Research · Sep 3, 2026
[ARM] Arm Holdings Thesis 2026: Server CPU Royalty Mix Drives v9 Architecture Cycle
Arm Holdings plc (NASDAQ: ARM) FY2025 (ending March 2025) revenue ~$3.95-4.10B (+22-25%) with adj. EPS ~$1.55-1.70 reflecting continued v9 architecture royalty rate expansion (~2x v8 royalty per chip) + Compute Subsystems (CSS) IP licensing acceleration + selected hyperscaler custom server CPU adoption (Microsoft Cobalt + Google Axion + Amazon Graviton4 + Meta MTIA) under continued CEO Rene Haas (~3-year tenure since February 2022). Global semiconductor IP licensing leader with ~99%+ smartphone application processor + ~50%+ embedded MCU + ~30-40% automotive + ~5-10% server CPU + selected emerging AI accelerator chip IP penetration. The company employs ~7,000+ globally with ~280 active customer licensees including Apple + Qualcomm + MediaTek + Nvidia + Amazon + Microsoft + Google + Samsung + Tesla. Founded 1990 as Advanced RISC Machines joint venture between Acorn Computers + Apple + VLSI Technology in Cambridge UK (~35-year heritage); selected post-1998 IPO London Stock Exchange + Nasdaq dual listing under Arm Holdings; selected post-September 2016 ~$32B SoftBank acquisition take-private + delisting; selected post-September 2020 ~$40B Nvidia proposed acquisition abandoned February 2022 due to UK + EU + China regulatory concerns; selected post-September 2023 ~$54B Nasdaq IPO re-listing (~10% public float; ~90% SoftBank retention); selected post-2024 follow-on offering modest float increase to ~10-12%. Headquartered in Cambridge UK; ~7,000+ employees globally with ~$3.95-4.10B revenue. Two primary revenue segments: Royalties ~55% revenue (~$2.2-2.3B — per-chip royalties from licensee shipments; v8 + v9 architecture royalty rates; ~30B+ Arm-based chips shipped FY2025), Licensing + Other ~45% (~$1.7-1.8B — upfront licensing fees + Compute Subsystems IP + Architecture Licensing Agreements + Technology Access Subscriptions + selected services). v9 architecture royalty cycle: post-March 2021 v9 architecture launch + ~25-30% royalty rate adoption FY2025 (~2x v8 royalty per chip; ~$0.20-0.40 per smartphone v9 vs ~$0.10-0.20 v8); v9 introduces SVE2 (Scalable Vector Extension 2) for AI + ML acceleration + Confidential Compute Architecture + Realm Management Extension + Memory Tagging Extension; v9 adoption progression FY2023 ~10% → FY2024 ~20% → FY2025 ~25-30% → FY2026 expected ~40-50% on Cortex-X925 + Cortex-A720 flagship deployment. Compute Subsystems (CSS): post-May 2024 CSS for Client + post-March 2024 CSS for Cloud productization providing pre-validated multi-IP packages (CPU + GPU + interconnect + system IP) with ~3-5x royalty rate per chip vs traditional core licensing (~$0.50-1.50 per smartphone CSS vs ~$0.20-0.40 v9 core only); FY2026 catalyst: continued hyperscaler + automotive + IoT customer adoption + ~$300-500M incremental annual royalty contribution. Hyperscaler custom server CPU: Microsoft Cobalt 100 (GA November 2024) + Google Axion (GA July 2024) + Amazon Graviton4 (GA July 2024) + Meta MTIA Inference Accelerator generation 2 + NVIDIA Grace GH200 + Grace Blackwell GB200 deploying Arm Neoverse v-series + n-series; aggregate ~5-10% global server CPU market share FY2025 (vs ~1-2% FY2022) representing ~$200-400M aggregate annual royalty FY2025; FY2026 catalyst: ~10-15% market share + ~$400-700M aggregate royalty. CEO Rene Haas since February 2022 (succeeded Simon Segars CEO 2013-February 2022 retired; Haas ex-Arm President IP Products Group 2017-2022 + ex-Nvidia GM Computing Products 2013-2017 + ~38-year semiconductor career). Capital return: no dividend; no buybacks; growth investment priority; ~$1.5-2B aggregate cash + investments + IP development capital deployment FY2025-2027. FY2026 thesis: v9 royalty rate expansion + Compute Subsystems adoption + hyperscaler custom server CPU growth + Qualcomm royalty + licensing dispute resolution. Risks: smartphone unit demand stagnation, ongoing Arm v Qualcomm royalty + licensing dispute, hyperscaler in-house IP expansion, ~20-25% China revenue exposure, ~90% SoftBank retention follow-on dilution.