Q2 performance and full-year guidance exceed expectations, Arm (ARM.US) received target price upgrades from several major banks.

Leader in the chip design field Arm (ARM.US) announced better-than-expected second quarter performance and full-year guidance, prompting positive ratings from Wall Street's major banks. The financial report shows that in the second quarter of the 2026 fiscal year ending in September, Arm's total revenue increased significantly by 34% to $1.14 billion, exceeding market expectations of $1.06 billion. Operating profit soared by 155% year-on-year to $163 million, with an operating profit margin of 14.4% (much higher than the 7.6% of the same period last year). Net profit increased by 122% year-on-year to $238 million. Adjusted earnings per share were $0.39, surpassing market expectations of $0.33. Benefiting from the rapid expansion of global AI data centers that support massive AI training/inference workloads, an unprecedented wave of "ARM architecture" is sweeping through data centers worldwide - with NVIDIA Corporation's CPU combined with cloud computing giants such as Amazon.com, Inc., Microsoft Corporation, and Alphabet Inc. Class C accelerating the deployment of ARM architecture server CPUs. This has driven Arm's performance to expand significantly, and the company's management has provided strong performance outlook as a result. Arm expects third-quarter revenue to be in the range of $1.175 billion to $1.275 billion, with the midpoint of $1.225 billion higher than the market's expected $1.1 billion; adjusted earnings per share for the third quarter are expected to be $0.41, surpassing market expectations of $0.35. Following the release of this encouraging financial report by Arm, several major Wall Street banks have raised their target prices for Arm. Mizuho Securities maintained an "outperform" rating for Arm and raised the target price from $180 to $190. The analyst team led by Vijay Rakesh stated, "Arm delivered a strong financial report and raised its third-quarter performance guidance to $1.23 billion/$0.41 per share (market expectations were $1.1 billion/$0.35 per share), driven by the increase in V9 architecture penetration rate, continuous strength in computing subsystems and data center business." Meanwhile, JPMorgan Chase maintained an "overweight" rating for Arm with a target price of $180. Wells Fargo & Company maintained an "overweight" rating for Arm with a target price of $195. Deutsche Bank maintained a "hold" rating for Arm with a target price of $150. Jefferies Financial Group Inc. raised its target price for Arm from $173 to $205. Additionally, Needham maintained a "hold" rating for Arm. The analyst team led by Charles Shi stated, "Arm delivered an earnings report that exceeded expectations and had a positive outlook - not only did the second quarter performance exceed expectations, but the third quarter guidance also exceeded market consensus, mainly due to the early recognition of smartphone royalties, accelerated growth in data center royalties, and some authorization agreements being brought forward from the fourth quarter. We have adjusted our expectations for the fourth quarter accordingly." Analysts pointed out that the outlook for the new fiscal year was only slightly adjusted compared to Needham's previous models, maintaining overall consistency. The analysts and their team added, "Arm's management remains cautious in its description of the ASIC strategy, but is confident in the opportunities presented by SoftBank's OpenAI/Stargate collaboration, while revenue from SoftBank has significantly increased this quarter."