Chip designer Arm says its data center business will soon become its largest source of revenue. Arm became popular in the early years with its processor architecture for low-power devices, and later became the de facto standard in the field of smartphone chips. In recent years, Arm has continuously launched designs with stronger performance, attracting the attention of data center giants. Both Amazon and Microsoft have developed their own data center processors based on Arm architecture.
In March this year, Arm released a new generation of CPU architecture AGI for "agent AI" (Agentic AI) applications. During the fourth quarter earnings call of fiscal year 2025/26, Arm CEO Rene Haas said that customer response to AGI CPUs has been "very strong" and that the company has locked in more than $2 billion in customer demand in fiscal years 2027 and 2028. This number is more than double the official expectations when AGI was released. He also admitted that Arm is still improving the supply chain to ensure that it can actually deliver the $2 billion AGI chip, but the relevant work is in progress.
Haas speculates that customers are actively placing orders in part because they predict that a large number of AI agents in the future will run on dedicated CPU cores, and Arm's AGI chip integrates 136 cores in a single chip. He believes that data center operators will deploy rows of Arm CPU racks and rows of GPU racks simultaneously in the computer room to form a complementary architecture. Haas bluntly stated that Arm had "significantly underestimated" the increase in CPU demand in this round of architecture migration in the past.
When talking about the overall business outlook, Haas said that the company is on track to move towards the goal of "annual revenue from AI infrastructure of US$15 billion" as planned, and said: "Soon, the data center will become Arm's largest business segment. This path is already very clear, and customers want Arm to be at the core of the AI data center."
Arm Chief Financial Officer Jason Child gave a longer-term forecast: By 2031, Arm’s annual revenue from licensing its intellectual property (IP) to customers is expected to double to $10 billion, with most of the increase coming from data center-related products.
Judging from the latest financial report, Arm achieved revenue of US$1.49 billion in the quarter that just ended, a year-on-year increase of 20%. Full-year revenue reached $4.9 billion, an increase of 22.8% from the previous fiscal year. The company expects current-quarter revenue of about $1.25 billion. According to management, large-scale cash flow from AGI chips will be significant starting mainly in the 2027/28 financial year.
Faced with the AI data center growth story presented by Arm, the attitude of the capital market was once wavering. After the release of the earnings report, Arm's stock price rose by about 10% from the closing price of $237, and then fell back to around $222, indicating that investors are still digesting the company's aggressive AI and data center growth expectations.