ARM HOLDINGS PLC /UK

Arm Holdings plc is a global leader in the semiconductor industry, with principal operations and activities in the licensing, marketing, research and development of central processing unit (CPU) intellectual property (IP), graphics processing unit IP, systems IP, compute subsystems (CSS), and associated software, tools and other related services. In March 2026, the Company announced it is expanding its compute platform into production silicon products with the Arm AGI CPU. The semiconductor industry is characterized by rapidly changing technology and end-user needs, with improvements rapidly being made in AI, cloud computing, data centers, and machine learning. The resources required to develop leading-edge products are significant and continue to increase exponentially as chip complexity increases, manufacturing process nodes shrink, and manufacturing times increase. Arm has developed an ecosystem that plays an increasingly valuable role in the chip design process by providing specialized capabilities and expertise that enable semiconductor suppliers to focus on their core product differentiation while keeping pace with market innovation.

The Company faces intense competition and could lose market share to competitors. The market for its products is intensely competitive and characterized by rapid changes in design and manufacturing technologies, software development efficiencies, end-user requirements, industry standards, and frequent new product introductions and improvements. The Company anticipates continued challenges from current and new competitors, including established technologies such as the x86 architecture, as well as by free, open-source technologies, including the RISC-V architecture. Many of the Company's customers are also major supporters of the RISC-V architecture and related technologies. The Company's top five customers (including Arm China and SoftBank Group) collectively accounted for approximately 57% ¹, 56% and 54% of total revenue for the fiscal years ended March 31, 2026, 2025 and 2024, respectively, and its largest customer individually, Arm China, accounted for approximately 16% ², 17% and 21% of total revenue, respectively, during those fiscal years. As of March 31, 2026, more than 350 billion ³ Arm-based chips were reported as shipped cumulatively, and the Arm compute platform supports a global community of more than 22 million ⁴ developers.

The Company's open and flexible business model provides access to high-quality CPU and other IP products from its compute platform for a wide range of potential customer types and end markets. Its primary business is licensing its IP products to semiconductor companies, OEMs, CSPs and other organizations to design their chips. Customers license IP products for a fee, which gives them access to designs and enables them to create Arm-based chips. Once a chip has been designed and manufactured with the Company's products, it receives a per-unit royalty on substantially all chips shipped. The royalty has typically been based on a percentage of the average selling price (ASP) of the chip or a fixed fee per unit, and it typically increases as more Arm products are included in the chip. As of March 2026, the Company also expanded its offerings to include Arm-designed silicon products with the introduction of the Arm AGI CPU, with production expected by the end of calendar year 2026. The business model enables the widest range of customers with a broad set of options to access Arm products through an agreement best suited to their particular business needs, including Arm Total Access, Arm Flexible Access, Technology Licensing Agreements (TLAs) and Architecture License Agreements (ALAs).

The Company's CPU products address diverse requirements for performance, power, and specific use cases, including its Arm AGI CPU. Complementary products include GPU and NPU accelerators, system IP such as interconnects, and others. The Company has a portfolio of products deployed alongside its CPUs, including accelerators offering a family of GPU and NPU products providing efficient computing acceleration and an optimal visual experience across a wide range of devices, and system IP providing complementary design components that enable designers to create high-performance, power-efficient, reliable, and secure chips. Compute platform products integrate Arm's CPU, GPU, and System IP products into a foundational compute platform optimized for a specific end market; these CSSs are pre-integrated and pre-verified configurations of Arm technology that deliver significantly higher value to customers by reducing development costs and time-to-market. The Company also offers development tools and software that support the development and deployment of its offerings. In 2024, the Company introduced a CSS targeted at customers in the infrastructure space, and in March 2026, it expanded its compute platform into production silicon products with the Arm AGI CPU.

The Company's primary markets are organized into three AI domains: Edge AI, serving smartphones and IoT; Physical AI, supporting automotive and robotics; and Cloud AI, addressing data center and networking. Within Edge AI, the mobile applications processor is the primary chip in a smartphone, and the Company has maintained market share in the mobile applications processor market of greater than 99% ⁵ for many years. Royalty revenue from the mobile applications processors market constituted approximately 43% ⁶ of total royalty revenue for the fiscal year ended March 31, 2026. The industrial IoT and embedded semiconductor market includes chips used by a wide range of goods including thermostats, digital cameras, drones, sensors, surveillance cameras, manufacturing equipment, robotics, electric motor controllers and city infrastructure and building management equipment. Consumer Electronics includes products found in the home such as digital TVs, tablets, laptops, XR headsets and wearables. Within Cloud AI, the cloud compute market includes the main server chips, data processing units, and smart network interface cards used by CSPs to run their operations. The networking equipment market includes chips deployed into wireless networking such as base-station equipment, enterprise Wi-Fi, and wired networking equipment such as routers and switches. Other Infrastructure refers to technological components and systems that support various aspects of computing, networking, and data processing and include chips deployed into HPC systems, enterprise servers, and edge networking equipment. Within Physical AI, the automotive market includes all chips with processors within vehicles, including chips used for in-vehicle-infotainment (IVI), advanced driver assistance systems (ADAS), engine management, and body and chassis control. The robotics market includes chips used in autonomous and semi-autonomous platforms, including drones, humanoid robots, and medical and industrial robotics.

On August 26, 2025, the Company completed the sale of its Artisan foundation IP business, consisting of standard cell libraries, memory compilers, and general-purpose I/Os to Cadence Design Systems, Inc. For the fiscal year ended March 31, 2026, the Company recognized a pre-tax gain on business divestiture of $131.0 million ⁷ in other non-operating income (loss), net. In October 2025, the Company entered into a definitive agreement to acquire all of the outstanding equity interests of DreamBig Semiconductor, Inc. for approximately $265.0 million ⁸ in cash, subject to purchase price adjustments. In October 2025, the Company commenced a restructuring plan to align its engineering workforce with strategic business activities. In March 2026, the Company announced the expansion of its compute platform into production silicon products with the Arm AGI CPU. In December 2025, the Company, as a minority shareholder of Ampere, received $143.4 million ⁹ in gross proceeds for its equity interest in Ampere and $39.3 million ¹⁰ from the settlement of the convertible promissory note with Ampere. In March 2026, the Company entered into a development agreement with Ampere. In April 2025, the Company entered into a Tax Sharing Agreement with SoftBank Group. In connection with the Consulting Agreement with SoftBank Group, for the fiscal years ended March 31, 2026 and 2025, revenue from the licensing and servicing arrangements was $704.4 million ¹¹ and $145.5 million ¹², respectively, and as of March 31, 2026 and 2025, the Company had current contract assets of $645.8 million ¹³ and $145.5 million ¹⁴ from an affiliate of SoftBank Group. During the fiscal year ended March 31, 2026, the Company also agreed to modify the structure of one of the statements of work under the Consulting Agreement resulting in a fixed payment amount of $300 million ¹⁵, which will be paid during the fiscal year ending March 31, 2027.

Total revenue increased $913 million ¹⁶, or 23% ¹⁷, to $4,920 million ¹⁸ during the fiscal year ended March 31, 2026, from total revenue of $4,007 million ¹⁹ during the fiscal year ended March 31, 2025. License and other revenue increased $468 million ²⁰, or 25% ²¹, during the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily driven by continued strong demand for Arm IP, as well as fluctuation in timing and size of multiple high-value license agreements and contributions from backlog into the current period from arrangements entered in prior periods. Royalty revenue increased $445 million ²², or 21% ²³, during the fiscal year ended March 31, 2026 as compared to the fiscal year ended March 31, 2025, driven by an improved mix of products with higher royalty rates per chip, such as Armv9 technology. Operating income was $900 million ²⁴ for the fiscal year ended March 31, 2026, compared to $831 million ²⁵ for the fiscal year ended March 31, 2025. Net income was $904 million ²⁶ for the fiscal year ended March 31, 2026, compared to $792 million ²⁷ for the fiscal year ended March 31, 2025. Net cash provided by operating activities was $1,524 million ²⁸ for the fiscal year ended March 31, 2026, compared to $397 million ²⁹ for the fiscal year ended March 31, 2025.

A key growth vector is the expansion of the compute platform into production silicon products, such as the Arm AGI CPU, with production expected by the end of calendar year 2026. The Company intends to continue allocating resources and engaging with its ecosystem partners to explore the viability and development of new products including, without limitation, new products in its IP portfolio, as well as solutions beyond individual IP designs such as RTL-based CSSs, GDSII-based CSSs, chiplets and complete chip solutions. The Company has been, and may in the future be, engaged to advise on or design chips for certain existing customers and other third parties, including affiliates of SoftBank Group, across a variety of use cases and end markets. The Company is currently focused on growing its business in key areas such as automotive, cloud and AI data centers, IoT, personal computers and robotics. AI demand is driving strong momentum for the Arm ecosystem, and AI growth requires significantly more compute across all of its end markets from smartphones with better chat features, to automobiles with better driving and parking assist, to IoT microprocessors with embedded NPUs.

Another major growth vector is the continued expansion in the PRC market. For the fiscal year ended March 31, 2026, total revenues derived from the PRC increased by 17% ³⁰ as compared to the prior fiscal year, mainly due to royalty revenue growth. The Company utilizes its commercial relationship with Arm China to access the PRC market for IP revenue, and substantially all of its PRC-related revenue is generated through the IPLA with Arm China. Arm China has the right to sublicense the Company's processor technology pursuant to the IPLA, and the Company's revenue is calculated as a percentage of license and royalty fees earned by Arm China from sub-license arrangements entered into with its end customers. The initial term of the IPLA is through April 23, 2048 ³¹, after which the IPLA will automatically renew for consecutive 10-year periods until the later of (a) the last to expire of the patents licensed pursuant to the IPLA expires and (b) the last of the trade secrets licensed pursuant to the IPLA ceases to be confidential. The Company expects that its licensing relationship with Arm China will continue to account for substantially all of its total IP revenues from the PRC and represent a significant portion of its revenues for the foreseeable future.

Research and development expenses increased by $705 million ³², or 34% ³³, during the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily due to increases in research and development expenses related to investments in next generation products, such as the Arm AGI CPU. The Company expects to continue investing greater financial and other resources in furtherance of those efforts, exploring investment and/or acquisition opportunities, and engaging with one or more partners to provide technical, financial and/or other support. The Company has substantially increased its research and development investment to focus on long-term returns and to replicate the strong position that it maintains in smartphones and in other markets, such as automotive, networking equipment, cloud compute and industrial IoT. Each generation of processor is typically more advanced and more complex than the previous generation, which requires increased development efforts that may be partially offset by improvements in productivity. Consequently, each year the Company increases its research and development investment in line with the increased development needs of the next generation of products.

The Company has expanded its operations and headcount significantly. As of March 31, 2026, the Company had 9,584 ³⁴ global employees, compared to 8,330 ³⁵ as of March 31, 2025 and 7,096 ³⁶ as of March 31, 2024. Approximately 84% ³⁷ of global employees, as of March 31, 2026, were focused on research, design, and technical innovation. The Company has global operations and research and development centers in the U.K., Europe, North America, India, and Asia-Pacific. The Company has entered into a definitive agreement to acquire DreamBig Semiconductor, Inc. for approximately $265.0 million ³⁸ in cash, with the transaction expected to close by the end of the second quarter of the fiscal year ending March 31, 2027, subject to customary closing conditions, including the receipt of regulatory approvals. The addition of DreamBig's advanced networking capabilities, technology, and engineering expertise is expected to enhance the Company's portfolio and help it deliver more complete solutions.

The Company does not currently have any debt. As of March 31, 2026, the Company had cash and cash equivalents of $2,751 million ³⁹ and short-term investments of $850 million ⁴⁰. For the fiscal years ended March 31, 2026, 2025 and 2024, the government incentive benefit recognized in research and development expenses was $149 million ⁴¹, $114 million ⁴² and $108 million ⁴³, respectively. The Company believes that its cash and cash equivalents and short-term investments will be adequate to meet its liquidity requirements for at least the next 12 months and in the longer term. The Company does not anticipate paying any cash dividends on its ordinary shares in the foreseeable future. The Company has not engaged in any share repurchase programs as described in the filing. The Company's capital expenditures for property and equipment were $545 million ⁴⁴ for the fiscal year ended March 31, 2026, compared to $219 million ⁴⁵ for the fiscal year ended March 31, 2025.

The Company faces significant headwinds from the cyclical nature of the semiconductor industry and the impact of the current macroeconomic environment and geopolitical events. Uncertainty in the macroeconomic and geopolitical environment could significantly affect demand for its products and its results of operations. The range of events and trends that can impact the business includes inflation and interest rates, supply chain disruptions, geopolitical pressures, the unknown impact of current and future trade regulations such as new export controls and tariffs, and geopolitical turmoil such as any changes in PRC-Taiwan relations, the war in Ukraine, and conflicts in the Middle East, including Iran. The continuing evolution of global trade policies, and uncertainty in trade relations between the U.S. and the PRC and other major U.S. trade partners, has caused, and could continue to cause, market disruptions and supply chain constraints. Given the concentration of semiconductor manufacturing in East Asia (particularly in Taiwan), any potential escalation in geopolitical tensions in Asia, particularly with respect to Taiwan, could significantly disrupt existing semiconductor chip manufacturing.

The Company faces structural headwinds from intense competition and the potential for market fragmentation. The Company faces significant competition from established technologies such as the x86 architecture, as well as from free, open-source technologies, including the RISC-V architecture. Many of the Company's customers are also major supporters of the RISC-V architecture and related technologies. If RISC-V-related technology continues to be developed and market support for RISC-V increases, customers may choose to utilize this free, open-source architecture instead of the Company's products. Additionally, several of the Company's customers are creating their own bespoke accelerators for AI workloads that are intended to sit alongside the Arm core. If, over time, more of the workloads move to accelerators away from the CPU, the CPU market size may decrease, resulting in a decrease of license fees and royalties. Furthermore, geopolitical and economic factors could contribute to the fragmentation of the global semiconductor market, as certain countries seek more end-to-end control over architecture, leading to increased fragmentation and a reduced role for a global architecture.

A significant portion of total revenue comes from a limited number of customers, with the top five customers (including Arm China and SoftBank Group) collectively accounting for approximately 57% ⁴⁶ of total revenue for the fiscal year ended March 31, 2026, and the largest customer, Arm China, accounting for approximately 16% ⁴⁷. The Company's reliance on Arm China exposes it to risks including that Arm China operates independently and the Company does not control its operations, and that Arm China's payments due to the Company are determined based on financial information Arm China provides, with past issues obtaining timely and accurate information. The Company faces intense competition from established technologies such as the x86 architecture and free, open-source technologies including the RISC-V architecture, and many customers are major supporters of RISC-V. The Company's development of production silicon products, such as the Arm AGI CPU, may subject it to new or enhanced competitive, brand, technological, operational and financial risks, and may create real or perceived conflicts with companies that are important to its business. The Company's concentration of revenue from the PRC market makes it particularly susceptible to economic and political risks affecting the PRC, which could be exacerbated by tensions between the U.S. or the U.K. and the PRC with respect to trade and national security; revenues from the PRC accounted for approximately 18% ⁴⁸ of total revenue for the fiscal year ended March 31, 2026.

Management's message emphasizes the Company's position as a global leader in the semiconductor industry and its expansion into production silicon products with the Arm AGI CPU, announced in March 2026. The Company has reorganized its business into three AI domains: Edge AI, serving smartphones and IoT; Physical AI, supporting automotive and robotics; and Cloud AI, addressing data center and networking, to further align with the growth of AI workloads. Management highlights that the Arm compute platform enables customers to address increasingly complex workloads with a broad suite of powerful, energy efficient solutions from CPU IP and CSS offerings to the production silicon product, the Arm AGI CPU. The Company believes its platform is well positioned to benefit from the growth in AI workloads, as Arm CPUs already run AI workloads in billions of devices from the edge to the cloud. Management's strategic priorities include continuing to invest in research and development for next-generation products, expanding the customer base and product offerings, and navigating the complex geopolitical and macroeconomic environment.