Imagine a world where the devices we rely on every day are powered by the cutting-edge technology designed by a single company. Arm Holdings plc is that transformative force in the semiconductor industry, architecting the microprocessors and intellectual property that fuel innovations across automotive, computing, and IoT sectors. With a reputation for quality and a commitment to excellence, Arm stands at the forefront of technological advancement. As we analyze its current market position and growth potential, the question arises: do the fundamentals still support Arm’s robust valuation?
Table of contents
Company Description
Arm Holdings plc, founded in 1990 and headquartered in Cambridge, UK, is a leading player in the semiconductor industry, specializing in the architecture, development, and licensing of central processing unit (CPU) products. With a market capitalization of approximately $149.22B, Arm develops microprocessors, graphics processing units (GPUs), and associated intellectual property used by major technology firms across automotive, computing, consumer electronics, and the Internet of Things (IoT). Operating globally, including key markets in the U.S., China, Taiwan, and South Korea, Arm’s strategic positioning and focus on innovation make it a critical enabler of next-generation technology, solidifying its role as a cornerstone in the evolving semiconductor landscape.
Fundamental Analysis
In this section, I will analyze Arm Holdings plc’s income statement, financial ratios, and dividend payout policy to evaluate its financial health and investment potential.
Income Statement
The following table presents the Income Statement for Arm Holdings plc over the last five fiscal years, highlighting key financial metrics to assist in evaluating the company’s performance.
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue | 2.027B | 2.703B | 2.679B | 3.233B | 4.007B |
| Cost of Revenue | 236M | 220M | 195M | 234M | 206M |
| Operating Expenses | 1.549B | 1.803B | 1.806B | 2.900B | 2.974B |
| Gross Profit | 1.791B | 2.483B | 2.484B | 2.999B | 3.801B |
| EBITDA | 876M | 962.5M | 841.2M | 374M | 902.9M |
| 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 | 2021-03-31 | 2022-03-31 | 2023-03-31 | 2024-05-29 | 2025-05-28 |
Interpretation of Income Statement
Over the period, Arm Holdings has demonstrated robust revenue growth, escalating from 2.027B in 2021 to 4.007B in 2025, reflecting a compound annual growth rate (CAGR) of approximately 36%. Net income has also significantly improved, rising from 388M in 2021 to 792M in 2025, indicating enhanced profitability alongside revenue expansion. Notably, the gross profit margin has remained stable, indicating effective cost control. In 2025, despite the strong revenue growth, operating expenses increased slightly, which could suggest a need for vigilance concerning cost management as the company scales. Overall, the financial outlook appears positive, but continual monitoring of expenses is essential to sustain margins.
Financial Ratios
Here is a summary of Arm Holdings plc’s financial ratios over recent fiscal years:
| Metrics | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Net Margin | 19.14% | 20.31% | 19.56% | 9.46% | 19.77% |
| ROE | 0% | 15.47% | 12.94% | 5.78% | 11.58% |
| ROIC | 0% | 11.36% | 9.58% | 2.21% | 11.31% |
| P/E | 160.65 | 113.54 | 118.96 | 426.12 | 141.58 |
| P/B | 0 | 17.57 | 15.39 | 24.63 | 16.40 |
| Current Ratio | 0 | 2.22 | 2.60 | 2.79 | 5.20 |
| Quick Ratio | 0 | 2.22 | 2.60 | 2.79 | 5.20 |
| D/E | 0 | 0.07 | 0.05 | 0.04 | 0.05 |
| Debt-to-Assets | – | 4.01% | 3.19% | 2.85% | 3.99% |
| Interest Coverage | 0 | – | 0 | 0 | 0 |
| Asset Turnover | 0 | 0.42 | 0.39 | 0.41 | 0.45 |
| Fixed Asset Turnover | 0 | 6.48 | 6.85 | 7.70 | 5.61 |
| Dividend Yield | 1.20% | 0% | 0% | 0% | 0% |
Interpretation of Financial Ratios
In assessing Arm Holdings plc’s financial health for FY 2025, several key ratios stand out. The liquidity ratios are exceptionally strong, with a current ratio of 5.20 and a quick ratio also at 5.20, indicating robust short-term financial stability. The solvency ratio is at 0.47, suggesting manageable debt levels. Profitability remains impressive, highlighted by a gross profit margin of 94.86% and a net profit margin of 19.77%. However, the high price-to-earnings ratio of 141.58 raises concerns about valuation, signaling potential overvaluation risks. The operating efficiency appears moderate with an asset turnover of 0.45, which may warrant closer scrutiny.
Evolution of Financial Ratios
Over the past five years, Arm Holdings has demonstrated solid growth in its profitability metrics, with gross profit margins improving from 88.36% in 2021 to nearly 95% in 2025. However, liquidity ratios have significantly increased, indicating a shift towards a more conservative financial strategy, particularly in the last year.
Distribution Policy
Arm Holdings plc does not currently pay dividends, reflecting its focus on reinvestment and growth within a high growth phase. The absence of dividends allows the company to allocate capital towards research and development and strategic acquisitions. While Arm engages in share buybacks, this strategy prioritizes long-term shareholder value creation, albeit with potential risks associated with market volatility. Overall, the lack of dividends aligns with a sustainable approach to enhancing shareholder value in the long run.
Sector Analysis
Arm Holdings plc operates in the semiconductor industry, specializing in CPU architecture and licensing. It competes with major players like Intel and AMD while leveraging strong IP portfolios and diverse market applications.
Strategic Positioning
Arm Holdings plc (ARM) commands a significant position in the semiconductor industry, with a market capitalization of approximately $149.22B. The company specializes in providing CPU architectures and technologies, making it a vital player for many semiconductor firms and OEMs. As competition intensifies from both established players and emerging technologies, ARM faces competitive pressure, particularly in automotive and IoT sectors. However, its focus on licensing and innovation helps mitigate risks associated with technological disruptions, positioning it favorably in a rapidly evolving market landscape.
Revenue by Segment
The following chart illustrates Arm Holdings’ revenue breakdown by segment for the fiscal year ending March 31, 2025, highlighting significant trends and contributions from each segment.
In FY 2025, Arm Holdings reported total revenues of $4.00B, with the License and Other Revenue segment contributing $1.84B and Royalty revenue at $2.17B. Compared to FY 2024, both segments experienced growth; License and Other Revenue rose by 29% while Royalty increased by 20%. The growth trajectory indicates a strengthening in the royalty segment, which remains a key driver for the business. However, as revenue growth continues, there may be margin pressures and concentration risks associated with reliance on specific clients or technologies.
Key Products
Arm Holdings plc specializes in the design and licensing of semiconductor technology, which is crucial for a variety of applications. Below is a table summarizing some of their key products:
| Product | Description |
|---|---|
| Cortex-A Series | High-performance application processors designed for mobile and embedded devices, optimizing power efficiency and performance. |
| Mali Graphics Processors | A range of graphics processing units (GPUs) used in mobile devices and embedded systems, enabling rich graphics and gaming experiences. |
| Neoverse Infrastructure | A platform designed for cloud and edge computing, providing scalability and performance for data centers and high-performance computing. |
| Arm IoT Solutions | Comprehensive solutions for Internet of Things applications, focusing on low-power, secure connectivity for devices. |
| Arm Virtualization | Technology that enables multiple operating systems to run on a single hardware platform, enhancing resource utilization and flexibility. |
These products are integral to the broader semiconductor ecosystem and reflect Arm’s commitment to innovation across multiple sectors, including automotive, consumer technology, and computing infrastructure.
Main Competitors
The competitive landscape for Arm Holdings plc is characterized by several major players in the semiconductor industry. Below is a table of the main competitors, including Arm itself, sorted by descending market capitalization.
| Company | Market Cap |
|---|---|
| Applied Materials, Inc. | 213.5B |
| Lam Research Corporation | 199.3B |
| Intuit Inc. | 187.5B |
| QUALCOMM Incorporated | 187.2B |
| Intel Corporation | 182.1B |
| ServiceNow, Inc. | 177.3B |
| Amphenol Corporation | 170.6B |
| Sony Group Corporation | 167.5B |
| Texas Instruments Incorporated | 165.9B |
| KLA Corporation | 159.6B |
| Arm Holdings plc American Depositary Shares | 149.2B |
These companies represent a significant portion of the semiconductor market, which operates primarily on a global scale, affecting various sectors including computing infrastructure and consumer technologies.
Competitive Advantages
Arm Holdings plc boasts several competitive advantages in the semiconductor industry. Its strong position stems from its extensive portfolio of microprocessors and intellectual property (IP) technologies, which are crucial for various applications such as automotive and IoT. The company’s recent IPO in September 2023 positions it for growth, particularly as demand for innovative computing solutions rises. Looking ahead, opportunities in emerging markets and the development of new products will likely enhance its market presence and foster long-term profitability. With a solid foundation and strategic vision, Arm is well-equipped to capitalize on these trends.
SWOT Analysis
The SWOT analysis provides an overview of Arm Holdings plc’s internal strengths and weaknesses, along with external opportunities and threats.
Strengths
- Strong market position
- Diverse product portfolio
- High demand in various industries
Weaknesses
- High beta increases volatility
- Lack of dividends
- Dependence on semiconductor industry
Opportunities
- Growth in IoT market
- Expansion in emerging markets
- Strategic partnerships
Threats
- Intense competition
- Supply chain disruptions
- Regulatory challenges
Overall, the SWOT analysis indicates that while Arm Holdings has a robust market presence and growth opportunities, it must navigate significant industry risks and volatility. This understanding can guide the company’s strategy to enhance resilience and capitalize on emerging trends.
Stock Analysis
Over the past year, Arm Holdings plc has demonstrated significant price movements, culminating in a robust bullish trend with a remarkable price increase of 101.87%. This analysis will delve into the key trading dynamics and the recent performance of the stock.
Trend Analysis
Analyzing the overall trend over the past year, the stock has experienced a price change of +101.87%, which indicates a bullish trend. Despite this strong performance, the recent trend over the last two months shows a slight decline of -1.12%, suggesting a neutral trend during this period. Notably, the stock reached a high of 181.19 and a low of 70.0, with the trend currently exhibiting signs of deceleration. The standard deviation of 22.47 implies moderate volatility in the stock price.
Volume Analysis
In the last three months, the total trading volume for Arm Holdings plc has reached approximately 4.32B shares, with buyer-driven activity accounting for 60.83% of the volume (approximately 2.63B shares). However, the volume trend is decreasing, indicating waning investor participation. In the recent period, buyer volume was approximately 140M shares compared to seller volume of about 138M shares, resulting in a neutral buyer behavior with a buyer dominance percentage of 50.47%. This suggests a balanced sentiment among investors, with neither side gaining significant traction.
Analyst Opinions
Recent recommendations for Arm Holdings plc (ARM) reveal a consensus leaning towards a “Hold” rating. Analysts have given the stock a solid “B” rating, with an overall score of 3 out of 5. Key arguments for this stance include strong return on equity and assets (both rated 4), which indicate solid operational efficiency. However, concerns about low scores in price-to-earnings and price-to-book ratios (both rated 1) suggest potential overvaluation. Analysts like those at FMP recommend cautious observation before making significant investment decisions.
Stock Grades
Arm Holdings plc has recently received consistent grades from several reputable grading companies, reflecting a stable outlook for the stock.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Loop Capital | Maintain | Buy | 2025-11-12 |
| Wells Fargo | Maintain | Overweight | 2025-11-06 |
| Mizuho | Maintain | Outperform | 2025-11-06 |
| Barclays | Maintain | Overweight | 2025-11-06 |
| UBS | Maintain | Buy | 2025-11-06 |
| Rosenblatt | Maintain | Buy | 2025-11-06 |
| TD Cowen | Maintain | Buy | 2025-11-06 |
| JP Morgan | Maintain | Overweight | 2025-11-06 |
| Keybanc | Maintain | Overweight | 2025-11-06 |
| Needham | Maintain | Hold | 2025-11-06 |
Overall, the trend in grades for Arm Holdings indicates a robust market position with multiple firms maintaining favorable ratings. The consistent “Buy” and “Overweight” recommendations suggest strong investor confidence in the company’s future performance.
Target Prices
The consensus target price for Arm Holdings plc is based on reliable analyst evaluations.
| Target High | Target Low | Consensus |
|---|---|---|
| 210 | 190 | 200 |
Analysts expect the stock to reach a consensus target price of 200, with a high of 210 and a low of 190, indicating a positive outlook.
Consumer Opinions
Consumer sentiment about Arm Holdings plc is a mixed bag, reflecting both enthusiasm for its innovative technology and concerns over market competition.
| Positive Reviews | Negative Reviews |
|---|---|
| “Arm’s chips are highly efficient and reliable.” | “Price fluctuations are concerning.” |
| “Excellent customer support and resources.” | “Competition is fierce in the semiconductor space.” |
| “Innovative designs that lead the market.” | “Need to focus on expanding market share.” |
Overall, consumer feedback on Arm Holdings highlights strengths in product efficiency and customer support, while pointing out weaknesses related to market competition and pricing stability.
Risk Analysis
In evaluating Arm Holdings plc, it’s essential to consider various risks that could impact the company’s performance.
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Risk | Volatility in semiconductor demand affecting sales. | High | High |
| Regulatory Risk | Changes in technology regulations impacting operations. | Medium | High |
| Competition Risk | Intense competition from major players like Intel and NVIDIA. | High | Medium |
| Supply Chain Risk | Disruptions in chip supply affecting production. | Medium | High |
| Cybersecurity Risk | Potential data breaches that could harm reputation. | Medium | Medium |
The most significant risks for Arm Holdings involve high market volatility and intense competition, particularly as the tech landscape evolves rapidly. Staying vigilant and adaptable is crucial for managing these risks effectively.
Should You Buy Arm Holdings plc American Depositary Shares?
Arm Holdings plc demonstrates strong profitability with a net income of 792M for FY 2025, indicating a positive net margin of 19.77%. The company has achieved value creation, as its return on invested capital (ROIC) of 11.31% exceeds the weighted average cost of capital (WACC) of 23.18%. With a total debt of 356M, the debt-to-equity ratio stands at 0.052, reflecting a conservative financial structure. The company’s fundamentals have evolved positively, with significant revenue growth of 23.94% year-over-year. The overall rating is a B, suggesting solid performance relative to peers.
Favorable signals
The company exhibits several favorable signals, including a revenue growth of 23.94%, which indicates strong demand for its products. Additionally, the gross margin stands at an impressive 94.86%, showcasing effective cost management. The net margin of 19.77% and net margin growth of 108.83% further highlight the company’s profitability. Moreover, with an EBIT margin of 17.97% and EBIT growth of 239.62%, the company’s operational efficiency appears robust.
Unfavorable signals
Despite the favorable elements, there are significant unfavorable signals. The return on invested capital (ROIC) is 11.31%, which is lower than the weighted average cost of capital (WACC) at 23.18%, indicating value destruction. Additionally, the price-to-earnings (P/E) ratio is high at 141.58, signaling potential overvaluation. The current ratio of 5.2, while numerically high, may suggest an inefficient use of assets. Lastly, the asset turnover ratio is at 0.45, which reflects lower efficiency in generating sales from assets.
Conclusion
Considering the favorable income statement evaluation but unfavorable ratios, the overall sentiment might suggest a cautious approach for long-term investors. With the recent seller volume exceeding buyer volume, it appears prudent to wait for a more favorable buying environment before making any decisions.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- ARM Holdings PLC Sponsored ADR $ARM Shares Sold by Creative Planning – MarketBeat (Dec 02, 2025)
- ARM Holdings PLC Sponsored ADR $ARM Shares Sold by Steward Partners Investment Advisory LLC – MarketBeat (Nov 30, 2025)
- Arm (ARM) Q2 2026 Earnings Call Transcript – The Globe and Mail (Nov 05, 2025)
- Guarantor: JPMorgan Chase & Co. – StreetInsider (Nov 18, 2025)
- Arm Holdings (ARM) Stock: Chip Designer Delivers Earnings Beat and Strong Guidance – parameter.io (Nov 06, 2025)
For more information about Arm Holdings plc American Depositary Shares, please visit the official website: arm.com
