Arm swings to profit on rising revenue

Arm Holdings plc made a net profit on sales revenue that increased 5 percent in the second quarter of its 2025 fiscal year, compared with the same quarter a year before.

Revenue was ahead of previous guidance at US$844 million due to record levels of royalty revenue.  The company made a net profit of US$107 million compared with a net loss of US$110 million a year before.

Royalty revenue was US$514 million up 23 percent year-on-year, while licensing revenues were down 15 percent to U$330 million.

Arm ascribed the fall in licensing revenue to normal fluctuations in the timing and size of multiple high-value license agreements. The company said the royalty increase was partly as a result of strengthening smartphone market and partly increased pricing as customers adopt ArmV9 instruction set architecture and cores based on it, and the adoption of Compute Subsystems (CSS) and Kleidi AI libraries.

Arm said that ArmV9 is responsible for about 25 percent of royalty revenue, up from around 10 percent a year before. CEO Rene Haas said he expects the adoption of ArmV9 to continue at pace.

Arm gave guidance of between US$920 million and US$970 million for the 3Qfiscal25 with full year guidance unchanged at between US$3.8 billion and US$4.1 billion.

Arm has an uncertainty with regard to a licensing dispute with key customer Qualcomm. The company has sent a 60-day notification of licensing cancellation to Qualcomm with lawsuit for breach of licensing expected to go to court in December 2024.

Qualcomm’s Arm-based Snapdragon architecture shipped in 550 million smartphone processors during 2023 and 2024 out of a total of 4,155 million, according to analyst Robert Castellano’s calculations.