ARM · Arm Holdings plc American Depositary Shares

Arm Holdings delivered a robust first quarter for fiscal 2027, with total revenue increasing 22% to $1,289 million, driven by broad-based strength in both licensing and royalty streams. License and other revenue grew 23% to $574 million, reflecting continued strong demand for Arm IP and the timing of multiple high-value license agreements. Royalty revenue rose 22% to $715 million, benefiting from an improved product mix with higher royalty rates per chip, particularly from Armv9 and Arm CSS technology, and increased deployment of Arm-based chips in data centers.

Despite revenue growth, operating income declined to $91 million from $114 million in the prior year, as operating expenses increased significantly. Research and development expenses rose 29% to $838 million, driven by investments in next-generation products, headcount growth, and higher share-based compensation. Selling, general and administrative expenses increased 22% to $317 million, primarily due to higher share-based compensation and salaries. Share-based compensation costs rose to $343 million, up 42% from $241 million, reflecting new grants including a Value Creation Plan award for the CEO.

Net income more than doubled to $270 million, largely due to a $128 million gain from equity investments, driven by unrealized gains on publicly listed companies (including Raspberry Pi Holdings) and a $10 million gain from non-marketable securities. Interest income increased to $31 million due to higher average cash balances.

Operating cash flow surged to $902 million from $332 million, benefiting from higher net income, non-cash charges, and favorable working capital changes, particularly in accounts receivable and other liabilities. The company ended the period with $3,058 million in cash and cash equivalents and $830 million in short-term investments.

Subsequent to quarter end, Arm completed the acquisition of DreamBig Semiconductor for approximately $265 million in cash, enhancing its networking capabilities. Arm also continues to expand into production silicon products with the Arm AGI CPU, with production expected by the end of calendar 2026. The MD&A noted ongoing litigation with Qualcomm and Nuvia, with no material losses recognized.