ARM Stock Forecast & Price Target

ARM Holdings is attractive because its royalty and licensing model provides recurring, high-margin exposure to one of the strongest secular growth areas in computing, with 4QF26 revenue of $1.49B and non-GAAP EPS of $0.60 both slightly ahead of estimates. Royalty revenue rose 11% y/y and licensing climbed 29% y/y, while ACV increased 22% y/y, reflecting durable demand for Armv9, CSS, and its energy-efficient architecture across smartphones, data center, and AI infrastructure. The outlook is further supported by data center royalties more than doubling and management seeing more than $2B of AGI CPU demand across FY27 and FY28, with supply constraints limiting near-term upside rather than demand.

ARM Holdings is facing a challenging fundamental setup because its growth depends heavily on slower-moving royalty expansion from ARMv9 and CSS adoption, while stronger competition from RISC-V and other alternate instruction sets could limit long-term pricing power. The business also faces operational and supply constraints, with 3nm wafer capacity cited as a main bottleneck and gross margins pressured if it must buy out TSMC allocation, while Arm China represents about 20% of sales and remains exposed to export-control risk. Although 1QF27 revenue was guided to $1.26B at the midpoint and royalties/licensing were expected to rise about 20% Y/Y, the prospect of SoftBank’s ~90% stake sale and uncertain plans to enter full SoC solutions add overhang and strategic risk.