One-glance verdict
Overvalued
$24.02 our estimate vs market $439.46
Wall Street consensus: $278.29 (1,058.4% higher than our fair-value estimate)
1729% above our estimate, beyond the bull case
Fundamentals snapshot
Arm Holdings plc
ARM · NMS · Technology · Semiconductors
Current price
$439.46
52-week range
$100.02 - $452.70
Market cap
$469.38B
Balance sheet
Healthy
8.18x Adequate
Net cash $3.11B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
2 Risks
3 rewards · 2 risks
- Reward Revenue grew 22.8% last year.
- Reward Returns 12.0% on equity, ahead of 33% of its peers.
- Risk Stock trades 102.6% above its 5-year average P/E.
- Risk Insider ownership is only 0.1% (peer median: 1.9%).
What this company does
Arm Holdings plc
Arm Holdings creates and licenses the essential blueprints for the processors found in most of the world's smartphones and other electronics. The company earns a royalty (a small fee for each chip made using its design) from tech giants, creating a powerful ecosystem (a network of companies building products on Arm's technology, which makes it the standard) that is expanding into data centers and cars.
How the company got here
Founded in 1990 as a joint venture between Acorn Computers, Apple, and VLSI Technology, Arm started by designing processors that were exceptionally power-efficient. This focus on low power consumption was initially a happy accident but became critically important for battery-powered devices. A major turning point was when Texas Instruments, on Arm's advice, used its designs in Nokia's mobile phones, leading to massive success and establishing Arm's dominance in the smartphone market. The company went public in 1998 and was later acquired by SoftBank Group in 2016.
What it actually does
Arm doesn't manufacture or sell physical computer chips like many other semiconductor companies. Instead, it designs the essential blueprints, or architecture (the fundamental design of a computer processor), for microprocessors. Companies like Apple, Samsung, and Qualcomm then pay Arm to use these designs to build their own chips that power a vast range of electronic devices. You can think of Arm as the architect who creates the detailed plans for a house, which different construction companies then use to build the actual houses.
Licensing
This is one of the two main ways Arm makes money, providing an upfront stream of cash. Companies pay Arm a one-time license fee to get access to its intellectual property (IP), which are the valuable designs and plans for its processors. This allows other chipmakers to use Arm's proven, power-efficient designs as a foundation, saving them significant time and research and development (R&D) costs (the money a company spends on creating and improving products). The fees for these licenses can range from one to ten million dollars.
Royalties
This is the second, and often more significant, way Arm earns money over the long term. After a company licenses an Arm design and starts producing and selling chips based on it, Arm receives a small payment, called a royalty, for every single chip that is shipped. While the royalty per chip is small, typically 1-2% of the chip's price, the sheer volume of Arm-based chips sold worldwide—powering over 99% of smartphones, for example—creates a massive and continuous stream of revenue. This part of the business grows as more and more electronic devices are sold globally.
What management is betting on now
Arm is heavily focused on expanding its reach beyond mobile phones into new, high-growth areas. A major priority is the data center market, where large cloud providers like Amazon and Microsoft are increasingly using Arm's power-efficient designs for their servers to handle the demands of artificial intelligence (AI). The company is also targeting the automotive industry for use in advanced driver-assistance systems and in-car technology, as well as the Internet of Things (IoT), which includes a growing number of connected devices like smartwatches and home appliances. By pushing into these markets, Arm aims to have its technology become the foundation for the next generation of computing.
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 $24.02 vs current price $439.46
Wall Street consensus is the average analyst price target: $278.29 (1,058.4% higher than our fair-value estimate).
Our most-likely fair value is $24.02 a share — about 94.5% below today's price of $439.46, so the stock currently looks expensive (overvalued).
Is it drowning in debt?
Healthy
Net cash $3.1B - more cash than debt. Interest coverage 8.2x.
Net debt
$-3.11B
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 $491.00M 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 $3.87B 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
2 Risks
Rewards
-
Revenue grew 22.8% last year.
-
Returns 12.0% on equity, ahead of 33% of its peers.
-
Free cash flow was positive in 5/10 years.
Risks
-
Stock trades 102.6% 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)
529.47x
Forward P/E
142.50x
P/B
56.44x
P/S
95.40x
EV/EBITDA
437.93x
PEG ratio
3.82x
Profitability
How much profit each dollar creates
Gross margin
97.5%
Operating margin
29.5%
Net margin
18.4%
ROE
12.0%
ROA
5.8%
Health
Liquidity and balance-sheet strength
Debt / equity
0.06x
Current ratio
6.00x
Quick ratio
5.83x
Total debt
$491.00M
Total cash
$3.60B
Growth
How the business has been compounding
Revenue TTM
$14.84B
Revenue 5Y CAGR
16.2%
EPS TTM
0.83
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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