Key Takeaways:
- Revenue Momentum: Arm Holdings delivered about $4 billion LTM revenue with 21% growth, reflecting rising royalty rates across AI, automotive, and infrastructure markets.
- Margin Profile: Arm Holdings achieved 46% operating margins, showing strong operating leverage from its asset-light licensing model.
- Price Projection: Based on current growth and margin assumptions, Arm Holdings stock could reach $189 by 2028.
- Return Outlook: From $114, Arm Holdings implies 66% total upside and about 26% annualized returns over the next 2 years.
Arm Holdings plc (ARM) designs and licenses processor IP and generated about $4 billion revenue in 2025, showing scale across mobile, data center, and automotive chips.
The company gained about 4% after a January 2026 upgrade which reflects shifting sentiment after an 11% decline during 2025.
Arm reported $1 billion quarterly revenue in September 2025, up 34% year over year, confirming accelerating royalty growth.
Arm generated about $1 billion LTM operating income with a 20% margin, reflecting strong profit leverage from IP licensing.
With revenue growth near 21% and margins above 46%, Arm trades near $114, prompting debate over embedded growth expectations.
What the Model Says for ARM Stock
We evaluated Arm using assumptions tied to royalty expansion, high-margin licensing economics, and sustained relevance across AI and compute.
Using 20.9% revenue growth, 46.2% margins, and a 58.7x exit multiple, the model reflects premium positioning and operating leverage.
The model points to a $188.99 target price, implying a 65.9% total return and 26.0% annualized return over 2.2 years.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ARM stock:
1. Revenue Growth: 20.9%
Arm delivered 23.9% revenue growth last year, driven by royalty momentum across smartphones, data centers, and early AI workloads.
Recent execution shows rising license value per chip as Arm expands royalty rates across premium mobile, infrastructure, and automotive workloads.
Forward growth assumes sustained architecture relevance in AI servers and edge devices, offset by cyclical demand risk in consumer electronics.
Revenue growth of 20.9%, per compiled analyst estimates, reflects strong royalty momentum tempered by moderation following Arm’s post-IPO growth surge.
2. Operating Margins: 46.2%
Arm generated operating margins of 43.6% historically, supported by a pure licensing model with minimal manufacturing exposure and high incremental profitability.
Margins have expanded as royalty revenue outpaces fixed operating costs, lifting profitability as revenue scales faster than headcount and R&D growth.
Normalization accounts for higher ongoing investment in AI compute platforms while preserving structurally high margins from software-like economics.
Operating margins of 46.2%, as reflected in pooled analyst expectations, signal durable operating leverage alongside ongoing reinvestment into AI and platform expansion.
3. Exit P/E Multiple: 58.7x
Arm has traded between roughly 73x and 77x earnings historically, reflecting scarcity value, strategic relevance, and high growth expectations.
The chosen exit multiple embeds caution around long-duration growth assumptions while remaining above market averages due to Arm’s licensing dominance.
Valuation sensitivity remains tied to royalty durability and Arm’s role in AI infrastructure adoption beyond mobile computing.
A 58.7x exit multiple, based on aggregated market forecasts, captures Arm’s premium positioning while accounting for execution risk and valuation cooling.
What Happens If Things Go Better or Worse?
Arm’s outcomes depend on royalty rate expansion, AI workload adoption, and platform penetration, setting up a range of possible paths through 2030.
- Low Case: If device demand softens and licensing uptake slows, revenue grows around 22.8% with margins near 38.1% → 21.1% annualized return.
- Mid Case: With core licensing executing steadily, revenue growth near 25.3% and margins around 40.7% hold → 30.0% annualized return.
- High Case: If AI and data center adoption accelerates, revenue reaches about 27.9% and margins approach 43.0% → 38.7% annualized return.
The $342.50 mid-case target price for Arm stock is achievable through execution on royalties and scale, without multiple expansion or speculative re-rating.
How Much Upside Does It Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
