Arm Holdings Raises Price Target to $175 Due to AI Growth Momentum

Wells Fargo raised Arm Holdings' price target to $175 from $145, citing AI growth momentum. The firm expects Arm to maintain 20% year-over-year annual contract value and licensing revenue growth. Arm's royalty revenue is predicted to increase by a high teens to low twenties percentage range year-over-year in fiscal 2026.

Title: Wells Fargo Boosts Price Target for ARM Holdings, Citing AI Growth Momentum

Wells Fargo has raised its price target for ARM Holdings (NASDAQ: ARM) to $175 from $145, citing the company's strong momentum in the AI sector. The investment bank expects ARM to maintain a 20% year-over-year growth in annual contract value and licensing revenue. Additionally, ARM's royalty revenue is predicted to increase by a high teens to low twenties percentage range year-over-year in fiscal 2026.

The move comes after a series of positive analyst reports. TD Cowen has increased its price target for ARM from $155.00 to $175.00, with a buy rating [1]. BNP Paribas upgraded ARM from a "neutral" rating to an "outperform" rating, boosting its target price from $110.00 to $210.00 [1]. UBS Group and Morgan Stanley have also raised their target prices for ARM, with UBS increasing it from $155.00 to $185.00 and Morgan Stanley raising it from $150.00 to $194.00 [1]. Despite these positive developments, Barclays decreased its target price from $125.00 to $115.00, and Bank of America cut its price objective from $144.00 to $135.00 [1].

ARM reported a quarterly revenue of $1.05 billion, a 12.1% increase year-over-year, surpassing analysts' estimates by a narrow margin [1]. The company's earnings per share (EPS) for the quarter was $0.35, topping the consensus estimate of $0.34 [1]. ARM's net margin was 16.96% and return on equity was 15.56% [1].

The semiconductor industry is undergoing a seismic transformation driven by the explosive demand for AI compute. Arm Holdings, traditionally a neutral IP licensor, is now venturing into manufacturing. This strategic pivot promises to redefine its value proposition and its vulnerabilities [2]. Arm's first in-house chips, produced in partnership with TSMC, are tailored for data centers and AI accelerators, targeting clients like Meta and AWS. By 2028, the AI semiconductor market is projected to grow from $150 billion to $500 billion, and Arm aims to be at its center [2].

However, this transition is not without risks. Manufacturing requires significant capital expenditure, and Arm's operating margin has been on a five-year decline [2]. The rise of RISC-V, an open-source instruction set architecture, poses a threat to Arm's ecosystem, which has long been a flywheel of innovation [2]. Geopolitical risks, such as U.S. export controls and supply chain disruptions, further complicate the picture [2].

Despite these challenges, ARM's partnerships remain a critical asset. Its collaboration with NVIDIA on the Grace Hopper and Blackwell superchips has positioned it as a key player in AI infrastructure [2]. The company's investment in tools like KleidiAI, which optimizes machine learning kernels for Arm CPUs, further solidifies its position in the AI edge market [2].

For investors, ARM's transformation offers both opportunities and risks. The company's strategic pivot into manufacturing could capture a larger share of the value chain in the AI era. However, the capital intensity of this new venture and the potential for ecosystem disruption pose significant challenges [2].

References:
[1] https://www.marketbeat.com/instant-alerts/arm-nasdaqarm-stock-price-expected-to-rise-td-cowen-analyst-says-2025-07-31/
[2] https://www.ainvest.com/news/arm-holdings-strategic-reimagining-navigating-ai-tectonic-shift-ecosystem-risks-2508/