Key Highlights

  • Arm Holdings (NASDAQ:ARM) closed at USD 166.72 on November 5, 2026, down 13.08%, after fiscal second-quarter Revenue rose 27% to USD 1.44 billion.
  • Licensing and other revenue rose 50% to USD 773 million, while Royalty revenue was USD 670 million, up about 8% in published figures, and smartphone royalties were flat.
  • Adjusted Earnings Per Share were USD 0.52 against a USD 0.47 consensus, and third-quarter revenue is guided to USD 1.54 billion, plus or minus USD 50 million.
  • Data center royalty revenue roughly doubled, and Arm expects its server processor share at leading hyperscalers to pass 60% by the end of calendar 2026.

A Double Beat Meets a Sharp Selloff

Arm Holdings (NASDAQ:ARM), the UK-based designer of processor architectures licensed to chipmakers and device makers, reported fiscal second-quarter results for the period ended September 30, 2026 on November 4, 2026. Revenue of USD 1.44 billion was up 27% and above the USD 1.38 billion consensus, about 4.3% higher (calculated). Adjusted earnings per share of USD 0.52 also topped USD 0.47. The company described it as its highest-ever second-quarter revenue, yet the shares closed at USD 166.72 on November 5, down 13.08%, which implies a prior close of about USD 191.82 (calculated). Published market data showed the stock down about 18% for the week by midday Thursday, so the reaction extended a decline already under way.

Why Royalties Overshadowed the Licensing Surge

Arm earns money two ways: upfront licensing fees when customers adopt its designs, and royalties on each chip shipped. Licensing and other revenue jumped 50% to USD 773 million, which the company calls a leading indicator of future royalty growth. Royalty revenue was USD 670 million, and published coverage put its growth near 8% and said it missed expectations. Licensing made up about 53.7% of revenue and royalties about 46.5% (calculated). Smartphone royalties were flat year over year, tied by one report to soft smartphone memory pricing. Data Center royalties roughly doubled and Physical AI royalties rose 50%, but both are smaller lines than smartphones.

Thin Guidance Margin and the AGI CPU Bet

Third-quarter revenue guidance of USD 1.54 billion, plus or minus USD 50 million, compares with a USD 1.53 billion consensus, and adjusted EPS guidance of USD 0.56, plus or minus USD 0.04, compares with USD 0.55. The revenue midpoint is only about 0.7% above consensus (calculated). Arm is also moving into chip sales with its AGI CPU, a data center processor, with first commercial deliveries expected in its fourth fiscal quarter and confidence in up to USD 2 billion of revenue across fiscal 2027 and 2028. That adds execution and cost risk to a licensing model. Qualcomm and other chip names also fell on November 5, so part of the move was sector-wide.

Where Things Stand

Arm Holdings (NASDAQ:ARM) fell 13.08% because investors focused on royalties, the more Recurring Revenue line, and on guidance that cleared consensus by a thin margin, while a broad chip selloff added pressure. The headline beat was real: revenue and earnings per share both topped estimates and data center royalties doubled. With licensing larger than royalties this quarter, the market appears to want faster royalty conversion. Next markers are smartphone royalty trends, AGI CPU deliveries, third-quarter results and whether chip stocks steady. None of this is a forecast.