Arm Holdings Shares Plunge 15% on Weak Earnings and Guidance

Arm Holdings, a U.K.-based specialty tech company, has faced a challenging week in the stock market. According to data compiled by S&P Global Market Intelligence, the company's shares plummeted by over 15% this week, largely due to an earnings report that failed to impress investors.

Arm published its results for the first quarter of its fiscal 2026 on Wednesday. The report showed that the company managed to increase its total revenue by 12% year over year to slightly more than $1.05 billion. This was largely due to a 25% increase in royalty revenue, which landed at $585 million, despite a 1% slump in licensing revenue to $468 million.

However, the company's non-GAAP (adjusted) net income traveled in the opposite direction, falling to $374 million, or $0.35 per share, compared with the year-ago profit of $419 million. While Arm met the consensus analyst estimate for profitability, it missed slightly on revenue, with pundits following the stock expecting it to earn $1.06 billion.

More concerning for investors was Arm's guidance for the company's current (second) quarter. The forecast is for $1.01 billion to $1.11 billion in revenue, which, if achieved, would be down or, at best, essentially flat over the first quarter. Meanwhile, adjusted earnings were forecast at $0.29 to $0.37.

Analyst reactions to the quarter were mixed, but enough pundits trimmed their price targets to affect sentiment on the stock. UBS's Timothy Arcuri, for instance, shaved his fair value assessment to $175 per Arm share from his preceding $185, although he maintained a buy recommendation. Similarly, Lee Simpson of Morgan Stanley reduced the price target to $180 per share from $194 while keeping an overweight (buy) rating intact.