Arm Holdings shares experienced a volatile session on Thursday after reporting fiscal Q1 results that blew past expectations but also raised concerns over a sharp rise in stock-based compensation. The stock initially plunged as much as 8% in regular trading before staging a remarkable recovery, gaining roughly 8% as investors refocused on surging artificial intelligence chip demand and a bullish outlook.
Revenue reached a record $1.289 billion, up 22% year-over-year and above analyst estimates of $1.26 billion. Adjusted EPS of 45 cents also beat consensus. Royalty revenue climbed 22% to $715 million, powered by a more than doubling of data center royalties, while licensing revenue rose 23% to $574 million.
However, investors initially recoiled at a 47% jump in stock-based compensation and related payroll taxes, which hit $433 million — consuming over a third of quarterly revenue. This widened the gap between GAAP and non-GAAP profitability: GAAP operating income fell 20% to $91 million, even as adjusted operating income surged 29% to $531 million.
The tide turned as the company highlighted accelerating demand for its AGI-focused CPU products. Arm disclosed that customer demand for its AGI CPU has now surpassed $2 billion across fiscal 2027 and 2028, with manufacturing capacity secured for the first $1 billion of orders. CEO Rene Haas noted that 1.5 billion Neoverse data center cores have shipped to date, including 500 million in the last nine months, and named Oracle as a key customer. Management also offered current-quarter revenue guidance of $1.33–$1.43 billion, well above Wall Street’s $1.34 billion forecast.
By the end of Thursday’s session, the AI narrative had won out, erasing earlier losses and delivering a strong gain that left analysts largely bullish on the long-term story.
