Arm CEO Rene Haas told Bloomberg Tech that the company’s data center business is “exploding,” driven by rapid uptake of its energy-efficient CPU designs in large-scale AI deployments. He noted that data center revenue more than doubled year-over-year in the third quarter of fiscal 2026, growing faster than handset royalties for the first time. Haas said new wins at hyperscale operators and cloud service providers in North America, Europe and Asia accounted for over one-third of total licensing agreements in the period.

In the quarter ended December 31, Arm reported record revenue of $1.242 billion, up 27% year-over-year, powered by robust demand from AI and edge computing customers. Licensing revenue reached $505 million, a 25% increase over the same quarter last year, though it fell 2.9% short of FactSet consensus. Royalty income grew 22% to $737 million, reflecting higher unit shipments of Arm-based processors in smartphones and data center accelerators. Net profit declined 8% to $320 million due to one-time integration costs associated with expanding server-focused design teams.

Arm forecast fourth-quarter revenue of $1.35 billion to $1.40 billion, representing 30% to 34% year-over-year growth, with management citing continued AI chip deployments and a ramp in new Cortex-X series server cores. The company expects data center licensing to contribute at least 40% of total new license bookings next quarter. CFO Jason Child highlighted operating margin expansion to 58%–60%, up from 56% this quarter, as fixed R&D investments scale across a larger revenue base.

While smartphone royalty growth may slow next year due to industry-wide memory constraints, Arm is diversifying revenue streams by penetrating automotive, IoT and network infrastructure markets. During the earnings call, management disclosed over 50 design wins for Arm-based AI accelerators in edge-networking applications and secured preliminary agreements with three leading automakers for next-generation in-car infotainment systems. These new verticals are expected to contribute 15% of total royalties by fiscal 2027.