Key Takeaways:
- AI Licensing Momentum: Arm Holdings plc benefits from rising AI infrastructure demand as v9 and CSS adoption expand royalty rates across data center and computing platforms.
- Mixed End-Market Signals: Arm Holdings plc faces mobile exposure at 53% of royalties while server adoption and AI workloads offset softer smartphone demand.
- Price Outlook: Based on 21% revenue growth, 46% operating margins, and a 55x multiple, Arm Holdings plc stock could reach $173 by March 2028.
- Valuation Upside: From the current $107 price, Arm Holdings plc implies 62% total upside and a 25% annualized return over 2 years.
Arm Holdings plc (ARM) designs and licenses processor architectures, which positions it as core infrastructure across smartphones, data centers, and AI workloads.
Last week, Arm Holdings plc shares rose 1% after ASML reported €13 billion bookings, indicating sustained AI-driven semiconductor investment momentum.
Arm Holdings plc generated $4 billion in revenue over the last twelve months, which matters because royalties scale efficiently across expanding device and server volumes.
The company produced $1 billion in operating income with a 44% margin, which explains its ability to fund R&D while maintaining strong profitability.
While Arm Holdings plc trades near $107 with a 55x forward multiple, improving fundamentals contrast with cautious pricing, setting up a valuation debate worth examining further.
What the Model Says for ARM Stock
We evaluated Arm stock based on royalty-led scale economics, high-margin licensing, and strong positioning across AI, servers, and mobile computing.
Using 20.8% revenue growth, 46.4% operating margins, and a 55.2x exit multiple, the model points to $173.
That implies 61.9% total upside and a 25% possible annual return by 2028, ending at a $173.12 target price.
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: 20.8%
Arm stock delivered 24% revenue growth over the past year, reflecting accelerating royalty streams tied to AI servers, custom silicon, and expanding compute workloads.
Recent quarters show sustained licensing momentum as hyperscalers and OEMs increase Arm-based designs across data centers, automotive platforms, and edge devices.
Forward growth assumes continued AI-driven adoption while accounting for softer mobile demand, which still represents a meaningful share of royalty revenue.
Viewed through aggregated analyst forecasts, 20.8% revenue growth reflects AI-linked demand strength while accounting for cooling smartphone and PC volumes, supporting a 25% annual return profile.
2. Operating Margins: 46.4%
Arm stock reported operating margins of 44% recently, placing the business among the highest-margin companies in global semiconductors due to its asset-light licensing model.
Margin expansion reflects rising royalty mix, stable R&D intensity, and limited incremental costs as volumes scale across existing IP portfolios.
Normalization assumes disciplined expense growth and no aggressive cost reduction, while recognizing risks from increased investment in next-generation architectures.
Against consensus operating benchmarks, 46.4% margins indicate sustained royalty efficiency while preserving flexibility for ongoing platform investment and ecosystem support.
3. Exit P/E Multiple: 55.2x
Arms stock has historically traded at elevated earnings multiples, with recent levels above 70x reflecting scarcity value and AI-driven growth expectations.
The chosen exit multiple assumes moderation from peak sentiment as growth normalizes, while still recognizing Arm’s central role in global compute architecture.
Investor caution stems from valuation sensitivity and dependence on end-market cycles, offset by long-term visibility in licensing and royalties.
Across pooled market forecasts, a 55.2x exit multiple values Arm’s central role in compute architecture without embedding assumptions of continued valuation inflation.
What Happens If Things Go Better or Worse?
Arm stock outcomes depend on data center adoption, smartphone recovery, and royalty rate expansion, setting up a range of possible paths through 2030.
- Low Case: If mobile demand stays soft and server adoption slows, revenue grows 21.2% with margins near 38.8% → 18.9% annualized return.
- Mid Case: With AI servers scaling steadily and licensing execution holding, revenue grows 23.5% and margins improve toward 41.5% → 27.7% annualized return.
- High Case: If AI workloads accelerate and royalty rates expand broadly, revenue reaches 25.9% with margins near 43.8% → 36.3% annualized return.
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!
