Arm Stock Had a Great Quarter — So Why Is It Down?

TLDR

• Arm beat Q4 estimates with EPS of $0.60 vs $0.58 expected, revenue of $1.49B vs $1.47B expected
• Stock jumped 12-13% after-hours before reversing to fall 5%
• AGI CPU demand exceeded $2 billion, but supply secured for only the first $1 billion
• Supply constraints prevented management from raising its revenue forecast
• Arm is shifting from a licensing model to making its own AI chips, bringing higher costs

Arm Holdings beat Wall Street expectations for its fiscal Q4 2026, but the stock couldn’t hold its gains. After initially jumping as much as 13% in after-hours trading, ARM fell over 5% as investors zeroed in on supply chain concerns.

Arm Holdings plc American Depositary Shares, ARM

The company reported adjusted earnings of $0.60 per share on revenue of $1.49 billion. Analysts had expected $0.58 per share on $1.47 billion in revenue.

Licensing revenue rose 29% year-over-year to $819 million. Royalty revenue climbed 11% year-over-year to $671 million.

The early rally made sense on the numbers. The reversal made sense on the call.

CEO Rene Haas said demand for Arm’s new AGI CPU — launched in March — has already surpassed $2 billion just six weeks after launch, more than double what was announced at launch. That’s the good news.

The problem is supply. Management confirmed it has only secured enough wafers, memory, and packaging to fulfill the first $1 billion of that demand. The remaining $1 billion is still being worked through.

Raymond James analyst Simon Leopold noted that supply constraints led management to hold back from raising its revenue forecast.

Supply Gap Spooks Investors

That gap between $2 billion in demand and $1 billion in confirmed supply appeared to be the turning point for the stock overnight.

Arm’s Q1 2027 guidance called for adjusted EPS of $0.40, plus or minus $0.04, on revenue of $1.26 billion, plus or minus $50 million. Analysts had penciled in $1.25 billion in revenue, so guidance was roughly in line.

Despite the beat and the strong AGI CPU demand figures, investors appeared unwilling to look past the execution risk on supply.

A Costlier Business Model

For years, Arm ran a relatively lean operation — licensing chip designs to Apple, Qualcomm, Nvidia, and Samsung, then collecting royalty fees per product shipped.

Now the company is moving into making its own silicon. The AGI CPU marks Arm’s first in-house chip aimed at AI data centers, requiring it to source advanced 3nm wafers from TSMC and manage its own production pipeline.

That’s a more capital-intensive model. Analysts have flagged that higher costs could pressure margins if growth doesn’t keep pace.

They also said the data center business is on track toward a $15 billion revenue target, and expect it to become Arm’s largest segment.

ARM stock has risen more than 115% in 2026, which set a high bar going into earnings. Wall Street currently holds a Strong Buy consensus on the stock, based on 18 Buy ratings, 3 Holds, and 1 Sell over the past three months.

The average analyst price target sits at $188.52 per share.

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