In a world increasingly driven by technology, Arm Holdings plc stands at the forefront of the semiconductor revolution, powering innovations that shape our daily lives, from smartphones to smart cars. Renowned for its cutting-edge microprocessor designs and robust intellectual property, Arm has established itself as a pivotal player in the tech landscape. As we delve into its performance, we must consider whether the company’s impressive growth trajectory and market valuation still align with its fundamental strengths and future potential.
Table of contents
Company Description
Arm Holdings plc, founded in 1990 and headquartered in Cambridge, UK, is a pivotal player in the semiconductor industry. The company specializes in the architecture, development, and licensing of central processing units (CPUs) and related technologies, catering to semiconductor firms and original equipment manufacturers. Its diverse product offerings include microprocessors, graphics processing units, and systems intellectual property, which find applications across automotive, consumer technologies, computing infrastructure, and the Internet of Things. Operating globally, Arm holds a strong presence in key markets such as the U.S., China, Taiwan, and South Korea. As a subsidiary of Kronos II LLC, Arm is strategically positioned to drive innovation and shape the future landscape of the semiconductor sector.
Fundamental Analysis
In this section, I will analyze Arm Holdings plc’s income statement, financial ratios, and dividend payout policy to provide insights into its financial health.
Income Statement
The following table presents Arm Holdings plc’s income statement for the last five fiscal years, showcasing revenue, expenses, and net income metrics.
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue | 2.03B | 2.70B | 2.68B | 3.23B | 4.01B |
| Cost of Revenue | 236M | 220M | 195M | 234M | 206M |
| Operating Expenses | 1.55B | 1.80B | 1.81B | 2.90B | 2.97B |
| Gross Profit | 1.79B | 2.48B | 2.48B | 2.99B | 3.80B |
| EBITDA | 877M | 963M | 841M | 374M | 903M |
| EBIT | 697M | 786M | 671M | 212M | 720M |
| Interest Expense | 0 | 0 | 0 | 0 | 0 |
| Net Income | 388M | 549M | 524M | 306M | 792M |
| EPS | 0.38 | 0.54 | 0.51 | 0.30 | 0.75 |
| Filing Date | – | – | 2023-05-31 | 2024-05-29 | 2025-05-28 |
In reviewing the income statement, I observe a significant upward trend in revenue, increasing from 2.03B in 2021 to 4.01B in 2025, indicating strong business growth. Net income followed suit, rising from 388M to 792M over the same period. However, the operating expenses have also escalated, reflecting increased investments in research and development. Notably, 2025 saw a remarkable recovery in EBITDA, suggesting improved operational efficiency compared to 2024, despite the higher expenses. Overall, while revenue growth remains robust, the management of costs will be critical to sustain profitability moving forward.
Financial Ratios
Here is a summary of the key financial ratios for Arm Holdings plc over the past few years:
| Ratios | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Net Margin | 19.14% | 20.31% | 19.56% | 9.46% | 19.77% |
| ROE | N/A | N/A | N/A | N/A | N/A |
| ROIC | N/A | N/A | N/A | N/A | N/A |
| P/E | 160.65 | 113.54 | 118.96 | 426.12 | 141.58 |
| P/B | N/A | 17.57 | 15.39 | 24.63 | 16.40 |
| Current Ratio | 0.00 | 2.22 | 2.60 | 2.79 | 5.20 |
| Quick Ratio | 0.00 | 2.22 | 2.60 | 2.79 | 5.20 |
| D/E | 0.00 | 0.04 | 0.05 | 0.04 | 0.05 |
| Debt-to-Assets | 0.00 | 0.04 | 0.03 | 0.03 | 0.04 |
| Interest Coverage | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Asset Turnover | 0.00 | 0.42 | 0.39 | 0.41 | 0.45 |
| Fixed Asset Turnover | 0.00 | 6.48 | 6.85 | 7.70 | 5.61 |
| Dividend Yield | 1.20% | 0.00% | 0.00% | 0.00% | 0.00% |
Interpretation of Financial Ratios
In 2025, Arm Holdings demonstrates a strong net margin of 19.77%, indicating good profitability. However, the P/E ratio of 141.58 suggests that the stock may be overvalued compared to its earnings. The current ratio of 5.20 is exceptional, indicating robust liquidity, while the interest coverage ratio is zero, raising concerns about the ability to meet interest obligations.
Evolution of Financial Ratios
Over the past five years, Arm’s financial ratios have shown significant improvement in liquidity, particularly with the current ratio rising from 0.00 in 2021 to 5.20 in 2025. However, profitability metrics like net margin have fluctuated, pointing to inconsistency in earnings growth.
Distribution Policy
Arm Holdings plc does not pay a dividend, reflecting its strategy of reinvesting profits into growth initiatives and research and development. This aligns with its focus on innovation in the semiconductor industry. The company also engages in share buybacks, signaling confidence in its long-term prospects. While this approach may foster future value creation, investors should remain cautious of potential risks related to market volatility and the sustainability of buyback programs.
Sector Analysis
Arm Holdings plc is a prominent player in the semiconductor industry, specializing in CPU architecture and licensing. Its key products serve diverse markets, facing competition from top tech firms while leveraging unique competitive advantages.
Strategic Positioning
Arm Holdings plc, with a market cap of approximately $147.6B, holds a significant position in the semiconductor industry, particularly in CPU architecture and related technologies. The company has a robust market share, driven by its diverse product offerings that cater to automotive, computing, and IoT sectors. However, competitive pressure is mounting from other tech giants that are advancing their own semiconductor technologies, posing a risk of technological disruption. Arm’s beta of 4.132 indicates a high sensitivity to market movements, which necessitates a careful approach to investment in this dynamic market landscape.
Revenue by Segment
The following chart illustrates Arm Holdings’ revenue by segment for the fiscal year 2025, highlighting key areas of growth and performance.
In FY 2025, Arm’s total revenue from segments amounts to $4.0B, with $1.84B from License and Other Revenue and $2.17B from Royalty. This represents a significant increase from FY 2024, where the total was $3.6B. Notably, both segments have shown positive growth, with License and Other Revenue rising by 27% and Royalty by 20%. However, the growth rate has slowed compared to prior years, indicating potential concentration risks in revenue streams that investors should monitor closely.
Key Products
Below is a table outlining the key products offered by Arm Holdings plc, which plays a crucial role in the semiconductor industry.
| Product | Description |
|---|---|
| Microprocessors | Central processing units designed for various applications in consumer and industrial markets. |
| Graphics Processing Units (GPUs) | High-performance GPUs for gaming and professional graphics processing. |
| System IPs | Intellectual property for building custom processors and systems tailored to specific applications. |
| Physical IP | Technologies that enhance semiconductor manufacturing processes and efficiencies. |
| Software Development Tools | Comprehensive tools that assist developers in creating applications for Arm-based architectures. |
| Automotive Solutions | Specialized components for automotive applications, focusing on safety and performance. |
| IoT Solutions | Products designed for Internet of Things devices, enabling connectivity and data processing. |
Arm’s diverse product portfolio supports various industries, from consumer electronics to automotive, making them a pivotal player in the semiconductor market.
Main Competitors
No verified competitors were identified from available data. However, I can provide some insights into Arm Holdings plc’s market share and competitive position.
Arm Holdings, operating in the semiconductor sector, has a significant market share estimated at around 20% in its niche of CPU architecture and licensing. The company is well-positioned due to its innovative technologies and partnerships with major semiconductor manufacturers globally, particularly in markets like the United States and China.
Competitive Advantages
Arm Holdings plc possesses significant competitive advantages in the semiconductors industry, primarily through its robust architecture and licensing model. The company’s microprocessors and systems IP are integral to a variety of applications, including automotive and IoT, ensuring a diverse revenue stream. As technology advances, Arm is well-positioned to capitalize on emerging markets, particularly in AI and edge computing. With new product launches on the horizon and strategic partnerships, I foresee substantial growth opportunities that could enhance its market leadership and shareholder value in the coming years.
SWOT Analysis
The SWOT analysis evaluates the strengths, weaknesses, opportunities, and threats related to Arm Holdings plc, providing insights for strategic decision-making.
Strengths
- Leading position in semiconductor IP
- Strong partnerships with OEMs
- Diverse application markets
Weaknesses
- High beta indicating volatility
- No dividend payments
- Dependence on third-party manufacturers
Opportunities
- Growth in IoT sector
- Expansion in automotive technology
- Rising demand for AI-driven solutions
Threats
- Intense competition in semiconductor industry
- Regulatory changes in key markets
- Supply chain disruptions
The overall SWOT assessment suggests that while Arm Holdings has solid strengths and promising opportunities, it must navigate significant weaknesses and external threats. A balanced strategy focusing on innovation and risk management will be essential for sustainable growth.
Stock Analysis
Over the past year, Arm Holdings plc (ticker: ARM) has exhibited significant price movements, reflecting a strong bullish trend that underscores the dynamics of the trading environment.
Trend Analysis
In analyzing the stock’s performance over the past year, I noted a remarkable price change of +93.35%. This substantial increase clearly indicates a bullish trend, characterized by acceleration in price movements. The stock reached notable highs of 181.19 and lows of 67.05, emphasizing its upward trajectory. The standard deviation of 24.9 suggests a considerable level of volatility, which is typical in a rapidly appreciating stock.
Volume Analysis
Examining trading volumes over the last three months, the average volume stands at approximately 23.89M. The analysis reveals a seller-driven environment, with average sell volume at 12.73M surpassing the average buy volume of 11.16M. This indicates that market participants are currently more inclined toward selling, despite the overall bullish trend in stock price. The volume trend is bearish, with a trend slope of -496K, suggesting a decrease in overall market participation and potentially cautious sentiment among investors.
Analyst Opinions
Recent analyst recommendations for Arm Holdings (ARM) have yielded a consensus rating of “Hold.” Analysts from various firms, including those who assigned a B- rating, cite concerns over the company’s low price-to-earnings and price-to-book scores, which are both rated at 1. They highlight the need for improved financial metrics to justify a “Buy” recommendation. While the return on assets and equity scores are more favorable, indicating potential, the overall sentiment leans toward caution for 2025.
Stock Grades
The recent ratings for Arm Holdings plc (ticker: ARM) indicate a consistent level of confidence among top analysts.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Loop Capital | Maintain | Buy | 2025-11-12 |
| Needham | Maintain | Hold | 2025-11-06 |
| Wells Fargo | Maintain | Overweight | 2025-11-06 |
| Keybanc | Maintain | Overweight | 2025-11-06 |
| Benchmark | Maintain | Hold | 2025-11-06 |
| UBS | Maintain | Buy | 2025-11-06 |
| Mizuho | Maintain | Outperform | 2025-11-06 |
| Barclays | Maintain | Overweight | 2025-11-06 |
| TD Cowen | Maintain | Buy | 2025-11-06 |
| Rosenblatt | Maintain | Buy | 2025-11-06 |
Overall, the grades reflect a stable outlook for ARM, with a mix of “Buy” and “Overweight” ratings suggesting a positive sentiment among analysts. The consistent maintenance of grades indicates that analysts are confident in the stock’s performance moving forward.
Target Prices
The consensus among analysts for Arm Holdings plc (ARM) indicates a solid outlook.
| Target High | Target Low | Consensus |
|---|---|---|
| 210 | 190 | 200 |
Overall, analysts expect Arm Holdings to reach a target price of approximately 200, suggesting a balanced perspective on the stock’s potential.
Consumer Opinions
Consumer sentiment surrounding Arm Holdings (ARM) reveals a mix of enthusiasm and concern, reflecting the company’s pivotal role in the tech landscape.
| Positive Reviews | Negative Reviews |
|---|---|
| “Arm’s technology is a game-changer in mobile.” | “Customer support could be more responsive.” |
| “The innovation in chip design is impressive.” | “Pricing is higher than competitors.” |
| “Strong potential for growth in AI applications.” | “Limited presence in some markets.” |
Overall, consumer feedback highlights Arm’s innovative technology and growth potential, while concerns about customer support and pricing competitiveness are frequently mentioned.
Risk Analysis
In evaluating Arm Holdings plc (ticker: ARM), it’s essential to consider various risks that could impact its performance. Below is a summary of key risks:
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Competition | Intense competition in the semiconductor industry affecting market share | High | High |
| Regulatory Risks | Potential changes in regulations impacting operations and profitability | Medium | High |
| Supply Chain Issues | Disruptions in supply chains due to geopolitical tensions or natural events | Medium | Medium |
| Technological Change | Rapid advancements requiring continuous innovation and adaptation | High | Medium |
| Economic Downturn | Global economic slowdowns leading to reduced demand for products | Medium | High |
The most pressing risks for Arm Holdings include intense market competition and potential regulatory changes, both of which could significantly affect revenue and growth prospects in the near term.
Should You Buy Arm Holdings plc American Depositary Shares?
Arm Holdings plc, known for its flagship semiconductor and software designs, has demonstrated a robust net margin of 19.77% and a return on invested capital (ROIC) of 3.8%. However, with a weighted average cost of capital (WACC) at 23.2%, the company is facing significant financial pressure, impacting its competitiveness in the market.
Based on the current financial indicators, the net margin is positive, but the ROIC is below the WACC, which raises concerns about the sustainability of returns. Additionally, the long-term trend for the stock appears bullish, despite some recent bearish volume patterns. Given the average buy volume is currently lower than sell volume, I recommend awaiting a more favorable buying signal before considering an addition to your portfolio.
Specific risks associated with Arm Holdings include heightened competition in the semiconductor space and potential supply chain disruptions that could affect production and distribution.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- 8,003 Shares in ARM Holdings PLC Sponsored ADR $ARM Acquired by Thoroughbred Financial Services LLC – MarketBeat (Nov 16, 2025)
- Arm (ARM) Q2 2026 Earnings Call Transcript – The Motley Fool (Nov 05, 2025)
- ARM Holdings PLC Sponsored ADR $ARM Shares Sold by Fox Run Management L.L.C. – MarketBeat (Nov 13, 2025)
- ARM Holdings PLC Sponsored ADR $ARM Stock Holdings Lowered by Bank of Montreal Can – MarketBeat (Nov 11, 2025)
- Arm Announces Closing of Initial Public Offering and Full Exercise of Underwriters’ Option to Purchase Additional American Depositary Shares – Arm Newsroom (Sep 18, 2023)
For more information about Arm Holdings plc American Depositary Shares, please visit the official website: arm.com
