RBC Capital has lowered its price target for Arm Holdings to $130.00 from $140.00 but maintained an Outperform rating on the stock. The adjusted target equates to about an 11% upside from Arm's recent share price of $116.70, though InvestingPro data suggests the equity is currently trading near its Fair Value.
The research note identified a softer outlook for fiscal fourth-quarter royalty growth as a likely catalyst for volatility in aftermarket trading. At the same time, RBC recorded management's public guidance that it expects to sustain roughly 20% growth in royalties in fiscal year 2027. That guidance sits alongside Arm's recent topline momentum: the company reported revenue growth of 26.45% over the trailing twelve-month period.
RBC's analysis called out the company's Data Center business as a key growth area. Data Center revenue more than doubled year-over-year, and average selling price tailwinds tied to the v9 architecture and CSS implementations helped counteract weaker smartphone unit growth. Those ASP improvements were singled out as an offset to softness in the smartphone segment.
On the licensing side, RBC highlighted 25% growth for Arm's licensing business, with the caveat that growth measures 18% when excluding SoftBank's contribution. Management said the contribution from SoftBank is expected to remain durable going forward, which the research firm noted as supportive of long-term licensing revenue stability.
Despite these positives, RBC flagged remaining uncertainty around Arm's chiplet and system-on-chip (SoC) strategy. Management has scheduled additional commentary on that topic for March 24, and RBC signaled that the market will be watching for clarifying detail. Even with that unresolved element, RBC characterized Arm's premium valuation as justified by an expected royalty growth rate near 20%, accelerating Data Center performance, and continued ASP tailwinds.
Valuation metrics cited in the note included a price-to-earnings ratio of 139.88 for ARM. InvestingPro assigns the company an overall financial health score of "GOOD" and, as noted in the research, offers additional investment resources around the stock.
Recent corporate moves and analyst actions were also summarized in the research and accompanying commentary. Arm has reorganized its business into three primary lines: Cloud and AI, Edge, and a newly created Physical AI division, the latter designed to broaden the company's footprint in robotics and to consolidate its automotive activities under the same umbrella.
In the analyst community, Susquehanna upgraded Arm from Neutral to Positive, explicitly citing its artificial intelligence initiatives. RBC initiated coverage with an Outperform rating while also raising caution about the potential dampening effect of higher memory prices on smartphone demand. William Blair reiterated an Outperform rating as well, pointing to multiple growth drivers that support the company’s expansion plans.
On the strategic partnership front, Arm has entered into a collaboration with South Korea aimed at strengthening that country’s semiconductor and AI capabilities. The agreement includes plans to establish a chip design school in South Korea leveraging Arm’s semiconductor design expertise.
Taken together, the analyst update and the company’s recent organizational and strategic moves paint a picture of a fast-growing semiconductor intellectual property company navigating short-term royalty cadence risk while leaning into Data Center, AI, and Physical AI opportunities.