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The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at 40 cents, indicating a 14.3% year-over-year increase. The consensus mark for revenues is pegged at $1.27 billion, indicating a 20.3% year-over-year increase.
Image Source: Zacks Investment Research
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 7.4%.
There have been no revisions for the upcoming quarter's earnings estimate in the past 30 days.
Image Source: Zacks Investment Research
Our Model Does Not Predict a Beat
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.
We expect year-over-year improvement in the company’s top line in the to-be-reported quarter to be driven by an increase in both Royalty and License revenues. The consensus estimate for Royalty revenues is pegged at $707.1 million, suggesting a 20.9% year-over-year decline. The consensus estimate for License and other revenues is pegged at $560.4 million, indicating a 19.7% year-over-year decline.
Price Surge, Elevated Valuation
ARM stock has climbed 138% over the past six months, making valuations high. ARM currently trades at a lofty forward 12-month price-to-earnings multiple of 107.76X, more than four times the industry average of 25.97, suggesting the stock remains far from inexpensive.
Image Source: Zacks Investment Research
Investment Considerations Tilted to Hold
Arm Holdings continues to strengthen its long-term investment case through its dominant processor ecosystem, expanding role in artificial intelligence infrastructure and growing adoption among leading cloud providers. Its architecture remains deeply embedded across mobile computing while new AI initiatives create meaningful opportunities beyond its traditional licensing business. However, much of this optimism already appears reflected in the stock's premium valuation, leaving limited room for disappointment if industry demand softens or growth moderates. Given its outstanding fundamentals but elevated valuation, ARM appears best suited as a Hold, with investors waiting for an attractive entry point before adding to positions.
Peer View
NVIDIA (NVDA - Free Report) dominates the AI accelerator market with its GPUs and networking platforms. Unlike Arm Holdings, which primarily generates revenue through licensing and royalties, NVIDIA designs and sells complete hardware and software solutions. While NVIDIA's growth is driven by direct chip sales, ARM benefits as more semiconductor companies adopt its CPU architecture to develop AI-optimized processors, making the two companies complementary in many AI deployments rather than direct competitors.
Advanced Micro Devices (AMD - Free Report) competes in CPUs, GPUs and data center processors, focusing on designing and selling semiconductor products. ARM, in contrast, licenses its processor architecture to a broad ecosystem of chipmakers. As demand for custom AI chips and energy-efficient computing grows, AMD competes through product innovation, while ARM benefits from broader adoption of its intellectual property across multiple customers and end markets.
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ARM to Post Q1 Earnings: Should the Stock Be in Your Portfolio Now?
Key Takeaways
Arm Holdings plc (ARM - Free Report) will report its first-quarter fiscal 2027 results on July 29, after the bell.
The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at 40 cents, indicating a 14.3% year-over-year increase. The consensus mark for revenues is pegged at $1.27 billion, indicating a 20.3% year-over-year increase.
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 7.4%.
There have been no revisions for the upcoming quarter's earnings estimate in the past 30 days.
Our Model Does Not Predict a Beat
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 -1.06% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Royalty and License 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 by an increase in both Royalty and License revenues. The consensus estimate for Royalty revenues is pegged at $707.1 million, suggesting a 20.9% year-over-year decline. The consensus estimate for License and other revenues is pegged at $560.4 million, indicating a 19.7% year-over-year decline.
Price Surge, Elevated Valuation
ARM stock has climbed 138% over the past six months, making valuations high. ARM currently trades at a lofty forward 12-month price-to-earnings multiple of 107.76X, more than four times the industry average of 25.97, suggesting the stock remains far from inexpensive.
Investment Considerations Tilted to Hold
Arm Holdings continues to strengthen its long-term investment case through its dominant processor ecosystem, expanding role in artificial intelligence infrastructure and growing adoption among leading cloud providers. Its architecture remains deeply embedded across mobile computing while new AI initiatives create meaningful opportunities beyond its traditional licensing business. However, much of this optimism already appears reflected in the stock's premium valuation, leaving limited room for disappointment if industry demand softens or growth moderates. Given its outstanding fundamentals but elevated valuation, ARM appears best suited as a Hold, with investors waiting for an attractive entry point before adding to positions.
Peer View
NVIDIA (NVDA - Free Report) dominates the AI accelerator market with its GPUs and networking platforms. Unlike Arm Holdings, which primarily generates revenue through licensing and royalties, NVIDIA designs and sells complete hardware and software solutions. While NVIDIA's growth is driven by direct chip sales, ARM benefits as more semiconductor companies adopt its CPU architecture to develop AI-optimized processors, making the two companies complementary in many AI deployments rather than direct competitors.
Advanced Micro Devices (AMD - Free Report) competes in CPUs, GPUs and data center processors, focusing on designing and selling semiconductor products. ARM, in contrast, licenses its processor architecture to a broad ecosystem of chipmakers. As demand for custom AI chips and energy-efficient computing grows, AMD competes through product innovation, while ARM benefits from broader adoption of its intellectual property across multiple customers and end markets.