Rosenblatt analyst Hans Mosesmann reiterated a Buy rating on Arm Holdings Plc
The analyst happened to be in Cambridge recently and came away with increased conviction that royalty trends are rising at a faster clip on the heels of more strategic licensing engagements that are increasingly AI-centric.
Mosesmann noted double-digit rates, up from the current mid-single digits, hitting the model by the end of the decade (up from his previous assumption of early next decade), shifting the model aggressively to over 80% royalties.
ARM's P/E multiple is supportive of 50%+ levels given secular and royalty shifts at ~10% by the end of the decade, if not sooner, the analyst writes
He said that, like Nvidia Corp
The analyst noted Arm's earnings power north of $3.00 in fiscal 2026.
The move to the new v9 architecture (2x the royalty rate of v8) is by the Street being digested after the recent beat and raise.
In addition, the computing subsystem (CSS) program is becoming an incredibly successful market thrust that shaves off as much as a year from engagement to silicon.
Time-to-silicon has become a crucial dynamic on AI accelerated schedules amidst increasing front-end silicon at leading-edge nodes (over 20% per node), per the analyst.
A top-tier customer saved 80 engineering years with CSS. CSS is a system-ready bundle with reference S/W stack, lead node, and RTL validated and pre-tuned vs. raw ARM physical IP delivery.
CSS is a mid-single digit royalty rate adder to existing royalty rate levels, Mosesmann said.
The analyst does not expect Softbank or ARM to make another offering anytime soon.
He is intrigued by Arm's work on running mobile AI models without acceleration, which points to existing Android platforms running on Arm 700 series CPU cores.
Quite interestingly, Arm CEO Rene Hass was invited on stage for the Intel Corp
As a historical competitor for Intel, the critical takeaway is that the Intel IFS is likely impossible without Arm support, given the ubiquity going forward. This is leverage per the analyst.
The analyst projects fourth-quarter revenue and EPS of $875 million and $0.30.
Price Action: ARM shares traded higher by 10.50% at $147.40 on the last check Monday.
