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The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at 48 cents, indicating a 23% year-over-year increase. The consensus mark for revenues is pegged at $1.37 billion, indicating a 21% 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 9.8%.
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 revenue is pegged at $712 million, suggesting a 14.8% year-over-year decline. The consensus estimate for License and other revenues is pegged at $661 million, indicating a 28.3% year-over-year decline.
Price Decline Still Elevated Valuation
ARM stock has declined 13.8% over the past three months, making valuations high. ARM currently trades at a lofty forward 12-month price-to-earnings multiple of 75.94X, more than seven times the industry average of 10.20, suggesting the stock remains far from inexpensive.
Image Source: Zacks Investment Research
Hold ARM Stock Ahead of Q2 Earnings
Arm Holdings’ strong position in semiconductor architecture, growing adoption of energy-efficient chip designs and increasing exposure to artificial intelligence present attractive long-term growth opportunities. Rising demand for advanced computing solutions and continued momentum in royalty and licensing businesses should support its prospects. However, ARM’s elevated valuation, despite the recent share price decline, remains a concern. Moreover, the absence of a favorable earnings beat prediction limits near-term optimism. Although ARM’s growth potential remains promising, its premium valuation leaves little room for disappointment. Given these mixed factors, existing investors should retain ARM shares, while prospective investors may await a more attractive entry point.
How Do NVIDIA and Intel Compare With ARM?
NVIDIA (NVDA - Free Report) represents an important comparison given its leadership in AI accelerators and data-center computing. NVIDIA benefits from demand for GPUs that power AI training and inference, while Arm provides CPU architectures that support complementary computing workloads. NVIDIA's established AI ecosystem highlights the scale of infrastructure opportunities available to semiconductor companies.
Intel (INTC - Free Report) offers another useful comparison as Arm expands into higher-performance CPUs. Intel maintains an established presence in processors for personal computers and data centers, making its competitive positioning relevant to Arm's expansion strategy. However, Intel's manufacturing-intensive operations differ substantially from Arm's traditional intellectual property licensing model, creating different profitability and capital requirements.
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ARM to Post Q2 Earnings: Should the Stock Be in Your Portfolio Now?
Key Takeaways
Arm Holdings plc (ARM - Free Report) will report its second-quarter fiscal 2027 results on Nov. 4, after the bell.
The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at 48 cents, indicating a 23% year-over-year increase. The consensus mark for revenues is pegged at $1.37 billion, indicating a 21% 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 9.8%.
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 0.00% 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 revenue is pegged at $712 million, suggesting a 14.8% year-over-year decline. The consensus estimate for License and other revenues is pegged at $661 million, indicating a 28.3% year-over-year decline.
Price Decline Still Elevated Valuation
ARM stock has declined 13.8% over the past three months, making valuations high. ARM currently trades at a lofty forward 12-month price-to-earnings multiple of 75.94X, more than seven times the industry average of 10.20, suggesting the stock remains far from inexpensive.
Hold ARM Stock Ahead of Q2 Earnings
Arm Holdings’ strong position in semiconductor architecture, growing adoption of energy-efficient chip designs and increasing exposure to artificial intelligence present attractive long-term growth opportunities. Rising demand for advanced computing solutions and continued momentum in royalty and licensing businesses should support its prospects. However, ARM’s elevated valuation, despite the recent share price decline, remains a concern. Moreover, the absence of a favorable earnings beat prediction limits near-term optimism. Although ARM’s growth potential remains promising, its premium valuation leaves little room for disappointment. Given these mixed factors, existing investors should retain ARM shares, while prospective investors may await a more attractive entry point.
How Do NVIDIA and Intel Compare With ARM?
NVIDIA (NVDA - Free Report) represents an important comparison given its leadership in AI accelerators and data-center computing. NVIDIA benefits from demand for GPUs that power AI training and inference, while Arm provides CPU architectures that support complementary computing workloads. NVIDIA's established AI ecosystem highlights the scale of infrastructure opportunities available to semiconductor companies.
Intel (INTC - Free Report) offers another useful comparison as Arm expands into higher-performance CPUs. Intel maintains an established presence in processors for personal computers and data centers, making its competitive positioning relevant to Arm's expansion strategy. However, Intel's manufacturing-intensive operations differ substantially from Arm's traditional intellectual property licensing model, creating different profitability and capital requirements.