Analyst(s): Olivier Blanchard, Daniel Newman
Publication Date: May 13, 2025
Arm’s Q4 FY 2025 earnings report highlights continued momentum in AI infrastructure, fueled by growing adoption of Armv9 and CSS platforms. Strong demand across smartphones, cloud, and automotive reinforced record royalty and licensing results.
What is Covered in this Article:
- Arm’s Q4 FY 2025 financial results
- Growth in royalty revenue driven by Armv9 and CSS adoption
- Surge in licensing revenue supported by sovereign and custom silicon demand
- Momentum in hyperscaler deployments across AWS, Google, Microsoft, and NVIDIA
- Q1 FY 2026 guidance and management commentary on AI and macro outlook
The News: Arm Holdings (NASDAQ: ARM) reported a 34% year-on-year (YoY) increase in revenue to $1.24 billion (+0.8% above consensus) in Q4 FY 2025, crossing the $1 billion quarterly mark for the first time. The quarter delivered record royalty revenue of $607 million (+18% YoY) and record license and other revenue of $634 million (+53% YoY). Non-GAAP operating profit rose 68% YoY to $655 million (+6.2% above consensus), with non-GAAP operating margin expanding to 52.8% from 42.1% a year ago. Non-GAAP net income increased 55% YoY to $584 million (+4.4% above consensus), and non-GAAP diluted earnings per share stood at $0.55 (+4.8% above consensus), up from $0.36 in the same period last year. Arm’s Annualised Contract Value (ACV) rose 15% YoY to $1.37 billion, while Remaining Performance Obligations (RPO) fell 10% YoY to $2.23 billion.
“Arm achieved record-breaking results in Q4, delivering record revenue and crossing the $1 billion revenue milestone for the first time in our history,” said Rene Haas, CEO of Arm Holdings. “We achieved record licensing revenue and, in a clear signal that we are increasing royalty per chip, delivered record royalty revenue exceeding $600 million.”
Arm Q4 FY 2025 Delivers Record Revenue as Armv9 and CSS Ramp Up
Analyst Take: Arm ended FY 2025 with a milestone quarter, surpassing $1 billion in revenue in Q4 for the first time, powered by record royalty and licensing performance. Adoption of Armv9 and CSS platforms remains the foundation of this momentum, with accelerating deployment across smartphones, cloud infrastructure, and automotive systems. Custom silicon design wins, sovereign AI initiatives, and rising Compute Subsystems (CSS) shipments reflect Arm’s expanding architectural footprint beyond mobile. However, guidance for Q1 FY 2026 reflects caution, with management citing tariff and macro uncertainty, licensing lumpiness, and visibility challenges in royalty streams.
Armv9 and CSS Drive Royalty Expansion
Royalty revenue hit a new high in Q4 FY 2025, growing 18% YoY to $607 million, driven by expanded deployment of Armv9 CPUs and growing shipments of CSS. Smartphone royalties surged ~30% YoY, significantly outpacing <2% unit growth across the broader handset market, indicating higher value capture per device. Armv9-based cores now account for more than 30% of royalty revenue, up from ~25% in prior quarters, as CSS contracts continue to scale. Every CSS design integrates v9 architecture, contributing higher royalty rates compared to traditional implementations. Mobile and cloud were key verticals benefiting from CSS volumes, with additional upside expected as automotive deployments begin ramping. For reference, CSS lowers both design complexity and development costs for Arm partners by providing verified compute architectures that can be customized for specific use cases and needs.
Arm also signed its first automotive CSS agreement this quarter with a global EV maker, highlighting the addressable market expansion in high-performance automotive compute. Management also noted that royalty rates are expected to increase further with the rollout of second-generation CSS, which offers improved performance and optimisations over first-generation deployments. As CSS adoption deepens across segments and second-generation versions come to market, royalty uplift from Armv9 is set to accelerate further.
Licensing Strength Boosted by Sovereign and Custom Silicon Demand
Q4 FY 2025 license and other revenue reached a record $634 million, up 53% YoY, supported by a mix of new agreements and recognition from previously signed high-value deals. A standout highlight was the multi-year agreement with the Malaysian government to accelerate the development of an Arm-based AI ecosystem. The deal will enable startups in Malaysia to access CSS under Arm’s Flexible Access model and reflects growing interest in sovereign AI compute frameworks. Malaysia is one of the world’s Top 40 economies (nominal GDP) and could act as a proof point for this type of government partnership. Notably, France, Taiwan, India, Indonesia, and Nigeria are pursuing sovereign AI strategies that could serve as on-ramps for partnerships similar to the one Arm developed with Malaysia.
Arm also signed its thirteenth CSS customer this quarter, including its first in automotive. While licensing revenue remains inherently lumpy, 15% YoY growth in ACV points to a strong underlying trend in deal momentum. Licensing from AI-driven custom silicon development is expected to remain a key growth lever in the near to medium term.
Hyperscaler Momentum Reinforces Arm’s AI Compute Position
Arm’s growing presence across hyperscaler AI infrastructure was a dominant theme in the quarter, reinforced by strong partner commentary and deployment milestones: On one hand, NVIDIA’s Armv9-based Grace Blackwell superchip entered full production. On the other hand, Google’s Axion is now active in 10 regions and used by nearly half of its top 100 customers, including Spotify. (For reference, Axion reportedly delivers up to 65% better price-performance over x86-based alternatives.)
Adding to this scale, Microsoft expanded its use of Arm-based Cobalt 100 chips to run workloads from Databricks, Siemens, and Snowflake, in addition to its own services like Teams and Copilot, and AWS also continues to ramp Arm-based Graviton CPUs, which now power more than 50% of new compute capacity.
Arm expects that nearly 50% of new hyperscaler server chips in 2025 will be Arm-based, cementing its relevance in general-purpose and AI-optimised compute. This widespread adoption highlights a clear architectural shift across the cloud ecosystem, securing Arm as a foundational platform for scalable, energy-efficient AI compute.
Guidance and Final Thoughts
Management guided Q1 FY 2026 revenue between $1 billion and $1.1 billion, implying 12% YoY growth at the midpoint. Royalty revenue is expected to grow by 25% to 30% YoY in Q1 FY 2026. Operating expenses are projected to rise sequentially as Q4-deferred R&D spending shifts into the current quarter, with non-GAAP opex estimated at $625 million. Arm chose not to issue full-year guidance, citing low visibility into customer forecasts and indirect risks from tariffs or supply chain disruptions.
Despite the cautious near-term outlook, management reiterated strong underlying momentum. CEO Rene Haas highlighted broad-based business strength and pointed to further upside from AI adoption, especially as hyperscaler and enterprise workloads increasingly shift to Arm-based architectures. These dynamics reinforce Arm’s long-term monetisation potential, with v9 accounting for nearly one-third of royalties and CSS contracts poised to contribute more meaningfully going forward.
See the full press release on Arm’s Q4 FY 2025 financial results on the Arm website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
Other insights from Futurum:
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Author Information
Research Director Olivier Blanchard covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
