Investment Rating - The report does not explicitly state an investment rating for ARM, but it provides insights into the company's performance and future expectations, indicating a generally positive outlook based on growth drivers in AI and custom chip solutions. Core Insights - ARM's FY1Q26 revenue was $1.05 billion, slightly below market consensus of $1.06 billion, with EPS at $0.35, in line with expectations. Royalty revenue increased by 25% YoY to $585 million, while License revenue decreased by 0.8% YoY to $468 million due to a strong base in FY1Q25 [1][6]. - The company is evolving towards full-end solutions to address increasing chip complexity and extended development cycles, with strong demand for Compute Subsystem (CSS) solutions, which have licensing fees twice that of Armv9 [2][7]. - ARM's custom chips are driving significant growth in cloud-based AI, with over 70,000 enterprises running AI workloads on Arm Neoverse chips, representing a 40% YoY increase. The company expects to capture nearly 50% market share among leading hyperscale customers this year [3][8]. - For 2Q26, ARM expects revenue between $1.01 billion and $1.11 billion, with a midpoint representing a 25% YoY increase. Non-GAAP EPS is projected to be between $0.29 and $0.37, with a median of $0.33, slightly below market expectations [9]. Summary by Sections Financial Performance - FY1Q26 revenue: $1.05 billion, slightly below consensus of $1.06 billion - EPS: $0.35, in line with expectations - Royalty revenue: $585 million, up 25% YoY - License revenue: $468 million, down 0.8% YoY [1][6] Business Strategy - ARM is transitioning to full-end solutions to tackle chip complexity and development cycles - Demand for CSS exceeds expectations, with licensing fees significantly higher than previous models - ARM supports chiplet development and aims to expand into complete solutions [2][7] AI and Market Outlook - Over 70,000 enterprises using Arm Neoverse chips for AI workloads, a 40% YoY increase - Expected market share among hyperscale customers to approach 50% - ARM's platform combines AI performance with energy efficiency, enhancing TCO [3][8] Future Guidance - 2Q26 revenue guidance: $1.01 billion to $1.11 billion, midpoint indicating 25% YoY growth - Non-GAAP EPS guidance: $0.29 to $0.37, median of $0.33, below market consensus [9]