Arm Holdings Shares Fall 8% on Lower Profit, Own Chip Plans

Arm Holdings reported fiscal 2026 first-quarter results with adjusted earnings per share matching estimates at $0.35 and revenue rising 12% to $1.05 billion, driven by record royalty revenue. Despite this, the company’s Q2 profit forecast fell slightly below analyst expectations, leading to an 7-9% drop in its stock price in after-hours trading. The decline was attributed to increased engineering expenses, which rose 33% year-over-year, as Arm invests more heavily in expanding its engineering workforce. CEO Rene Haas revealed the company’s strategic shift toward developing its own chips and chiplets, a move that could pit Arm against its customers and impact future profitability. While this investment could create new revenue streams, it carries significant risks and costs, including the potential for reduced profits and intense competition. Arm remains debt-free with strong cash reserves, but investors remain cautious amid global trade tensions affecting smartphone demand.