Arm Doubles Data Centre Royalties, Cuts Full-Year Outlook

Arm's Data Centre Royalties Doubled and the Stock Fell 8%

Revenue hit a first-quarter record of $1.29 billion, free cash flow rose 343%, and infrastructure royalties more than doubled year over year. Then Arm cut its full-year royalty growth outlook to the high teens, and the market priced that instead.

Jul 30, 2026Source: Arm Newsroom

Arm reported first-quarter results for fiscal year 2027 on 29 July, and beat on both lines. Revenue was a Q1 record $1.29 billion, up 22%, against consensus near $1.26 billion. Non-GAAP earnings per share were $0.45 versus $0.40 expected. Free cash flow reached $665 million, up 343%. The stock fell about 8%.

What went right

Royalty revenue was $715 million, up 22%; licensing $574 million, up 23%. Arm said data centre royalties more than doubled year over year. Cumulative Neoverse deployments passed 1.5 billion cores — and the most recent 500 million took nine months against six years for the first billion.

What went wrong

Arm cut full-year royalty growth guidance to the high teens from around 20%, citing smartphone weakness and memory price inflation. Second-quarter guidance was above consensus at $1.38 billion and $0.47, but a guidance cut on the largest revenue line outweighed a beat on the quarter just reported.

Two things worth getting right

Arm's in-house server chip is the Arm AGI CPU, where AGI stands for Arm General Infrastructure — not artificial general intelligence. Launched in March 2026 with Meta as lead partner, it runs 136 cores on TSMC 3nm and is built on Neoverse V3, complementing rather than replacing that brand. It is Arm's first in-house silicon in 35 years.

The $2 billion is not new

The widely reported $2 billion of AGI CPU demand was first disclosed on 6 May, covering fiscal 2027 and 2028. Arm reiterated it; it did not double. What is genuinely new from this call: Oracle and ByteDance named as adopters, and first-generation gross margins guided from the high 30s toward 50%.

Why It Matters

Arm is winning the architectural argument in the data centre and still getting marked down, because the phone business that funds it is being squeezed by the same memory shortage enriching Samsung and SK Hynix. The AI story and the royalty base are moving in opposite directions.