ARM
LongArm Holdings plc
Investment Thesis
What is ARM? Our simple way of describing what ARM does is being the literal arms for artificial intelligence. ARM doesn't manufacture chips—it designs the architecture that powers them, licensing its energy-efficient blueprints to the world's most influential technology companies. In an era where AI workloads demand unprecedented compute power while data centers strain under massive energy costs, ARM's architecture has become the foundation upon which the future of computing is being built.
The adoption of ARM-based chips across the cloud infrastructure landscape is staggering. Amazon Web Services, the dominant force in cloud computing, has gone all-in with its Graviton processor family—ARM-powered chips now account for over 50% of AWS's new compute capacity, with more than 90,000 customers already benefiting from the platform. Microsoft has entered the arena with its custom-designed Cobalt processors, with Cobalt 100 already generally available across 32 Azure regions and the next-generation Cobalt 200 (featuring 132 ARM-based cores on TSMC's cutting-edge 3nm process) rolling out in 2026. Microsoft Teams alone has achieved up to 45% better performance running on ARM-based Cobalt instances. Google has joined the movement with its Axion processor, built on ARM's Neoverse V2 platform, delivering up to 50% better performance and 60% greater energy efficiency compared to x86 alternatives.
The momentum extends far beyond cloud hyperscalers. NVIDIA—the undisputed leader in AI acceleration—has built its Grace CPU on ARM architecture, pairing it with Blackwell GPUs in its next-generation superchips that deliver up to 2-4x the performance of x86 systems at comparable power levels. Apple's revolutionary M-series chips, which transformed the PC industry's expectations for performance-per-watt, are built entirely on ARM architecture. Even the enterprise software giants have taken notice: Databricks, Snowflake, Netflix, Snap, and Epic Games have all migrated critical workloads to ARM-based infrastructure. When every major cloud provider, the leading AI chip company, and the world's most valuable consumer electronics company are all building their future on your architecture, you're not just participating in the AI revolution—you're enabling it.
Our Opinion on Why to Buy Now
I am personally buying ahead of ARM's earnings report on 2/4/2026 due to the rise of Claude and Gemini. Claude specifically has limited options to be investable in the public stock market. Investors are buying up stocks that have a minuscule investment in Claude. The reality is, if a major competitor to ChatGPT and OpenAI enters the show, this is a perfect environment for ARM to benefit. ARM collects royalties from companies that utilize their designs. Amazon specifically is very tight with Claude, and is providing Trainium chips to boost Claude. Every Trainium chip sold brings in royalties to ARM.
Further, Tesla just discontinued the production of the Model S and Model X. This move was made in order to build new Tesla Bots. Each Tesla Bot produced will bring in royalties to ARM as well. The environment is shifting to where companies will have to pay ARM in order to simply operate.
All the companies paying ARM are worth trillions, whereas ARM is worth $112B at the time of this post. There are many arguments that ARM is overvalued regardless, which will be explained below.
ARM Financials
ARM has demonstrated exceptional financial momentum. For fiscal year 2025 (ended March 31, 2025), the company reported record revenue of $4.0 billion—crossing the $4 billion annual threshold for the first time in company history. This represents a 24% increase from the prior year's $3.23 billion. The company also achieved a historic milestone in Q4 FY2025, surpassing $1 billion in quarterly revenue for the first time, with $1.24 billion reported.
The growth has continued into fiscal year 2026. In Q2 FY2026 (ended September 30, 2025), ARM reported revenue of $1.14 billion—up 34% year-over-year and marking the third consecutive quarter above the $1 billion mark. Royalty revenue, which represents ARM's recurring income stream from chips shipped, reached $607 million in Q4 FY2025 (up 18% YoY) and $620 million in Q2 FY2026 (up 21% YoY). Full-year royalty revenue for FY2025 exceeded $2 billion for the first time, totaling $2.17 billion—a 20% increase from the prior year.
Looking ahead, Wall Street analysts project continued strong growth. The consensus estimate from 39 analysts forecasts FY2026 revenue of approximately $4.9 billion, representing roughly 21% growth. Revenue is projected to rise more than 21% in both fiscal 2026 and 2027, with FY2027 estimates reaching approximately $6.3 billion. The projected compound annual growth rate (CAGR) for ARM's revenue over the next three years is 21%, while net income CAGR is projected at 58%—reflecting significant operating leverage as the company scales.
Our Conclusion
We believe that Claude's rise is not priced into ARM's estimates. There will be continued money flowing into AI data centers, which can be seen with Micron and SanDisk's rise—both of which have more than quadrupled in market cap in under 6 months.
The final conclusion we would like to add: NVIDIA tried to purchase ARM in 2020, before the AI boom, for $40B. Since then, AI has exponentially grown, but we believe why ARM stayed stagnant was because there was limited competition to OpenAI. Now Gemini and Claude have entered the arena, which will boost ARM first, in our opinion.
Our Outlook
Long term trend line, as well as ARM holding up $105 as of recent
Sources
- Network World — "Graviton progress: 50% of new AWS instances run on Amazon custom silicon"
- AWS — "AWS Graviton Processor"
- ARM — "AWS and Arm Partners"
- Microsoft Tech Community — "Announcing Cobalt 200: Azure's next cloud-native CPU"
- Microsoft Azure Blog — "Azure Cobalt 100-based Virtual Machines are now generally available"
- ARM — "Microsoft and Arm Partners"
- AnandTech — "Google Develops In-House Arm 'Axion' CPU for Datacenters"
- NVIDIA — "Grace CPU and Arm Architecture"
- ARM Newsroom — "How Arm is redefining compute through the converged AI data center"
- CNBC — "How Arm is gaining chip dominance with its architecture"
- ARM Newsroom — "Arm Reports Quarterly Revenue of Over $1 Billion for First Time in Company's History"
- ARM Newsroom — "Arm Q2 FYE26 revenue surpasses $1 billion for third consecutive quarter"
- More Than Moore — "Arm 2025 Q4 and FY Financials"
- Nasdaq — "ARM Stock Down 20% in a Year vs Industry Gains: Buy Signal or Caution?"
- Alpha Spread — "ARM Stock Forecast - Analyst Estimates"
- StocksGuide — "Arm Stock Forecast & ARM Price Target 2026"