In the fast-evolving semiconductor industry, Arm Holdings plc and IPG Photonics Corporation stand out with distinct but overlapping technological innovations. Arm focuses on designing microprocessors and IP solutions powering diverse markets, while IPG excels in high-performance fiber lasers for materials processing and communications. Both companies drive critical advancements, making their comparison vital. Join me as we explore which presents the most compelling investment opportunity in 2026.
Table of contents
Companies Overview
I will begin the comparison between Arm Holdings plc American Depositary Shares and IPG Photonics Corporation by providing an overview of these two companies and their main differences.
Arm Holdings plc Overview
Arm Holdings plc designs and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers. Its portfolio includes microprocessors, system IPs, graphics processing units, and software used across automotive, computing infrastructure, consumer technologies, and the Internet of Things markets. Headquartered in Cambridge, UK, Arm operates globally as a subsidiary of Kronos II LLC with a market cap of $111B.
IPG Photonics Corporation Overview
IPG Photonics Corporation develops and sells high-performance fiber lasers, amplifiers, and diode lasers primarily for materials processing worldwide. Its product range includes hybrid fiber lasers, optical fiber delivery cables, and integrated laser systems used in telecommunications, medical, and advanced applications. Founded in 1990 and based in Marlborough, Massachusetts, IPG has a market cap of $3.4B and serves OEMs, system integrators, and end users.
Key similarities and differences
Both companies operate in the semiconductor technology sector and focus on advanced components used in various industrial and technological applications. Arm specializes in semiconductor IP and microprocessor architecture, licensing its technology globally, while IPG Photonics manufactures fiber lasers and laser systems for materials processing and communications. Arm’s business model is IP licensing, whereas IPG’s revolves around manufacturing and direct sales, reflecting distinct approaches within the tech industry.
Income Statement Comparison
The table below presents a side-by-side comparison of key income statement metrics for Arm Holdings plc American Depositary Shares (ARM) and IPG Photonics Corporation (IPGP) for their most recent fiscal years.
| Metric | Arm Holdings plc American Depositary Shares | IPG Photonics Corporation |
|---|---|---|
| Market Cap | 111B | 3.4B |
| Revenue | 4.01B | 977M |
| EBITDA | 903M | 76M |
| EBIT | 720M | 14M |
| Net Income | 792M | -182M |
| EPS | 0.75 | -4.09 |
| Fiscal Year | 2025 | 2024 |
Income Statement Interpretations
Arm Holdings plc American Depositary Shares
Arm Holdings showed strong growth from 2021 to 2025, with revenue nearly doubling from $2.03B to $4.01B and net income increasing from $388M to $792M. Its gross margin remained high at 94.86%, and net margin improved to 19.77%. The fiscal year 2025 saw significant margin expansion and a 24% revenue rise, highlighting robust profitability and operational efficiency.
IPG Photonics Corporation
IPG Photonics faced declining revenue and earnings over 2020-2024, with revenue dropping from $1.2B to $977M and net income turning negative at -$182M in 2024. Gross margin fell to 34.61%, and net margin was unfavorable at -18.58%. The 2024 fiscal year showed steep declines in sales and profitability, reflecting operational challenges and margin pressure.
Which one has the stronger fundamentals?
Arm Holdings demonstrates stronger fundamentals with consistent revenue and net income growth, favorable margins, and positive earnings momentum. Conversely, IPG Photonics posted declining revenues and losses in recent years, with unfavorable margin trends and deteriorating profitability, indicating weaker financial health relative to Arm.
Financial Ratios Comparison
The table below presents a selection of the most recent key financial ratios for Arm Holdings plc (ARM) and IPG Photonics Corporation (IPGP), reflecting their fiscal year 2025 and 2024 data respectively.
| Ratios | Arm Holdings plc (ARM) FY 2025 | IPG Photonics Corporation (IPGP) FY 2024 |
|---|---|---|
| ROE | 11.58% | -8.97% |
| ROIC | 10.28% | -9.97% |
| P/E | 141.58 | -17.76 |
| P/B | 16.40 | 1.59 |
| Current Ratio | 5.20 | 6.98 |
| Quick Ratio | 5.20 | 5.59 |
| D/E (Debt-to-Equity) | 0.05 | 0.01 |
| Debt-to-Assets | 3.99% | 0.78% |
| Interest Coverage | 0 | 0 |
| Asset Turnover | 0.45 | 0.43 |
| Fixed Asset Turnover | 5.61 | 1.66 |
| Payout Ratio | 0 | 0 |
| Dividend Yield | 0 | 0 |
Interpretation of the Ratios
Arm Holdings plc American Depositary Shares
Arm Holdings’ ratios show a mix of strengths and weaknesses. The net margin is favorable at 19.77%, but the return on invested capital (10.28%) and weighted average cost of capital (24.3%) are unfavorable. The company has a strong quick ratio (5.2) and low debt-to-equity (0.05), yet a high price-to-earnings ratio (141.58) raises valuation concerns. Arm does not pay dividends, reflecting a focus on reinvestment and growth.
IPG Photonics Corporation
IPG Photonics displays several unfavorable profitability ratios, with net margin at -18.58% and return on equity at -8.97%. However, the price-to-earnings ratio is favorable at -17.76, and the company maintains low debt levels (debt-to-assets 0.78%). Its current ratio is high at 6.98 but considered unfavorable. IPGP does not pay dividends, likely prioritizing research, development, and strategic initiatives.
Which one has the best ratios?
Both companies have slightly unfavorable global ratios evaluations, with Arm showing marginally better profitability and leverage metrics. Arm’s higher valuation multiples and liquidity ratios contrast with IPGP’s negative returns but more moderate valuation. Neither company currently pays dividends, reflecting differing strategic priorities amid mixed financial strengths and weaknesses.
Strategic Positioning
This section compares the strategic positioning of Arm Holdings plc and IPG Photonics Corporation, focusing on Market position, Key segments, and Exposure to technological disruption:
Arm Holdings plc American Depositary Shares
- Leading semiconductor IP licensor with strong competitive pressure from industry peers.
- Key segments include microprocessors, graphics IP, and semiconductor technologies for automotive, computing, and IoT.
- Exposure to semiconductor technology shifts, requiring continuous innovation in processor architecture.
IPG Photonics Corporation
- Smaller market cap with moderate competitive pressure in fiber laser and amplifier markets.
- Focused on fiber lasers, amplifiers, and laser systems mainly for materials processing and communications.
- Faces technological disruption risks in laser advancements and fiber optic communications.
Arm Holdings plc American Depositary Shares vs IPG Photonics Corporation Positioning
Arm demonstrates a diversified approach through semiconductor IP across multiple tech markets, while IPG Photonics concentrates on fiber lasers and amplifiers. Arm’s broader market exposure contrasts with IPG’s niche focus, each with distinct competitive challenges and segment dependencies.
Which has the best competitive advantage?
Both companies are shedding value with ROIC below WACC; Arm shows stable but unfavorable profitability, whereas IPG Photonics faces very unfavorable conditions with declining ROIC, indicating weaker competitive advantage for both.
Stock Comparison
The stock price movements of Arm Holdings plc American Depositary Shares (ARM) and IPG Photonics Corporation (IPGP) over the past 12 months reveal notable bearish trends, with ARM experiencing a sharper decline and higher volatility compared to IPGP.
Trend Analysis
Arm Holdings plc’s stock fell by 21.17% over the past year, indicating a bearish trend with decelerating decline. The price ranged between 181.19 and 87.19, showing substantial volatility with a standard deviation of 19.31.
IPG Photonics Corporation’s stock dropped 6.49% over the same period, also bearish with deceleration. The price fluctuated between 90.69 and 52.12, exhibiting lower volatility than ARM, with a 9.27 standard deviation.
Comparatively, ARM showed a more pronounced bearish trend and higher volatility, whereas IPGP’s decline was milder; ARM delivered the weakest market performance over the past year.
Target Prices
The consensus target prices from verified analysts indicate potential upside for both Arm Holdings plc and IPG Photonics Corporation.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Arm Holdings plc American Depositary Shares | 210 | 120 | 166 |
| IPG Photonics Corporation | 96 | 92 | 94 |
Analysts expect Arm Holdings’ stock to rise substantially from its current price of 105.11 USD, while IPG Photonics is forecasted to trade modestly higher than its current 80.03 USD price.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for Arm Holdings plc American Depositary Shares (ARM) and IPG Photonics Corporation (IPGP):
Rating Comparison
ARM Rating
- Rating: B, assessed as Very Favorable overall by analysts.
- Discounted Cash Flow Score: Moderate at 3, indicating average valuation based on cash flows.
- ROE Score: Moderate at 3, showing average profit generation from equity.
- ROA Score: Favorable at 4, reflecting efficient asset utilization.
- Debt To Equity Score: Favorable at 4, indicating a strong balance sheet with low financial risk.
- Overall Score: Moderate at 3, consistent with the other moderate to favorable scores.
IPGP Rating
- Rating: B+, also rated Very Favorable overall, slightly higher than ARM.
- Discounted Cash Flow Score: Favorable at 4, suggesting better undervaluation assessment.
- ROE Score: Moderate but lower at 2, indicating relatively less efficient equity use.
- ROA Score: Moderate at 3, less effective asset use compared to ARM.
- Debt To Equity Score: Favorable at 4, similarly strong financial stability.
- Overall Score: Moderate at 3, matching ARM’s overall assessment.
Which one is the best rated?
IPGP holds a slightly better rating (B+) than ARM (B), supported by a higher discounted cash flow score but lower ROE and ROA scores. Both have identical overall and debt-to-equity scores, making IPGP marginally better rated based on the available data.
Scores Comparison
Here is a comparison of the Altman Z-Score and Piotroski Score for both companies:
Arm Holdings plc American Depositary Shares Scores
- Altman Z-Score: 32.43, indicating a safe zone rating
- Piotroski Score: 7, classified as strong financial health
IPG Photonics Corporation Scores
- Altman Z-Score: 9.65, indicating a safe zone rating
- Piotroski Score: 7, classified as strong financial health
Which company has the best scores?
Both Arm and IPG Photonics have Altman Z-Scores in the safe zone and identical Piotroski Scores of 7, indicating equally strong financial health based on the provided data.
Grades Comparison
Here is a detailed comparison of the latest grades from recognized grading companies for the two companies:
Arm Holdings plc American Depositary Shares Grades
This table summarizes recent grades assigned by reputable grading firms to Arm Holdings plc ADS:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| B of A Securities | Downgrade | Neutral | 2026-01-13 |
| B of A Securities | Maintain | Buy | 2025-12-16 |
| Goldman Sachs | Downgrade | Sell | 2025-12-15 |
| Loop Capital | Maintain | Buy | 2025-11-12 |
| TD Cowen | Maintain | Buy | 2025-11-06 |
| Rosenblatt | Maintain | Buy | 2025-11-06 |
| 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 |
Arm Holdings shows a majority of buy and outperform ratings, with a recent downgrade by B of A Securities to neutral and Goldman Sachs downgrading to sell, indicating some caution among analysts.
IPG Photonics Corporation Grades
Below is a summary of recent grades from established grading firms for IPG Photonics Corporation:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Citigroup | Upgrade | Buy | 2025-11-05 |
| Bernstein | Upgrade | Outperform | 2025-08-07 |
| Raymond James | Maintain | Strong Buy | 2025-05-07 |
| CL King | Upgrade | Buy | 2025-03-18 |
| Citigroup | Maintain | Sell | 2025-02-18 |
| Stifel | Maintain | Buy | 2025-02-12 |
| Needham | Maintain | Hold | 2025-02-12 |
| Seaport Global | Downgrade | Neutral | 2024-08-01 |
| Stifel | Maintain | Buy | 2024-07-31 |
| Raymond James | Maintain | Strong Buy | 2024-07-31 |
IPG Photonics has a mixed but generally positive set of ratings, including strong buy and outperform grades, though some neutral and sell assessments remain.
Which company has the best grades?
Both companies hold a consensus rating of “Buy.” Arm Holdings has a stronger concentration of buy and outperform ratings but faces recent downgrades from prominent firms. IPG Photonics exhibits a wider range of ratings, including strong buy and outperform grades, but also some hold and sell opinions. This divergence may influence investor sentiment and portfolio risk profiles differently.
Strengths and Weaknesses
Below is a comparison of Arm Holdings plc (ARM) and IPG Photonics Corporation (IPGP) based on key financial and strategic criteria as of 2026.
| Criterion | Arm Holdings plc American Depositary Shares (ARM) | IPG Photonics Corporation (IPGP) |
|---|---|---|
| Diversification | Moderate: Primarily licensing and royalties from semiconductor designs; steady revenue growth in licensing and royalty segments (License & Other: $1.84B, Royalty: $2.17B in 2025) | Moderate to low: Concentrated on laser technology with multiple laser product lines; revenue declines in key segments (High Power CW Lasers decreased to $333M in 2024) |
| Profitability | Mixed: Net margin favorable at 19.77%, but ROIC (10.28%) below WACC (24.3%), indicating value destruction | Weak: Negative net margin (-18.58%) and ROIC (-9.97%), signaling consistent losses and value destruction |
| Innovation | Strong IP portfolio with continuous licensing revenue; however, innovation impact on ROIC is neutral | Innovation in laser systems is strong, but declining ROIC and profitability suggest challenges in translating innovation to profits |
| Global presence | Extensive global licensing footprint supporting semiconductor companies worldwide | Global sales in laser systems, but more niche market presence compared to ARM’s semiconductor ecosystem |
| Market Share | Significant in semiconductor IP licensing market with steady royalty growth | Leading in fiber lasers but facing revenue declines in core segments and competitive pressures |
Key takeaways: ARM demonstrates stable revenue streams from licensing and royalties but struggles with capital efficiency and value creation. IPGP faces more severe profitability challenges with declining returns and margins despite innovation in laser technologies. Both companies exhibit slightly unfavorable financial ratios, suggesting cautious investment consideration.
Risk Analysis
Below is a comparison of key risks for Arm Holdings plc (ARM) and IPG Photonics Corporation (IPGP) based on the most recent data:
| Metric | Arm Holdings plc (ARM) | IPG Photonics Corporation (IPGP) |
|---|---|---|
| Market Risk | High beta (4.36) indicates high volatility and sensitivity to market swings. | Moderate beta (1.02) suggests average market risk. |
| Debt Level | Very low debt-to-equity (0.05) and debt-to-assets (3.99%) ratios, indicating strong balance sheet. | Extremely low debt (0.01 D/E, 0.78% debt-to-assets), very conservative leverage. |
| Regulatory Risk | Operates globally including China and Taiwan; exposed to international regulatory changes and tech export controls. | US-based with some international exposure; regulatory risk moderate but less geopolitical tension. |
| Operational Risk | Dependent on semiconductor industry innovation; unfavorable asset turnover (0.45) could impact efficiency. | Negative profitability ratios and unfavorable asset turnover (0.43) may signal operational challenges. |
| Environmental Risk | Moderate, typical for technology sector; no significant issues reported. | Similar environmental exposure as a technology company with laser manufacturing processes. |
| Geopolitical Risk | High due to operations in sensitive regions (China, Taiwan), impacting supply chain and market access. | Lower geopolitical risk relative to ARM, primarily US-focused operations. |
In summary, ARM faces the most significant risks from high market volatility and geopolitical factors, amplified by its global footprint in sensitive regions. IPGP’s main concerns lie in operational inefficiencies and negative profitability, though with lower market and geopolitical risks. Investors should weigh ARM’s growth potential against its volatility and geopolitical exposure, while IPGP’s stable leverage contrasts with profitability challenges.
Which Stock to Choose?
Arm Holdings plc shows strong income growth with a 24% revenue increase in 2025 and favorable margins near 20%. The company maintains low debt levels, a robust current ratio of 5.2, and a moderate return on equity at 11.6%, though its ROIC is below WACC, indicating value destruction. Its overall rating is very favorable with some mixed financial ratios.
IPG Photonics Corporation faces challenges with a 24% revenue decline in 2024 and a negative net margin of -18.6%. Despite very low debt and a solid current ratio of 7.0, profitability metrics remain unfavorable, and ROIC also lags behind WACC with a declining trend. The firm holds a very favorable rating but with a slightly unfavorable financial ratio profile.
Investors prioritizing growth and strong income statement performance may find Arm Holdings plc more appealing, while those with higher risk tolerance seeking a company with low debt and potential turnaround might consider IPG Photonics. Both stocks exhibit some financial weaknesses, suggesting careful evaluation aligned with individual risk profiles.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Arm Holdings plc American Depositary Shares and IPG Photonics Corporation to enhance your investment decisions:
