Few companies sit inside as many devices as Arm while earning money, so unusually, the Arm second-quarter fiscal 2027 results deserve more than a glance at the headline growth rate. Revenue rose 27 percent, but the mix of upfront license fees and per-chip royalties explains most of the story.
In this article, we will explore the figures for the quarter ended September 30, 2026, how Arm earns its money, why GAAP and adjusted profit moved in opposite directions, and what the company’s guidance for the next quarter says.
Arm Second Quarter Fiscal 2027 Results at a Glance
The short answer is that Arm had a strong quarter on revenue and a weaker one on reported profit. Total revenue was $1,443 million, up 27 percent from $1,135 million a year earlier. License and other revenue was $773 million, up 50 percent, and royalty revenue was $670 million, up 8 percent. GAAP net income fell 45 percent to $130 million, while non-GAAP net income rose 36 percent to $566 million.
These figures come from Arm’s shareholder letter and are in US dollars. Arm’s fiscal year ends on March 31, so the quarter that ended on September 30, 2026 is its second quarter of fiscal 2027, covering July through September. That labeling trips up many readers, because the fiscal 2027 tag appears while the calendar year is still 2026. The same convention applies to the next period, which Arm calls its third quarter and which covers October through December.
The quarter does not settle everything. It leaves open why profit on the GAAP basis dropped, whether the license surge repeats, and how the company’s cost base will behave. Those questions come up again below, with the figures that bear on each.
Who Is Affected
Arm’s results matter first to the companies that license its designs and to the people who follow the sector, but they reach ordinary consumers indirectly. The designs sit inside a large share of the phones, tablets and connected devices people already own, so the health of the licensing relationship shapes what chipmakers can build. A reader who owns a phone is unlikely to feel any change from a single quarter’s numbers. The value for non-specialists lies in seeing how a design company, which sells ideas and not products, can post growth that looks very different from a manufacturer’s.
The Numbers Side by Side
The table below collects the headline figures. Where a change is shown, it is the company’s own comparison with the same quarter a year earlier.
| Measure | This quarter | Year-earlier quarter | Change |
| Total revenue | $1,443 million | $1,135 million | Up 27 percent |
| License and other revenue | $773 million | Not stated | Up 50 percent |
| Royalty revenue | $670 million | Not stated | Up 8 percent |
| GAAP net income | $130 million | $238 million | Down 45 percent |
| Non-GAAP net income | $566 million | $417 million | Up 36 percent |
| GAAP diluted EPS | $0.12 | $0.22 | Lower |
| Non-GAAP diluted EPS | $0.52 | $0.39 | Higher |
Designs, Licenses and Royalties: How Arm Earns Money
To read the numbers properly, it helps to know what Arm sells. The company designs processor architectures and related technology and licenses them to other companies, which then build chips for phones, cars, servers and many other products. Arm has traditionally not manufactured or sold finished chips itself, though its business may change over time. That is why its revenue is split into two lines that behave very differently.
Seeing this split matters because the same revenue headline can mean different things depending on which line drives it. Growth led by royalties points to more chips shipping or higher value per chip. Growth led by licenses points to partners signing or extending agreements, which can be a strong signal about plans but a weaker one about current sales. This quarter leaned toward the second pattern, and the sections below examine each line in turn.
The Upfront Side
License revenue comes from companies paying for the right to use Arm’s designs and technology. The deals can be large, they are negotiated individually, and the revenue is often recognized when the technology is delivered or over the life of a contract, depending on the terms. Because of this, the line can jump from one quarter to the next without any change in how many devices are being sold. The company labels the line “license and other”, so it can include items beyond pure licenses.
The per-Chip Side
Royalty revenue is the fee Arm earns when its licensees ship chips that use its designs. It is tied to the volume and value of those chips, which makes it a more direct reflection of the real-world device market. Royalties are generally reported with some delay, since chipmakers tell Arm about shipments after the fact, so a quarter’s royalty figure often reflects earlier sales. The exact accounting rules are in Arm’s filings and are worth checking if the detail matters to you.
License Revenue Jumps 50 Percent
The standout number is license and other revenue of $773 million, up 50 percent. It was the larger of the two lines, making up about 54 percent of total revenue by simple arithmetic, and royalty revenue made up the remaining 46 percent.
Rounded percentages can be used to work out how much each line added. Dividing $773 million by 1.50 suggests the year-earlier license figure was roughly $515 million, and dividing $670 million by 1.08 suggests roughly $620 million for royalties. Those two estimates add to about $1,135 million, matching the year-earlier total, which is a good sign that the arithmetic holds. On that rough basis, license revenue grew by about $258 million and royalties by about $50 million, so license revenue accounts for roughly 84 percent of the $308 million rise in total revenue. This is simple arithmetic on rounded figures and not a number Arm reported.
One practical way to cross-check the claim is to look at the cumulative picture. A single quarter of 50 percent growth is notable, but only a series of quarters shows whether license revenue is on a higher plateau or simply had a large quarter. Readers who record the license and royalty lines each quarter in a simple notebook or spreadsheet will see the pattern in a year or so, with no special tools.
Why a Lumpy Line Deserves Caution
A 50 percent jump in a line built on negotiated contracts is not the same as a 50 percent rise in sales of a mass-market product. A single large agreement or a cluster of renewals in one quarter can lift the line, and a quieter quarter can follow. The shareholder letter, as we have it, does not explain what drove the increase, so readers should avoid attributing it to a specific customer, product generation or trend without evidence.
What the Jump Does and Does Not Show
It does show that Arm’s partners are paying for technology in meaningful volume at present. It does not show how many chips will ship, because that is what the royalty line measures over time. Many analysts treat license strength as a sign of future royalty potential, since a licensee that pays today is typically planning to ship chips later. That is a reasoned view, not a reported fact, and the lag between a license deal and shipped chips can be long and varies from project to project.
Royalties Grow 8 Percent
Royalty revenue of $670 million, up 8 percent, is the quieter line, but it is the one most linked to everyday gadgets. Every phone, tablet, connected car or server chip built on an Arm design that ships can generate a fee, so royalty growth is a rough gauge of how the broader chip market and Arm’s share of it are doing.
An 8 percent rise is solid rather than spectacular, and it was far below the license line’s pace. It is also worth noting how little the material tells us about the cause: it gives the percentage, not a breakdown by device type. Royalties are influenced by the number of chips shipped, the mix of chip types, and the royalty rate that applies to each design, and any of these could have moved. Without Arm’s own detail, it would be speculation to say which did.
Reading Royalties Against the License Line
Because royalties follow shipped chips, they tend to be smoother than license revenue, and a gap between the two growth rates is normal rather than alarming. Here the gap was wide: 50 percent against 8 percent. One way to hold the two together is to treat license revenue as a measure of what partners are committing to build and royalty revenue as a measure of what they have already shipped. The first can run ahead of the second for a while. If the commitments turn into shipments later, royalties would be the line to show it, but the material here gives no basis for saying when or whether that happens.
What Would Change the Picture
A reader following the royalty line over several quarters should watch for two things: whether the growth rate holds near the level seen this quarter, and whether the line keeps its share of total revenue, which was about 46 percent this time by simple arithmetic. A falling share is not a problem in itself if total revenue is rising, as it did here, but it tells you where the growth is coming from.
The sensible takeaway is that royalties grew steadily, while the large step up in total revenue came from licensing. For readers tracking the device market, that is a reminder that a strong revenue headline at a chip design company does not automatically mean a matching surge in devices being sold.
Earnings: GAAP Profit Fell While Adjusted Profit Rose
The profit picture is the most confusing part of the release. GAAP net income was $130 million, down 45 percent from $238 million, and GAAP diluted earnings per share were $0.12 against $0.22. Non-GAAP net income, on the other hand, was $566 million, up 36 percent from $417 million, and non-GAAP diluted earnings per share were $0.52 against $0.39.
GAAP follows the standard accounting rules, while non-GAAP removes certain items that management considers outside normal operations. The gap between the two this quarter was $436 million in net income, by simple arithmetic. As a share of revenue, non-GAAP net income was about 39 percent and GAAP net income about 9 percent, again by simple arithmetic.
To make the gap concrete, here is an illustration with invented round numbers. Suppose a company earns 1,000 in revenue and reports an accounting profit of 100. If management removes 300 of costs it regards as outside normal operations, and the tax effect of those items is small, the adjusted profit becomes about 400. The adjusted figure rose by a large multiple and the reported figure did not move, yet no sale changed. Real reconciliations are more detailed, but the principle is the same, and it is why the size of the gap matters as much as the direction.
What Typically Sits Between the Two Measures
Companies commonly exclude items such as share-based compensation, the amortization of acquired intangible assets, restructuring costs and certain tax effects when they calculate adjusted profit. Which of these applied to Arm, and in what amounts, is not in the material we have, and the reason for the GAAP decline is likewise not given. Arm’s shareholder letter includes a reconciliation, and anyone who needs the explanation should read it directly instead of relying on summaries.
How to Hold Both Numbers in Mind
Neither measure is wrong. GAAP shows what the company reports under accounting rules, including costs that management excludes from the adjusted view. Non-GAAP is useful for comparing operating performance across periods, but it depends on management’s choices about what to exclude. A widening gap, as seen here, is a signal to read the reconciliation, not a reason to dismiss either figure.
Outlook for the Third Quarter
Arm also gave guidance for its fiscal third quarter. It expects revenue of $1.54 billion, plus or minus $50 million, which makes a range of $1.49 billion to $1.59 billion. It expects non-GAAP operating expense of about $825 million and non-GAAP diluted earnings per share of $0.56, plus or minus $0.04, or a range of $0.52 to $0.60.
Guidance is the company’s own expectation and can turn out higher or lower, and nothing here is a forecast or advice from TechGili. The table compares the guidance range with the quarter just reported.
| Item | Second quarter result | Third quarter guidance |
| Revenue | $1,443 million | $1.49 billion to $1.59 billion |
| Non-GAAP operating expense | Not stated | About $825 million |
| Non-GAAP diluted EPS | $0.52 | $0.52 to $0.60 |
By simple arithmetic, the $1.54 billion midpoint is about 7 percent above the second-quarter revenue, the low end is about 3 percent above and the high end about 10 percent above. The low end of the earnings per share range equals the result just reported at $0.52. So the guidance describes a quarter in which revenue is expected to rise again from this level, and in which earnings per share are expected to stay level or move higher.
The guidance on non-GAAP operating expense, about $825 million, is a cost expectation and is not a profit figure. Subtracting it from revenue does not give profit, because other costs, such as the direct cost of revenue, sit outside that line, and the material here does not provide them. Its use is for tracking whether spending is growing faster or slower than revenue over time, which readers can do by recording the figure each quarter.
The earnings range works the same way. A result of $0.56, plus or minus $0.04, spans $0.52 to $0.60, so the swing either side is about 7 percent of the midpoint by simple arithmetic. Revenue has a narrower band, about 3 percent either side. Taken together, the ranges say the company sees earnings as somewhat less predictable than revenue, though that is an inference from the ranges and not a statement from management.
A word of caution applies to any such guidance: because license revenue is lumpy, it is harder to forecast than a steady royalty stream, and a range of plus or minus $50 million on $1.54 billion is about 3 percent either way. That width is a company choice and says something about its confidence, but how much is a matter of interpretation.
Limits: What the Material Does and Does Not Cover
Earnings coverage works best when it separates reported facts from interpretation, and this story has several places where that line matters.
Confirmed Facts Versus Reading Between the Lines
The confirmed facts are the revenue lines, the profit measures and the guidance, all from Arm’s shareholder letter. The percentages we calculated, such as the share of revenue from each line and the approximate dollar growth of each, are our arithmetic on rounded figures. Statements about what license strength implies for the future are interpretation and are labeled as such. Nobody can read the next quarter from this one, and guidance covers only a single quarter.
Gaps in the Material
The material does not give the release date, the reason for the GAAP decline, the market reaction or a breakdown of license revenue by customer. It also does not provide a year-earlier figure for each revenue line, which is why those were estimated from the percentage changes above. If an outlet offers a confident explanation for any of these gaps, check whether it cites the company or only offers a guess.
Readers Outside the United States
Arm reports in US dollars, so readers in other countries may see the numbers move when converted to local currency. Its licensees are located across the world, and rules about technology licensing and trade differ by country and can change, so check official sources if a business decision depends on them. For personal financial decisions, a qualified professional can advise on your situation.
A Checklist for Following Arm Earnings
You do not need to be an analyst to follow a company like Arm. A short routine makes each report easier to digest, and the same approach works for other chip design and licensing companies. None of this is investment advice.
Start From the Fiscal Calendar
Confirm which quarter you are reading. Arm’s year ends on March 31, so its labels run ahead of the calendar year. Mixing up periods when comparing with other companies, many of which use calendar years, is a common error.
Read the Two Revenue Lines Separately
Treat license and royalty revenue as two businesses. Ask whether growth came from the lumpy line, the steady line or both, as in this report. Then compare growth in dollars, not just percentages, since 50 percent on one line and 8 percent on another can be closer in dollars than they look.
Reconcile GAAP and Non-GAAP
When the two profit measures diverge, find the reconciliation table in the shareholder letter and note the largest items. Then decide which measure answers your question.
Watch for Common Mistakes
Three errors come up repeatedly. The first is treating the fiscal quarter as a calendar quarter. The second is comparing a GAAP number from one source with a non-GAAP number from another and drawing a conclusion from the gap. The third is quoting a growth rate without saying which line it applies to; here, 50 percent belongs to license and other revenue, 8 percent to royalties, and 27 percent to the total. Writing the line name beside every percentage avoids all three.
Compare Guidance With the Latest Result
Place the range next to the figure just reported, as in the table above, and track where the next result lands. The following table summarizes the routine.
| Step | What to check | Why it helps |
| Calendar | Which fiscal quarter the report covers | Avoids comparing mismatched periods |
| Revenue mix | License versus royalty growth in dollars | Separates lumpy deals from steady volume |
| Profit basis | GAAP against non-GAAP and the reconciliation | Shows what management excludes |
| Guidance | Range against the last actual result | Reveals the starting point and the width |
| Source | The company letter or filing itself | Provides definitions that summaries omit |
Peers with different calendars complicate comparisons further. Many technology companies report on calendar quarters, so Arm’s second fiscal quarter lines up with their third calendar quarter, which is the July to September period. Matching on months, not labels, keeps the comparison honest.
Conclusion
Arm’s quarter ended September 30, 2026 combined brisk revenue growth with a split verdict on profit. License revenue did most of the lifting, royalties grew at a steadier pace, and the two profit measures pointed in opposite directions for reasons the available material does not explain.
The guidance describes another step up in revenue and flat-to-higher adjusted earnings per share, as the company’s own expectation. The best habit for readers is to separate the lumpy line from the steady one and to read the reconciliation before drawing conclusions.
Frequently Asked Questions
How Much Was Arm’s Revenue in the Second Quarter of Fiscal 2027?
Total revenue was $1,443 million, up 27 percent from $1,135 million a year earlier. License and other revenue was $773 million and royalty revenue was $670 million.
Which Months Does Arm’s Second Fiscal Quarter Cover?
Arm’s fiscal year ends on March 31, so the second quarter of fiscal 2027 ran through September 30, 2026. That means it covers July through September 2026.
Which Factors Explain the Fall in Arm’s GAAP Net Income?
GAAP net income was $130 million, down 45 percent, while non-GAAP net income was $566 million, up 36 percent. The reason for the GAAP decline is not given in the material available here, so check the reconciliation in Arm’s shareholder letter.
Is Arm’s License Revenue Growth Likely to Last?
Nobody can say from these figures. License revenue is tied to individual contracts and can swing from quarter to quarter, so one strong quarter does not set a trend.
Which Revenue Range Did Arm Guide for the Third Quarter?
Arm guided revenue of $1.54 billion, plus or minus $50 million, with non-GAAP diluted earnings per share of $0.56, plus or minus $0.04. It also expects non-GAAP operating expense of about $825 million.
Does Arm Make Its Own Chips?
Traditionally Arm designs architectures and technology and licenses them to other companies that build the chips, earning royalties as those chips ship. Check Arm’s own filings for any change to that model.