Wall Street Analysts Bullish on Arm Holdings Ahead of Earnings Report

Analysts foresee strong growth potential for Arm as it benefits from AI and new tech innovations.

Arm Holdings (ARM) is preparing to report its fiscal second-quarter earnings after the market closes on Wednesday, with Wall Street analysts largely optimistic about the chip-design company's future. While the consensus price target is slightly above Arm's current trading level, analysts are anticipating modest revenue growth and a significant turnaround in profitability.

Analysts’ Outlook: Mostly Bullish with Modest Target Upside

Of the 12 analysts surveyed by Visible Alpha, nine have rated Arm as a “buy” or equivalent, indicating strong confidence in the company’s growth prospects. Only two analysts have issued “hold” ratings, and one has recommended a “sell.” The consensus price target for Arm's stock is set at $138, just slightly above its Monday closing price of $137.49.

Despite the generally bullish sentiment, the price target reflects the cautious expectation that Arm's stock may face limited upside in the near term, even as the company’s fundamentals show promising signs.

Profitability Expected to Rebound

Wall Street is expecting Arm to report a fiscal Q2 profit of $93 million, or 8 cents per share, following a loss of $110 million (11 cents per share) during the same period last year. The company’s revenue is expected to edge up by less than 1%, reaching approximately $811.6 million, signaling modest growth amid a challenging macroeconomic environment.

Generative AI and Edge Computing: Key Drivers for Arm's Future Growth

Raymond James analyst Srini Pajjuri is particularly bullish on Arm’s long-term prospects, setting a price target of $160 for the company. He sees Arm as “well-positioned” to capitalize on the rapid growth of generative AI, especially in cloud computing and edge AI. Edge AI refers to processing AI tasks on local devices, rather than relying on distant cloud servers, a shift that could boost demand for Arm’s chip designs.

Pajjuri highlights that Arm’s Armv9 architecture—used in Apple’s iPhone 16 processor—plays a pivotal role in powering this next-generation AI processing. As edge AI technology grows, Arm stands to benefit from increased adoption across a range of industries, including mobile, automotive, and consumer electronics.

Looking Ahead: Modest Growth with Promising AI Opportunity

While analysts predict only modest revenue growth for Arm in the short term, the company is well-positioned to benefit from long-term trends in generative AI, cloud computing, and edge processing. With its cutting-edge chip designs already central to major tech players like Apple, Arm’s future earnings prospects are tied closely to the explosive growth of AI and the increasing demand for advanced chip technology.