ARM Stock Drops After CEO Flags Supply Risks That Could Dent New Semiconductor Chips Sales In Q2

• Record quarterly revenue of $1.49 billion for the period ended March 31, 2026, representing 20% year-over-year growth.
• Royalty revenue of $671 million, up 11% year-over-year, and license revenue of $819 million, surging 29% year-over-year.
• Sees $2 billion worth of demand for a new in-house chip in fiscal years 2027 and 2028 combined, twice its previous estimate.

ARM Holdings (ARM) stock gave up early gains and dropped 6% after-hours after the firm’s CEO flagged supply constraints to meet an additional $1 billion in demand for its new datacenter chip.   

The semiconductor stock’s adjusted earnings per share for the fiscal fourth quarter ending March were $0.60, ahead of Wall Street’s consensus estimate of $0.58 and up from $0.55 last year. Revenue for the quarter reached $1.49 billion, better than expectations of $1.47 billion, and up 20% on the year.

Arm’s licensing revenue came in at $819 million, rising by 29% from last year, while its revenues from royalties grew at a slower pace of 11% to $671 million.

Shares initially soared as much as 13% after-hours before giving up all the gains and more. 

The company said it expects $2 billion in demand for a new in-house datacenter-focused chip in fiscal years 2027 and 2028 combined, twice its previous estimate, but said it could secure supply only for $1 billion worth of chips. 

"Customer response to Arm AGI CPU has been strong. We now have more than $2 billion of customer demand across fiscal 2027 and fiscal 2028, more than double what we stated at launch," ARM top boss Rene Haas and finance chief Jason Child said in a shareholder letter. 

However, the management confirmed it had secured supply for the first $1 billion in demand during the earnings call. "For the $2 billion we are now in the process of securing supply to support that."  

ARM, along with its chipmaking peers like AMD, are seeing a strong rise in chip demand as the world continues to increase usage of AI services, which require high computational power. 

ARM Guidance 

The company sees fiscal Q1 2027 ending June’s adjusted earnings of $0.40 per share, plus or minus $0.04 per share, on revenue of $1.26 billion, plus or minus $50 million. Analysts had expected a revenue of $1.25 billion. 

ARM Retail View 

Retail sentiment on Stocktwits was ‘extremely bullish’ and message volumes were ‘extremely high’. 

One user highlighted how most chipmakers are choked by limited manufacturing capacities and opined that they should raise prices. 

The stock has soared 114% year-to-date. 

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