Arm Holdings plc (ARM.O): Licensing Strong, Royalties Weak

First Take: Arm reported a strong Q2 print but gave little in the way of update to the longer term story in CPUs. Instead, the company reiterated increasing confidence for c.$2bn in FY27/28. Sales/EPS for Q2 of $1.44bn/52c, ahead of consensus, with licensing well ahead of street at $773m (css $667m), which is up c.50%yy. Royalties meantime were notably weaker at $670m (vs $710m) where we think ongoing handset production weakness was to blame. This is offsetting strength in data cloud momentum, just as we previewed. The guide to Q3 talked of a sales range of $1.49-1.59bn (vs. street at $1.52bn) and EPS of 56c (vs street at 55c), or just ahead at the mid-point. The company is again guiding for strong Q3 opex in-line with that expected (c.$825m non-GAAP), which we think is supportive of long term development needs.