ARM Stock Forecast & Price Target

Arm Holdings has demonstrated robust financial growth, with royalty revenue increasing by 21% year-over-year to $620 million, driven by the adoption of Armv9 and CSS chip designs. Additionally, licensing revenue saw a significant boost of 56% year-over-year, reaching $515 million, fueled by high-value agreements and increasing demand across various markets, including smartphones and data centers. The company also reported a strong balance sheet, with cash and short-term investments rising to $3.26 billion, indicating financial stability and capability to invest in future innovation.

Arm Holdings faces challenges reflected in its management's guidance, which indicates expectations of lower licensing revenue for FQ4 due to earlier closures of large deals and a stagnant mobile industry. The company's reliance on the smartphone segment is concerning, with flat smartphone shipments projected for CY25 and CY26, raising doubts about its ability to increase royalty rates and operational margins. Additionally, a seasonal slowdown in royalty revenue, compounded by maturing markets and longer replacement cycles, further undermines Arm's growth prospects and profitability trajectory.