Arm’s Q2 FY25 financial results reveal a 5% increase in revenue to $844 million, spurred by strong year-over-year growth in royalty revenue and rising annualized contract value (ACV). Royalty revenue reached $514 million, a 23% jump, largely driven by increasing adoption of Armv9 technology and a recovering smartphone market. License and other revenue, however, declined by 15% to $330 million, reflecting typical fluctuations in high-value licensing agreements and backlog contributions. Annualized contract value (ACV), a metric for recurring license revenue, grew 13% year-over-year to $1,253 million, with remaining performance obligations (RPO) increasing by 10% to $2,385 million.
Arm’s expanding AI and cloud computing reach, alongside a strong pipeline in IoT and automotive markets, further supports revenue momentum. For example, in partnership with Meta, Arm optimized the Llama 3.2 large language model to run more efficiently on Arm CPUs, achieving a 5x reduction in processing time for initial tokens and a 3x improvement in token generation. Arm also launched the Cobalt 100 chip with Microsoft and the Axion chip with Google, both optimized for cloud workloads, underscoring its growing role in cloud data centers. Additionally, Arm’s CSS program is gaining traction, doubling the number of licenses signed this fiscal year and enabling faster, more cost-effective chip development.
• Q2 FY25 revenue: $844 million, a 5% year-over-year increase
• Royalty revenue: $514 million, up 23% due to Armv9 adoption and smartphone recovery
• License revenue: $330 million, down 15% due to timing of high-value agreements
• Annualized contract value (ACV): $1,253 million, up 13% year-over-year
• Remaining performance obligations (RPO): $2,385 million, up 10% quarter-over-quarter
• Six new Arm Total Access licenses signed, expanding the total to 39 across top customers
• Arm Flexible Access program now has 269 customers, broadening Arm’s ecosystem reach
• Meta collaboration: 5x faster initial token processing and 3x faster token generation with Kleidi AI libraries
• Armv9 adoption: Now accounts for 25% of royalty revenue, up from 10% a year ago
• Key partnerships: Microsoft’s Azure Cobalt 100 and Google’s Axion chip for cloud data centers on Arm CPUs
• Edge and IoT market expansion: Licensing for high-performance AI chips for edge devices is increasing
• Data center market: NVIDIA’s upcoming Grace Blackwell superchips to combine Arm CPUs with high-performance accelerators
• Gross profit: GAAP $812 million, Non-GAAP $820 million, reflecting a 97.2% margin
• Operating expenses: GAAP $748 million; Non-GAAP $494 million, up 25% year-over-year driven by increased engineering staff
“Demand for our high-performance Armv9 and CSS compute platforms continues to exceed expectations and accelerate our licensing and royalty revenue growth,” said Rene Haas, CEO. “AI everywhere is generating new opportunities for the Arm compute platform from the cloud to the edge.”
