Financial Data and Key Metrics Changes - Revenue for Q2 reached $1.14 billion, up 34% year-on-year, marking the third consecutive billion-dollar quarter [4][11] - Royalty revenue hit a record $620 million, up 21% year-on-year, driven by growth across major markets [4][11] - Licensing revenue rose 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] Business Line Data and Key Metrics Changes - Royalty revenue from smartphones grew significantly, driven by higher royalty rates per chip and the deployment of Arm V9 and CSS chips [12][13] - Data center royalties more than doubled year-on-year due to the deployment of Arm-based chips by hyperscaler companies [12][13] - CSS licenses increased, with three new licenses signed during the quarter, bringing the total to 19 across 11 companies [7][13] Market Data and Key Metrics Changes - The demand for compute in data centers has surged, with Arm's neoverse royalties more than doubling year-on-year [21] - The automotive sector continues to grow, with significant advancements in AI performance for electric vehicles [9] - The software developer ecosystem has expanded to over 22 million, representing over 80% of the world's developer base, driving further demand for Arm's compute platform [9] Company Strategy and Development Direction - The company announced a strategic partnership with Meta to enhance AI efficiency across various compute layers [6] - Continued investment in R&D is prioritized to meet the increasing demand for Arm technology, particularly in AI [10][16] - The company is exploring opportunities beyond its current platform, including chiplets and complex SOCs [9][10] 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 future demand for compute is expected to grow, particularly as AI workloads transition from cloud to edge devices [61] - The company remains confident in its long-term growth trajectory and strategy to enable AI everywhere [16][71] Other Important Information - Non-GAAP operating expenses were $648 million, up 31% year-on-year, reflecting strong R&D investment [15] - The company expects Q3 revenue of $1.225 billion, representing approximately 25% year-on-year growth [16] Q&A Session Summary Question: AI opportunity and data center deals - Management noted that power efficiency is critical, with Arm being about 50% more efficient than competitors, driving growth in the neoverse business [20][21] Question: Acquisition of Dream Big Semiconductor - The acquisition aims to enhance Arm's offerings in high-speed communications, particularly in data centers [24] Question: Related party revenue and SoftBank relationship - Management explained that the relationship with SoftBank provides significant opportunities for technology integration in data center solutions [27] Question: OPEX and go-to-market strategies - Management indicated that details on new products will be shared once milestones are achieved, focusing on R&D investments [30][32] Question: SoftBank contribution and revenue streams - The contribution from SoftBank was approximately $178 million, with expectations for continued strong revenue streams [36] Question: Stargate revenue opportunities - Management expressed optimism about the demand for compute, indicating that the opportunity has grown since the Stargate announcement [44] Question: Arm's penetration in data centers - Management confirmed that Arm technology is increasingly used across networking stacks, with expectations for royalty revenue to rise [52][53] Question: Chip demand and inference world - Management anticipates a shift from cloud-based training to edge-based inference, which will benefit Arm's position in the market [61] Question: Performance in China - The demand in China has been strong, with licensing being a significant driver of revenue growth [66]

Financial Data and Key Metrics Changes - Revenue for Q2 2026 reached $1.14 billion, up 34% year-on-year, marking the best second quarter ever and the third consecutive billion-dollar quarter [5][11] - Royalty revenue hit a record $620 million, up 21% year-on-year, driven by growth across all major markets [5][12] - Licensing revenue increased by 56% to $515 million, reflecting strong demand for next-generation architectures [5][12] - Non-GAAP operating income was $467 million, up 43% year-on-year, resulting in a non-GAAP operating margin of 41.1% [15][11] - Non-GAAP EPS was $0.39, exceeding the midpoint of guidance by 6 cents [15][11] Business Line Data and Key Metrics Changes - Royalty revenue from smartphones grew significantly, driven by higher royalty rates per chip, while data center royalties doubled year-on-year due to the deployment of Arm-based chips by hyperscaler companies [12][5] - The addition of five new CSS licenses brought the total to 19 across 11 companies, indicating strong demand for compute subsystems [8][12] - CSS has become a starting point for customers building next-generation silicon, with significant interest in the newly launched Lumix CSS platform [9][12] Market Data and Key Metrics Changes - The data center market saw unprecedented compute demand, with Arm's neoverse royalties more than doubling year-on-year [5][20] - China accounted for approximately 22% of sales in Q2, with strong demand driven by licensing deals [67][68] - The mix of royalty revenues from cloud and networking is expected to increase, potentially reaching 15-20% of total royalty revenues [52][55] Company Strategy and Development Direction - The company announced a strategic partnership with Meta to enhance AI efficiency across various compute layers [6][5] - Continued investment in R&D is prioritized to meet the increasing demand for Arm technology, particularly in AI and edge computing [11][15] - The company is exploring opportunities to expand beyond its current platform into additional compute subsystems, chiplets, or complex SOCs [10][11] Management's Comments on Operating Environment and Future Outlook - Management highlighted that power has become a bottleneck in data centers, driving the need for more efficient compute platforms [19][20] - The demand for compute is expected to grow as AI workloads transition from cloud to edge devices, presenting significant opportunities for Arm [63][64] - The company remains confident in its long-term growth trajectory and strategy to enable AI everywhere [16][11] Other Important Information - Non-GAAP operating expenses were $648 million, up 31% year-on-year, reflecting strong R&D investment [15][11] - The company signed a deal to acquire Dream Big Semiconductor, which will enhance its offerings in high-speed communications [24][11] Q&A Session Summary Question: AI opportunity and data center deals - Management expressed confidence in Arm's strategic positioning for AI deals, noting that power efficiency is critical and Arm's technology is about 50% more efficient than competitors [19][20] Question: Acquisition of Dream Big Semiconductor - The acquisition aims to enhance Arm's capabilities in scale-up and scale-out networking, which is crucial for data center demands [24][11] Question: Related party revenue and SoftBank relationship - Management indicated a significant increase in related party revenue, with ongoing collaboration with SoftBank providing opportunities for technology integration in data centers [26][27] Question: OPEX and go-to-market strategies - Management acknowledged the increase in OPEX but emphasized that revenue growth is outpacing OPEX increases, ensuring a balanced approach to investment [30][31] Question: SoftBank contribution and licensing pipeline - The contribution from SoftBank was approximately $178 million, with a strong licensing pipeline expected for the remainder of the year [36][37] Question: Revenue opportunity from Stargate - Management noted that the demand for compute has grown since the Stargate announcement, with expectations for significant revenue opportunities in the coming years [44][45] Question: Lumix CSS royalty revenues - Early royalty revenues from Lumix CSS were reported, indicating faster-than-expected adoption due to existing partnerships [46][47] Question: Chip demand and implications for Arm - Management highlighted the shift from cloud to edge computing, with increasing demand for Arm's scalable solutions for AI workloads [63][64] Question: Performance in China - Strong demand in China was attributed to significant licensing deals, with licensing being a larger driver than royalties this quarter [67][68]

AI Innovation & Technological Advancement - Google is transitioning into a new category of "AI phone," with Pixel and Tensor at the forefront [1][38] - Tensor G5 represents the biggest upgrade yet, marking a milestone in deeper chip customization since 2021, leading to leaps in performance, AI innovation, and camera quality [2] - The machine learning model for ProRes Zoom has grown from tens of thousands of parameters in 2021 to nearly 1 billion parameters with Tensor G5, showcasing exponential AI progress [1][2] - Tensor G5's TPU (Tensor Processing Unit) achieves up to a 60% compute uplift compared to the previous year, enhancing AI processing for features like Gemini Nano and ProRes Zoom [2][33] - The CPU (Central Processing Unit) in Tensor G5 sees a 34% average performance uplift versus last year, contributing to general-purpose computing improvements [2] - Tensor G5 transitions to TSMC's leading 3 nanometer process node, enabling more transistors, higher compute, higher performance, and lower energy expenditure [2][3] - Google DeepMind and Tensor teams co-designed the latest Gemini Nano model, resulting in a Matformer model architecture that dynamically chooses between a full-size model for peak quality and a submodel for peak speed [18][26] - Recorder summarization is 26% faster and twice as energy-efficient on Tensor G5, demonstrating improved user experience [29] Strategic Focus & Industry Perspective - Google initiated the Tensor program to bring the best of Google research to Pixel devices, controlling the entire technology stack from cloud TPUs to device hardware [1] - Google is designing Tensor chips for Pixel users and focusing on use cases, performance, efficiency, and end-to-end experience rather than solely on benchmarks [30][31] - The industry's definition of a flagship mobile processor is shifting towards on-device AI innovations, with Tensor being ahead of the curve [35][36]

Core Viewpoint - Google Pixel 10 is a well-regarded smartphone with practical AI features, but it falls short of being a true "AI phone" despite having advanced capabilities and technology [1][62]. Group 1: AI Features - Pixel 10 introduces practical AI functionalities like "Magic Cue," which proactively provides relevant information based on user data, enhancing user experience [6][7][11]. - The "Daily Hub" feature summarizes daily schedules and suggests content, although its effectiveness can vary [12][14]. - AI real-time translation during calls is a highlight, but it has limitations in practical use [15][17]. - The "Camera Coach" feature, while capable of improving photo quality, complicates the user experience rather than simplifying it [18][19]. - "Pro Res Zoom" enhances long-range photography, but results can be inconsistent [20][22]. - Overall, while many AI features are useful, some appear forced and do not significantly change user interaction with the device [25][51]. Group 2: Hardware and Performance - The new Tensor G5 processor, built on a 3nm process, shows improvements in daily use and gaming performance compared to its predecessor [30][32][33]. - Despite performance gains, the G5 still lags behind competitors like Qualcomm and Apple in benchmark scores [31][34]. - Battery life has improved, with the Pixel 10 series capable of lasting a full day, particularly the XL model, which offers 90 minutes more than the previous generation [38][39]. - The camera system, while not drastically changed in hardware, benefits from Google's software optimizations, particularly in portrait mode and low-light performance [41][44][49]. Group 3: Market Position and Future Outlook - Pixel 10 is generally well-reviewed, with scores above 8 from various media outlets, indicating it is a solid product [50]. - Despite the advancements, there is a sense of disappointment that Google, with its resources, has not fully realized the potential of an "AI phone" [52][62]. - The current AI capabilities, while impressive, still rely on cloud connectivity for many functions, limiting their effectiveness in mobile scenarios [58][60].

Core Viewpoint - Google has launched the Pixel 10 smartphone featuring the new G5 application processor, marking a significant shift in its manufacturing strategy by switching from Samsung to TSMC for chip production, which is expected to enhance performance and power management [1][4]. Group 1: Product Features - The Pixel 10 smartphone boasts improved performance, larger battery capacity, faster charging, and support for magnetic wireless charging, along with up to seven years of software support [1]. - The flagship Pixel 10 Pro features a 6.3-inch LTPO OLED display with a resolution of 1280×2856, while the ultra-flagship XL model has a larger 6.8-inch display with a resolution of 1344×2992 [1]. Group 2: Processor Improvements - The Tensor G5 processor shows a 34% increase in CPU speed compared to the previous Tensor G4, with a notable 60% improvement in AI-driven tasks, although the data format used for these claims has not been disclosed [2]. - The G5 processor is manufactured using TSMC's advanced N3P process technology, which is expected to provide higher performance and better power efficiency compared to Samsung's previous manufacturing methods [4]. Group 3: Manufacturing Technology - TSMC's N3P process offers approximately 5% speed improvement at the same power level or a 5% to 10% reduction in power consumption while maintaining the same clock frequency, providing flexibility for design goals [4]. - The transition to TSMC is seen as a strategic move by Google to leverage better yield rates and refined transistor designs, ultimately aiming for higher performance and lower heat generation in the Pixel 10 [4].

This is the new Pixel 10, 10 Pro and 10 Pro XL. They feature our latest Android UI, Material 3 Expressive, bringing visual updates, smoother interactions, and more customization. Pixel 10 comes in new colors and has an even brighter display than Pixel 9, and for the first time, the base model has a 5X telephoto lens with fast autofocus and Super Res Zoom to get you 20 times closer to your subject.Our Pro phones come in two sizes and feature our best triple rear camera with a 50-megapixel wide sensor, 48-meg ...

[Music] So, these phones might look familiar. They look a lot like last year's phones. I'm talking about the Pixel 10, the Pixel 10 Pro, the 10 Pro XL, and the 10 Pro Fold.But there's actually a lot to talk about, even if you can't really see the difference from the outside. Some of the changes are like Gemini updates that are just floating around the UI and one of them is inside the phone. So, we definitely didn't see that.They might be look alikes from the outside, but hang tight cuz we have a lot to talk ...

Investment Rating - The industry investment rating is "Positive" (maintained) [1] Core Viewpoints - Continuous focus on AI applications and stablecoin investment opportunities is emphasized [5][12] - The 2025 World Artificial Intelligence Conference (WAIC) has commenced, showcasing global AI innovations with over 800 participating companies and more than 3000 cutting-edge exhibits [5][12] - OpenAI is expected to release the GPT-5 series model in early August, which is anticipated to significantly enhance AI application development [6][13][32] - Hong Kong's stablecoin regulations will take effect on August 1, 2025, with initial licenses being limited and focused on practical business proposals [7][14] Market Review - During the week of July 21-25, 2025, the CSI 300 index rose by 1.69%, while the computer index increased by 1.71% [4][16] Investment Recommendations - Recommended companies in the AI application sector include Kingsoft Office, Dingjie Zhizhi, and others, with beneficiaries such as Hanbang Gaoke and Huitian Ruisheng [8][15] - AI computing sector recommendations include Haiguang Information and others, with beneficiaries like Cambricon and Jingjia Micro [8][15] - In the stablecoin sector, recommended companies include Hengsheng Electronics and Boyan Technology, with beneficiaries such as New Cap and New Morning Technology [8][15] - RWA sector recommendations include Langxin Group and Zhuoyi Information, with beneficiaries like Anheng Information [8][15] Company Dynamics - Rongzhi Rixin expects a half-year revenue of 250 million to 260 million yuan, a year-on-year increase of 30.06 million to 40.06 million yuan, with a net profit increase of 133.42 million to 143.42 million yuan [17] - Gaolun Electronics has signed a strategic cooperation agreement with Shanghai Guotou and Shanghai Xinhui [19] - Huitian Ruisheng anticipates a half-year revenue of 148.86 million to 164.53 million yuan, a year-on-year increase of approximately 61.06% to 78.01% [18]

Core Viewpoint - Samsung's 3nm process yield remains low at 50% after three years of production, leading major tech companies like Google to shift to TSMC for chip production, impacting Samsung's market position [2]. Group 1: Samsung's 3nm Process Challenges - Samsung's 3nm yield is reported to be at 50%, making it difficult to gain trust from large tech companies [2]. - Google is transitioning its Tensor G5 chip production to TSMC, securing a contract for the next 3 to 5 years, which includes future Pixel models [2]. - Other companies like Qualcomm and AMD are also relying on TSMC due to its over 90% yield rate, which attracts more orders [2]. Group 2: Financial Implications and Cost Control - Samsung's mobile application processor (AP) costs surged by 37% in Q1 2025, reaching 4.79 trillion KRW, primarily due to reliance on Qualcomm chips for the Galaxy S25 series [3]. - Utilizing its own chips could help Samsung manage rising expenses more effectively [3]. Group 3: Competitive Landscape - In the 5nm and 7nm segments, China's SMIC is making progress and securing key orders, increasing competitive pressure on Samsung [3].