Arm Stock: Why One Analyst Remains Hold-Rated After Earnings

Arm stock displayed on a screen at the Nasdaq MarketSite in New York City — (Image credit: Michael M. Santiago/Getty Images)

Arm Holdings (ARM) is one of the top Nasdaq stocks Thursday after the semiconductor and software design company beat top- and bottom-line expectations for its fiscal 2025 second quarter and issued a strong outlook for its third quarter.

In the three months ended September 30, Arm's revenue increased 4.7% year over year to $844 million. Its earnings per share (EPS) declined nearly 17% from the year-ago period to 30 cents.

"Demand for our high-performance Armv9 and CSS compute platforms continues to exceed expectations, and to accelerate our licensing and royalty revenue growth," said Arm CEO Rene Haas in a statement. "Artificial intelligence (AI) everywhere is generating new opportunities for the Arm compute platform from the cloud to the edge."

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The results topped analysts' expectations. Wall Street was anticipating revenue of $810 million and earnings of 26 cents per share, according to Investor's Business Daily.

For its fiscal third quarter, Arm said it expects to achieve revenue in the range of $920 million to $970 million and earnings per share of 32 cents to 36 cents. The midpoints of these ranges, $945 million in revenue and earnings of 34 cents per share, came in ahead of the $939 million in revenue and 33 cents in earnings per share Wall Street is anticipating.

Arm also reiterated its full-year outlook, calling for revenue to arrive between $3.8 billion to $4.1 billion and EPS in the range of $1.45 to $1.65. The midpoint of these forecasts, $3.95 billion in revenue and earnings of $1.55 per share, is just below the $3.97 billion in revenue and $1.56 in earnings per share analysts are guiding for.

Is Arm stock a buy, sell or hold?

Arm has more than doubled on the price charts for the year to date, easily outperforming the broader market. And Wall Street sees even more upside for the tech stock.

According to S&P Global Market Intelligence, the consensus recommendation covering analysts is a Buy.

However, analysts' price targets have struggled to keep up with ARM's strong performance in 2024. Currently, the average analyst price target of $138.64 represents a discount to where the large-cap stock is currently trading. Price-target hikes could come down the pike if Arm continues to gain ground.

Not all of Wall Street is sold on the outperforming stock, though. Indeed, financial services firm Needham has a Hold rating on ARM.

"Arm emerged along with the foundry/fabless ecosystem to command an overwhelming share of the smartphone processor market," says Needham analyst Charles Shi. "We think the company's strong control over the smartphone ecosystem and consequent pricing power can support growth, but it will face challenges when trying to replicate its success in other technology sectors, most notably IoT [Internet of Things] and high-performance computing."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.