Licensing revenue grew 29% YoY to $819 million, reflecting strong momentum in next-generation AI and cloud platform designs, while royalty revenue increased 11% YoY to $671 million, supported by a higher Armv9 mix and broader deployment of Arm-based processors across smartphones, cloud and AI data centers. Data center royalty revenue more than doubled YoY during the quarter, highlighting accelerating hyperscaler deployment of Arm-based CPUs for AI workloads. 

Smartphones Remain Resilient Despite Broader Weakness 

Arm highlighted that the broader smartphone market remained soft, particularly across mainstream and lower-tier devices. However, the premium smartphone segment continued to show resilience, driven by rising AI workloads, increasing compute complexity and growing adoption of Armv9 and CSS platforms. Arm continues to benefit from a richer royalty mix, with higher royalty rates for Armv9-based designs, as smartphone OEMs increasingly shift toward advanced AI-capable SoCs with larger NPUs, heterogeneous compute architectures and more sophisticated on-device AI capabilities. 

Global Smartphone SoC Shipments Share by Arm Architecture

According to Counterpoint Research’s Global Smartphone SoC Shipment Forecast, Armv9-based smartphone SoC shipments are expected to grow in double digits YoY in 2026, driven primarily by premium-tier devices and increasing AI integration, which will support Arm’s smartphone royalty revenue growth. 

Data Centers Become Arm’s Next Major Growth Engine 

Data centers and AI infrastructure emerged as Arm’s fastest-growing business segments during the quarter, driven by increasing hyperscaler adoption of Arm-based CPUs across cloud infrastructure, AI inference, networking and next-generation AI clusters. Arm’s ecosystem expansion continues to strengthen through deployments such as AWS Graviton, Google Axion, Microsoft Cobalt and NVIDIA Vera, reflecting growing momentum for Arm-based architectures in large-scale AI and cloud computing environments. 

These deployments reinforce Arm’s growing role in cloud computing and AI infrastructure as hyperscalers increasingly prioritize power-efficient compute architectures. Arm also highlighted that the rise of agentic AI workloads is expected to significantly increase CPU requirements inside AI data centers. As AI clusters become larger and more complex, CPUs are becoming increasingly important for workload orchestration, networking, scheduling, memory management, and coordination of accelerators. This shift is creating a substantial long-term opportunity for Arm-based CPUs, particularly as hyperscalers look to optimize both performance-per-watt and total cost of ownership. 

Arm’s data center royalty revenue has already seen strong growth, doubling YoY, with the segment expected to become an increasingly important contributor to overall revenue over time. According to the latest Data Center AI Server Compute ASICs Shipment Forecast and Tracker, we expect Arm-based CPUs to capture nearly 90% share of the AI ASIC server CPU market by 2029, reflecting growing industry confidence in Arm architectures for AI infrastructure deployments. 

Arm’s broader strategy, including initiatives such as next-generation CPU platforms and AI-optimized designs like AGI-class compute, targets these emerging performance and efficiency bottlenecks in AI data centers. Ecosystem validation is also strengthening, with companies like Meta already deploying Arm-based CPUs in data centers for AI ranking and recommendation workloads. 

AGI CPU Expands Arm’s AI Infrastructure Opportunity 

One of the biggest highlights from the quarter was Arm’s growing AGI CPU opportunity. The company stated that customer demand for its AGI CPU platform has already exceeded $2 billion over next two years, with revenue recognition expected to begin in Q1 2027. 

The AGI CPU platform is designed specifically for cloud and AI data centers, targeting agentic AI workloads that require significantly higher CPU orchestration capabilities alongside accelerators. 

Arm is increasingly positioning itself beyond being just an IP provider, evolving into a broader AI compute platform company spanning CPU architectures, CSS, AI infrastructure silicon, cloud AI platforms, and networking and DPU solutions. This expansion reflects its growing ambitions to play a larger role across the end-to-end AI and cloud computing ecosystem. 

Beyond Smartphones: Diversification Accelerates 

Beyond smartphones and cloud infrastructure, Arm is also witnessing increasing traction across automotive, edge AI, networking, industrial applications, DPUs, SmartNICs and physical AI. This broader diversification is helping Arm gradually reduce its long-term dependence on the cyclical smartphone market while expanding its exposure to structurally growing AI, edge computing, and cloud infrastructure opportunities. 

Outlook 

For Q2 2026, Arm guided revenue to grow by 20% YoY to around $1.3 billion, driven by increasing Armv9 adoption, expanding Compute Sub-Systems (CSS) deployments, rising hyperscaler investments in AI infrastructure and growing contribution from cloud and data center platforms. 

Arm continues to invest across key strategic growth areas, including Armv9 ecosystem expansion, AI compute platforms, next-generation CPUs, cloud infrastructure and AGI CPU deployments, highlighting the company’s increasing focus on strengthening its position across AI, cloud and high-performance computing markets.