Arms International Revenue Hits $1 Billion for Third Consecutive Quarter in Q2 FYE26

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november 5, 2025

Cambridge, UK – Arm Holdings (NASDAQ: ARM) today revealed robust financial outcomes for the second quarter of its fiscal year 2026, which concluded on September 30, 2025. The company’s performance signals continued strength in the semiconductor industry, particularly as Artificial Intelligence implementations expand across diverse sectors. These findings were shared in a letter to shareholders released earlier today.

Record Revenue and Growth in Key Areas

Arm reported a second-quarter revenue of $1.14 billion, representing a considerable 34% increase compared to the same period last year. This marks the third consecutive quarter where revenue has exceeded the $1 billion threshold, and the results surpassed both internal projections and analyst expectations. Non-GAAP earnings per share also exceeded forecasts.

A significant driver of this success was the remarkable 21% year-over-year growth in royalty revenue, reaching $620 million. This surge is attributed to the wider adoption of Arm’s advanced technologies, including the Armv9 architecture and Arm Compute Subsystems (CSS), along with increasing royalty rates linked to more refined chips.

Expanding CSS licensing and the Lumex Platform

During the quarter, Arm secured three new CSS licenses – one each for applications in smartphones, tablets, and data centers – bringing the total number of licenses to 19, distributed amongst 11 distinct companies.Five clients are already actively shipping products based on CSS technology. Notably, Samsung is now integrating CSS into its Exynos chipset family, meaning that the four leading Android smartphone manufacturers are all utilizing CSS-powered devices.

Arm also launched the Lumex CSS platform, its most cutting-edge smartphone solution to date. This platform promises up to a fivefold increase in AI processing speed, enabled by new Arm C1 CPUs with Arm Scalable Matrix Extension 2 (SME2), alongside a 3x improvement in energy efficiency. further bolstering performance is the integration of the new Arm Mali G1-Ultra GPU, delivering up to 2x gains in both AI and graphics capabilities compared to prior generations.Leading applications like Alipay, Gmail, and YouTube are already leveraging Lumex for enhanced on-device inference and personalized experiences.

Cloud AI Momentum and Hyperscaler Adoption

Arm is experiencing accelerating momentum in the Cloud AI landscape. Over 1 billion Arm Neoverse CPU cores have now been deployed for demanding AI and hyperscaler workloads. The company anticipates that Arm-based CPUs will account for nearly 50% of all compute deployed by top hyperscalers this year, solidifying its position as a central component in the future of AI data centers.

Google has already transitioned over 30,000 cloud applications to Arm, including popular services like Gmail and YouTube, with plans to migrate the majority of its 100,000+ applications. Microsoft has expanded its Arm-powered Cobalt 100 service to 29 global regions, and NVIDIA has secured over $500 billion in expected orders through 2026, driven by robust demand for its Arm-based Grace Blackwell superchips. Five new Stargate AI data center sites have been established, all strategically anchored on Arm’s compute platforms.

Strategic Partnership with Meta and AI at the Edge

In October, Arm and Meta announced a strategic partnership aimed at optimizing AI capabilities across a broad range of devices, from wearables to large-scale data centers. This collaboration involves co-designing across the entire compute stack, facilitating a consistent software architecture that enables Meta to seamlessly scale its AI initiatives.

Arm’s influence extends to the edge computing realm, as demonstrated by Google’s Pixel 10, powered by the Arm-based Tensor G5 chip, which delivers up to 2.6x faster and 2x more energy-efficient performance for Google’s Gemini AI model. NVIDIA has begun shipping its Arm-based DGX Spark desktop supercomputer, bringing data center-level capabilities to developers’ workstations. In the automotive sector,a flagship electric vehicle from a leading manufacturer and Tesla’s next-generation AI5 chip – designed for its future vehicles and robots – both utilize arm’s compute platform,achieving up to a 40x performance increase in AI processing.

Developer Ecosystem and Future Innovation

Arm continues to cultivate its expansive developer ecosystem,now exceeding 22 million developers – representing more than 80% of the global total.The company introduced an agentic AI integration with GitHub Copilot, automating and optimizing cloud workload migration to Arm-based infrastructure. Arm KleidiAI is driving advancements in AI software performance, achieving up to 2.5x faster performance on transformer-based models and improving on-device speed and efficiency by over 20% with ExecuTorch. Additionally, Arm’s contribution to the Foundation Chiplet System Architecture (FCSA) standard and the growth of the Arm Total Design membership at the Open Compute Project highlight the company’s commitment to open standards and collaboration.

Here’s a summary of Arm’s Q2 FY26 performance:

Metric	Result	Year-over-Year change
Revenue	$1.14 billion	+34%
royalty Revenue	$620 million	+21%
CSS Licenses	19 (with 11 companies)	+3 new licenses
Developer Ecosystem	Over 22 million	growing

The Rise of Arm in AI: A Long-Term Trend The increasing dominance of Arm in AI is not a sudden phenomenon. Its power efficiency,combined with flexible licensing models,has made it an attractive option for a wide range of applications. As AI models become more complex, the need for specialized hardware that balances performance and power consumption will only intensify, further solidifying Arm’s position. Industry analysts predict that the Arm architecture will continue to gain market share in the coming years,driven by innovations in areas like chiplet design and advanced packaging.

did You Know? According to a recent report by gartner, the global AI chip market is projected to reach $300 billion by 2028, with Arm-based solutions capturing a significant portion of that growth.

Pro Tip: Understanding the differences between Arm’s various processor families (Cortex-A, Cortex-M, Neoverse) is crucial for developers and businesses selecting the right architecture for their specific needs.

frequently Asked Questions about Arm’s Performance

• What is driving Arm’s revenue growth? Arm’s revenue growth is primarily fueled by increased adoption of its technology in AI applications, particularly through royalty revenue and CSS licensing.
• What is Arm CSS and why is it important? Arm Compute Subsystems (CSS) are pre-integrated blocks of IP that simplify the design process for system-on-chip (SoC) manufacturers, enabling faster time-to-market and improved performance.
• How is Arm contributing to Cloud AI? Arm’s Neoverse processors are powering a growing number of cloud workloads, and the company is collaborating with hyperscalers like Google and Microsoft to optimize AI deployments.
• What is the importance of the partnership with Meta? The partnership with Meta demonstrates Arm’s ability to provide a consistent compute platform across a wide range of devices,from wearables to data centers.
• What impact will the Lumex platform have on the smartphone market? The Lumex platform promises significant improvements in AI performance and energy efficiency for smartphones, enabling new features and applications.
• What is Arm kleidiai and how does it benefit developers? Arm KleidiAI optimizes AI software performance across leading frameworks, speeding up growth and improving efficiency.
• How is Arm fostering innovation within the chiplet ecosystem? Arm contributed the foundation Chiplet system Architecture (FCSA) to accelerate chiplet design and integration.

What are your thoughts on Arm’s increasing influence in the AI landscape? Do you think the company is well-positioned to capitalize on the growing demand for AI-powered solutions?

Share your comments below!

What potential geopolitical risks could impact Arms International’s future revenue streams?

Arms International, a leading global defense contractor, has announced its financial results for the second quarter of fiscal year 2026 (Q2 FYE26), reporting international revenue exceeding $1 billion for the third consecutive quarter. This sustained performance underscores the company’s strong position in the global defense market and its ability to capitalize on increasing geopolitical demand. This article delves into the key drivers behind this success, regional performance, and future outlook for Arms International.

Key Financial Highlights – Q2 FYE26

The Q2 FYE26 results demonstrate a continued upward trajectory for Arms International’s international business. Here’s a breakdown of the key figures:

* Total International Revenue: $1.08 billion – a 12% increase year-over-year.

* Backlog growth: International backlog increased by 8% to $15.2 billion, providing strong visibility into future revenue.

* Operating Margin: International operating margin remained robust at 15.5%, reflecting efficient cost management and high-value contracts.

* Key Contract Wins: Secured several important contracts in the Middle East and Indo-pacific regions (detailed below).

* Earnings per Share (EPS): Increased by 10% compared to the same quarter last year, driven by international revenue growth.

These figures highlight the company’s prosperous strategy of focusing on international markets and delivering advanced defense solutions. Investors are closely watching Arms International stock performance and future guidance.

Regional Performance Breakdown

Arms International’s international revenue is geographically diversified, mitigating risk and enabling growth across multiple regions. Here’s a look at performance by key region:

* middle East: Remains the largest contributor to international revenue, accounting for 45% of the total. Increased demand for air defense systems and precision-guided munitions drove growth. Recent geopolitical tensions have fueled demand for advanced defense technologies.

* Indo-Pacific: Fastest-growing region, with revenue up 25% year-over-year. Strong demand from countries seeking to modernize their naval and air forces. Focus on maritime security solutions is a key driver.

* Europe: Revenue increased by 10%, driven by increased defense spending among NATO members. Demand for armored vehicles and electronic warfare systems is especially strong. The ongoing conflict in Eastern Europe continues to influence defense budgets.

* Latin America: Steady growth, with revenue up 5%. focus on border security and counter-terrorism solutions.

This regional diversification is a core strength of Arms International, allowing it to navigate fluctuating geopolitical landscapes and maintain consistent revenue streams. Defense industry analysis consistently points to these regions as key growth areas.

Driving Factors Behind the success

Several factors have contributed to Arms International’s sustained success in the international market:

* Technological Innovation: Continuous investment in research and growth, resulting in cutting-edge defense technologies. focus on areas like artificial intelligence, autonomous systems, and cyber security.

* Strategic Partnerships: Collaboration with local partners in key regions,enhancing market access and building strong relationships. Joint ventures and technology transfer agreements are crucial.

* Strong Government Relations: Effective engagement with governments and defense ministries worldwide, securing key contracts and influencing policy.Lobbying efforts and participation in international defense exhibitions are crucial.

* Focus on High-Value Contracts: Prioritizing contracts with higher margins and long-term revenue potential. Emphasis on system integration and lifecycle support services.

* Geopolitical Landscape: Increased global instability and rising geopolitical tensions have driven demand for defense solutions. The need for enhanced security and deterrence is a major factor.

Recent Contract Wins & Key Programs

Arms International has secured several significant contracts in Q2 FYE26, bolstering its backlog and future revenue prospects:

* $450 Million Air Defense System Contract (Middle East): Supplying advanced air defense systems to a key regional ally. This contract includes training and maintenance services.

* $300 Million Naval Modernization Program (Indo-Pacific): Providing advanced radar systems and combat management systems for a regional navy.