Arm Holdings Q4 FYE25 presentation: revenue jumps 34%, diversification strategy accelerates

Introduction & Market Context

Arm Holdings plc (NASDAQ:ARM) presented its Q4 FYE25 investor presentation on May 7, 2025, highlighting strong financial performance and strategic initiatives aimed at expanding its footprint beyond its traditional mobile stronghold. The company, whose chip architecture powers billions of devices worldwide, reported significant growth across key metrics while emphasizing its expanding role in artificial intelligence computing and automotive applications.

As the semiconductor industry continues its transformation driven by AI adoption and increased computing demands across various sectors, Arm has positioned itself as a critical player in providing energy-efficient computing solutions from data centers to edge devices.

Quarterly Performance Highlights

Arm reported total revenue of $1,241 million for Q4 FYE25, representing a 34% year-over-year increase. This growth was driven by strong performance in both royalty revenue, which grew 18% YoY to $607 million, and license and other revenue, which surged 53% YoY to $634 million.

As shown in the following chart of quarterly revenue figures:

The company’s profitability metrics were equally impressive, with non-GAAP gross profit reaching $1,221 million at a 98% gross margin. Non-GAAP operating income stood at $655 million, representing a 53% operating margin, while non-GAAP net income came in at $584 million.

The following waterfall chart illustrates Arm’s progression from revenue to profit:

Arm’s financial strength is underpinned by its extensive reach in the semiconductor ecosystem. The company reported that over 310 billion Arm-based chips have been shipped since inception, with 30.6 billion chips shipped in FYE25 alone. Additionally, the company boasts a developer community of over 22 million software developers working on its platform.

Strategic Initiatives and Market Diversification

A key element of Arm’s growth strategy involves diversifying beyond its traditional mobile market. The company has made significant inroads into automotive, IoT/embedded, and cloud computing sectors. This diversification is clearly illustrated in the comparison of royalty revenue by end market between FYE16 and FYE24:

While smartphones still represent a significant portion of Arm’s royalty revenue (40% in FYE24), the company has successfully expanded into IoT/embedded (20%), consumer electronics (15%), automotive (8%), and other segments. This diversification provides Arm with multiple growth vectors and reduces its dependency on any single market.

The company is also gaining market share across various segments. In the automotive sector, for instance, Arm’s market share increased from 36% to 41% between FYE22 and FYE24, while the market value grew from $15 billion to $22 billion during the same period.

AI and Compute Subsystems Focus

Arm’s presentation emphasized its growing role in AI computing across different market segments. The company highlighted how its architecture is enabling AI applications from data centers to edge devices, with notable developments including NVIDIA (NASDAQ:NVDA)’s Grace Blackwell processor entering full production and the announcement of the first Armv9 compute platform targeting edge AI devices.

The following image illustrates Arm’s presence across various AI application domains:

A significant driver of Arm’s royalty growth is the adoption of its latest Armv9 architecture, which commands higher royalty rates per chip than previous generations. The transition from older architectures to Armv9 is visualized in the following chart:

Another strategic initiative gaining traction is Arm’s Compute Subsystems (CSS), which provide a more comprehensive starting point for chip design. CSS helps partners reduce design costs and time-to-market, with 13 licensees already on board. Notably, Arm entered into its first license for automotive CSS with a leading global automotive OEM designing their first major automotive chip.

The CSS ecosystem is illustrated in the following diagram:

Forward-Looking Statements

Looking ahead to Q1 FYE26, Arm provided guidance for revenue between $1,000 million and $1,100 million, with non-GAAP operating expenses of approximately $625 million. The company expects non-GAAP fully diluted earnings per share to range from $0.30 to $0.38.

Arm’s long-term growth prospects are supported by three key drivers: increasing complexity per chip, growing chip volumes, and expanding Arm technology adoption. The company noted that more advanced workloads require its latest Armv9 architecture, with high-end cloud compute chips evolving from 8 cores in 2016 to 192 cores in 2025.

The following diagram outlines these growth drivers:

Arm’s royalty business model provides a solid foundation for long-term growth, with approximately 50% of current royalty revenue coming from products launched more than 10 years ago. This demonstrates the durability of Arm’s revenue streams and provides visibility into future performance.

As AI computing continues to proliferate across various sectors, Arm is well-positioned to capitalize on the increasing demand for energy-efficient computing solutions. With its extensive software ecosystem, growing market share, and strategic focus on high-growth segments, Arm appears poised for continued expansion beyond its traditional mobile stronghold.

Full presentation:

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