Arm's Datacenter Business Poised to Become Company's Largest Revenue Source

Chip design giant Arm has announced that its datacenter business will soon become the company's largest source of revenue, marking a significant shift for the company that rose to prominence through smartphone and mobile device processors.

During its Q4 FY 2025/26 earnings call, CEO Rene Haas confirmed that customer response to Arm's new AGI (Artificial General Intelligence) CPU has been exceptionally strong. "We now have more than $2 billion of customer demand across fiscal 2027 and fiscal 2028. This is more than double what we stated at launch," Haas reported.

The AGI chips, announced in March, are specifically designed to power agentic AI applications and feature 136 dedicated processor cores optimized for AI workloads. Haas theorized that datacenter operators will likely run racks full of Arm CPUs alongside racks full of GPUs to support AI infrastructure needs.

"I think one thing we know for sure is that we probably have under-called the CPU demand in terms of the transition here," Haas stated, emphasizing the growing importance of Arm's technology in AI datacenters. "Soon, the datacenter will be Arm's largest business. The direction is clear. Customers want Arm at the center of the AI datacenter."

Despite the strong customer demand, Arm is still working to assemble the necessary supply chain to deliver the $2 billion worth of AGI silicon. The company expects cash from AGI chip sales to begin arriving in volume starting with fiscal year 27/28.

This strategic shift represents a significant evolution for Arm, which has traditionally dominated the mobile and smartphone processor markets. In recent years, major cloud providers like Amazon and Microsoft have already built their own datacenter silicon based on Arm designs, signaling the growing acceptance of Arm architecture in enterprise environments.

Financially, Arm reported strong performance in its most recent quarter, with revenue reaching $1.49 billion, a 20 percent increase year-over-year. Full-year revenue for FY 2025/26 totaled $4.9 billion, representing a 22.8 percent increase. The company forecasts $1.25 billion revenue for its current quarter.

Looking ahead, CFO Jason Child predicted that Arm is on track to double its annual revenue from selling intellectual property to $10 billion by 2031, with the majority of that growth expected to come from datacenter products. The company also maintains its forecast of $15 billion in annual revenue for AI infrastructure.

The market reacted cautiously to these announcements, with Arm's share price initially rising ten percent above its $237 close before settling down to $222, indicating some investor uncertainty about the company's ambitious growth projections.

As AI continues to drive demand for specialized computing hardware, Arm's pivot toward datacenter and AI-specific chip designs positions the company to capture a significant portion of this rapidly expanding market. The company's ability to execute on its supply chain commitments and deliver on its ambitious financial targets will determine whether this datacenter transformation becomes a reality.