Arm Q2 FY27: Securing supply for AGI CPU as a major milestone

Arm Q2 FY27 results were strong with revenue, gross profit, operating profit and EPS all ahead of consensus; revenue grew 27% YoY and beat consensus by 4.6%, driven by exceptionally strong licensing activity and continued royalty growth. License and other revenue increased 50% YoY to 773mn as customers accelerated long term commitments, with three new ATA agreements and four additional CSS licenses. Royalty revenue grew 8% YoY to 670mn, with data center royalties doubling YoY to offset smartphone weakness, while physical AI royalties rose 50% YoY. Arm has secured contracts with suppliers for 2bn of AGI CPUs next year as well as customer contracts of 2bn, a major step towards lifting AGI CPU sales from 1bn to 2bn next year, with execution and delivery the next steps and a full update expected at the Arm Everywhere event around May 2027. Arm architecture share in big CSPs is expanding from 50% to 60% exiting 2026. Weaker mobile royalty is offset by stronger licensing; applying a lower 32