Arm Holdings plc (ARM): A Bull Case Theory

We came across a bullish thesis on Arm Holdings plc on Investing With Purpose’s Substack. In this article, we will summarize the bulls’ thesis on ARM. Arm Holdings plc's share was trading at $146.54 as of September 18th. ARM’s trailing and forward P/E were 222.03 and 84.03, respectively according to Yahoo Finance.

Arm Holdings (ARM) has emerged as one of the semiconductor sector’s most innovative companies, benefiting from structural growth in AI, IoT, and 5G. Since April, the stock rallied roughly 40% from $80 to $168, before entering a shallow correction that masks a compelling long-term buying opportunity. ARM operates a pure-play IP licensing model, designing chip architectures and collecting royalties on each chip shipped, which generates extremely high gross margins of 80–95% and attractive operating leverage. Its designs power over 70% of the world’s smartphones, billions of IoT devices, and are increasingly central to edge-AI and data-center GPU/CPU deployments, reflecting both leadership and secular tailwinds.

Financially, ARM has demonstrated exceptional growth, with revenues expanding from ~$2.5 billion in 2021 to ~$5 billion in 2024, representing a CAGR of ~35%. Operating margins sit between 30–35%, with free cash flow exceeding net income thanks to light capital expenditures. The balance sheet is robust, with net cash and ample liquidity for R&D and potential acquisitions. Analysts forecast 20–25% annual EPS growth through FY2027, supporting a premium valuation around 50× forward EPS, justified by its market dominance and secular growth.

Technically, the stock is consolidating within a strong uptrend. Key support is observed in the $140–$145 range, aligning with Fibonacci levels, trendlines, and moving averages, offering a disciplined entry point. If ARM maintains this level, upside targets range from $168 to $220 over 12–24 months. Even if near-term corrections occur, the company’s high-margin licensing model, secular growth drivers, and robust free cash flow support a compelling risk/reward profile for medium- to long-term investors, with deeper declines below $133 signaling a potential trend shift. ARM represents a rare opportunity to combine quality growth with disciplined entry timing.

Previously we covered a bullish thesis on Arm Holdings plc (ARM) by Stock Analysis Compilation in December 2024, which highlighted the company’s diversified revenue streams beyond mobile, strong momentum in its Armv9 architecture, and growth potential in automotive and cloud computing. The stock has appreciated approximately 10.93% since our coverage. The thesis still stands as ARM’s high-margin licensing and secular growth remain intact. Investing With Purpose shares a similar thesis but emphasizes technical consolidation and disciplined entry points around $140–$145 for medium- to long-term upside.

Arm Holdings plc is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held ARM at the end of the second quarter which was 42 in the previous quarter. While we acknowledge the potential of ARM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.