29-07-2025
Arm Q1 2026 Earnings Preview: Royalty Ramp in Focus
Arm will release fiscal first-quarter results after the bell on July 30, 2025. Consensus targets call for 12% revenue growth but a 13% drop in EPS versus Q1 2025. Shares are up 32% YTD, a move powered by AI and IoT demand.
Royalty backlog and AI demand are the key watch-points. Remaining performance obligations were $2.23 billion at the end of Q4 FY25, down 10% YoY as prior deals converted to revenue. Management has called the drop timing-related and says growing Armv9 use in cloud and automotive will lift royalties through FY 2026. An update on large AI-accelerator licenses now in negotiation could refill RPO and restore confidence in the full-year sales range. Investors also want proof that a richer royalty mix can keep operating margin in the mid-40s while R&D rises to defend IP.
Arm trades at 91 forward P/E and 35 forward P/S. A clean beat with upbeat AI and IoT commentary could keep that premium intact, but a renewed guide cut or slower royalty run-rate might cap any post-print upside.
This article first appeared on GuruFocus.
