Schwab Network on $ARM (Nov 5, 2026)
ARM beat Q2 revenue and EPS, but royalty revenue missed and Q3 guidance was in line; it raised its in-house chip backlog target to $2 billion for fiscal year 2027 and fiscal year 2028 from around $1 billion. The business is volatile, a slowdown from chip prices could hit the stock, and its data-center chip-stack transition may or may not work long term.
Jump to any passage
All right, let's talk ARM holdings. This is another one that's uh kind of a part of the AI story. Those shares under pressure this morning. Uh walk us through some of your takeaways here.
Yeah, this is a you know ARM is always volatile when it comes to its earnings announcements. And so I think we have to say that at the onset here before we go through the numbers, the revenue actually did beat the street's expectations for Q2.
Coming in at $1.44 billion, Street was looking for 1.38 billion and the adjusted earnings per share came in at 52 cents. Street was looking for 47 cents. So beat both on the top and bottom line.
But when you're looking at their loyalty of royalty revenue, that did come up lighter than the street's expectations coming in at 670 million. That's up 8% on a year-over-year basis.
But the street was looking for 720.8. 8 million. And unfortunately, that's going to be your demand line when it comes to the businesses that are selling their chips or selling products that have their chips within it or their designs within it.
Now, when you're looking at their fiscal year guide for Q3 came in for the most part in line with the streets expectations, revenue at $ 1.54 billion. She was looking for 1.53 billion.
Now, they did announce back in March that they're going to be trying to build out their own chips in house here. Uh, and they are actually rerating their guidance for that. At their first they were saying around $1 billion in the AGI CPU order uh backlog.
Now they're expecting $2 billion uh between fiscal year 2027 and fiscal year 2028 here. So a very volatile business. We do see a slowing because of chip prices unfortunately that could hit the stock but this is a company that has been trying to transition itself and get a little bit more exposure when it comes to the full complete uh chip stack if you will especially when you're looking at the data center front.
We'll see if that's going to pan out over the long term, but we are seeing some weakness early on in today's trading.
What this channel has said about $ARM
Schwab Network has 2 calls on this stock; only the adjacent ones are shown.