Is ARM's Q2 2025 performance a sign of sustained growth?

Arm Holdings' Q2 2025 performance indicates a sustained growth trajectory, driven by several key factors:

1. Revenue Growth: Arm reported a total revenue of $844 million for Q2 2025, surpassing analyst estimates of $808.37 million. This represents a 5% year-over-year increase in revenue, demonstrating the company's ability to generate consistent growth.

2. Earnings Growth: The company's net income for the quarter was $107 million, with a diluted EPS of $0.1. More notably, the diluted EPS grew by 200% compared to the previous year, reaching $0.24. This significant increase in EPS reflects improved profitability and financial performance.

3. Royalty and Licensing Trends: Arm's revenue growth was primarily driven by record levels of royalty revenue, which increased by 23% year-over-year. This growth is attributed to the continued adoption of Armv9 architecture and the overall recovery in the smartphone market. Additionally, the company's licensing and other revenue remained strong, with $330 million reported for the quarter.
4. Future Outlook: Arm Holdings has provided guidance for the third quarter of fiscal year 2025, with projected revenue ranging from $780 million to $830 million and adjusted EPS between $0.23 and $0.27. These figures align closely with analyst expectations, reinforcing the company's optimistic growth outlook.
5. Strategic Positioning: Arm's strategic focus on artificial intelligence and its leadership in the mobile device market are expected to fuel continued growth. The company's Neoverse data center chips and V9 architecture are anticipated to power a significant portion of hyperscale data centers and AI applications, respectively.
6. Analyst Confidence: Multiple analysts have reiterated positive ratings on Arm Holdings, with several raising price targets based on the company's strong Q2 performance and growth prospects. This positive sentiment underscores the market's confidence in Arm's ability to sustain and accelerate growth.

In conclusion, Arm Holdings' Q2 2025 performance, marked by revenue and earnings growth, strategic positioning, and positive analyst sentiment, serves as a strong indicator of sustained growth for the company.