One-glance verdict
Overvalued
$22.26 our estimate vs market $275.61
Wall Street consensus: $288.70 (1,197.2% higher than our fair-value estimate)
1138% above our estimate, beyond the bull case
Fundamentals snapshot
Arm Holdings plc
ARM · NMS · Technology · Semiconductors
Current price
$275.61
52-week range
$100.02 - $452.70
Market cap
$294.35B
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 6.5% above its 5-year average P/E.
What this company does
Arm Holdings plc
Arm creates and licenses the essential blueprints for the computer chips that power most of the world's smartphones and many other electronic devices. The company makes money from design fees and by collecting a royalty (a small payment for each chip a customer sells using its technology). Because its energy-efficient designs are used in billions of products, Arm is a key player in the technology supply chain (the network of companies that create and distribute electronics).
How the company got here
Founded in England in 1990 as a joint venture between Acorn Computers, Apple, and VLSI Technology, Arm started by designing processors that were powerful yet very energy-efficient. This focus on low power consumption was perfect for the new wave of mobile devices. Its big break came as its technology was adopted for early cell phones, and today its designs are in over 99% of smartphones worldwide. After being a publicly traded company, it was bought by SoftBank Group in 2016 and then returned to the public stock market in 2023.
What it actually does
Arm is a company that designs the essential blueprints for computer chips, known as processors (the 'brains' of a device). Unlike other big names in the chip world, Arm doesn't manufacture or sell any physical chips itself. Instead, it licenses its designs and technology—its intellectual property (IP)—to over 1,000 other companies, like Apple and Samsung, who then use these plans to build their own processors for everything from smartphones to cars and data centers.
Licensing
This is one of the two main ways the company makes money. Companies pay Arm an upfront fee to get access to its intellectual property (IP), which is the library of chip designs and technology. This allows other companies to save time and money by using Arm's proven, power-efficient designs as the foundation for their own chips. This part of the business provides immediate revenue and has been growing as more companies want to create custom chips for things like artificial intelligence.
Royalties
This is the second major way Arm earns 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. While the fee per chip is small, it adds up because billions of Arm-based chips are shipped every year. This part of the business is the larger contributor to Arm's revenue and grows as more and more electronic devices are sold worldwide.
What management is betting on now
Arm is focused on expanding beyond its dominance in smartphones into new, fast-growing areas. A major priority is the market for data centers and cloud computing, where its energy-efficient designs are attractive to large tech companies. The company is also heavily investing in designs for artificial intelligence (AI), automotive technology, and the Internet of Things (IoT), which includes everyday connected devices. Management sees a large opportunity in providing the foundational technology for these expanding markets, which could lead to significant future growth.
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 $22.26 vs current price $275.61
Wall Street consensus is the average analyst price target: $288.70 (1,197.2% higher than our fair-value estimate).
Our most-likely fair value is $22.26 a share — about 91.9% below today's price of $275.61, 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 $15.27B Interest coverage 18.67x +128% vs ARM Carries about 2.3x more debt cushion than ARM.
Total debt $59.42B 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 $5.29B Interest coverage 6.61x -19% vs ARM Carries about 1.2x less 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 6.5% above its 5-year average P/E.
-
Insider ownership is only 0.1% (peer median: 0.5%).
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)
278.39x
Forward P/E
90.22x
P/B
34.11x
P/S
57.09x
EV/EBITDA
273.52x
PEG ratio
2.26x
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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