Morgan Stanley’s downgrade of Arm Holdings (NasdaqGS:ARM) after its push into building in house data center chips has pushed investors to reassess the trade off between AI opportunities, higher costs, and execution risk.
See our latest analysis for Arm Holdings.
At a share price of US$148.91, Arm has a 1 day share price return of 3.51%, while the 7 day share price return of negative 3.97% contrasts with strong recent momentum, including a 30 day share price return of 26.59% and 1 year total shareholder return of 39.70%.
If Arm’s AI and data center push has your attention, this is a good moment to widen your research and review 36 AI infrastructure stocks
With Arm up 39.70% over the past year and trading at US$148.91, some recent optimism appears to be reflected in the price already. Is the current pullback a fresh entry point, or is the market already baking in future growth?
Most Popular Narrative: 280.3% Overvalued
According to the most widely followed narrative on Arm, the fair value sits at $39.16 per share compared with the last close of $148.91, a wide gap that puts the current price under scrutiny.
In my view, ARM is still in a speculative phase and I’m maintaining my $53B forward value for 2029. In Q2’25 ARM reported revenues of $844M, up 5% YoY. Sales were down 10% from Q1, as the company marked its first sequential drop after Q4’FY23. The company made $3.5B in revenues over a 12-month period, and is up by 18% on a TTM basis. This is close to my revised 16% CAGR estimate, and I maintain my 2029 $7.3B revenue target for ARM. Management issued Q3 and FYE 2025 guidance at the $945M and $3.95B respective midpoints.
Want to see how one investor links aggressive revenue targets, margin assumptions and a future profit multiple to such a low fair value? The full narrative joins those moving parts into a single valuation story that either supports or challenges what the current $152.8b market cap is implying.
Result: Fair Value of $39.16 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, if Arm secures more long term partnerships or manages patent expirations more effectively than expected, this cautious valuation story could quickly appear too harsh.
Find out about the key risks to this Arm Holdings narrative.
Next Steps
With mixed views on Arm’s valuation and growth story, it helps to see the data firsthand and decide how much optimism you share. To see what is driving that optimism, take a closer look at 1 key reward
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If Arm feels fully priced to you, do not stop here; broaden your watchlist and give yourself more options before the next big move catches you off guard.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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