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On Thursday, William Blair maintained an Outperform rating on Arm Holdings (NASDAQ:ARM) shares despite a significant price drop in after-hours trading. The technology company’s stock fell approximately 10% to around $110 per share, as investors showed concerns about the potential for slower growth in fiscal 2026. According to Sebastien Naji at William Blair, even with the decline, Arm Holdings is valued at a price-to-earnings multiple of 68 times the firm’s calendar 2025 estimate and 53 times its calendar 2026 estimate. Currently trading at a P/E ratio of 160, with a market capitalization of $131 billion, InvestingPro analysis indicates the stock is trading above its Fair Value.
The analyst highlighted that the core aspects of Arm’s business are still performing robustly. The increase in both ATA and AFA licenses and the company’s success in transitioning customers to its latest technologies, v9 and CSS, were noted as positive indicators. Additionally, Arm Holdings is gaining traction in the data center market, propelled by the growing demand for cloud services and artificial intelligence, and is making headway in the PC sector. Financial data supports this strength, with the company achieving an impressive 96.37% gross margin and 25.73% revenue growth in the last twelve months.
Despite the recent volatility, William Blair’s outlook for Arm Holdings remains optimistic for long-term investment. The firm anticipates that Arm will continue to achieve sustained revenue growth and improved operating margins over the coming years. The analyst’s commentary suggests that while the company’s near-term financial results may be unpredictable due to a potentially weaker macroeconomic environment affecting Arm’s downstream customers, the long-term prospects are still favorable. The company maintains a strong financial position with a current ratio of 4.96 and minimal debt. For deeper insights into ARM’s valuation and growth prospects, including 13 additional ProTips, check out the comprehensive research available on InvestingPro.
In other recent news, Arm Holdings has been the focus of several analyst revisions and strategic developments. BofA Securities reduced its price target for Arm Holdings to $135 while maintaining a Buy rating, citing a lack of fiscal year 2026 guidance and ongoing uncertainties. Barclays (LON:BARC) also adjusted its price target to $115, maintaining an Overweight rating, pointing to expected seasonal declines in royalties. Meanwhile, Raymond (NSE:RYMD) James lowered its target to $140 but kept an Outperform rating, noting strong royalty revenue growth and increased adoption of the ARMv9 architecture. HSBC took a more cautious stance, cutting its target to $95 and maintaining a Reduce rating, highlighting potential downside risks in fiscal year 2026 earnings.
In strategic moves, Arm Holdings announced plans to sell its Artisan foundation IP business to Cadence Design (NASDAQ:CDNS) Systems. This acquisition aims to enhance Cadence’s design IP offerings and expand its presence in system-on-chip designs. The deal, subject to regulatory approvals, is expected to close in the third quarter of 2025. Despite these developments, the market’s immediate reaction has been cautious, with both Cadence and Arm shares experiencing a decline.
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