Arm Holdings (ARM) delivered a strong third-quarter 2025 earnings report, showcasing impressive revenue growth and bright performance in its royalty segment. Despite surpassing analysts’ expectations, the stock experienced a sharp decline in after-hours trading, as investors had anticipated even stronger forward guidance. However, after the news of Arm and Qualcomm resolving their legal dispute broke, the trend flipped, and ARM stock regained positive momentum.
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Q3 Earnings Highlights
Arm reported $983 million in revenue, a 19% increase year-over-year. Earnings reached $252 million, or $0.24 per share, beating Wall Street forecasts. The standout performer was the royalty revenue segment, which surged 23% to $580 million, driven by the growing adoption of Arm-based chips in data centers, mobile devices, and AI applications. Additionally, license and other revenue rose 14%, totaling $403 million.
The company has delivered mixed guidance and projects fourth-quarter revenue between $1.175 billion and $1.275 billion, aligning with analysts’ expectations. However, the company narrowed its full-year guidance to $3.94 billion – $4.04 billion, indicating it would not reach the high end of its previous forecast.
What Was the Market’s Reaction?
Despite the strong financial results, Arm’s stock fell about 6% in extended trading. Investors, who had driven the stock up 6.8% during regular trading hours, seemed to have priced in even more substantial results and a more bullish outlook. However, the stock has reverted and risen 6.82% since yesterday. Here’s why:
Resolution of Legal Dispute with Qualcomm
In a positive development, Arm and Qualcomm (QCOM) resolved their long-standing legal dispute over chip licensing. The agreement allows Qualcomm to continue using Arm’s technology in its Snapdragon processors, ensuring long-term revenue stability for Arm. This resolution had previously boosted investor confidence, contributing to the stock’s strong year-to-date performance.
While Arm remains a leader in chip architecture, the market’s reaction highlights the high expectations for the company as AI and semiconductor demand continue to surge. Arm’s strong performance and strategic resolutions signal a promising future for potential investors despite the recent market pullback.
What Is ARM Price Target?
On Wall Street, Arm is considered a Moderate Buy. The price target for ARM stock is $162.36, implying a 6.29% downside potential.
