Wide-moat compute-IP monopoly with ~98% gross margins and net cash, but valuation remains extreme (forward P/E ~153, PEG ~6.7, EV/EBITDA ~371) just ~10% off a fresh 52-week high amid steady executive selling.
Researched 15 days ago
Earnings Jul 27· in 5 weeks
Wide-moat compute-IP monopoly with ~98% gross margins and net cash, but valuation remains extreme (forward P/E ~153, PEG ~6.7, EV/EBITDA ~371) just ~10% off a fresh 52-week high amid steady executive selling.
Not held — nothing to trim; not a buy at this price.
Recommendation
Conviction
45/100
watch
Upside
14/100
bull 10% · ~30% odds · +0% expected
Risk-adjusted upside
0/100
+0% after downside pressure
Thesis quality
8.1/10
Opportunity
4.5/10
Risk pressure
10.0/10
Valuation
ExpensiveAI fair value
$250.00
Fundamentals check
$406.50
12-24mo fair-value range
$175.00 / $250.00 / $350.00
width 70%
Estimates disagree — look closer.
Buy below
—
Trim above
$420.00
Implied expectations
implausible60.1% implied revenue CAGR
Today's P/S implies ~60.1% revenue CAGR for five years versus 22.2% realized growth.
Arm sits at the architectural root of nearly all compute, including a growing share of data-center CPUs and custom AI silicon built on its cores; AI is a genuine tailwind via higher-value Armv9/CSS royalties, but the royalty base remains mobile-heavy, so direct AI-capex exposure is moderate rather than pure-play.
Moat
Dominant CPU ISA with deep ecosystem lock-in and high switching costs.
Bottleneck fit
Architectural root of compute with rising data-center/CSS royalties; direct AI exposure only moderate.
Valuation
Forward P/E ~153, PEG ~6.7, EV/EBITDA ~371 leave no margin of safety.
Catalyst
Royalty mix-shift is gradual; no identifiable near-term catalyst that justifies entry at this price.
Why not higher
Valuation is extreme near a 52-week high with insider selling, so quality and thesis fit cannot support CONSIDER without a meaningful pullback or accelerating data-center royalty evidence.
Description
Arm designs and licenses the dominant CPU instruction-set architecture and core IP used across mobile, IoT, automotive, and increasingly data-center compute, earning upfront license fees plus per-chip royalties.
Value Chain
Foundational IP layer: licenses architecture/cores to chip designers (component/platform root) rather than manufacturing silicon itself.
Moat
wideNear-ubiquitous ISA with enormous software/toolchain ecosystem lock-in and high switching costs; royalty model compounds as Armv9/CSS lift per-chip value.
Pricing Power
highArmv9 and Compute Subsystems command materially higher royalty rates than v8; ~97.5% gross margin reflects strong pricing and minimal incremental cost.
Customer Concentration
Not disclosed in packet; royalty base is broad across the chip industry but still mobile-heavy, with rising hyperscaler/custom-silicon exposure (concentration unavailable).
| Metric | Value |
|---|---|
| Revenue growth YoY | 19.80% |
| Gross margin | 97.54% ↑ |
| Operating margin | 18.29% |
| FCF margin | 19.29% |
| Cash position | 3614000000 |
| Net debt / EBITDA | -3.12 |
| Share count change YoY | — |
| ROIC | 10.91% |
Forward P/E
152.72
Trailing P/E
177.72
PEG
6.67
EV/EBITDA
370.52
P/S
32.65
| Peer | Metric | Value |
|---|---|---|
| ARM | Forward P/E | 152.72 |
| ARM | P/S TTM | 32.65 |
| ARM | EV/EBITDA TTM | 370.52 |
Bull fair value
$480.00
Probability
30%
Horizon
Long term
YTD
—
1Y
219.79%
Vs sector
—
From 52w high
-9.86%
| Risk | Severity | Explanation |
|---|---|---|
| Extreme valuation with no margin of safety | high | Forward P/E ~153, PEG ~6.7, EV/EBITDA ~371, and P/S ~33 leave the stock priced for years of flawless execution; any growth disappointment risks sharp multiple compression. |
| Sustained insider selling | medium | Multiple Form 4 sales by executives (Abbey, Eaton) through late May/June 2026 at $283-$416, with no offsetting buys. |
| ROIC modest relative to price | medium | ROIC ~10.9% is unremarkable against a ~153x forward multiple, implying heavy reliance on multi-year royalty growth to justify valuation. |
0%–0%
WATCH: quality and thesis fit are strong, but valuation offers no margin of safety even after a ~10% pullback from the high; monitor for a deeper drawdown or confirmed data-center royalty acceleration before sizing in.
| Claim | Source | URL | Retrieved |
|---|---|---|---|
| Price $385.77, down 6.33% on the day | packet:currentPrice | — | retrieved 2026-06-04T15:06:37.612Z |
| Market cap ~$428.5B, 1,068M shares, GB-domiciled, NASDAQ, semiconductors, IPO 2023-09-14 | finnhub:profile | Link | retrieved 2026-06-04T15:06:37.158Z |
| Forward P/E 152.72, forward PEG 6.67, trailing P/E TTM 177.72, EV/EBITDA TTM 370.52, P/S TTM 32.65 | finnhub:basic-financials | — | retrieved 2026-06-04T15:06:37.164Z |
| Gross margin TTM 97.54%, FY2026 operating margin 18.29%, FY2026 FCF margin 19.29%, ROIC FY2026 10.91% | finnhub:basic-financials | — | as of 2026-03-31 · retrieved 2026-06-04T15:06:37.164Z |
| FY revenue/share 4.6067 (2026) vs 3.7695 (2025) = +22.2%; latest-quarter sales/share 1.3951 vs 1.1642 YoY = +19.8% | finnhub:basic-financials | — | as of 2026-03-31 · retrieved 2026-06-04T15:06:37.164Z |
| Net cash position (total debt/equity ~0.003, net-debt-to-equity negative); cash/share ~3.38 | finnhub:basic-financials | — | as of 2026-03-31 · retrieved 2026-06-04T15:06:37.164Z |
| 52-week high 427.99 (2026-06-02), low 100.02 (2026-02-05), 1Y return 219.79%, beta 3.75 | finnhub:basic-financials | — | as of 2026-06-02 · retrieved 2026-06-04T15:06:37.164Z |
| Analyst recommendations: 5 strongBuy, 23 buy, 14 hold, 1 sell, 1 strongSell (2026-06) | finnhub:recommendations | — | as of 2026-06-01 · retrieved 2026-06-04T15:06:37.183Z |
| Insider selling: executives Abbey and Eaton sold shares May 21-June 1 2026 at $282-$416, no buys | finnhub:insider-transactions | — | as of 2026-06-03 · retrieved 2026-06-04T15:06:37.177Z |
| Macro backdrop: 10Y 4.46%, fed funds 3.62% (2026-06-02) | fred:macro-snapshot | — | as of 2026-06-02 · retrieved 2026-06-04T14:11:26.225Z |