ARM Executives Reportedly Raised Royalties On Smartphone Partners, Company Expects A 20 Percent Boost In Revenue With This Change

ARM investors are reportedly concerned over the drop in profits in the company’s latest quarter due to a slowdown of the smartphone industry, but the Cambridge-based firm’s executives have a plan to cushion it from future setbacks with an increase in royalties. This rumor has been in circulation previously, though how much smartphone makers have to now pay ARM is yet to be disclosed, again. However, the move stands to favor ARM, as its revenue is said to receive a 20 percent boost from this decision.

With the smartphone market having slowed this year, ARM hopes to see growth from AI and data centre customers

Unnamed individuals who attended the roadshow claim that ARM executives increased royalties for its partners, with the Financial Times reporting that the British chip designer could achieve revenue growth of 20 percent in the financial year ending March 2025, ahead of analysts’ expectations. While it will take time for the company’s financials to reflect those royalty increases, there are other avenues where it stands to benefit, such as AI and data centers.

ARM currently possesses just a ‘peripheral’ role in the technology required to build Large Language Models (LLMs) that power AI chatbots such as ChatGPT and others, but the opportunity is boundless, at least according to ARM’s chief. Even NVIDIA’s founder and CEO Jensen Huang stated that the new Grace Hopper AI chip would not have been possible had ARM’s architecture not existed, highlighting its pivotal position.

ARM's revenue did not see much change in 2023 due to a dwindling smartphone market / Image Credits - Financial Times

ARM also recently renewed its licensing deal with Apple for a multitude of years, but even that is not indicative of the royalty increase that smartphone partners will have to bear or if both entities have a special agreement regarding these royalties. Apple was among the several technology giants that invested in the IPO, with the amount in the $25-$100 million range, but even in that report, it was mentioned that being a part of the IPO did not mean the companies would have a strategic advantage in the market.

The previous rumors disseminating information in the past about royalty increases in the past have been squashed, so we recommend readers to treat all of this with a pinch of salt, and we will be back with more updates.

Written by Omar Sohail