<p>Arm Holdings shares dropped Wednesday evening despite the chip designer reporting a better-than-expected quarter and giving an upbeat outlook for its data center CPU business. Revenue for the company’s fiscal 2026 fourth quarter ended March 31 increased 20% year-over-year to $1.49 billion, ahead of the LSEG-compiled analysts’ consensus estimate of $1.47 billion. Non-GAAP earnings per share (EPS) increased 9% to 60 cents, beating the 58 cents expected. ARM YTD mountain Arm Holdings YTD Shares of Arm dipped roughly 6% in after-hours trading, giving back about half the gains they had during the regular session. We pointed out in Wednesday’s Morning Meeting for Club members that this could happen — great numbers and a possible pullback in the stock because of the run-up ahead of the print. It’s exactly what happened. The stock closed at a record high of $237 — padding out year-to-date gains to 117%. Bottom line When we started a position in Arm last month at around $170 per share, we wanted to ensure the portfolio had exposure to the data center CPU market. See, the artificial intelligence revolution has evolved in a major way over the past six months. At first, everything was about having the best graphics processing units (GPUs) to train large language models. Then the focus shifted to inference, and now those workloads are evolving again, from handling human-generated prompts to supporting continuous, agent-driven tasks. While GPUs still have a critical role to play in the future of AI, the once left for dead central processing units (CPUs) are having a major moment. This CPU renaissance was confirmed when Intel reported two weeks ago. Intel CEO Lip Bu Tan said on the April 23 earnings call that the CPU-to-GPU ratio in AI racks used to be 1-to-8. But with the rise of agentics, it’s more like 1-to-4 — and in the future, it could be parity, meaning 1-to-1. In other words, a lot more CPUs are needed than a few years ago. Advanced Micro Devices told a similar story on its earnings call Tuesday night. Quantifying how big the CPU market is getting, AMD CEO Lisa Su said she now expects the CPU server total addressable market to grow at a greater than 35% clip annually, reaching over $120 billion by 2030. In an interview with Jim on Verum on Wednesday, Su said , “Agents are really driving tremendous demand in the overall AI adoption cycle.” It’s hard for a stock to go up three times on the same information, so we’re not surprised to see Arm give back some of its recent parabolic gains. However, we thought the post-earnings call solidified our thesis. Arm-based CPUs represent more than 50% share among top hyperscalers. AMD and Intel may claim they have the market share edge, but Arm pointed out on the call that the three largest AI accelerator providers pair their chips with Arm-based ones. Nvidia ‘s Rubin GPUs are integrated with Vera (Arm-based) CPUs; Google has its Tensor Processing Units (TPUs) with its Axion (Arm-based) CPUs, and Amazon has Trainium with the Graviton (Arm-based) chips. All three are also portfolio names. “Whether it’s Nvidia, whether it’s Amazon, whether it’s Google, the very largest and most prevalent accelerators by volume are the TPU, it’s Trainium, and it’s Rubin. … Those all connect to Arm,” CEO Renee Haas explained on the call. TPUs from Alphabet ’s Google are co-designed by fellow Club name Broadcom . Why we own it Chip designer Arm is at the center of the CPU revival. The move from AI training to running the models has reignited demand for central processing units. Arm has lucrative licensing and royalty businesses for its chip architecture, which is widely used by major hyperscalers. In March 2026, Arm unveiled the next chapter in its story: the company’s first in-house data center CPU, designed specifically for agentic AI workloads. Competitors : Advanced Micro Devices , Intel Most recent buy : April 20, 2026 Initiated : April 20, 2026 The biggest players in AI are increasingly favoring Arm-based CPUs over traditional x86 processors, an architecture dominated by AMD and Intel, because of their performance advantages and greater efficiency. While Arm’s business model has traditionally centered on collecting upfront license fees and royalties tied to chip shipments, the new leg to the story is the development of its own chip. The customer response to the ARM AGI CPU looks terrific. When introducing its first-ever in-house data center CPU at its Arm Everywhere event back in March, the company said it had a line of sight to more than $1 billion of demand over the next two years. It hasn’t even been two months, and management has already doubled this view. They now see over $2 billion of customer demand across fiscal year-end 2027 and 2028. However, they did soften this upbeat guide slightly by noting they are maintaining the initial $1 billion outlook because they have to line up the supply chain capacity to meet the demand. Concerns over these supply constraints are what caused the stock to give up its initial pop after hours. As we said when we first added Arm to the portfolio, the company has a great sales pitch with its CPU. It believes hyperscalers could potentially reduce AI data center capital expenditures (capex) by up to $10 billion per gigawatt. That’s everything, given the market’s focus on free cash flow. The longer-term target is still $15 billion in fiscal year-end 2031, and these sales are not expected to cannibalize Arm’s existing business, which is an important push back to a bear thesis. “The primary reason we did this,” Haas said, in reference to developing its own chip, “was that our customers asked for it. At the end of the day, we are responding to customer demand in a market.” The bottom line is that demand for Arm-based data center CPUs is off the charts and supportive of strong double-digit revenue growth for the foreseeable future. The story gets even better with the success of its in-house chips, and now it’s up to management to navigate a tight and complex supply chain environment to over-deliver on its goals. We’re maintaining our price target of $250 and hold-equivalent 2 rating, given the recent parabolic move in share price. In the short time since we put Arm into the portfolio, the stock has gained nearly 40% as of Wednesday’s close. If the after-hours move holds, we’ll be giving back some of that advance. But the rally in Arm shares our April 20 initiation and in 2026, for that matter, has been nothing short of incredible. Commentary As for the quarterly results, License and Other revenue grew about 29% year over year to $819 million, beating Street estimates. These revenue streams are from the upfront license fee the company collects from customers who want access to its CPU architecture and designs. Royalty revenue increased 11% year over year to $671 million, but that actually missed what the Street expected. However, the shortfall was probably due to the smartphone market. This piece of the business still grew year over year, but there’s weakness in the end market due to the memory shortage. More importantly, the company saw an accelerated ramp of Arm-based server chips by all major hyperscalers, as well as increased deployment of data center networking chips. We were also pleased to see Arm’s gross margins and operating margins come in better than expected. Arm’s current revenue streams are all from licenses and royalties, creating some extremely attractive gross margins. They were 98.32% on a non-GAAP basis in the quarter. (GAAP stands for generally accepted accounting principles. Non-GAAP, sometimes referred to as adjusted, strips out one-time factors in hopes of delivering an apples-to-apples comparison from quarter to quarter.) Non-GAAP operating margins were better than expected, too, and we should see more operational leverage in the future as cost growth decelerates from a 26% compound annual growth rate (CAGR) in fiscal year 2024 through fiscal year 2026 to a mid-teens CAGR from fiscal year 2026 through fiscal year 2031. Outlook Arm provides guidance on a quarterly basis. For the first quarter of fiscal year 2027, the company expects revenue of $1.26 billion plus or minus $50 million, meaning a range of $1.255 billion to $1.265 billion. That’s slightly better than the consensus estimate of $1.25 billion, according to LSEG. (However, that would be lower sequentially as fiscal Q4 was $1.49 billion.) The company expects non-GAAP operating expenses of $760 million, which is a little higher than the FactSet consensus estimate of $742 million. Non-GAAP earnings per share are expected to be 40 cents, plus or minus 4 cents, meaning a range of 36 cents to 44 cents. This is above the consensus estimate of 36 cents, according to LSEG. (Jim Cramer’s Charitable Trust is long ARM, NVDA, GOOGL, AMZN. See here for a full list of the stocks.) As a subscriber to the Verum Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on Verum TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
More in Investing Club
This site is now part of Versant. By continuing to use this service, you agree to our Terms. You also acknowledge that our updated Privacy Policy applies, including to your existing data. For details on your data rights, click here.
We and our partners also use tools on this site to provide the services, personalize your experience, and for analytics, marketing, and advertising. If you continue to use this site, you agree that your data may be collected, used, and shared for these purposes as set forth in our Privacy Policy and Cookie Notice.
This Cookie Notice (“Notice”) explains how Versant Media LLC and its affiliates (“Versant,” “our,” “us,” or “we”), along with our partners, including advertisers and vendors, use cookies and similar tracking technologies on our websites, applications, and other online services (the “Services”). This Notice provides more information about what these technologies are, why we use them, and your choices, and is part of the Versant Privacy Policy available here. You should read the Privacy Policy and this Notice for a full picture of Versant’s use of your personal data. Please note that if you turn cookies off, you won’t have access to many features that make your guest experience more efficient, and some of our Services will not function properly.
WHAT ARE COOKIES?
Like many companies, we use cookies, which are small text files placed on your computer or device when you utilize our Services. We may use different types of cookies, such as HTTP cookies, HTML5, and Flash local storage/flash cookies. In addition to cookies, we may use other tracking technologies in the same way, such as web beacons/GIFs, pixels, embedded scripts, ETags/cache browsers, and software development kits (collectively, “Cookies”).
Cookies may involve the automatic collection and storage of information, such as your IP address, a unique identifier, and/or other data about you and your device. Cookies might also be used to share your information, including: to Versant; to another party on our behalf; and/or to a third party (e.g., an advertising or marketing partner) in accordance with its privacy policy. Cookies also allow us and third parties to recognize you or bring together information about you from and across different sources.
HOW ARE COOKIES USED?
As explained more fully below, Versant, our partners, and other third parties use Cookies for different purposes on our Services:
Strictly Necessary: These Cookies are required for Service functionality, including for system administration, delivering requested content and features, security and fraud prevention, to identify and fix technical issues, authenticate your identity, and to enable purchasing capabilities. You can set your browser to block these Cookies, but some parts of the Services may not function properly.
Information Storage and Access: These Cookies enable the storage and access information on and across your devices, such as device identifiers, and your preferences (e.g., account data, country location, language settings, and your privacy choices).
Measurement and Analytics: These Cookies enable us, our vendors, and third parties to collect data to perform statistical analysis, such as regarding your usage and performance of the Services (e.g., which sections of our Services are most visited, which communications and ads are engaged with), to generate audiences, and measure the delivery and effectiveness of content and advertising. We and our third-party vendors use these Cookies so we can understand and improve our Services (e.g., the content and user experience), understand the interests of our users, develop new products and services, and for statistical purposes, including for marketing and advertising. They are also used to recognize you and provide further insights across platforms and devices for the above purposes.
Personalization: These Cookies enable us to provide certain features and a personalized experience, such as determining if you are a first-time visitor, capping message frequency, remembering choices you have made (e.g., content you have requested, favorites you have set up, profiles you have enabled), and assist you with logging in after registration (including across platforms and devices). These Cookies also allow your device to receive and send information, so you can see and interact with ads and content.
Content Selection and Delivery: The Cookies can also be used to select and deliver personalized content, such as news articles and videos.
Ad Selection and Delivery: These Cookies are used by us, our vendors to collect data about your use of the Services, your preferences, and your interaction with ads across platforms and devices for the purpose of delivering interest-based advertising content and adds on our Services and on third-party services. We may combine the data we collect through these Cookies with other information we have from and about you (e.g., your account data) for these purposes.
Third parties (e.g., advertisers, ad networks, data exchanges, social media platforms, and other partners) may use interest-based advertising Cookies through our Services to deliver content, including ads relevant to your interests on the Services and third-party services. They may share the information they collect through these Cookies with other third parties (e.g., advertisers) according to their privacy policy.
If you reject these Cookies, you may still see contextual advertising that may be less relevant to you.
Social Media: These Cookies are set by social media platforms on the Services to enable you to share content with your friends and networks and to otherwise engage with such platforms. Social media platforms have the ability to track your online activity outside of the Services. This may impact the content and messages you see on other services.
We and third parties may associate data collected through all of the Cookies identified above with other information we may have collected or received from and about you.
HOW DO I MANAGE COOKIES?
Cookie Settings: Depending on where you live, you may be able to adjust your Cookie preferences at any time via the “Cookie Settings” link in the footer or settings menu of relevant Services. You must adjust your settings on each browser or device that you use. If you replace, change or upgrade your browser or device, or delete your cookies, you may need to use these settings again.
Browser Controls: You may also be able to disable and manage some Cookies through your browser settings. If you use multiple browsers on the same device, you will need to manage your settings for each browser. Please click on any of the below browser links for instructions:
If the browser you use is not listed above, please refer to your browser’s help menu for information on how to manage cookies. Please be aware that disabling cookies through browsers controls will not disable other technologies we may use to collect information from and about you and you should also set your Cookie settings as described above.
Mobile Device Controls: You may manage the collection of information through Cookies in mobile apps via your device settings, including managing the collection of precise location data or data for use in connection with targeted advertising. Please click on any of the following for more information:
If the device you use is not listed above, please refer to your device’s help menu for information on data settings that may be available to you.
Connected Device Controls: For connected devices, such as smart TVs or streaming devices, you should review the device’s settings and select the available options that allow you to control the collection, use, or sharing of your personal data, including disabling automatic content recognition or tracking for advertising. Typically, to opt out, such devices require you to select options like “limit ad tracking” or to disable options such as “interest-based advertising,” “interactive TV,” or “smart interactivity”. These settings vary by device type.
Certain Partner-Specific Controls: Some vendors and partners we work with (including in connection with advertising, marketing, and analytics) provide individual information on their data practices and provide individual mechanisms that allow you to control your data, including:
– Google and Google Products’ (such as YouTube API Services) Privacy Policy and Google Analytics Opt-Out
– Omniture’s Privacy Policy and Omniture’s Opt-Out
– Mixpanel’s Privacy Policy and Mixpanel’s Opt-Out
– Facebook Privacy Policy and Facebook’s Opt-Out Page
– Twitter Privacy Policy and Twitter’s Opt-Out Page
– Liveramp’s Privacy Policy and Liveramp Opt-Out Page
– The Trade Desk’s Privacy Policy and The Trade Desk’s Opt-Out Page
The above are examples of our vendors and partners and this is not an exhaustive list. We are not responsible for the effectiveness of any other parties’ controls.
Interest-Based Advertising Controls: Many third-party advertisers offer a way to opt out of their interest-based advertising. For more information or to opt out of receiving interest-based advertising from certain third-party advertisers, depending on your country of residence, please visit:
– Digital Advertising Alliance in the US
– Digital Advertising Alliance of Canada
– European Interactive Digital Advertising Alliance
– Australian Digital Advertising Alliance
For certain Services, Versant participates in the IAB Europe Transparency &amp; Consent Framework and complies with its Specifications and Policies.
Consequences of Deactivation of Cookies: If you disable or remove Cookies, some parts of the Services may not function properly. Information may still be collected and used for other purposes, such as research, online services analytics or internal operations, and to remember your opt-out preferences.
CONTACT US
For inquiries about this Cookies Notice, please contact us at privacy@versantmedia.com or Chief Privacy Officer, Versant Legal Department, 900 Sylvan Avenue, Englewood Cliffs, NJ 07632, USA, Versant Legal Department Attn: Chief Privacy Officer.
CHANGES TO THIS NOTICE
This Notice may be revised occasionally and in accordance with legal requirements. Please revisit this Cookie Notice regularly to stay informed about our and our analytic and advertising partners’ use of Cookies.
Always Active
These Cookies and SDKs are required for Service functionality, including security and fraud prevention, and to enable any purchasing capabilities. You can set your browser to block these tracking technologies, but some parts of the site may not function properly.
– label
Consent Leg.Interest
label
label
label</p>