Arm Holdings plc
Arm Holdings plc researches, develops, licenses, and markets central processing unit (CPU) intellectual property (IP), graphics processing unit IP, systems IP, compute subsystems (CSS), and associated software, tools and related services. The company provides a product portfolio, including CPU IP, GPU and neural processing unit (NPU) accelerators, system IP such as interconnects, compute platform products including pre-integrated CSSs, and development tools and software. The company serves semiconductor companies, original equipment manufacturers (OEMs), cloud service providers (CSPs), and organizations developing chips for end markets such as smartphones, consumer electronics, industrial IoT, embedded systems, cloud data centers, networking, automotive, and robotics. It provides its products and services in the United States, China, Japan, Taiwan, Korea, and internationally. The company was founded in 1990 and is based in Cambridge, United Kingdom. Arm Holdings plc operates as a subsidiary of SoftBank Group Corp.
What does it do?
Arm designs the 'blueprints' for the tiny chips inside almost every smartphone on the planet — but here's the twist: Arm doesn't actually make any chips itself. Instead, it licenses its designs to companies like Apple, Qualcomm, and Samsung, who then build the physical chips. Think of it like Arm owning the recipe for the world's most popular dish, and charging every restaurant that wants to cook it. If you've used an iPhone, an Android phone, or even a modern MacBook, you've used a device powered by an Arm-designed chip.
Arm sits at the foundation of the AI boom — Nvidia's new chips, Apple's iPhones, and the data centre processors being built to run AI all rely on Arm's architecture. As the world rushes to build more powerful computing hardware, almost every new chip design flows through Arm's blueprint library. With AI driving a wave of new chip development, Arm is in a rare position: it benefits from the entire industry growing, not just one company winning.
How does it make money?
Arm makes money in two main ways: licensing fees and royalties. Licensing fees are upfront payments from chip companies who want access to Arm's designs — like paying for the recipe book. Royalties are the ongoing cut Arm takes every time a chip based on its design is sold — so every iPhone sold puts a small amount of money in Arm's pocket. Revenue grew from $4.0B to $4.9B last year, a 22.5% increase, showing that demand for its designs is accelerating as more devices and data centres need chips.
Why do investors care?
The AI megatrend is the core of Arm's investment story — every AI device, from smartphones to data centre servers, needs chips, and most of those chips are built on Arm's designs. Arm is also pushing into higher-value 'Compute Subsystems' (pre-packaged, ready-to-use chip blueprints) which command higher royalty rates, meaning more revenue per chip sold. For the thesis to play out, Arm needs AI-related chip demand to keep growing and its newer, premium designs to become the industry standard. The risk is that at a $407B valuation on just $0.9B in profit, investors are paying a very high price for future growth that still has to happen.
Deep Dive
MemberA full investor briefing on Arm Holdings plc — history, leadership, risks, and outlook.