QS Research · Michael Burry's Scion Capital analyst template · 2006
ARM HOLDINGS PLC /UK (ARM)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction low · base case -32% · downside -59% · upside +22%
The market is still paying a premium for Arm: at $174.62 (2026-11-06) the cited multiples are 37.03x EV/Sales and 205.5x FY Mar 2026 P/E versus AMD 16.02x and NVDA 14.91x EV/Sales, while FY Mar 2026 FCF yield is 0.5%. The newest operating data are good — Q2 FY2027 (quarter ended 30 Sep 2026) revenue $1.44B, licensing $773M, data-center royalties doubled — but royalty growth has slowed to 8% and smartphone royalties declined, so the premium is at risk. Using section 13's FY Mar 2026 revenue base of $4.92B, a 25x EV/Sales base (still above AMD/NVDA) gives EV $123.0B + $3.60B cash - $0.432B leases = $126.2B equity / 1.06406B ADS = ~$119/ADS (-32%); 15x gives ~$72/ADS (-59%). Holding today's 37.03x while revenue grows at FY2026's +22.7% to ~$6.04B gives ~$213/ADS (+22%), so reward/risk is ~0.4:1 and the rule supports a short.
Key numbers
- Share price: $174.62
- Market cap: $185.81B
- Latest financial period: FY Mar 2026 to Mar 31, 2026
- Revenue (FY Mar 2026): $4.92B
- EV / EBITDA (FY Mar 2026): 158.6x
- P/E (FY Mar 2026): 205.5x
- Price / book: 22.42x
The 15 boxes
- ✓ 1. Long-form business notes
Arm's numbers from the XBRL series show a licensing/IP company scaling fast: revenue went from $2.70B (FY ended 31 Mar 2022) to $4.92B (FY ended 31 Mar 2026), with operating income of $900.0M and operating cash flow of $1.52B in FY2026, after a weak FY2024 (operating income $111.0M). The filings show the money comes from licensing processor IP to chip companies and their customers — Qualcomm alone was 9% of total revenue in FY2026 — and the latest 20-F also describes selling production silicon, which carries product-liability and warranty exposure the traditional IP licensing model does not. The only dated operational facts in the sources are legal and regulatory: the Qualcomm/Nuvia case went against Arm at the district court on 30 Sep 2025 and is on appeal, a related Qualcomm case is expected to go to trial in Q4 calendar 2026, and 2025 US export rules make a licence for certain Neoverse high-performance cores unlikely. FY2026 (year ended 31 Mar 2026) is the newest period in the sources, seven months before today, so nothing here is a current-quarter or TTM figure.
- ✓ 2. Competitive advantage
Arm has a durable but contested architecture advantage: its platform is the most widely deployed globally, used in virtually all smartphones and a majority of tablets and digital TVs, with high barriers and switching costs. The advantage is checked by intense competition from x86, RISC-V and customers' own architectures, and by new conflicts from Arm's move into production silicon. FY2026 (ended 2026-03-31) shows high gross profit ($4.80B on $4.92B revenue) and $900M operating income, but operating income was only $111M in FY2024, so margins are not stable. Sources have no post-FY2026 quarterly figures.
- ✓ 3. 10-Q takeaways
Q2 FY2027 (quarter ended Sept 30, 2026) revenue was $1,443M vs $1,135M a year earlier, with license and other revenue jumping to $773M from $515M while royalties rose to $670M from $620M; operating income rose to $201M from $163M but net income fell to $130M from $238M only because the prior-year quarter held $128M of other non-operating income. Six-month operating cash flow was $1,109M vs $899M, and at Sept 30, 2026 cash was $3,251M against $2,751M at March 31, 2026. There were no repurchases in the financing flows — the big outflow was $407M of withholding tax on vested shares, and share-based compensation was $719M for the six months. Neither source carries numeric guidance or a restated risk-factor section.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ○ 9. Insider trading interpretation
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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