Arm designs the instruction set and the CPU cores that most of the world's chips run on, and it is paid twice: a licence fee to use the design and a royalty on every chip shipped. The shift that matters is the datacentre. NVIDIA's Grace, Amazon's Graviton, Google's Axion and Microsoft's Cobalt all run on Arm, datacentre royalties doubled in the quarter to September 2026, and Arm now sells its own server chip, with orders it says run through 2027. Each new generation also carries a higher royalty rate, so revenue can grow on flat unit volumes. The quarter reported on 4 November showed both sides. Revenue was $1.44B, up 27%, and licence revenue a record $773M, up 50%. But royalty revenue grew only about 8%, and the guide for the next quarter is low single digits, with phone royalties held back by memory prices. About 29% of revenue came from related parties, SoftBank among them. Building its own chip puts Arm in competition with its customers, and the Qualcomm dispute over royalties is still before a judge. The call is BULLISH on the datacentre shift over three years, at LOW conviction because the royalty line, the annuity the whole valuation rests on, has slowed just as the shares fell 13% in a week. The entry is the live price on 6 November.
Arm: the toll on every chip, now reaching the datacentre
By MenFem Editorial·Semiconductors — CPU IP·6 November 2026·Methodology·
ai-infrastructuresemiconductorscpu
Share
Price since the call
$205.97+15.6% since opened
Entered at $178.18, the close on 6 Nov; last close 30 Oct. The grade comes from the falsifier, never this number.
What would prove this wrong · verbatim, as published
The reason for holding this stops being true if the annuity breaks: total royalty revenue falling year on year for two consecutive quarters. It also stops being true if the datacentre shift reverses: datacentre royalties falling year on year in any quarter. And it stops being true if the biggest licensee walks: a final ruling or settlement that ends Qualcomm's royalty payments to Arm.
- leg 1 · Total royalty revenue down year on year for two consecutive quarters · not read yet
- leg 2 · Datacentre royalties down year on year in any quarter · not read yet
- leg 3 · A ruling or settlement ending Qualcomm's royalty payments · not read yet
Scrub the call’s life
The argument, taken apart
Turn it, hover a ring, a moon or a weight
One call, taken apart
Rings are the falsifier’s legs. Moons are the catalysts it named. Weights are its risks, longer for higher severity.
The claim
Bullish on Arm's move into datacentre CPUs, where royalties doubled; low conviction while total royalty growth has stalled.
What would make it wrong · 3 legs
- Leg 1 · Not read yetTotal royalty revenue down year on year for two consecutive quartersNot read at a review yet.
- Leg 2 · Not read yetDatacentre royalties down year on year in any quarterNot read at a review yet.
- Leg 3 · Not read yetA ruling or settlement ending Qualcomm's royalty paymentsNot read at a review yet.
The window
6 Nov 2026 to 6 Nov 2029
0% gone · 1096 days left
The reviews
Not reviewed since it was published
- Leg 1, not read yet: Total royalty revenue down year on year for two consecutive quarters
- Leg 2, not read yet: Datacentre royalties down year on year in any quarter
- Leg 3, not read yet: A ruling or settlement ending Qualcomm's royalty payments
- Qualcomm ruling
- First deliveries of Arm's own chip (Q4 FY27)
- high severity: Royalty slowdown
- medium severity: Channel conflict
- medium severity: SoftBank
The timeline · 1 entry · newest firstreviews · notes · moves · the book
- 6 Nov 2026Opened
Arm: the toll on every chip, now reaching the datacentre
Key Points
- Q2 FY27 revenue $1.44B (+27%); licences $773M (+50%), a record.
- Datacentre royalties doubled; total royalties only ~+8%, guided to low single digits.
- ~29% of revenue from related parties (6-K).
- Own server chip, with orders through 2027, competes with Arm's customers.
Bull Case
Datacentre royalties keep doubling, higher rates per generation lift the whole royalty line, and Arm's own chip opens a second revenue stream without driving customers away.
Bear Case
What I'd have to believe for the other side: the toll is being competed down. RISC-V offers customers an escape, Arm's own chip pushes them toward it, and a royalty line growing in single digits does not support a growth-company valuation.
Catalysts
Qualcomm rulingRegulatory
Whether Qualcomm may stop paying royalties.
First deliveries of Arm's own chip (Q4 FY27)Product Launch
The test of the own-silicon push.
Risk factors
Royalty slowdownHigh
Royalties are the annuity; low single-digit growth undercuts the case.
Channel conflictMedium
Selling its own chips competes with the licensees who pay royalties.
SoftBankMedium
Related-party revenue and SoftBank's margin loan against Arm shares.
Key Metrics
- Q2 FY27 revenue
- $1.44B
- Licence revenue
- $773M
- Royalty revenue
- $670M