Arm is a widely known player in the semiconductor industry. For decades, the company has designed its instruction set architecture and licensed it to companies that develop chips based on it. Among the Arm’s clients are tech giants, including Nvidia, Alphabet, and others.
However, following the unveiling of its first in-house chip on March 24, Arm is no longer solely a supplier but is also emerging as a partial competitor to these companies.
According to its CFO, the new CPU release is expected to benefit all parties: it will provide partners with greater choice, expand the market by attracting customers who didn’t find the license model suitable, and for Arm, it would create a new growth opportunity.
The shares initially declined on Wednesday on the news before rallying sharply following the announcement of financial targets. The 16% jump — comparable to moves seen in top stock gainers — shows that the market values clear numbers over broad vision.
Over the next five years, the company aims to reach $25 billion in total sales, with $15 billion projected from the new chip segment and the remaining $10 billion from its current IP licensing operation. Compared to the $4 billion generated in fiscal 2025, the anticipated figure is impressive. Earnings per share are expected to reach $9 by 2031.
Mass production of the chip, known as the Arm AGI CPU and designed for AI inference in data centers, is scheduled for later this year. Meta — which was involved in its development — has emerged as the first customer, while giants such as OpenAI, Cloudflare, and others are also named among early adopters.
It is also worth noting that CPUs are gaining increased attention amid a broader industry shift. While GPUs — traditionally used to train and run AI models — have long dominated the market, the transition to agentic applications, where AI agents operate on users’ behalf, is driving renewed importance for CPUs.
Although the development of a proprietary chip was not a surprise — as Arm initiated the process back in 2023 — the market reaction was initially uncertain. For now, with its first deal signed, a strong lineup of customers, and ambitious financial targets, sentiment has turned broadly positive toward the company’s strategy. However, to secure further growth, Arm must not only meet its stated targets but also withstand market scrutiny, as Nvidia’s case shows that revenue and EPS alone are not enough.
This release marks a significant shift in the company’s business model. While it will continue expanding its licensing business, it will no longer be limited to royalties as a new revenue stream emerges. However, this transition may cause friction, given the intensified competition in the chip manufacturing industry.
This article was written in cooperation with TRADINGVIEW