Raymond James raised its price target on Arm Holdings to $641 from $565, maintaining an Outperform rating as the chip designer’s push into data center CPUs and a potential fabless model drive valuation expectations.
The new target reflects a 78x multiple on Arm’s royalty and licensing earnings, near its five-year median, and a 35x multiple on projected earnings from a future fabless CPU business. Arm’s shares were trading at $238.78 at the time of the update, implying roughly 168% upside from current levels. Raymond James also cited Arm’s 97.5% gross margin over the trailing twelve months and a P/E ratio of 243 as supporting the premium valuation.
The upgrade comes as Arm prepares to commercialize its own CPUs in the data center segment, with initial shipments expected by the end of fiscal 2027. Analysts project CPU sales reaching $1.4 billion in fiscal 2028, exceeding management’s prior forecast of about $1 billion but falling short of the $2 billion target discussed in recent conferences. By calendar 2028, CPU revenue is seen climbing to $2.5 billion, with a bull-case scenario pushing that figure to $2.7 billion, constrained by TSMC’s manufacturing capacity. Royalty revenue is forecast to hit $5.4 billion in the same period, driven by aggressive adoption of Arm-based CPUs in hyperscaler deployments by companies such as Amazon and Google.
Server royalties currently account for less than 20% of Arm’s trailing twelve-month revenue but are projected to exceed one-third by fiscal 2028 as data center demand accelerates. Arm’s recent quarterly results showed licensing revenue up 23% year-over-year and royalties up 22%, supported by strength in data center-related licensing.
The bullish outlook contrasts with mixed reactions from other analysts. Rosenblatt cut its target to $250 while maintaining a Buy rating, citing margin and expense pressures. Guggenheim reiterated a Buy rating with a $255 target, emphasizing AI-driven growth offsetting smartphone market softness. Wells Fargo lowered its target to $280 due to semiconductor sector multiple compression, though it kept an above-average rating. Evercore ISI maintained an Outperform rating with a $326 target, while BofA Securities reduced its target to $260 on valuation concerns but acknowledged progress in AI and data center markets.
