One-glance verdict
Overvalued
$24.30 our estimate vs market $290.44
Wall Street consensus: $286.79 (1,080.3% higher than our fair-value estimate)
1095% above our estimate, beyond the bull case
Fundamentals snapshot
Arm Holdings plc
ARM · NMS · Technology · Semiconductors
Current price
$290.44
52-week range
$100.02 - $452.70
Market cap
$310.18B
Balance sheet
Healthy
8.18x Adequate
Net cash $3.40B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
3 Risks
3 rewards · 3 risks
- Reward Revenue grew 22.8% last year.
- Reward Returns 13.4% on equity, ahead of 33% of its peers.
- Risk Operating margin compressed from 25.3% to 7.6% over 3 years.
- Risk Stock trades 12.3% above its 5-year average P/E.
What this company does
Arm Holdings plc
Arm Holdings is like an architect for computer chips; it doesn't build the chips itself but creates the essential blueprints, known as intellectual property. Companies like Apple and NVIDIA pay Arm a licensing fee to use these designs and then a royalty (a small payment for each chip they produce using the design). This business model has made Arm's energy-efficient technology the foundation for nearly all smartphones and increasingly popular in data centers and cars.
How the company got here
Founded in Cambridge, England, in 1990, Arm started by designing chips that used less power, a critical feature for the emerging world of portable electronics. A key turning point was when its designs were chosen for early mobile phones and Apple's Newton handheld device, establishing its dominance in low-power processors. Instead of making and selling its own chips, Arm created a unique business model of licensing its designs to other companies. This strategy led to its technology being used in the vast majority of smartphones and tablets worldwide. In 2016, the company was acquired by SoftBank Group, a major Japanese technology investor.
What it actually does
Arm doesn't manufacture or sell physical computer chips like Intel or AMD. Instead, it designs the essential blueprints, known as 'architectures' or 'intellectual property' (IP), that determine how a processor works. Think of it like an architect who creates the detailed plans for a house but doesn't build it. Other companies, such as Apple and Samsung, pay Arm to use these blueprints to create their own chips for smartphones, laptops, cars, and data centers. This focus on design allows Arm's technology to be incredibly widespread, powering billions of devices globally.
Licensing
This is how Arm gets its technology into the hands of chipmakers. Companies pay Arm an upfront fee for a license, which gives them the legal right to use Arm's processor designs and blueprints. This allows companies like Qualcomm or Apple to save time and money by using Arm's proven designs instead of starting from scratch. These licensing fees provide Arm with immediate revenue and are a leading indicator of future success, as they plant the seeds for later royalty payments. This part of the business represents a significant, though sometimes fluctuating, portion of Arm's total income.
Royalties
This is the other major way Arm makes money, and it creates a steady, long-term stream of income. After a company licenses Arm's design and manufactures a chip, it pays Arm a small fee, called a royalty, for every single chip it sells that contains Arm's technology. This fee is typically a small percentage of the chip's price. Because billions of Arm-based chips are shipped every year in everything from smartphones to cars, these small fees add up to become the larger and more predictable half of Arm's revenue.
What management is betting on now
Arm is heavily focused on expanding beyond its dominance in mobile phones into new, high-growth areas. A major priority is the data center market, designing powerful and energy-efficient chips for cloud computing and artificial intelligence (AI). The company sees a massive opportunity in AI, from large cloud systems to small devices, believing its processors are well-suited for these tasks. Additionally, Arm is pushing its technology into the automotive industry for use in-car infotainment and driver-assistance systems, and is even beginning to produce its own specialized chips to accelerate growth in these new markets.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2025 Q4
$178.00M
FY2026 Q4
$979.00M
Revenue
$4.92B
Net income
$904.00M
Diluted EPS
0.85
Operating cash flow
$1.52B
Free cash flow
$979.00M
Fetching…
Sources
Revenue
$4.01B
Net income
$792.00M
Diluted EPS
0.75
Operating cash flow
$397.00M
Free cash flow
$178.00M
Fetching…
Sources
Is it cheap or expensive?
Fair value $24.30 vs current price $290.44
Wall Street consensus is the average analyst price target: $286.79 (1,080.3% higher than our fair-value estimate).
Our most-likely fair value is $24.30 a share — about 91.6% below today's price of $290.44, so the stock currently looks expensive (overvalued).
Is it drowning in debt?
Healthy
Net cash $3.4B - more cash than debt. Interest coverage 8.2x.
Net debt
$-3.40B
Interest coverage
8.18x
Arm Holdings plc's profit covers its interest bill about 8.2 times over. which is stronger than most peers shown here.
Healthy
Worse cushion
Baseline
Better cushion
ARM
BASELINE
Arm Holdings plc
Total debt $485.00M Interest coverage 8.18x This is the baseline the peer rows are being compared against.
Total debt $12.81B Interest coverage 503.42x +6,054% vs ARM Carries about 61.5x more debt cushion than ARM.
Total debt $15.27B Interest coverage 18.67x +128% vs ARM Carries about 2.3x more debt cushion than ARM.
Total debt $64.91B Interest coverage 8.12x -1% vs ARM Has roughly the same debt cushion as ARM.
Total debt $4.28B Interest coverage 28.20x +245% vs ARM Carries about 3.4x more debt cushion than ARM.
Total debt $10.84B Interest coverage 2.05x -75% vs ARM Carries about 4.0x less debt cushion than ARM.
What you should know
The case for and against ARM
3 Rewards
3 Risks
Rewards
-
Revenue grew 22.8% last year.
-
Returns 13.4% on equity, ahead of 33% of its peers.
-
Free cash flow was positive in 5/10 years.
Risks
-
Operating margin compressed from 25.3% to 7.6% over 3 years.
-
Stock trades 12.3% above its 5-year average P/E.
-
Insider ownership is only 0.1% (peer median: 1.9%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
293.37x
Forward P/E
94.63x
P/B
35.94x
P/S
60.16x
EV/EBITDA
272.49x
PEG ratio
1.97x
Profitability
How much profit each dollar creates
Gross margin
97.5%
Operating margin
7.6%
Net margin
20.2%
ROE
13.4%
ROA
5.4%
Health
Liquidity and balance-sheet strength
Debt / equity
0.06x
Current ratio
5.25x
Quick ratio
5.06x
Total debt
$485.00M
Total cash
$3.89B
Growth
How the business has been compounding
Revenue TTM
$14.84B
Revenue 5Y CAGR
16.2%
EPS TTM
0.99
EPS 5Y CAGR
18.5%
Cash flow
How much cash the business throws off
Operating CF TTM
$3.75B
Free CF TTM
$979.00M
FCF margin
6.6%
Dividend
Shareholder payout
Yield
—
Payout ratio
0.0%
Last ex-div date
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