Core Financial Performance - Arm achieved record performance in Q2 of FY2026, with revenue reaching $1.14 billion, a 34% year-over-year increase, marking the third consecutive quarter exceeding $1 billion [1] - Royalty revenue was $620 million, up 21% year-over-year, driven by growth across data centers, smartphones, automotive, and IoT markets [1] - Licensing revenue reached $515 million, a significant increase of 56% year-over-year, primarily due to accelerated customer adoption of next-generation AI chip architectures [1] Management Insights and Strategic Direction - CEO Rene Haas emphasized that AI is expanding from cloud to edge and endpoint devices, with Arm's architecture leading the industry in energy efficiency by approximately 50%, making it the preferred platform for major cloud and supercomputing vendors [6] - Arm announced a strategic partnership with Meta to enhance AI computing efficiency and consistency across devices, leveraging both companies' strengths [7] - The new Lumex Compute Subsystem (CSS) was introduced for mobile AI experiences, with early revenue generation due to prior collaborations shortening production cycles [8][9] Market Penetration and Product Strategy - Arm added three new CSS licenses this quarter, bringing the total to 19 licenses across 11 companies, with major Android manufacturers adopting the CSS architecture [11] - Arm's architecture is increasingly penetrating the smart automotive and edge device markets, with notable implementations in Google Pixel 10 and Tesla's new AI chip [12][14] - The company is accelerating R&D investments to explore complete computing subsystems and Chiplet or SoC-level products, indicating a shift towards system-level innovations [15] Q&A Highlights - Arm's platform is seen as a key player in the AI data center construction wave, with significant demand for energy-efficient solutions [15] - The acquisition of DreamBig Semiconductor is aimed at enhancing Arm's capabilities in high-bandwidth interconnects and data center networking [16] - Revenue from collaborations with SoftBank is expected to continue growing, with a notable increase in licensing and design service income [17] - The cloud and networking market's contribution to revenue is projected to rise from approximately 10% to 15-20% [21] Forward-Looking Statements - Q3 guidance indicates revenue of approximately $1.225 billion, with royalty growth of 20% and licensing growth of 25-30% [25] - The "AI Everywhere" strategy will continue to expand across cloud, edge, and endpoint devices, with a focus on R&D investments in subsystems and complete SoC products [26][27] - The strategic focus remains on leveraging AI-driven demand for computing power and energy constraints as significant opportunities for Arm [29]