Arm lifts Q3 outlook on strong AI chip demand

Arm Holdings forecast fiscal Q3 revenue of about US$1.2 billion and adjusted profit of 41 cents per share, both above analyst expectations.

The UK-based chip design firm said demand for chips supporting AI data centers is driving the outlook.

In Q2, Arm reported a 34% rise in revenue to US$1.1 billion and profit of 39 cents per share.

Licensing revenue reached US$515 million and royalties were US$620 million, beating estimates in both categories.

Shares rose 7% in after-hours trading and are up 30% this year.

🔗 Source: Bloomberg

🧠 Food for thought

Implications, context, and why it matters.

Q2 royalties reached $620 million 1. Some of the lift comes from the Armv9 shift (the latest Arm instruction set and core designs) that earns higher rates than older lines 1. Public filings do not split Neoverse server chips (Arm CPU cores for servers and data centers) from mobile, even as the article credits “AI data centers”.
Azure Cobalt 100, Microsoft’s in-house Arm server CPU for Azure, reached 32.9% of new CPUs in Q4 2024 2. Google Axion hit general availability in October 2024 3. Royalty granularity is missing, so the AI share remains hard to size.
Licensing revenue came in at $515 million 2 4. Licensing covers upfront rights to design with Arm tech, while royalties arrive per chip shipped. The gap means payouts may land in later quarters.

Azure Cobalt 100 virtual machines (hosted server instances in the cloud) are live in Canada Central; Central US; Germany West Central; Japan East; and North Europe 5. Google Axion C4A launched in late October 2024 3 and is in Iowa; Virginia; Belgium; Frankfurt; and Singapore 4. These general availability timelines (GA) open a short window for third-party software vendors and cloud consultancies to pitch Arm64 migration, performance tuning, plus compatibility tools.
General-purpose and memory-optimized cloud workloads exceed 72% 2. Cobalt and Axion target web servers; databases; microservices; plus analytics 6 4. Teams will want help on cost-performance and x86 porting.
Vendors offering Arm64 profiling (the 64-bit Arm instruction set), container image recompilation (rebuilding software packages for a different CPU architecture), plus benchmark-as-a-service platforms (on-demand performance testing) can tie offers to Axion’s 10% price-performance edge over Graviton4 4 and to Cobalt’s 50% improvement versus prior Arm virtual machines 5. That framing helps buyers justify and speed migrations.