Arm Holdings closed its fiscal year with the strongest quarter in its history, as AI infrastructure spending pushed data center royalties to fresh highs and customer commitments for its AGI server CPU platform doubled to more than $2 billion. The company reported Q4 FY2026 revenue of $1.49 billion, up 20% year-over-year and above the midpoint of guidance, with full-year revenue of $4.92 billion, up 23%.
The results, posted on May 6, were a clean beat on every major line. Licensing revenue jumped 29% to $819 million as hyperscalers and AI startups locked in long-term access to Arm's compute roadmap. Royalty revenue rose 11% to $671 million, but the underlying mix told the more important story: data center royalties more than doubled year-over-year for the second consecutive quarter.
AI data center is the new core business
Arm-based CPUs now hold roughly 50% CPU compute share among leading cloud providers, with CEO Rene Haas saying he expects data center royalties to "double year-on-year again" in FY2027. Arm also has near-100% share in DPUs and SmartNICs, the networking silicon that increasingly sits between GPUs and the rest of the AI stack.
The headline number for AI-focused investors was AGI CPU demand. Arm said customer commitments for its dedicated AI data center CPU platform have grown from $1 billion to more than $2 billion across fiscal 2027 and 2028, with first production revenue expected in Q4 FY2027. Management is keeping its formal $1 billion AGI revenue target in place until supply chain capacity catches up — which it called the primary constraint on the ramp.
CEO Rene Haas framed the opportunity in unusually direct terms. He told analysts agentic AI workloads will require "more than 4 times today's CPU capacity" by 2030, and added: "I believe that by the end of the decade, the largest market share by CPU type will be Arm." The company is targeting $15 billion in AGI CPU revenue by FY2031 at roughly 35% operating margins, and pitched up to $10 billion in CapEx savings per gigawatt for operators that pair AGI with their accelerator fleets.
Smartphone cracks dent the rally
The market reaction was less euphoric than the numbers suggested. Arm shares fell as much as 9% in early trading after Haas told investors that smartphone unit growth had "flipped to negative" last quarter — a striking comment for a business whose royalty stream has long been anchored by handsets. Premium-tier Armv9 and CSS adoption kept smartphone royalties growing in dollar terms, but the soft unit picture reignited concerns about the cyclicality of Arm's largest end market.
For FY2027 Q1, Arm guided revenue to $1.26 billion plus or minus $50 million, with non-GAAP EPS of $0.40 plus or minus $0.04, and royalty revenue up roughly 20% year-over-year.
Implications
Arm's results underline how quickly the AI build-out is rewriting the economics of legacy semiconductor IP businesses. With hyperscalers standardizing on Arm cores for general-purpose compute around their GPU clusters, and AGI CPU demand now scaling into multi-billion-dollar territory, the data center is increasingly the swing factor in Arm's valuation — and the smartphone slowdown is becoming a manageable, rather than existential, drag.
