Arm Holdings Q2 2026 Revenue Guidance Sets Tone for Growth

Arm Holdings has announced Q2 2026 revenue guidance of $1.01B to $1.11B, a 42% increase in share price over the last quarter. The company's partnership with Cerence Inc. to enhance AI capabilities in vehicles and strategic initiatives align with the broader tech market, bolstering market sentiment. Analysts remain divided on price targets, with some predicting growth driven by robust revenue and expanding profit margins. The valuation report suggests Arm's current price could be inflated.

Title: Arm Holdings Stock Drops Amid Q2 Guidance and Analyst Disagreement

Arm Holdings (NASDAQ: ARM) saw its shares drop 6% in pre-market trading on July 31, following its Q1 2026 results and Q2 guidance. The company reported $1.05 billion in Q1 revenue, slightly under the $1.06 billion estimate, and adjusted earnings of $0.35 per share, in line with forecasts. Royalty revenue grew 25% to $585 million, while licensing revenue declined 1% to $468 million. Year-to-date, ARM stock has gained 32% [1].

CEO Rene Haas announced plans to increase R&D spending on AI initiatives and develop custom chips and chiplets in addition to its licensing model. Arm's designs power nearly all smartphones and are deployed in data-center and IoT devices. More than 70,000 organizations run workloads on Arm-based servers. In the quarter, Arm signed three new Arm Compute Subsystems agreements, two for data-center chips and one for PC chips. Customers including Nvidia (NVDA), Microsoft (MSFT), and Google (GOOG) have started using Arm-based AI accelerators [2].

Analysts remain divided on ARM stock's prospects. Based on one-year price targets from 31 analysts, the average target price for ARM Holdings PLC is $144.74, with a high estimate of $210.00 and a low estimate of $76.54. The average target implies a downside of -11.38% from the current price of $163.32 [2].

Raymond James raised its price target on Arm Holdings to $165 from $140, maintaining an Outperform rating. The firm noted that while Arm's fiscal first-quarter results were in line with expectations, its fiscal second-quarter outlook was slightly weaker than anticipated. The company's royalty revenue grew 25% year-over-year, driven by strong data center performance despite weakness in smartphone and IoT units. ARM maintains impressive profitability with a gross margin of 97% and operates with moderate debt levels, while its current ratio of 5.2x indicates strong liquidity [3].

Mizuho, Wells Fargo, and BNP Paribas have also increased their price targets for Arm Holdings, reflecting a positive outlook on the company's growth potential in various markets. However, Goldman Sachs initiated coverage with a Neutral rating and a $160 price target, expecting Arm to sustain its leading position in the smartphone sector and expand in the datacenter market [3].

Arm Holdings' Q2 2026 revenue guidance of $1.01B to $1.11B suggests a 42% increase in share price over the last quarter. The company's partnership with Cerence Inc. to enhance AI capabilities in vehicles and strategic initiatives align with the broader tech market, bolstering market sentiment [4].

References
[1] https://finance.yahoo.com/news/arm-holdings-arm-stock-plunges-121548082.html
[2] https://www.tradingview.com/news/gurufocus:600b03cbd094b:0-arm-holdings-arm-stock-plunges-after-disappointing-q2-eps-outlook/
[3] https://www.investing.com/news/analyst-ratings/arm-holdings-price-target-raised-to-165-from-140-at-raymond-james-93CH-4163421
[4] https://www.fool.com/investing/2025/07/31/arm-stock-earnings-is-arm-a-buy-ai-stocks/