Financial Data and Key Metrics Changes - The company reported revenue of $1.14 billion for Q2, representing a 34% year-on-year increase, marking the third consecutive billion-dollar quarter [4][11] - Royalty revenue reached a record $620 million, up 21% year-on-year, driven by growth across all major markets [4][11] - Licensing revenue increased by 56% to $515 million, reflecting strong demand for next-generation architectures [4][13] - Non-GAAP operating income was $467 million, up 43% year-on-year, resulting in a non-GAAP operating margin of 41.1% [15] - Non-GAAP EPS was $0.39, exceeding the midpoint of guidance by 6 cents [15] Business Line Data and Key Metrics Changes - Royalty revenue from smartphones grew significantly faster than the market, driven by higher royalty rates per chip [12] - Data center royalties doubled year-on-year due to the deployment of Arm-based chips by hyperscaler companies [12] - The company signed three new compute subsystem (CSS) licenses, bringing the total to 19 across 11 companies, indicating strong demand for CSS [7][14] Market Data and Key Metrics Changes - The company noted unprecedented compute demand, particularly in data centers, where Neoverse royalties more than doubled year-on-year [4][21] - The automotive sector saw advancements with Arm's technologies, including Tesla's next-generation AI chip delivering up to 40x faster AI performance [9] - The software developer ecosystem has grown to over 22 million, representing over 80% of the world's developer base, which is a significant growth engine for the company [9] Company Strategy and Development Direction - The company announced a strategic partnership with Meta to enhance AI efficiency across various compute layers [6] - There is a focus on expanding into additional compute subsystems, chiplets, or complex SOCs to capture growing AI opportunities [10] - The company is committed to investing aggressively in R&D to support customer demand and innovation in next-generation architectures [10][16] Management's Comments on Operating Environment and Future Outlook - Management highlighted that power has become a bottleneck in data centers, emphasizing the efficiency of Arm's compute platform [20] - The demand for compute is expected to grow, particularly as AI workloads transition from cloud to edge devices [61] - The company remains optimistic about long-term growth, driven by the increasing demand for efficient compute solutions [16][71] Other Important Information - The company is exploring the acquisition of DreamBig Semiconductor to enhance its offerings in high-speed communications technology [24] - The relationship with SoftBank and its partners is seen as a significant opportunity for technology integration in data center solutions [27] Q&A Session Summary Question: AI opportunity and data center deals - Management expressed confidence in Arm's strategic positioning in the AI market, noting that power efficiency is a key advantage [20][21] Question: Acquisition of DreamBig Semiconductor - The acquisition is aimed at enhancing Arm's capabilities in Ethernet and RDMA controllers, crucial for data center networking [24] Question: Related party revenue and SoftBank relationship - Management indicated a significant increase in related party revenue, with a strong partnership with SoftBank providing opportunities for technology integration [26][36] Question: Operating expenses and future product announcements - Management stated that details on new products will be shared once certain milestones are achieved, emphasizing careful management of operating expenses [30][32] Question: SoftBank contribution and licensing pipeline - Management noted a $52 million increase in SoftBank-related revenue, with confidence in the licensing pipeline for the remainder of the year [36][66] Question: Revenue opportunity from Stargate and Lumex CSS - Management highlighted strong demand for compute and early royalty revenues from Lumex CSS, indicating faster adoption than expected [44][46] Question: Growth in data center royalty revenues - Management confirmed that the mix of royalty revenues from cloud and networking is expected to increase, potentially reaching 15-20% [52][53] Question: Chip demand and inference world implications - Management anticipates a shift from cloud-based training to edge-based inference, which will drive demand for Arm's solutions [60][61] Question: Performance in China - Management reported strong demand in China, with licensing being a significant driver of revenue growth in the region [65][66]