In its third quarter of fiscal 2026, Arm reported a record $1.242 billion in total revenue, representing a 25.7% year-over-year increase. This performance was powered by surging demand for its energy-efficient chip designs in artificial intelligence applications, particularly in cloud data centers and edge computing devices. The company beat consensus estimates by 1.54%, underscoring the strength of its royalty and licensing model despite challenges in other parts of the semiconductor supply chain.

Arm’s licensing revenue rose 25% from a year earlier to $505 million, narrowly missing analyst expectations by 2.9%. Investors reacted to the slight shortfall with an 8% drop in after-hours trading, highlighting sensitivity to even modest deviations in the handset royalty business. CEO Rene Haas acknowledged the importance of maintaining handset royalty growth while accelerating diversification into AI-centric markets.

According to Arm CEO Rene Haas, the company’s data center business is “exploding,” with design wins in server and AI accelerator markets growing at a double-digit rate. Haas indicated that data center applications could soon contribute more to Arm’s top line than the traditional smartphone handset segment, as cloud service providers ramp up deployments of Arm-based processors to manage large-scale AI workloads more efficiently.

Looking ahead to the fourth quarter, Arm forecast revenue above consensus estimates, driven by continued AI chip demand across enterprise and cloud infrastructure. However, management cautioned that global memory shortages—particularly affecting smartphone production in China—could temper handset royalty growth in early fiscal 2027. The company plans to offset this risk by further expanding its IP licensing into new high-performance computing and automotive markets.