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Arm

Three ways to build on Arm, To FY31

AI has fundamentally redefined how computing is built and deployed
Rene Haas, Arm’s chief executive, on launching the Arm AGI CPU

Three ways to build on Arm

Until 2026 Arm did not make chips. It designs processors and is paid in two ways: a licence when a partner starts a design, and a royalty on every chip that ships. In March 2026 it launched its own production chip, and told investors it expects about $25 billion of revenue in the year to March 2031, $15 billion of it from that chip.

License the architecture

  • Licence and royaltyEarn income from licensing Arm’s technology designs, from royalty fees on chips that contain them, and from development tools and services.
  • Licence typesOffer two ways to license: Total Access, and Flexible Access for partners that start small and pay as they build. At the end of FY26 there were 56 Total Access and 329 Flexible Access licences.
  • Armv9Raise the royalty per chip by moving partners to newer architectures such as Armv9.

Royalty revenue rose 21%, or $445 million, to $2,613 million in FY26, on a better mix of chips with higher royalty rates.,

Licensing and other revenue rose 25% to $2,307 million.,

More than 350 billion Arm-based chips have shipped.

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Arm now supplies anything from a design to a finished chip

Each of the three ways covers more of the same chip, and each is paid differently: a licensed design earns a royalty, a Compute Subsystem earns a higher one, and the Arm AGI CPU is sold as a chip.

Shared cacheMemory systemAcceleratorsthe partner’s ownInterfaces and I/Oeverything else the partner designs
Supplied by ArmAdded by the partner

Compute Subsystems

Arm supplies
The cores and the system around them, tested as one
The customer adds
The accelerators and interfaces it adds, and the manufacturing
Arm is paid
A licence, then a royalty at about twice the rate

Royalty rate, against a standalone Armv9 CPU licence

0x1x2x3x

About 2x now; dashed to about 3x for later generations.

About twice the royalty rate of a standalone Armv9 CPU licence, and about three times with later generations.

About $25 billion of revenue by FY31

Arm’s revenue in FY26 was $4.92 billion, all of it licensing and royalties. Its target for FY31 is about $25 billion, of which the licensing and subsystem business is $10 billion and the chip $15 billion.

$0bn$5bn$10bn$15bn$20bn$25bnFY25$4.0bnFY26$4.9bnFY31Licensing and subsystemsArm AGI CPU$25bn
Royalties, and the FY31 licensing and subsystem businessLicensing and otherArm AGI CPU

FY25, reported

The year to March 2025, worked back from FY26 and its stated changes.,

FY26, reported

Up 23%, the third year in a row of growth above 20%.,,

FY31, target

About $25 billion: $10 billion from licensing and subsystems at an operating margin above 65%, and $15 billion from the chip at above 30%.

The white line inside the FY31 licensing and subsystem bar is where royalties would be at 20% a year from FY26’s $2,613 million: about $6.5 billion. That figure is worked out here. The first quarter of FY27 brought $1,289 million, with royalties of $715 million and licensing of $574 million.

Up to 136 cores in one chip

Arm says a rack of Arm AGI CPUs delivers more than twice the performance of a rack of x86 CPUs.

136cores

One chip, one square for each core

Up to 136 Neoverse V3 cores, on TSMC’s 3nm process, in a 300-watt envelope.

Lead partner and co-developer

Meta

Also named at the launch

  • Cerebras
  • Cloudflare
  • F5
  • OpenAI
  • Positron
  • Rebellions
  • SAP
  • SK Telecom

Available to order from

  • ASRock Rack
  • Lenovo
  • Quanta Computer
  • Supermicro

  1. Move up one layer at a time.

    Arm sold cores, then subsystems that earn about twice the royalty rate, and only then a chip, and it presents all three as one platform on one software base. We recommend extending an offer in steps, each built from the last, so that the new product is a larger version of something customers already buy from you.

  2. Give the new business its own margin.

    Arm expects its licensing and subsystem business to earn an operating margin above 65% and the chip business above 30%, and it says so in advance. We recommend a separate target for a business with a different cost base, so that a lower margin is a decision the plan already made and not a surprise that looks like a slip.

  3. Plan on the rates you have already signed.

    Over 70% of the royalties Arm forecasts through FY31 rest on rates already under contract, and the rest is the part it has to win. We recommend a plan that separates what is signed from what is hoped for, so that a forecast can be checked against its own commitments.

Sources

  1. 1. Arm Holdings plc (2026). About Arm. arm.com, Accessed 29 September 2026. arm.com
  2. 2. Arm Holdings plc (2026). Arm expands compute platform to silicon products in historic company first. Arm Newsroom, 24 March 2026. newsroom.arm.com
  3. 3. Arm Holdings plc (2026). Arm delivers record-breaking quarter and full-year results. Arm Newsroom, 6 May 2026. newsroom.arm.com
  4. 4. Arm Holdings plc (2026). Fourth quarter and full-year FY26 financial results and key metrics. Form 6-K, exhibit 99.2, SEC. sec.gov
  5. 5. Arm Holdings plc (2026). Consolidated annual report for the year ended 31 March 2026. Form 6-K, SEC. sec.gov
  6. 6. Arm Holdings plc (2026). Arm delivers record first-quarter for total revenue. Arm Newsroom, 29 July 2026. newsroom.arm.com
  7. 7. Investing.com (2026). Arm Q1 FY27 slides: AI surge drives record results, $25B revenue target. Investing.com, 29 July 2026, reporting Arm’s results presentation. investing.com

Headwater is not connected with Arm Holdings plc. Arm, Armv9, Neoverse, and Compute Subsystems are trade marks of their owners. Updated 29 September 2026.

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