ARM to Post Q3 Earnings: Should the Stock Be in Your Portfolio Now?

Arm Holdings plc ARM will report its third-quarter fiscal 2026 results on Feb. 4, after the bell.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at 41 cents, indicating a 2.5% year-over-year increase. The consensus mark for revenues is pegged at $1.24 billion, indicating 25.7% year-over-year increase.

The company has a strong history of earnings surprises. Earnings have surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an average earnings surprise of 11.1%.

There have been no revisions for the upcoming quarter's earnings estimate in the past 30 days.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for ARM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

ARM has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royalty and License Should Drive ARM’s Top Line

We expect year-over-year improvement in the company’s top line in the to-be-reported quarter to be driven by an increase in both Royalty and License revenues. The consensus estimate for Royaltyrevenuesis pegged at $707 million, suggesting a 22% year-over-year decline. The consensus estimate for License and other revenues is pegged at $530 million, indicating a 31.5% year-over-year decline.

Price Dynamics and Valuation

ARM stock has plunged 37% over the past three months, but the sell-off could not make valuations compelling. Even after the steep correction, ARM continues to trade at a lofty forward 12-month price-to-earnings multiple of 48.56x, nearly double the industry average of 26.88, suggesting the stock remains far from inexpensive.

Investment Considerations

Arm Holdings has moved well beyond its roots as a traditional chip designer to become central to energy-efficient AI computing, spanning edge devices and cloud data centers. Its RISC-based architecture delivers superior performance per watt, a decisive advantage as AI scales under growing power constraints, with Neoverse CPUs enabling efficient inference and machine-learning workloads. Architectural consistency across mobile, cloud, and edge environments allows developers to deploy AI with minimal friction, reinforcing long-term strategic leverage.

This strength is amplified by a self-reinforcing ecosystem linking developers and hardware makers, where broad software compatibility reduces integration risk and speeds adoption. In competitive terms, NVIDIA NVDA competes with Arm in edge and AI workloads but lacks comparable mobile scale, while Qualcomm QCOM remains deeply tied to Arm Holdings through its mobile chip designs. Even as NVIDIA expands into low-power computing and Qualcomm invests in custom cores, Arm’s vast installed base sustains its moat, keeping NVIDIA and Qualcomm aligned around Arm’s platform economics.

Wait for a Better Price

Arm Holdings remains a high-quality, strategically important company with strong exposure to long-term AI and computing trends. Investors who already own the stock can continue to hold, supported by Arm’s durable ecosystem and architectural relevance. That said, the current valuation offers limited room for upside and may restrict near-term gains. For those without a position, this is not an attractive entry point. Waiting on the sidelines appears prudent, as a more favorable risk-reward opportunity could emerge if the stock sees further downside. This stance reflects confidence in the business while maintaining valuation discipline.

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This article originally published on Zacks Investment Research (zacks.com).

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