Arm Holdings (ARM) has surged 142% year to date, but the chip design giant has pulled back more than a third from its June peak. With quarterly results due on July 29, investors are watching closely to see whether the stock can resume its rally.
The gains this year have been anchored by a sustained expansion in AI infrastructure spending. Among the major cloud providers that have reported so far, Alphabet raised its capital expenditure forecast for the year to a range of $195 billion to $205 billion, up from $180 billion to $190 billion, reflecting accelerating growth in its cloud division. Other hyperscalers are expected to follow suit. Arm stands to benefit directly, as its designs are already embedded in data-center chips such as Google Axion, Microsoft Cobalt and Amazon Graviton.
Arm generates revenue mainly through licensing and royalties. Royalty income is relatively predictable, leaving licensing as the primary source of variability. The shift in AI workloads from training to inference is driving a sharp rise in CPU demand, creating a favorable environment for new license sales.
An even bigger catalyst is Arm’s first move into designing its own chips. The company’s Arm AGI CPU is expected to begin contributing revenue in the fiscal fourth quarter ending March 2027. Arm has already disclosed that initial production capacity sold out, securing more than $2 billion in commitments within weeks of the launch — double its original forecast. By fiscal 2030, the AGI CPU is projected to generate $15 billion in revenue, pushing total revenue to $25 billion, a dramatic leap from the $4.92 billion recorded in fiscal 2026. Any update on the chip’s progress could move the stock significantly.
Despite the pullback from its peak, Arm still trades at a lofty price-to-sales ratio of 56. The valuation reflects high expectations for the company’s high-margin licensing model and the AGI CPU opportunity. Such elevated multiples could weigh on the stock, especially after this year’s rally has already priced in much of the optimism around AI sentiment and the in-house chip roadmap.
Arm has a track record of sharp post-earnings swings, with shares occasionally falling in after-hours trading on guidance or cautious management commentary, only to rebound during the regular session. With tailwinds from AI spending and the company’s competitive edge in power-efficient CPU technology, this earnings report still has the potential to spark an upward move. Even if a near-term pop fails to materialize, the long-term narrative remains compelling as Arm expands into silicon with its own AGI CPU.
