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In today’s fast-paced tech market, investors know that even well-established stocks can be outpaced by emerging innovation. Blue-chip names like Apple (AAPL) and Nvidia (NVDA) have long set the benchmark for performance and growth, but the dynamic semiconductor industry never stands still. As the race for more efficient and powerful processors intensifies, a British chip architecture designer is now capturing significant attention.
Arm (ARM) is making waves by forecasting a dramatic surge in its data center CPU market share, from a modest 15% in 2024 to an ambitious 50% by the end of 2025. According to Mohamed Awad, Arm’s infrastructure chief, the company’s technology not only delivers lower power consumption compared to competitors like Intel (INTC) and Advanced Micro Devices (AMD), but is also increasingly favored in software-first development.
For investors weighing the potential of ARM stock, this transformative momentum could signal a pivotal moment in the semiconductor landscape.
About Arm Stock
Arm Holdings is semiconductor company that dominates the global chip design market with its industry-leading CPU architectures. Unlike traditional chipmakers, Arm licenses its designs to major technology firms and earns revenue primarily through royalties. Arm’s technology runs in nearly every type of device, from smartphones to data centers, and its chip designs power over 99% of all smartphones worldwide. With such a strong presence, Arm arguably plays a bigger role in modern computing than traditional chipmakers like Intel and AMD, making it one of the most important companies in the semiconductor industry.
Valued at $102 billion, shares of Arm holdings are down 28% over the past 52 weeks.
However, the recent pullback has improved its valuation, with its forward price-earnings (P/E) ratio dropping to 60x from its 1-year average of 84x. Although this ratio remains higher than those of its peers, the correction offers a better margin of safety for investors considering Arm’s growth trajectory and expanding customer base.
Arm Delieverd Strong Q3 Results
Arm Holdings delivered a double beat in its fiscal third quarter results, driven by robust growth in its royalty and licensing operations. Revenue climbed to $983 million, a 19% increase year-over-year, supported by record royalty income of $580 million, up 23%. This performance was driven by the growing adoption of Armv9-based designs and increased use of Compute Subsystem (CSS) chips, while the licensing segment saw a 14% annual increase to reach $403 million.
Arm’s Notleby segment, which targets AI infrastructure, is experiencing rapid growth. The company plays a key role in the $500 billion Stargate Project alongside Nvidia (NVDA), Microsoft (MSFT), and OpenAI, while its technology powers Nvidia’s new DIGITS superchip and Samsung’s Galaxy S25 AI smartphone, further underlining its influence in the AI space.
Despite these strong figures, potential risks remain. Royalty revenue from Armv9 has held steady at 25% for the last three quarters. Moreover, the company faces challenges from its reliance on smartphone royalties in a market where sales have yet to return to 2017 levels, with refurbished phones now comprising over one-fifth of the market.
Profitability remained intact, with non-GAAP net income rising 12% year-over-year to $150 million and adjusted EPS improving by 15% to $0.39.
Qualcomm Dispute Could Hurt Arm Holdings
Arm and Qualcomm (QCOM) have been embroiled in a legal battle over licensing rights tied to Qualcomm'’ use of Arm’s chip designs. The dispute escalated after Arm accused Qualcomm of improperly using its intellectual property following the acquisition of Nuvia. A U.S. jury later sided with Qualcomm on two key claims. The court loss could cost Arm around $50 million annually in missed revenue, adding pressure to its already concentrated customer base. With Qualcomm filing antitrust complaints against Arm in multiple regions, the chip designer now faces serious regulatory and financial headwinds, which could weaken its growth outlook and investor confidence.
What Do Analysts Think About Arm Stock?
Wall Street analysts are optimistic about Arm’s stock prospects. The group of 29 analysts covering the stock has assigned a “Moderate Buy” rating, with 18 recommending a “Strong Buy,” one suggesting a “Moderate Buy,” and nine advising a “Hold,” while one gives a “strong Sell.”
The average 12-month price target of $163 implies massive 85% upside potential from the current price.
