Arm Holdings plc (NASDAQ:ARM) is one of the AI Stocks Trending on Wall Street. On January 13, BofA Securities analyst Vivek Arya downgraded the stock from Buy to Neutral and lowered the price target to $120 from $145. The downgrade comes ahead of ARM’s fiscal 2026 third-quarter results on February 4.
BofA has pointed to near-term problems in the smartphone unit (memory cost), an increased reliance on SoftBank on licensing, and a slowdown in royalties (only about 10% of royalties) for the stock.
Global smartphone shipments could decline at a low single-digit rate year-over-year, compared to LSD in FY25. This will likely be driven by higher memory costs and supply constraints, which would be a headwind for Arm’s customer business, which accounts for more than half of royalty revenue.
Despite all these factors, the company still likes ARM’s potential in the data center in the long term.
“For ARM, we point to a slowdown in revenue (both royalties and licensing) and increased reliance on SoftBank in FY26. In particular, global smartphone units could decline LSD YoY (compared to LSD increase in FY25) due to rising memory costs and supply constraints, a headwind for customer ARM (>50% of royalty sales). Meanwhile, CSS adoption (or content expansion) is still limited and is in the early stages. For licensing, we note that FY26 revenue could actually be down -5% YoY (if we exclude SoftBank, which now accounts for 25% to 30% of total licensing and could raise concerns about circular financing, however, in the long term, we still like the potential of ARM in the data center, both in server content ($ per core, more cores, profit sharing) and new storage options. silicon/chiplet.”
Arm Holdings plc (NASDAQ:ARM) is a semiconductor and software design company that designs and manufactures semiconductor technology and other related products.
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