ARM Holdings shares experienced a significant increase of 8% on Wednesday, trading at $115.69, following an upgrade from Susquehanna to a Positive rating with a price target of $150. The trading volume hit 4.32 million shares, which is approximately 23% below the stock”s average daily volume.
The boost in ARM”s stock price can be attributed to its successful second-quarter earnings report, where the company reported an earnings per share (EPS) of $0.39, surpassing the anticipated $0.33. Additionally, ARM”s revenue reached $1.14 billion, reflecting a year-over-year growth of 34.5%.
Susquehanna”s positive outlook centers around ARM”s advancements in the AI chip sector and increased fees associated with its latest architecture. Despite some immediate challenges in ARM”s core smartphone and PC markets, analysts view the company”s prospects favorably.
Over the past six months, ARM”s stock had dropped by 30%, driven by investor concerns regarding diminishing demand in smartphone and PC markets. The rise in memory prices has added further pressure on these sectors, but analysts believe these worries are already factored into the current stock price.
ARM is reportedly collaborating with SoftBank and Broadcom to develop a custom AI chip for OpenAI, named Titan-1, which is expected to begin production in late 2026. This initiative marks ARM”s foray into AI accelerators, moving beyond its traditional central processing units.
The impending Titan-1 project could potentially generate over $1 billion in royalty revenue annually, compared to an estimated $2.5 billion in total royalties expected across the company this year.
In the data center space, major cloud providers are increasingly adopting new in-house chips based on ARM designs, which boast higher core counts leading to larger royalty payments. Furthermore, reports indicate that ARM is working on a custom server processor for Meta, marking a shift from its traditional licensing model to selling finished chips, enabling ARM to capture a greater portion of the profits per sale.
Despite a decline in overall smartphone demand, ARM”s strategy includes increasing fees per device. The company is transitioning from the older v8 architecture to the newer v9 standard, which carries approximately double the royalty rate of its predecessor. Currently, the adoption rate of v9 remains below its peak levels, suggesting further growth opportunities in 2026.
ARM”s Q2 results reveal strong performance, with analysts projecting Q3 2026 EPS guidance between $0.37 and $0.45. The market capitalization of ARM stands at $120.81 billion. Analyst ratings are mixed, with a consensus rating of Moderate Buy and an average price target of $175.50. Notably, UBS has adjusted its target to $195 while maintaining a buy rating, whereas Citigroup downgraded the stock from buy to hold.
Institutional investors have shown increased activity, with Rathbones Group raising its stake by 4,638.8% in the last quarter, now holding 500,043 shares valued at $54.66 million. Similarly, Newbridge Financial Services Group boosted its position by 54% to 90,145 shares worth $9.85 million.
Currently, ARM”s 50-day moving average is $123.53, while the 200-day moving average stands at $141.46.
