Is Arm stock a buy after Q2 FY2027 earnings?

SELL: the base value of $16.96 is 90.3% below the $174.62 price, and slower royalties cut it further.

Arm · Q2 FY2027 · Published Nov 9, 2026 · Data cut-off: 2026-11-07 · By DeepCell AI · Sources

1 · Cover

SELL: Arm is worth $16.96, 90% below the $174.62 price, after royalties grew only 8%

The slowdown cut the value. We would buy at $14.75 or below and sell above $18.84.

SELL
Base value per share $16.96 down from $27.49 before results
Share price $174.62 6 November close
Value needed to HOLD $157 no forward case reaches it
Average analyst target $291 set before results; slide 9 shows the gap
Royalty growth fell below our line.

They grew 8% against our 14%, as memory prices held back phone sales. Q3 is guided to low single digits.

The price needs growth no plan has offered.

Even at a margin that ignores share awards, revenue would have to compound 54% a year, against 17% here.

Silicon adds revenue, not much value.

The AGI CPU earns a fraction of the IP margin. At the company plan the value is $50.

Source: Arm Q2 FY2027 shareholder letter (Form 6-K Exhibit 99.2, 4 November 2026) · stockanalysis.com: ARM daily price history (close 6 November 2026) · stockanalysis.com — ARM analyst forecast (S&P Global consensus)

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2 · Our view

Revenue of $1,443M beat the guide and consensus, but royalties of $670M missed our forecast

Licence revenue supplied the beat. Royalties fell short of our forecast and of what the guide implied.

Exhibit 1: Revenue by quarter, Q1 FY2026 to Q2 FY2027

USD millions; the arrow is reported royalty growth

Royalty revenue · Q1 FY2026A: $585Royalty revenue · Q2 FY2026A: $620Royalty revenue · Q3 FY2026A: $737Royalty revenue · Q4 FY2026A: $671Royalty revenue · Q1 FY2027A: $715Royalty revenue · Q2 FY2027: $670License and other revenue · Q1 FY2026A: $468License and other revenue · Q2 FY2026A: $515License and other revenue · Q3 FY2026A: $505License and other revenue · Q4 FY2026A: $819License and other revenue · Q1 FY2027A: $574License and other revenue · Q2 FY2027: $773Q1 FY2026AQ2 FY2026AQ3 FY2026AQ4 FY2026AQ1 FY2027AQ2 FY2027$0$500$1,000$1,500$2,000$1,053$1,135$1,242$1,490$1,289$1,443Q2 royalty growth, reported: 8%Royalty revenueLicense and other revenue

Exhibit 2: Q2 FY2027: reported against expectations

The guide, consensus, our forecast before results, and the reported figure

USD millions except EPS
Q2 FY2027 · GuidanceQ2 FY2027 · ConsensusQ2 FY2027 · Our forecastQ2 FY2027 · Actual
Total revenue$M1,380.01,380.01,376.31,443.0
Royalty revenue$M710.5706.8670.0
Royalty revenue growth (y/y)%14.6%14.0%8.1%
License and other revenue$M669.5669.5773.0
Diluted EPS (non-GAAP)$0.470.480.480.52

Licensing drove the revenue beat; royalties missed. Operating expenses were $774M against a guide of $780M; EPS was $0.52 against consensus of $0.48.

Source: Arm Q2 FY2027 shareholder letter (Form 6-K Exhibit 99.2, 4 November 2026) · MarketBeat — Arm Holdings earnings date and estimates (Q2 FY2027)

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3 · Results

Royalties grew 8.1%, below the 11.0% line we set for a slowdown

Memory prices are holding back phone sales. The model carries the Q2 rate into every later year, so the miss cuts the value.

Exhibit 3: Royalty growth by quarter, against our forecast and the slowdown line

Year on year; Q2 is the reported figure

Royalty revenue growth (y/y) · Q2 FY2026A: 21%Royalty revenue growth (y/y) · Q3 FY2026A: 27%Royalty revenue growth (y/y) · Q4 FY2026A: 11%Royalty revenue growth (y/y) · Q1 FY2027A: 22%Royalty revenue growth (y/y) · Q2 FY2027: 8%0%10%20%30%Q1 FY2026AQ2 FY2026AQ3 FY2026AQ4 FY2026AQ1 FY2027AQ2 FY202727%22%8%Our forecast before results: 14%Slowdown line: 11%Royalty revenue growth (y/y) · Q1 FY2026A: 25%Royalty revenue growth (y/y) · Q2 FY2026A: 21%Royalty revenue growth (y/y) · Q3 FY2026A: 27%Royalty revenue growth (y/y) · Q4 FY2026A: 11%Royalty revenue growth (y/y) · Q1 FY2027A: 22%Royalty revenue growth (y/y) · Q2 FY2027: 8%
Royalty revenue, Q2 FY2027 $670M our forecast was $707M
FY2027E royalty growth, this model 11% was 17%; FY2028E goes from 19% to 13%

The mechanic may overstate this. The CFO expects triple-digit data-centre royalty growth and double digits from phones next year, but gave no total. Back on our earlier rates from FY2028E the value is $25.

Source: Arm Q2 FY2027 shareholder letter (Form 6-K Exhibit 99.2, 4 November 2026) · Arm Q2 FY2027 earnings call transcript (4 November 2026), via TradingKey

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4 · Royalty

We raised the forecast to management's view, and revenue reaches $12,669M by FY2032E

AGI CPU in FY2028E goes to $1,800M from $1,000M; SoftBank in FY2027E to $819M from $793M.

Exhibit 4: Revenue by type, FY2022A to FY2032E

USD billions; royalty, licence and other, and AGI CPU silicon; total above each column

Royalty revenue · FY2022A: $2Royalty revenue · FY2023A: $2Royalty revenue · FY2024A: $2Royalty revenue · FY2025A: $2Royalty revenue · FY2026A: $3Royalty revenue · FY2027E: $3Royalty revenue · FY2028E: $3Royalty revenue · FY2029E: $4Royalty revenue · FY2030E: $4Royalty revenue · FY2031E: $4Royalty revenue · FY2032E: $5License and other revenue · FY2022A: $1License and other revenue · FY2023A: $1License and other revenue · FY2024A: $1License and other revenue · FY2025A: $2License and other revenue · FY2026A: $2License and other revenue · FY2027E: $3License and other revenue · FY2028E: $3License and other revenue · FY2029E: $3License and other revenue · FY2030E: $3License and other revenue · FY2031E: $3License and other revenue · FY2032E: $3AGI CPU silicon revenue · FY2027E: $0AGI CPU silicon revenue · FY2028E: $2AGI CPU silicon revenue · FY2029E: $2AGI CPU silicon revenue · FY2030E: $3AGI CPU silicon revenue · FY2031E: $4AGI CPU silicon revenue · FY2032E: $5FY2022AFY2023AFY2024AFY2025AFY2026AFY2027EFY2028EFY2029EFY2030EFY2031EFY2032E$0$5$10$15$3$3$3$4$5$6$8$8$10$11$13ForecastRoyalty revenueLicense and other revenueAGI CPU silicon revenue

The raise moved the value from $16.87 to $16.96. AGI CPU now totals the up to $2,000M named for FY2027 and FY2028, but silicon takes gross margin from 98% to 79% and needs inventory and capex.

Source: Arm Q2 FY2027 earnings call transcript (4 November 2026), via TradingKey · Arm Q2 FY2027 shareholder letter (Form 6-K Exhibit 99.2, 4 November 2026)

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5 · Growth

Licensing drove the beat, and this time SoftBank was not the reason

SoftBank paid $209M, up from $178M. Related parties fell to 29% of revenue from 37% a year earlier.

Exhibit 5: Licence and other revenue, Q2 FY2026 to Q2 FY2027

USD millions; SoftBank is the consulting agreement in the interim report

Q2 FY2026: $515SoftBank: $31Everyone else: $227Q2 FY2027: $773Q2 FY2026SoftBankEveryone elseQ2 FY2027$515$31$227$773

Everyone else added $227M; SoftBank added $31M. Large deals swing this line, and contract value grew only from $1,600M to $1,790M, so the model does not carry the beat forward.

Source: Arm Q2 FY2027 interim report (Form 6-K, 4 November 2026): related parties, Qualcomm litigation · Arm Q2 FY2027 shareholder letter (Form 6-K Exhibit 99.2, 4 November 2026)

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6 · Earnings quality

Share awards are the cost the non-GAAP figures leave out, and the model keeps them in

R&D intensity falls as silicon revenue arrives; GAAP operating margin rises to 19% by FY2032E.

Exhibit 6: R&D intensity and GAAP operating margin, FY2022A to FY2032E

Share of revenue, FY2022A to FY2032E; the shaded years are the forecast

R&D, % of revenue · FY2023A: 42%R&D, % of revenue · FY2024A: 61%R&D, % of revenue · FY2025A: 52%R&D, % of revenue · FY2026A: 56%R&D, % of revenue · FY2027E: 60%R&D, % of revenue · FY2028E: 53%R&D, % of revenue · FY2029E: 56%R&D, % of revenue · FY2030E: 52%R&D, % of revenue · FY2031E: 49%R&D, % of revenue · FY2032E: 46%Operating margin · FY2023A: 25%Operating margin · FY2024A: 3%Operating margin · FY2025A: 21%Operating margin · FY2026A: 18%Operating margin · FY2027E: 12%Operating margin · FY2028E: 13%Operating margin · FY2029E: 10%Operating margin · FY2030E: 13%Operating margin · FY2031E: 17%Operating margin · FY2032E: 19%0%20%40%70%FY2022AFY2023AFY2024AFY2025AFY2026AFY2027EFY2028EFY2029EFY2030EFY2031EFY2032E61%56%46%3%18%19%ForecastR&D, % of revenueOperating marginR&D, % of revenue · FY2022A: 37%R&D, % of revenue · FY2023A: 42%R&D, % of revenue · FY2024A: 61%R&D, % of revenue · FY2025A: 52%R&D, % of revenue · FY2026A: 56%R&D, % of revenue · FY2027E: 60%R&D, % of revenue · FY2028E: 53%R&D, % of revenue · FY2029E: 56%R&D, % of revenue · FY2030E: 52%R&D, % of revenue · FY2031E: 49%R&D, % of revenue · FY2032E: 46%Operating margin · FY2022A: 23%Operating margin · FY2023A: 25%Operating margin · FY2024A: 3%Operating margin · FY2025A: 21%Operating margin · FY2026A: 18%Operating margin · FY2027E: 12%Operating margin · FY2028E: 13%Operating margin · FY2029E: 10%Operating margin · FY2030E: 13%Operating margin · FY2031E: 17%Operating margin · FY2032E: 19%
Share-based pay, FY2026 $1,052M and $377M in Q2 FY2027 alone
R&D, share of FY2026 revenue 56% GAAP, with share awards

Source: Arm Holdings plc Form 20-F (fiscal year ended 2026-03-31, filed 2026-05-26) — Consolidated Income Statements and revenue by type · Arm Q2 FY2027 shareholder letter (Form 6-K Exhibit 99.2, 4 November 2026)

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7 · Costs

The base DCF is a fraction of the price, and so is every forward case

The cases are boundaries, not weights. Every one sits far below the HOLD line, and only the analyst range reaches the price.

Exhibit 7: Value per share by case, against the price and the HOLD line

USD per share; base on WACC 11.6% and terminal growth 3.5%; the marker is the base value or the average target

Low · Analyst targets before results: low to high, average marked: $125Point value · Analyst targets before results: low to high, average marked: $291Low · DCF: base case to exit-multiple bound: $17Point value · DCF: base case to exit-multiple bound: $17Low · Forward cases: royalty slows to royalty recovers: $14Point value · Forward cases: royalty slows to royalty recovers: $17Low · Qualcomm stops paying to AGI CPU at plan: $14Point value · Qualcomm stops paying to AGI CPU at plan: $17Analyst targets before results: low to high,average markedDCF: base case to exit-multiple boundForward cases: royalty slows to royaltyrecoversQualcomm stops paying to AGI CPU at plan$0$100$200$300$400$500$550$125–$500$17–$47$14–$25$14–$50HOLD from: $157Price: $175

The 25x exit multiple gives $47: an upper bound, not a target. The price is 90x FY2027E non-GAAP earnings.

Source: stockanalysis.com: ARM daily price history (close 6 November 2026) · stockanalysis.com — ARM analyst forecast (S&P Global consensus)

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8 · Valuation

All four generous steps reach $171, still below the $174.62 price; the $291 target needs $120 more

None of the four is in our base. Each uses a figure in this model; this shows what it takes, not what any analyst assumes.

Exhibit 8: From our value to the average analyst target

USD per share; the multiple and share award steps are taken on the AGI CPU plan case

Our value: $17Royalties recover: $8AGI CPU plan: $3325x EBITDA exit: $85Share awards free: $27Beyond all of these: $120Analyst target: $291Our valueRoyaltiesrecoverAGI CPU plan25x EBITDAexitShare awardsfreeBeyond all oftheseAnalysttarget$17$8$33$85$27$120$291
Revenue growth a year the price needs 54% to FY2032E at a margin that ignores share awards; this model has 17%
FY2027E revenue, this model $5,780M consensus before results was $6,060M: the gap is in later years

Source: stockanalysis.com — ARM analyst forecast (S&P Global consensus) · Arm Q2 FY2027 earnings call transcript (4 November 2026), via TradingKey

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9 · From our value to the street

What would change the rating from here

Price moves the rating. No forward case we model does.

If we see Value per share Rating
Shares at $14.75 or below The base, 15% above the price BUY
Shares above $18.84 The base, more than 10% below the price SELL, where the shares are now
Royalty growth back on our earlier rates from FY2028E $25 SELL. HOLD needs $157 at this price
AGI CPU at the company plan $50 SELL
Royalties slow further $14 SELL
A ruling that Qualcomm may stop paying royalties $14 SELL

SELL. The next test is Q3: revenue of $1,540M guided, with royalties up low single digits on the year.

Source: Arm Q2 FY2027 shareholder letter (Form 6-K Exhibit 99.2, 4 November 2026) · Arm Q2 FY2027 earnings call transcript (4 November 2026), via TradingKey · values from the forward cases and the rating rule

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10 · What would change the rating

What we said and what happened: SELL stood, and royalties crossed the slowdown line

Before results we set the slowdown line at 11% royalty growth. Royalties grew 8%, so the line was crossed, and that cut the value from $27.49 to $16.87.

We said SELL before results.

The base value then sat far below the $196.79 price. The shares closed at $191.80 before the reaction, fell 13% to $166.72 on 5 November and closed at $174.62 on 6 November.

Value before results $27.49 on royalty growth of 14%
Our forecast missed both ways.

Royalties came in below it and licence revenue of $773M well above our $670M.

Value now $16.96 on royalty growth of 8%, after the raise to management's figures
The next test is Q3.

Management guides revenue of $1,540M, royalties up low single digits and licence revenue up a little over 50%. The court has yet to rule on whether Qualcomm can withhold royalties.

Qualcomm, share of FY2026 revenue 9% a ruling is pending

Source: Arm Q2 FY2027 shareholder letter (Form 6-K Exhibit 99.2, 4 November 2026) · Arm Q2 FY2027 earnings call transcript (4 November 2026), via TradingKey · Arm Q2 FY2027 interim report (Form 6-K, 4 November 2026): related parties, Qualcomm litigation · Reuters (Tom Hals, via Investing.com): Delaware jury awards Qualcomm $2 in damages, finds Arm breached license agreement (13 October 2026) · stockanalysis.com: ARM daily price history (close 6 November 2026)

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11 · What we said and what happened

Sources

Not investment advice. Any rating here is this model's view of value against price at the data cut-off.

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