Arm Holdings, the British chip designer whose processor blueprints power virtually every smartphone in the world, said data centres are on track to become its largest source of revenue as it pivots from licensing intellectual property to selling its own silicon for artificial intelligence infrastructure.
The company reported record fourth-quarter revenue of $1.49 billion, up 20% year on year, and full-year revenue of $4.92 billion, a 23% increase, marking a third consecutive year of growth above 20%.
Chief executive Rene Haas used the earnings call to highlight surging demand for the Arm AGI CPU, the company's first processor designed and manufactured as a finished chip rather than sold as a licensable design for others to build.
The AGI CPU, unveiled six weeks ago, is purpose-built for what the industry calls agentic AI, systems that can reason, plan and take action autonomously rather than simply responding to prompts.
Customer demand for the chip has already exceeded $2 billion across the next two fiscal years, more than double the figure Arm cited at launch, though Haas acknowledged the company has not yet assembled the full supply chain to fulfil that level of orders.
The shift represents a fundamental change to Arm's business model.
For more than three decades, Arm has earned revenue by licensing its chip architectures to companies such as Apple, Qualcomm and Samsung, which then design and manufacture their own processors.
With the AGI CPU, Arm is for the first time selling a finished data centre processor, putting it in more direct competition with Intel and AMD in the server market.
Haas said the chip delivers more than twice the performance per rack compared with x86 platforms, the architecture used by Intel and AMD, and could reduce AI data centre capital expenditure by up to $10 billion per gigawatt of deployed capacity.
Meta, the parent company of Facebook, was named as a lead partner and co-developer working with Arm on a multi-generation roadmap for the chip.
Data centre royalty revenue, which captures fees Arm earns when customers ship chips based on its designs, continued to more than double year on year, driven by accelerating adoption of Arm-based server processors by all major cloud providers and near-total market share in data centre networking chips such as data processing units (DPUs) and SmartNICs.
Chief financial officer Jason Child said Arm is targeting $15 billion in AGI CPU revenue and $10 billion in intellectual property revenue by fiscal 2031, for a combined $25 billion and earnings per share above $9.
First production revenues from shipped AGI chips are expected in the fourth quarter of fiscal 2027, with volume cash arriving through fiscal 2028.
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Shares initially jumped roughly 10% in after-hours trading following the results before pulling back below the $237 closing price.
The retreat suggests some investors remain cautious about a revenue target that depends on a supply chain Arm has yet to fully secure and production sales that will not arrive in volume for at least another year.
The recap
- Arm predicts datacenter will become its largest revenue source.
- Company reports more than $2 billion customer AGI demand.
- Cash from AGI chip sales expected starting fiscal 27/28.
