Arm Q4 revenue grew 20.2% year-on-year, demand for AGI CPUs exceeds $2 billion | Earnings Report Insights

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Arm's AI data center business is strong, and it has provided performance guidance slightly higher than expectations.

After the US stock market closed on May 6, Arm announced its financial report for the fourth quarter of fiscal year 2026, with revenue up 20.2% year-on-year to $1.49 billion and adjusted earnings per share of $0.60, both exceeding analysts' expectations.

Arm expects first-quarter revenue to be around $1.29 billion, with adjusted earnings per share between $0.36 and $0.44, both higher than previous analyst forecasts.

Management pointed out that demand from AI data centers for high-efficiency CPU designs continues to heat up, effectively offsetting short-term pressure in the smartphone market. The company also disclosed that demand for its AGI CPU products in fiscal years 2027 to 2028 has already exceeded $2 billion.

After the news was released, Arm's stock price rose by about 9% in after-hours trading, then narrowed to 6%.

Authorization Revenue Shines, Smartphone Market Under Pressure

Behind this quarter's revenue beat, Arm's two main sources of income showed clear divergence.

Authorization and other income grew by 29% year-on-year to $819 million, while royalty income grew more moderately by 11% to $671 million, slightly below market expectations.

Analysts believe that although end device shipments fluctuate, customers are actively pre-paying authorization fees to lock in usage rights for Arm's chip designs ahead of time.

The correlation between authorization income and recent product sales is relatively low, which can provide a buffer for overall company performance when the consumer electronics market weakens.

In terms of profitability, adjusted gross profit was $1.57 billion, with an adjusted gross margin of 98.3%, higher than the market expectation of 98.1%; adjusted operating profit was $731 million, and adjusted operating profit margin was 49.1%.

Arm management explicitly highlighted the headwinds facing the smartphone market in its financial report.

Tight supply of memory components may push up end device prices, thereby affecting phone shipments and royalty income tied to shipments. Mobile chip supplier Qualcomm also conveyed similar signals in its own outlook.

Since Arm's architecture covers almost all smartphones worldwide, the prosperity of the phone market still has a significant impact on its royalty income. In the short term, supply chain pressures may restrict this portion of revenue.

AI Data Center Becomes New Growth Engine, AGI CPU Demand Significant

The AI data center business is becoming an important pillar of Arm's growth strategy.

Management stated that more and more designs based on Arm architecture are entering AI data center deployments, and power consumption control and heat management have become increasingly prominent constraints in these scenarios, highlighting the competitive advantage of Arm's high-efficiency CPU designs.

The Arm AGI CPU released in March this year has received high attention from customers.

The company disclosed that customer demand for this product in fiscal years 2027 to 2028 has already exceeded $2 billion. However, Arm also noted that the AGI CPU is still facing supply constraints, which to some extent limits the actual shipment scale in the short term.

From a broader perspective, the demand for computing power brought by the AI wave is extending from specialized acceleration chips like GPUs to general-purpose CPUs.

New-generation AI systems increasingly rely on task scheduling, memory access, and network collaboration, which is opening up new application space for Arm's CPU architecture in future data center markets.

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