Datacenter to become Arm’s biggest business ‘soon’

Arm, the chip design company known for powering smartphones and low-powered devices, announced that its datacenter business is poised to become its largest revenue source. During its Q4 FY 2025/26 earnings call, CEO Rene Haas revealed that customer demand for Arm’s new AGI CPU, designed for agentic AI applications, has exceeded $2 billion for fiscal years 2027 and 2028—more than double initial projections. This surge in interest is attributed to the AGI chip’s architecture, which features 136 dedicated processor cores, making it attractive for AI workloads alongside traditional GPUs. Arm expects to generate significant revenue from these chips starting in FY 2027/28, although the company is still working to establish the necessary supply chain. Arm’s transition into the datacenter market marks a strategic shift from its historical focus on mobile and low-power devices. Major cloud providers like Amazon and Microsoft have already adopted Arm-based silicon for their datacenters, validating the company’s approach. CEO Haas emphasized that the company may have underestimated CPU demand amid the AI infrastructure boom, forecasting annual revenues of $15 billion from AI-related products. CFO Jason Child also projected that Arm’s annual revenue from intellectual property sales could double to $10 billion by 2031, with datacenter products driving most of that growth. The company reported a 20 percent year-over-year increase in quarterly revenue to $1.49 billion and a 22.8 percent rise in full-year revenue to $4.9 billion. Despite the strong outlook, investor reactions were mixed, with Arm’s share price initially rising before falling below previous levels. The growing demand for Arm’s AGI chips signals a broader industry trend toward specialized AI hardware, positioning Arm as a central player in the evolving AI datacenter ecosystem.