Arm Holdings Stock Gains Into Earnings – What To Expect

ARM Holdings stock is 3.18% higher today, on what has been an otherwise difficult day for tech names. With the broader Nasdaq more than 1% lower, and AVGO (-4%) and AMD (-16.68%) nursing heavy declines, expectations are high for Arm leading in to earnings.

Wall Street will be watching closely to see if the chip design giant can sustain its exceptional licensing momentum above $500 million while converting AI partnerships into near-term revenue growth. The quarter provides the first test of whether the company’s 56% licensing revenue surge in Q2 represents durable AI infrastructure demand or a one-time spike tied to hyperscaler timing.

The market’s positioning reflects a fundamental tension. ARM has beaten adjusted EPS expectations in all eight quarters since its September 2023 IPO, yet the stock sold off in three of the last four releases as guidance, not results, reset expectations.

The May 2025 quarter delivered a clean beat on $1.24B revenue and $0.55 EPS but dropped 11% after-hours when management declined to issue full-year guidance and guided the next quarter below Street models.

Consensus sits at $1.24B revenue and $0.41 adjusted EPS, both at or slightly above management’s prior $1.225B revenue midpoint (±$50M) and $0.41 EPS midpoint (±$0.04), creating a setup where merely meeting guidance likely disappoints given the stock’s 37% decline over three months has already priced in execution risk.

Consensus Estimates

Consensus has converged on ARM’s prior guidance midpoint rather than moving ahead of it, a dynamic that raises the bar for a positive reaction. The $1.24B revenue estimate sits just $15M above management’s $1.225B midpoint, well within the ±$50M guidance range, while the $0.41 EPS estimate matches the midpoint exactly. This positioning reflects the market’s persistent caution following three quarters where guidance, not execution, drove post-earnings selloffs.

The licensing revenue estimate of roughly $500M represents the quarter’s highest-confidence call. Last quarter’s 56% surge to $515M was driven by hyperscaler demand for custom ARM-based chips, particularly Amazon’s Graviton5 and Google’s Axiom processors. Sustaining licensing above $500M would validate that AI infrastructure buildout is translating into durable design wins rather than lumpy timing effects.

Management Guidance & Commentary

“We are the compute platform for the AI era. Record royalties reflecting new high in demand for Arm compute platform.”

CEO Rene Haas framed the November quarter results around ARM’s positioning as the foundational architecture for AI workloads, emphasizing that both licensing and royalty strength reflected structural demand rather than cyclical tailwinds. The company guided fiscal Q3 revenue to $1.225B at the midpoint, a figure that came in well above the $1.11B FactSet estimate circulating at the time of the release.

The tension between execution and forward outlook has defined ARM’s earnings narrative over the past year. In May, the company beat on $1.24B revenue and $0.55 EPS but declined to issue full-year guidance, citing uncertainty around licensing timing and broader market conditions. That conservatism triggered an 11% after-hours decline despite the headline beat.

Management’s willingness to invest beyond IP licensing into chiplets and solutions has created tension with investors focused on near-term operating leverage.

Into the February 4 report, the setup requires ARM to guide the March quarter materially above where consensus sits at the time of the release. The company’s historical pattern shows that when guidance comes in at or below Street expectations, the stock sells off regardless of the reported quarter’s performance.

Analyst Price Targets & Ratings

Wall Street remains predominantly bullish, with 81% of analysts rating shares a Buy or Strong Buy. The consensus target of $145.00 implies 36% upside from current levels, though targets range widely based on assumptions about HBM growth sustainability and AI partnership monetization timelines.

Sector & Peer Comparison

ARM trades at a 48.5x forward P/E, roughly 80% above the semiconductor industry average and materially higher than direct IP licensing peer Synopsys at 42.3x. The premium reflects ARM’s positioning as the foundational architecture for AI infrastructure, with strategic partnerships extending through 2040 with Apple and multi-year commitments from Amazon and Google.

Earnings Track Record

ARM has beaten or met adjusted EPS expectations in all eight quarters since its September 2023 IPO, delivering an average surprise of 11.1%. The execution consistency is unambiguous. However, the stock’s post-earnings performance tells a different story: shares sold off in three of the last four releases despite the beats, illustrating that guidance credibility matters more than reported results.

Post-Earnings Price Movement History

ARM’s post-earnings price behavior demonstrates that guidance stance overwhelms reported results. The November 2025 quarter broke the pattern when ARM’s 18.2% EPS beat was accompanied by a fiscal Q3 revenue guide well above consensus, helping stabilize the post-earnings reaction with a 3% gain.

Expected Move & Implied Volatility

Options traders are pricing a 9.7% move in either direction following ARM’s February 4 earnings release. The implied volatility of 62.3% sits at the 78th percentile of its one-year range, indicating elevated uncertainty compared to most of the past year, reflecting both the stock’s 37% three-month decline and ARM’s pattern of guidance-driven post-earnings moves.

Expert Predictions & What to Watch

The sustainability of licensing revenue above $500 million will validate whether hyperscaler demand for ARM-based custom chips represents durable infrastructure buildout or one-time timing effects.

Key Outlook: Guidance Will Drive the Trade

Key Metrics to Watch

The licensing revenue metric is the quarter’s highest-confidence watch item. Last quarter’s 56% surge to $515M was driven by hyperscaler demand for custom ARM-based chips, with Amazon’s Graviton5 delivering 30% performance improvement while reducing computing costs by 30% compared to other processor options. Sustaining licensing above $500M would validate that this demand is structural rather than cyclical.

The March quarter revenue guidance carries equal weight. ARM’s historical pattern shows that when guidance comes in at or below Street expectations, the stock sells off regardless of the reported quarter’s performance. The ability to guide March materially above consensus at the time of the release will determine whether the stock can sustain a recovery or whether the valuation premium requires another reset lower.