SoftBank: at Arm, licence revenue rises 50%, its normalised measure 12% and royalties 8%

In the quarter ended 30 September, Arm reports $1,443m of revenue (+27%), and licences (+50%) account for $258m of the $308m rise, or 84%. Arm weighs 60.1% of SoftBank's adjusted holdings at 30 June. Its normalised measure of licences rises 12% and its royalties 8%: on Opulion's reading, this pace, rather than the 27%, gives the measure of what repeats.

Why it matters for SoftBank shareholders: at 30 June 2026, Arm accounts for ¥49,910bn of SoftBank's ¥83,110bn of adjusted holdings, or 60.1% (Opulion calculation already set out in our analysis of 13 September). SoftBank held about 87% of it at 31 March 2026, according to Arm's annual report. Arm enters this value of holdings through its share price, net of the margin loan secured on the shares. For this shareholder, the quarter matters for what it says about the recurring pace: 8% on royalties, 12% on annualised contracts.

Arm attributes the 50% rise in licences to strong demand, but also to fluctuations in the timing and size of several high-value contracts and to contributions from backlog. ACV serves to smooth these swings: Arm defines it as the annualised fees committed under all active signed agreements, excluding future royalties. Royalties, for their part, add $50m, held back by the effect of memory prices on the smartphone market, while those from data centres doubled, with no amount published in the letter.

The quarter's other measures also separate. Reported net income goes from $238m to $130m, or −45%, but the 2025 quarter carried a $131m disposal gain. Adjusted net income goes from $417m to $566m, or +36%, excluding in particular $377m of share-based pay. Adjusted free cash flow for the quarter falls from $411m to $110m, or −73%, while the twelve-month figure goes from $1,073m to $1,096m, or +2%. The letter leaves this fall without comment, and its cash flow table mainly shows unfavourable working capital movements. One last cross-check: sales to related parties, with no breakdown by company in the financial statements read, go from $422m to $424m, or from 37% to 29% of revenue (Opulion calculation). Almost all of the rise, $306m, therefore comes from other customers, according to the same day's financial statements.

For SoftBank shareholders, three checkpoints will follow. On 10 November, the group's results should give a value of holdings at 30 September. With its results for the quarter to December, Arm will say whether its revenue reaches the range given and whether ACV keeps its pace. Arm's weight in these holdings, for its part, will say each quarter how much SoftBank depends on Arm.