Arm Holdings plc (ARM)

Arm designs processor technology and licenses it to others. Its core product is the CPU, the central processor, and the architecture behind it: the set of instructions that software is written for, which it calls a common language for developers. Around it sit graphics and neural processors, system components and compute subsystems, meaning pre-integrated, pre-verified bundles of its designs. Chip makers, device makers and cloud providers license these to build their own chips; more than 350 billion Arm-based chips had been reported shipped by March 2026, and more than 22 million developers work on its platform. In March 2026 it announced its first chip of its own, the Arm AGI CPU, with production expected by the end of calendar 2026. 26272829303132

How it operates

Arm designs processor technology and licenses it to others. Its core product is the CPU, the central processor, and the architecture behind it: the set of instructions that software is written for, which it calls a common language for developers. Around it sit graphics and neural processors, system components and compute subsystems, meaning pre-integrated, pre-verified bundles of its designs. Chip makers, device makers and cloud providers license these to build their own chips; more than 350 billion Arm-based chips had been reported shipped by March 2026, and more than 22 million developers work on its platform. In March 2026 it announced its first chip of its own, the Arm AGI CPU, with production expected by the end of calendar 2026. 26272829303132

It earns in two ways, each about half of revenue. Customers pay license fees for access to the designs, under single-design licenses, portfolio deals called Arm Total Access and Arm Flexible Access, compute subsystem deals, or architecture licenses that let them design their own compatible CPUs. Then Arm collects a royalty on substantially every chip shipped with its technology, set as a share of the chip's selling price or a fixed fee per chip, and rising as more Arm products go into a chip. In fiscal 2026, the year to March, royalties brought in 2.6 billion dollars, 53.1% of revenue, and license and other revenue 2.3 billion, 46.9%. It reports in US dollars; less than 2% of revenue is in other currencies. 3334353637

Revenue is concentrated. The top five customers, Arm China and SoftBank Group among them, took about 57% of fiscal 2026 revenue, and three customers each took more than a tenth: 16%, 14% and 12%. The largest, Arm China, holds the exclusive right to sublicense Arm's designs to Chinese companies, and substantially all of Arm's revenue from China flows through it, yet Arm owns only an indirect stake of about 4.8% in it. Qualcomm, which Arm is fighting in court, took 9%. 383940414243

About three tenths of revenue, $1,499 million, came from related parties: Arm China, companies in which Arm holds an equity stake, and businesses under SoftBank Group's common control. Arm China accounted for $790.6 million of it. Under a consulting agreement Arm advises SoftBank and its affiliates on deals, licensing and partnerships, and it has been engaged to advise on or design chips for SoftBank affiliates; revenue from those licensing and servicing arrangements rose to $704.4 million from $145.5 million, and at year end the SoftBank affiliate owed $645.8 million in contract assets, revenue booked but not yet billed. 444546474849

Counted by where customers have their headquarters, the United States brought in 1.8 billion dollars, 35.8% of fiscal 2026 revenue; China 874.0 million, 17.8%; Japan 825.0 million, 16.8%, up 178.7% on the year; Taiwan 14.1%; and South Korea 8.0%. Arm is based in Cambridge in the United Kingdom, in about 418,793 square feet of leased offices, with research and development centers in the United Kingdom, Europe, North America, India and Asia Pacific. Manufacturing is left to others: licensees mostly hire foundries, concentrated in Taiwan and East Asia, to make their Arm-based chips, and Arm's own AGI CPU depends on third-party foundry partners and contract manufacturers. 36505152535455

The specifics

Arm began in 1990 as a joint venture of Acorn Computers, Apple Computer and VLSI Technology, and its low-power processors took hold in mobile phones in the mid-1990s. It was listed on the London Stock Exchange and Nasdaq from 1998 until SoftBank Group took it private in 2016, and its shares returned to Nasdaq in September 2023, sold by a shareholder, with Arm itself raising nothing. In August 2025 it sold its Artisan foundation IP business, standard cell libraries and memory compilers, to Cadence Design Systems for a pre-tax gain of $131.0 million, and in October 2025 it agreed to buy DreamBig Semiconductor for about $265.0 million in cash for its networking technology and engineers, a deal it expects to close by the end of the second quarter of its fiscal year ending March 2027. 565758596061

It names its competition as other architectures: x86, and RISC-V, a free, open-source instruction set that some of Arm's own customers back. Some customers design architectures of their own, and the AGI CPU now puts Arm in direct competition with some of its licensees, a conflict the filing warns could cost it significant licensing customers. It holds about 8,600 issued patents with about 2,750 applications pending, and says it has kept more than 99% of the market for mobile applications processors, the main chip in a smartphone, for many years. 626364656667

Its largest legal fight is with a customer. Arm sued Qualcomm and Nuvia in August 2022, saying they breached the termination terms of Nuvia's architecture license after it was assigned to Qualcomm without Arm's consent. A jury in December 2024 found Qualcomm had not breached it, the court ruled on September 30, 2025 that Nuvia had not either, and Arm has appealed. Qualcomm has sued Arm in turn, alleging it failed its delivery obligations under Qualcomm's own architecture license and adding tort and anti-competition claims; that case is expected to go to trial in the fourth calendar quarter of 2026. 686970717273

China is reached through a company Arm does not control. About 48% of Arm China is owned by Acetone Limited, which SoftBank Group controls and in which Arm holds a 10% non-voting stake; about 35% belongs to HOPU Investment Management and the rest to other Chinese parties. Its license runs to April 23, 2048 and then renews automatically, and what Arm China pays is worked out from financial information Arm China itself supplies. US export rules on advanced chips can also limit which companies in affected countries Arm may license to directly. 4074757677

What drives growth, line by line

Royalty. The larger line: 2.6 billion dollars, 53.1% of fiscal 2026 revenue, up 20.5%. The filing credits a better mix of products carrying higher royalty rates per chip, such as its Armv9 technology; from Arm China, royalties rose on higher chip shipments and the same richer mix. Mobile applications processors, the main chips in smartphones, produced about 43% of royalty revenue. 3678798067

License and Other Revenue. 2.3 billion dollars, 46.9% of revenue, up 25.4%. The filing credits strong demand for Arm IP, the timing and size of several high-value license agreements and backlog from earlier contracts. The growth came from related parties: license and other revenue from outside customers fell 9% to $1,298 million, while from related parties it rose 141% to $1,009 million. 368182

Total revenue rose 23% to $4,920 million, up from 2.7 billion dollars in fiscal 2023. Operating income rose less, to 900.0 million dollars from 831.0 million, because research and development spending climbed 34%, by $705 million, mostly on next-generation products such as the AGI CPU. 838485

What comes next, in the company's own words: production of the AGI CPU by the end of calendar 2026, a move it says may bring materially different margins, revenue recognition and sales cycles from its licensing business; about 28% of $2,071.4 million in remaining performance obligations, contracted revenue not yet recognized, to be recognized over the next 12 months; and a fixed $300 million payment under a restructured SoftBank statement of work, to be paid in the fiscal year ending March 2027. 3286878889

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What the desk infers Inferred

1. Inferred

   The unnamed customer that took 14% of fiscal 2026 revenue is almost certainly SoftBank Group, Arm's own parent, through the chip design and licensing work its affiliate buys from Arm.

   Because

   • The filing counts SoftBank Group among the top five customers and names Arm China as the largest, at 16%; the second largest took 14%. 3839
   • Arm China brought in $790.6 million, matching the largest customer's 16%, and the SoftBank affiliate's arrangements $704.4 million out of total revenue of $4,920 million, a match for the second largest's 14%. 47498339
   • The filing reports no material revenue from any other SoftBank-controlled entity besides that affiliate and Ampere. 90
   • Revenue from customers headquartered in Japan, where SoftBank Group has its address, rose to $825.0 million from $296.0 million in the year the affiliate's arrangements rose to $704.4 million from $145.5 million. 369149
   Confidence 90 of 100Wrong if A filing that names a different company as the second-largest customer, or shows SoftBank Group's revenue split among customers that each stay below 14%.
2. Inferred

   Outside its parent, Arm's licensing business shrank in fiscal 2026: the whole rise in license revenue, and more, came from SoftBank's arrangements, while license fees from independent customers fell.

   Because

   • License and other revenue from outside customers fell 9%, to $1,298 million from $1,421 million, while from related parties it rose 141%, to $1,009 million from $418 million. 82
   • The whole license and other line rose by $468 million, while revenue from SoftBank's licensing and servicing arrangements alone rose from $145.5 million to $704.4 million. 8149
   • License revenue earned over time, as a service or design job runs, jumped to $1,080 million from $467 million, while license revenue earned at a single point, the classic delivery of a design, fell to $1,227 million from $1,372 million. 92
   Confidence 70 of 100Wrong if A breakdown showing that most of the growth in related-party license revenue came from Arm China or equity-method investees rather than from SoftBank's arrangements.
3. Inferred

   Arm books the revenue from SoftBank's arrangements well before it bills for it: nearly all of what it recognized from them in each of the last two years was still owed as unbilled contract assets at year end.

   Because

   • Revenue from the arrangements was $145.5 million in fiscal 2025, and contract assets from the SoftBank affiliate stood at $145.5 million at that year end. 49
   • In fiscal 2026 the arrangements brought in $704.4 million, and contract assets from the affiliate stood at $645.8 million at year end. 49
   • One statement of work was restructured into a fixed $300 million payment due in the fiscal year ending March 2027. 89
   Confidence 80 of 100Wrong if A later filing showing the contract assets from the SoftBank affiliate were billed and paid within months of each year end, or that they arise from arrangements other than this licensing and servicing work.