ARM: The focus is now only on AI data centers

Higher fees per processor and more ARM CPUs overall increase ARM's revenue. Smartphones play hardly any role anymore.

(Image: ARM)

May 7, 2026 at 4:42 pm CEST

3 min. read

By

Mark Mantel

ARM's annual financial report speaks volumes: AI data centers are the biggest growth driver. The company only mentions smartphones, notebooks, and edge devices in passing in its two-page letter to investors and not at all in the rest of the report. “Soon the data center will be Arm's largest business,” it states, driven by ARM's first own server processor, which ARM manufactures and sells.

ARM generated a good 4.9 billion US dollars in fiscal year 2026, which ran from April 2025 to the end of March 2026. Compared to the previous year, this represents growth of 23 percent. The most money comes from fees per ARM processor sold (Royalty): this part accounts for 2.6 billion US dollars in revenue (+21 percent). Licensing fees bring ARM 2.3 billion (+25 percent).

Data centers are lucrative

Royalty payments are increasing for two reasons: Firstly, ARM receives more money per processor on average, and secondly, more high-priced server processors are being manufactured. With the current ARMv9 architecture and new CPU building blocks, fees for all licensees have increased.

Overview of ARM's business areas — For chip designers who do not develop their own ARM cores, ARM offers three options: individual logic blocks, a building kit for complete processors, and, more recently, finished processors.

(Image: ARM)

Since fees are calculated based on the processor price, those for data centers are particularly lucrative for ARM. CPUs there cost thousands of US dollars; for smartphones, only dozens. Smartphones are only worthwhile for ARM due to sheer volume – around 1.25 billion smartphones were sold in 2025, all with ARM internals.

Attempts to increase fees on smartphone processors have failed. ARM apparently wanted to calculate them based on the complete device price at one point but failed.

Ultimately, this is enough for an operating profit of 900 million US dollars (+8 percent). The net profit after taxes is slightly higher at 904 million US dollars (+14 percent) because ARM earned 257 million US dollars from interest income, other non-operating business, and stakes in other companies.

Operating expenses mainly include research and development as well as other personnel costs. For the former, ARM spent nearly 2.8 billion US dollars in fiscal year.

Videos by heise

High interest in entire ARM processors

According to ARM, royalty income from processors for data centers has more than doubled, without specifying a concrete figure. The growth comes from cloud hyperscalers that are launching their CPUs, such as Amazon AWS's Graviton, Google Axion, and Microsoft Cobalt. Meta is the only hyperscaler without its CPU development, but is now the main development partner for ARM's “AGI CPU.”

The forecast for the AGI CPU has more than doubled since its announcement: it is expected to bring in a total of over two billion US dollars in fiscal years 2027 and 2028. In the long term, ARM aims to generate 15 billion US dollars annually from its processors.

In the current quarter, ARM expects an average revenue of 1.26 billion US dollars. That would be 20 percent more than in the previous year. The stock market initially reacted positively to the business report. However, after reaching a high of 223 euros, the stock has fallen by 16 percent.