Investment Rating and Core Views - The report assigns an "Overweight" rating to Arm (ARM O) based on its strong position in the AI era and its potential for revenue growth driven by its CSS model and royalty income [2][3] - Arm is expected to benefit from the expansion of downstream market demand and the increase in royalty rates, with projected revenues of 398B4 86B and 605BforFY2025EFY2026EandFY2027Erespectively[4]−Thecompany′stargetmarketvaluefor2025isestimatedat162 95B with a target price of 154[4]RevenueandProfitForecasts−Arm′srevenueisexpectedtogrowataCAGRof231 53B 181Band2 38B for FY2025E FY2026E and FY2027E respectively [4] - The company's royalty income is expected to grow at a double digit rate supported by diversified customer base and market applications [11] Market Position and Competitive Advantages - Arm dominates the smartphone market with a 99% market share and 40% of its royalty income coming from this segment [4] - The company's energy efficiency advantage is highlighted as a key factor in its success in mobile and AI PC markets with Arm based chips consuming 30% less power than x86 chips [4] - Arm's CSS model is expected to drive higher royalty rates and market penetration in data centers and automotive electronics [4] Licensing and Royalty Income Breakdown - Licensing income is expected to grow due to the shift towards subscription based models (ATA and AFA) with projected licensing revenues of 179B2 23B and 276BforFY2025EFY2026EandFY2027Erespectively[9]−RoyaltyincomeisdrivenbytheadoptionofArmv9architectureandtheexpansionofAIenableddeviceswithsmartphoneroyaltyincomeexpectedtogrowatan18162 95B for 2025 [17][19] - Arm's forward P/E for FY2025 is estimated at 105x with a target price of $151 based on its growth prospects and market position [21]