Arm Holdings plc American Depositary Shares (ARM) Fundamental Analysis: Bull vs. Bear Case

ARM

Arm Holdings plc American Depositary Shares

Fundamental data last updated:August 18, 2026

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company profile

SECTOR

Technology

industry

Semiconductors

Exchange

NASDAQ

County of HQ

GB

Next Earnings Date

Pending Announcement

Business Summary

Arm Holdings plc architects, develops, and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers rely on to develop products. It offers microprocessors, systems intellectual property (IPs), graphics processing units, physical IP and associated systems IPs, software, tools, and other related services. Its products are used in various markets, such as automotive, computing infrastructure, consumer technologies, and Internet of things. The company operates in the United States, the People's Republic of China, Taiwan, South Korea, and internationally. The company was founded in 1990 and is headquartered in Cambridge, the United Kingdom. Arm Holdings plc operates as a subsidiary of Kronos II LLC.

VALUATION

P/E

407.83 Market Cap ($M USD)

$369.03B

Forward P/E

38.67 PEG

0.04 PRICE TO SALES

75.01 PRICE TO BOOK

44.49 EV / EBITDA

268.65 5-Year Average P/E

Free Cash Flow Yield

0.26%

DCF Value

$7.21

Graham Number

$12.21

Price to FCF

379.66 EV to FCF

377.27 Earnings Yield

0.25%

FCF Yield

0.26%

DIVIDEND

Yield

0.00%

Annual Payout

$0.00

Payout Ratio

0.00%

Consecutive Years of Dividend Growth

5-Year Dividend Growth Rate

Financial Health & Profitability

Earnings Per Share

$0.85

Next Year EPS Growth Estimate

$8.97

Next Year Revenue Growth Estimate

$25.38B

Return on Equity (ROE)

11.86%

FREE CASH FLOW

Operating Margin

18.31%

Debt-to-Equity

0.05 Piotroski F-Score

6 Altman Z-Score

86.81 Return on Invested Capital (ROIC)

9.32%

Current Ratio

6.00 Quick Ratio

6.00 Net Debt to EBITDA

-1.70

Interest Coverage

0.00 Gross Profit margin

94.63%

FCF PER SHARE

$0.91

REVENUE PER SHARE

$4.63

Gainseekers Quantitative Analysis

Summary

The market seems to have priced ARM with sky-high expectations, as evidenced by its astronomical Price/Earnings ratio of 372.17. Despite this, the Forward P/E of 35.28 suggests a more reasonable outlook, hinting at anticipated earnings growth. However, the DCF Value and Graham Number are dwarfed by the recent pricing, indicating a potential overvaluation. The Altman Z-score of 82.93 signals robust financial health, while the Earnings Yield of just 0.27% raises questions about immediate returns. Overall, the stock appears to be priced for perfection, with significant growth already baked in.

AI Exposure / Tech Reliance

In the rapidly evolving semiconductor industry, ARM is strategically positioned to capitalize on AI advancements. Its technology underpins a vast array of devices, making it indispensable in the tech ecosystem. This foundational role ensures resilience as AI and tech shifts accelerate.

The Bull Case

For the discerning GARP investor, ARM offers compelling reasons to buy. The company's ROIC of 9.32% reflects efficient capital deployment, while a Piotroski F-Score of 6 indicates solid financial health. Despite a low FCF Yield of 0.29%, its impressive Gross Profit Margin of 94.63% showcases strong pricing power. These metrics suggest a company with the ability to generate substantial returns on investment, even in a competitive landscape.

The Bear Case

ARM's valuation metrics paint a picture of excess. The Price/Sales ratio of 68.34 and Price/Book of 40.54 are alarmingly high, suggesting the stock is trading at a premium. With a Price to FCF of 345.94, the cash flow situation appears strained, further exacerbated by its proximity to the 52-week high. While debt levels are low, the technical overextension and lofty multiples present significant risks for investors.

Market Sentiment & Smart Money

Short Interest %

Analyst Consensus

Buy

Average Analyst Price Target

$192.22

Institutional Ownership %

1-Year Beta

3.41 Insider Buying % (6 Mo)

Distance to 52-Week High

2.57%

Distance to 52-Week Low

71.16%

EARNINGS SURPRISE %

3.45%

50-DAY SMA

$193.94

200-DAY SMA

$149.79

⚠️ Financial Disclaimer:
This content is for informational purposes only and is not financial advice. Information may be delayed or inaccurate. We may earn a commission from partner links.