse technological applications.

The financial outlook for Arm Holdings is negatively impacted by a projected slowdown in licensing revenue for FQ4, attributed to an earlier closure of large deals and a seasonal dip in royalty revenue. Additionally, the mobile industry's stagnation, caused by a saturated customer base and elongated replacement cycles, poses further challenges to growth and profitability. Key risks include flat smartphone shipments through CY25 and CY26, inability to raise royalty rates, and minimal growth in royalty revenue outside of smartphones, all culminating in constrained operating margins.