Arm expects $2bn sales from its first in-house AI data center chip

In short: Arm says its first in-house data center chip for AI could bring in $2bn in sales in 2027 and 2028.

What happened

Arm, a UK chip company backed by SoftBank, told investors it expects about $2bn in sales from its new AI chip starting next year, with sales forecast for 2027 and 2028. Arm said demand for the chip has been stronger than it expected.

A chip is a small piece of hardware that acts like the “brain” of a computer. Arm has long made money by licensing its chip designs, meaning other companies pay to use Arm’s blueprints, rather than Arm selling finished chips.

This new product is a shift because Arm is now selling its own complete chip for data centers, which are large buildings full of computers that run online services and AI tools. Arm’s shares rose after the company shared the forecast.

Arm also reported $1.5bn in revenue for the quarter ending in March. It predicted $1.26bn for the current quarter, slightly above what analysts expected. Royalty revenue was $671mn, while licensing revenue was $819mn, which Arm linked to demand for AI-related designs.

Why it matters

AI apps need a lot of computing power, and the chips inside data centers are a big part of that cost. If Arm can sell more of its own chips, it could earn more money than it does from licensing, but it may also compete more directly with some of its customers, including large tech companies that already design or buy chips at huge scale.

Source: Financial Times