After an impressive rally, Arm Holdings (ARM) has experienced a sharp correction, with its stock price falling 36.3% from its 52-week high. The decline has largely been driven by profit-taking following the stock's strong run, along with concerns about sluggish smartphone demand, which remains an important end market for the company.
However, a closer look at Arm's latest financial performance and long-term growth drivers suggests that the recent weakness represents an entry point. Arm Holdings continues to benefit from accelerating adoption of artificial intelligence (AI), expanding demand for its chip architecture across data centers, automotive applications, edge devices, and cloud infrastructure.
More Top Stocks Daily: Go behind Wall Street’s hottest headlines with Barchart’s Active Investor newsletter.
In addition, Arm’s growing technology portfolio and strengthening relationships with major global customers position it well for sustained long-term growth.
www.barchart.com Arm’s Strong Performance Shows the Business Remains Strong
Arm began fiscal 2027 with impressive momentum. First-quarter revenue increased 22% year-over-year (YOY) to $1.29 billion, reflecting broad-based demand across its business.
Royalty revenue climbed 22% to a record $715 million for a first quarter, led by AI-related demand. Cloud AI remained the largest contributor, while data-center royalty revenue more than doubled from a year ago as hyperscale cloud providers expanded deployments of Arm-based processors.
The company is also benefiting from growing adoption of networking chips such as DPUs and SmartNICs, both of which are increasingly used in AI infrastructure.
Although smartphone shipments remain under pressure due to weaker consumer demand and higher memory prices, Arm has successfully offset this weakness through higher-value technologies. Adoption of its latest Armv9 architecture and Compute Subsystems continues to rise across smartphones, tablets, and other connected devices. Because these products generate higher royalty rates, Arm can grow revenue even in a sluggish handset market.
Beyond consumer electronics, Arm is expanding into Physical AI, with its architecture gaining traction in advanced driver-assistance systems (ADAS), autonomous vehicles, robotics, and industrial automation. This diversification reduces reliance on smartphones and strengthens the company's long-term growth profile.
Meanwhile, license and other revenue rose 23% to $574 million, driven by renewed long-term licensing agreements and new customer wins across multiple industries.
AGI CPU and Neoverse to Support Solid Growth Ahead
Arm has several new growth drivers that could significantly expand its addressable market over the next few years. One of the most important catalysts is the company's newly introduced Arm AGI CPU, which extends the Arm Compute Platform into AI infrastructure.
Initial shipments have already begun, and management has secured sufficient manufacturing capacity to support approximately $1 billion in revenue across fiscal 2027 and fiscal 2028. Further, customer demand has already exceeded $2 billion, suggesting the initial revenue outlook could prove conservative if production continues to scale as planned.
To support this demand, Arm is working closely with manufacturing and supply-chain partners to expand production capacity, positioning the company to capitalize on the rapidly growing AI infrastructure market.
Another major growth engine is Neoverse, Arm's server CPU platform. The company has shipped more than 1.5 billion Neoverse CPU cores, with shipments accelerating in recent quarters. As enterprises and cloud providers continue investing heavily in AI infrastructure, demand for energy-efficient server processors is expected to rise significantly.
Neoverse's growing adoption indicates that Arm's architecture is becoming deeply embedded in next-generation AI data centers, a market that could drive royalty growth for many years.
The Bottom Line
Arm continues to post strong revenue growth, expand royalty streams, and deepen its position across several of the fastest-growing areas of computing.
While smartphone demand remains a near-term headwind, AI is becoming a much larger growth driver. From cloud data centers and networking to autonomous vehicles, robotics, and edge devices, Arm's architecture is at the center of multiple secular trends. With AI driving solid demand, the pullback in Arm stock presents a buying opportunity.
Wall Street currently maintains a "Moderate Buy" consensus rating on Arm stock.
www.barchart.com 
www.barchart.com On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
Arm Stock Is Off 39% From Its High. Why This Could Be the Best Time to Buy. Advanced Micro Devices Dips on Lower FCF, But Short Put Plays Attract Value Investors Wide-Moat Stocks Are the Sedative Your Tech-Dominated Portfolio Desperately Needs Advanced Micro Devices Reported Record Revenue. AMD Stock Sank Anyway.