Arm reported record financial results for Q4 2025, but cautious guidance for the upcoming quarter rattled investors
Arm Holdings plc reported record financial results for the fourth quarter and fiscal year ended March 31, 2025, hitting several key milestones in revenue and profitability. However, its cautious guidance for the upcoming quarter has rattled investors, sending shares down 9% in premarket trading.
Arm posted Q4 revenue of $1.241 billion, a 34% year-over-year increase and the first time the company surpassed $1 billion in quarterly revenue. Royalty revenue rose 18% to $607 million, while license and other revenue jumped 53% to $634 million. Adjusted net income for the quarter reached $584 million, or $0.55 per share, topping analyst estimates.
For the full fiscal year, revenue surpassed $4 billion, with royalty revenues exceeding $2 billion for the first time. The company reported a non-GAAP gross margin of 98% and an operating margin of 53%.
While the semiconductor company remains foundational to virtually every smartphone on the planet, it is aggressively pushing into new markets:
- Data centers: CEO Rene Haas noted on the investors call that “nearly 50% of all new server chips shipped to top hyperscalers in 2025 will be Arm-based.” Arm’s architecture now underpins chips from major players including AWS (Graviton), Microsoft (Cobalt 100) and Google (Axion). Google’s Axion Armv9 chips are deployed in 10 regions, serving 40 of its top 100 customers and delivering “up to 65% better price performance than current-generation x86,” said Haas. The company is likely correct in thinking data centers are key to its future success — a February report found that AI data centers are booming, with 80% of survey respondents expecting “significant increases in capacity requirements due to AI workloads.”
- Automotive: Arm technology is powering AI-defined vehicles, including in a collaboration between GM and NVIDIA using the Arm-based NVIDIA DRIVE AGX Thor.
- AI and edge computing: The launch of the first Armv9 compute platform tailored for edge AI strengthens the company’s position in the booming AI hardware space.
Soft Q1 guidance rattles market
Despite the Q4 beat, Arm issued a weaker-than-expected forecast for fiscal Q1 2026. The company expects revenue between $1.0 billion and $1.1 billion, and adjusted EPS of $0.30 to $0.38. “At the midpoint, this represents revenue growth of 12% year-on-year,” said CFO Jason Child.
This guidance came as a surprise to analysts and investors, who had anticipated stronger momentum following the Q4 results. As a result, multiple brokerages lowered their price targets for Arm, with the median now sitting at $144.50, according to data compiled by LSEG.
In light of macroeconomic and trade uncertainties, Arm declined to provide full-year guidance for fiscal 2026. “Given the uncertainty in the global trade and economic picture, we have lower visibility than is traditional to start the year,” Child said. “Nevertheless, we reiterate our confidence in healthy growth in the coming year and years to come.”
He emphasized the company’s continued commitment to R&D investment, stating: “This is a moment to press our advantages to ensure AI is everywhere and runs on Arm.”
Arm also addressed concerns about tariffs and geopolitical tensions. While direct revenue impacts from tariffs are expected to be limited, the company acknowledged it has “less visibility into the indirect impact on end demand.” Currently, 10–20% of royalty revenue stems from shipments into the U.S., and past downturns like COVID had minimal licensing impact due to long chip development cycles.
