QS Research · Michael Burry's Scion Capital analyst template · 2006
ARM HOLDINGS PLC /UK (ARM)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case -21% · downside -52% · upside +25%
Section 13's FY Mar 2026 base is stale, so I use TTM to Sep 2026: revenue = FY2026 $4.920B - 6M FY2026 $2.188B + 6M FY2027 $2.732B = $5.464B. At a still-premium 25x EV/Sales, EV = $136.6B; adding net cash after leases of about $3.19B ($3.621B cash+ST less $432M leases) gives $139.8B equity / 1.064B ADS = about $131/ADS, -21% from $166.72. Downside at 15x EV/Sales is about $80/ADS (-52%); upside at 40x is about $208/ADS (+25%). The market is not missing the growth - Q2 FY2027 revenue rose 27% and licensing 50% - but it still pays 35.32x FY Mar 2026 sales and 196.2x earnings after a 63% drawdown, so the long rule is not met and the base case is not negative enough for a short. Watch.
Key numbers
- Share price: $166.72
- Market cap: $177.40B
- Latest financial period: FY Mar 2026 to Mar 31, 2026
- Revenue (FY Mar 2026): $4.92B
- EV / EBITDA (FY Mar 2026): 151.3x
- P/E (FY Mar 2026): 196.2x
- Price / book: 21.41x
The 15 boxes
- ✓ 1. Long-form business notes
Arm licenses processor architecture and technology to chip designers and collects on products built with them — FY2026 (year ended 2026-03-31) revenue $4.92B, gross profit $4.80B, operating income $900.0M, operating cash flow $1.52B. Revenue has risen every year on file from $2.70B in FY2022, so this is a growth, not a cyclical-recovery, story; the only ugly print was FY2024 ($111.0M operating income), and that year's net income was flattered above pre-tax income by a tax effect, not operations. The business has also changed shape: it now sells production silicon alongside IP licensing (a materially different liability profile) and is spending far more on capex ($545.0M FY2026 vs $34.0M FY2022). Qualcomm, which accounted for 9% of FY2026 revenue, is in active litigation with trial expected in Q4 calendar 2026.
- ✓ 2. Competitive advantage
Arm's advantage is real but narrow in kind: it owns the most widely deployed processor architecture and a software ecosystem that makes switching expensive, which shows up as roughly 98% gross margin in FY2026 (year ended 2026-03-31), not as pricing power. Operating margin has actually fallen as revenue scaled ($633M on $2.70B in FY2022 vs $900M on $4.92B in FY2026), and the 20-F itself concedes royalty per chip declines with volume, customers do not license exclusively, and x86 plus free RISC-V are backed by Arm's own customers. It competes with other architectures (x86, RISC-V) and increasingly with its own licensees as it pushes into production silicon such as the Arm AGI CPU.
- ✓ 3. 10-Q takeaways
Q2 FY2027 (three months ended Sept 30, 2026) revenue rose 27% to $1,443M from $1,135M in Q2 FY2026, with license and other revenue $773M vs $515M and royalty revenue $670M vs $620M. Gross profit was $1,401M vs $1,106M and operating income $201M vs $163M, but net income fell to $130M from $238M because Q2 FY2026 included $128M of other non-operating income (six-month FY2026 cash flow shows a $131M divestiture gain). Cash was $3,251M at Sept 30, 2026 vs $2,751M at March 31, 2026, and six-month operating cash flow was $1,109M vs $899M. No buyback or specific guidance is disclosed; new risk is the March 2026 expansion into production silicon (Arm AGI CPU).
- ✓ 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.
Sign in with a QuantSignals Premium or Gold plan to read every box: each point linked to the SEC filing it came from, the bull and bear case, and the comparables. QS Research powers the signals behind FST, our autonomous trading agent.