Arm’s latest quarter shows how quickly the economics of its processor designs are being pulled toward data centers. The company reported record fiscal second-quarter revenue of $1.44 billion, up 27% from a year earlier, and said royalties from data-center products doubled year over year. The figures arrived as cloud providers expand infrastructure for artificial intelligence, though the sharpest statements about Arm’s future market position and its new in-house CPU business remain company expectations rather than completed outcomes.
A record quarter, led by licensing
For the three months ended September 30, 2026, Arm recorded $1.44 billion in total revenue, its highest second-quarter result, according to its November 4 results announcement. Revenue was 27% higher than in the comparable quarter a year earlier. Arm said this was its fifth consecutive quarter in which total revenue growth exceeded 20% year over year. That streak helps explain why the result matters beyond a single earnings beat: demand for the company’s compute platform has translated into repeated high growth, although the announcement alone does not establish how durable that pace will be.
The composition of sales is important. Licensing and other revenue reached $773 million, up 50% year over year, while royalty revenue was $670 million. The difference between the two lines reflects Arm’s business model. It licenses processor designs and related technology to customers, and also collects royalties when products incorporating that technology ship. Licensing activity can indicate customer investment in future designs; royalties track deployed products and shipments. Neither metric, by itself, provides a complete read on future earnings, because timing, customer mix, product cycles and shipment volumes can vary.
Reuters independently reported the $1.44 billion quarterly total and noted that it exceeded the $1.38 billion average analyst estimate compiled by LSEG. Its report also showed a notable split against analyst expectations: licensing revenue of $773 million exceeded a $625.1 million estimate, while royalty revenue of $670 million came in below a $720.8 million estimate. Adjusted earnings were 52 cents per share, above the 47-cent estimate cited by Reuters. Those comparisons put the headline growth in context: a strong overall result and licensing performance coexisted with a royalty line below consensus expectations.
What the royalty figures say
Arm’s statement that data-center royalties doubled is a striking indicator of momentum in a segment that has attracted increasing attention as cloud operators build AI infrastructure. The company attributed the broader demand environment to the rising amount and complexity of computing required across markets. Reuters likewise described demand for Arm-based technology as benefiting from the AI boom, noting that major cloud companies are developing custom processors for data-center workloads. It also reported Arm CEO Rene Haas’s view that power efficiency is increasingly valuable as operators manage the energy and cooling costs associated with running large AI models.
The doubling refers specifically to Arm’s data-center royalties, not to all royalty revenue. Total quarterly royalty revenue increased 8% year over year to $670 million, according to both Arm and Reuters. The distinction matters: data-center royalties can rise rapidly from a smaller base while the total royalty category grows at a slower rate because it also reflects other markets and product cycles. Arm did not disclose the absolute dollar amount of the data-center royalty subcategory in the announcement, so the doubling should not be converted into an invented dollar figure.
Arm also said partners reported shipping more than 10 billion Arm-based chips during the quarter, up 1.5 billion from the year-earlier period. That shipment milestone points to the breadth of the architecture across devices, but it is not a count of data-center chips alone. A large portion of Arm’s installed footprint spans markets beyond servers, and the announcement does not break down the 10 billion figure by application. The same caution applies to interpreting partner shipments as revenue: Arm receives royalties under contractual terms that can differ by product and customer.
Hyperscalers and the server-share forecast
Arm reported that its server architecture represented more than half of deployments at top hyperscalers in calendar 2025, compared with 15% in calendar 2024. The company says that share more than tripled over that interval. Building on current product ramps, Arm expects the share to exceed 60% by the end of calendar 2026. This is a forward-looking estimate, not a measured outcome for the end of the year. Arm linked the projection to deployments across AWS Graviton, Google Axion, Microsoft Cobalt and NVIDIA platforms.
Reuters also reported the more-than-50% 2025 deployment figure and the expectation of exceeding 60% by the end of 2026. Its account described two roles for CPUs in AI infrastructure: conventional server processors can displace x86-based designs in standard racks, while CPUs inside AI systems help manage data flow. Reuters quoted Haas describing Arm as gaining share in standard CPU server racks, and reported that Google has begun using its Arm-based Axion chips in tensor-processing-unit AI systems.
Market-share language needs careful handling. The figures concern server-chip architecture deployments at major cloud providers or top hyperscalers, not all servers worldwide, and not revenue share. The public announcement does not provide a full methodology, denominator or customer-by-customer breakdown for the estimate. The comparison is therefore useful as an indicator of Arm’s claimed progress in a defined customer group, but readers should not treat it as a universal measure of the server market.
Arm cited examples of activity among large technology companies. It said Amazon recently reported that Arm-based Graviton revenue commitments had increased more than 20 times year over year; it pointed to Google’s description of Axion as important to its AI infrastructure and Microsoft’s positive comments about Cobalt adoption. The company also said NVIDIA’s Arm-based Vera CPU platform was generally available on Oracle Cloud Infrastructure and in production with OpenAI. These are statements included in Arm’s own account and should be attributed as such; they do not independently quantify Arm’s overall server share.
Arm’s direct-chip bet
Arm is also moving beyond its longstanding focus on licensing architecture and collecting royalties. Its AGI CPU is a silicon product designed by Arm for customers, extending the company into direct chip sales. The results announcement said Arm’s confidence in achieving up to $2 billion of AGI CPU revenue across fiscal years 2027 and 2028 had increased over the previous 90 days, citing additional supply and a changing customer mix. That $2 billion is a company forecast, not revenue already earned or a guaranteed order total.
Arm said purchase orders from multiple customers extend through calendar 2027 and that first commercial deliveries are on track for the fourth quarter of fiscal 2027. Reuters separately reported the $2 billion expectation and quoted Haas calling the target “very achievable.” Reuters said Arm had worked with Taiwan Semiconductor Manufacturing Company and other suppliers to secure enough raw materials, including a fast form of DRAM, to produce the planned volume. In the absence of reported shipments, actual recognized sales and independently verified order values, the figure remains an outlook.
Arm’s direct-chip effort creates a different opportunity and a different set of execution requirements. A successful product could add sales beyond licensing and royalties, but it also makes delivery, component availability, customer adoption and product performance more directly relevant to Arm. The company said Oracle Cloud Infrastructure plans to offer AGI CPU instances in 2027. That planned availability is an announced future offering, not evidence that the service is already broadly deployed or that the sales forecast has been achieved.
What the results do—and do not—prove
Together, the quarter’s data point to AI demand supporting more than one part of Arm’s business. Licensing revenue rose sharply, data-center royalties doubled, and the company described a pipeline for its own CPU product. Reuters’ report provides an independent check on the headline revenue, revenue mix and outlook, while emphasizing that licensing revenue was especially strong and that royalties were below analyst expectations. The two sources therefore support an account of growth with important differences between actual reported performance and expectations for future sales or market share.
Arm’s announcement also described growth in areas beyond data centers. It said physical-AI royalty revenue grew 50% year over year, citing adoption of advanced driver-assistance and in-vehicle infotainment systems. It said Arm-based PCs reached approximately 20% of global PC shipments. These figures are company-reported and provide broader context for the company’s diversification narrative, but the central driver in the Q2 discussion was the demand for compute associated with AI and cloud infrastructure.
One quarter cannot settle whether this growth will persist. Cloud companies’ custom-chip programs may expand, but their investment pace and product choices can change. Royalties depend on customer shipments and contractual arrangements. Licensing revenue can shift with the timing of agreements and design activity. A direct CPU business adds supply-chain and execution exposure. And the deployment share projection rests on ramps that were still in progress when Arm made the forecast.
The outlook and the risks
Arm forecast third-quarter revenue of $1.54 billion, slightly above the $1.53 billion average analyst estimate cited by Reuters. That guidance is management’s forecast for the next quarter, not a reported result. Reuters also described a memory shortage affecting the chip industry and noted Haas’s statement that Arm had secured enough supply to support the $2 billion AGI CPU plan. Supply availability is consequential: a strong order book or customer interest does not automatically become delivered product or recognized revenue if components, manufacturing capacity or qualification schedules constrain shipments.
The company’s own materials say forward-looking statements about performance, market opportunity and customer demand are subject to risks and uncertainties that could make actual results materially different. For readers assessing the story, the most defensible bottom line is narrower than the boldest projections: Arm had a record $1.44 billion second quarter, total revenue rose 27%, and it reported that data-center royalties doubled. The server-deployment share above 60% and up to $2 billion of AGI CPU revenue over two fiscal years are targets to monitor, not facts already established.
Frequently asked questions
What were Arm’s Q2 fiscal 2027 results?
For the quarter ended September 30, 2026, Arm reported record revenue of $1.44 billion, up 27% year over year. Licensing and other revenue was $773 million, up 50%, and royalty revenue was $670 million.
Did all Arm royalties double?
No. Arm said data-center royalties doubled year over year. Total royalty revenue across the business was $670 million, up 8% year over year. The company did not publish an absolute dollar figure for data-center royalties in the announcement.
Has Arm already reached 60% of server deployments at hyperscalers?
No. Arm said its architecture accounted for more than 50% of deployments at top hyperscalers in calendar 2025 and expects the share to exceed 60% by the end of calendar 2026. The latter is a company forecast.
Is the $2 billion AGI CPU figure already booked revenue?
No. Arm said it expects up to $2 billion in AGI CPU revenue across fiscal 2027 and fiscal 2028. The company cited purchase orders from multiple customers through calendar 2027 and expects initial commercial deliveries in Q4 fiscal 2027, but the $2 billion remains a forward-looking estimate.
What did Reuters independently confirm?
Reuters independently reported Arm’s $1.44 billion revenue, 27% growth, the $670 million royalty line and $773 million licensing revenue. It also reported the AI-demand context, the company’s server-share expectation, its $2 billion AGI CPU outlook and third-quarter revenue guidance.