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ARM to Post Q1 Earnings: Should the Stock be in Your Portfolio?

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Key Takeaways

  • ARM is projected to report Q1 EPS of 34 cents on $1.04B in revenue, with earnings down 15% year over year.
  • ARM's top-line growth is expected to stem from Royalty revenues, despite year-over-year segment declines.
  • The stock surged 46% in 3 months, trading at 85.2X forward earnings versus the industry average of 34.18X.

Arm Holdings plc (ARM - Free Report) will report its first-quarter fiscal 2026 results on July 30, after the bell.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at 34 cents, indicating a 15% year-over-year decline. The consensus mark for revenues is pegged at $1.04 billion, indicating a 11% year-over-year increase.

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The company has a strong history of earnings surprises. Earnings have surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an average earnings surprise of 14.4%.

There have been no revisions for the upcoming quarter's earnings estimate in the past 30 days.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for ARM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

ARM has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royalty Should Drive ARM’s Top Line

We expect year-over-year improvement in the company’s top line in the to-be-reported quarter to be driven mainly by an increase in Royalty revenues. The consensus estimate for Royaltyrevenuesis pegged at $599 million, suggesting a 28.3% year-over-year decline. The consensus estimate for License and other revenues is pegged at $440 million, indicating a 6.8% year-over-year decline.

Price Dynamics

ARM has rallied a massive 46% in the past three months. This massive rally has sent the stock to a higher valuation. If we look at the forward 12-month Price/Earnings ratio, ARM shares currently trade at 85.2X forward earnings, well above the industry’s 34.18X.

Zacks Investment Research< Image Source: Zacks Investment Research

Investment Considerations

ARM’s core strength in power-efficient chip architecture remains central to its leadership in mobile computing. Its designs power sleek, energy-saving devices from Apple (AAPL - Free Report) , Qualcomm (QCOM - Free Report) , and Samsung, making ARM the foundation of today’s mobile innovation. As demand for performance on minimal power rises, Arm Holdings’ chips continue to dominate smartphones and tablets.

Apple leverages ARM’s architecture for its M-series chips, while Qualcomm depends on it to power its Snapdragon lineup. Samsung integrates ARM designs across mobile and consumer electronics, further affirming its critical role. ARM’s proven ability to balance high efficiency and low power draw has solidified its status in the mobile era.

ARM is rapidly emerging as a foundational player in the age of artificial intelligence (AI) and the Internet of Things (IoT). As Apple, Qualcomm, and Samsung pursue AI-driven innovation, they are increasingly relying on ARM’s flexible and energy-efficient architecture. AI models are being embedded into everything from wearables to cloud data centers, and ARM’s chips are built to meet these growing demands.

Apple continues to scale its AI integration on ARM-based silicon, Qualcomm expands its AI capabilities in mobile and automotive, and Samsung explores next-gen IoT through Exynos chips powered by ARM. With machine learning and edge computing at the forefront, ARM is becoming an indispensable infrastructure for the next wave of tech advancement.

Wait for a Better Price

Given the stock’s substantial increase over the past three months, it may experience a correction soon. Therefore, it might be wise for investors to wait for a potential correction.

While ARM remains fundamentally strong, a more advantageous entry point could emerge if the stock undergoes some price adjustment. The company’s robust position in the AI hardware market and its strategic advancements in chip design suggest long-term growth potential, but timing the market entry is crucial for maximizing investment returns.


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