Why Arm Holdings Gained 31% in the First Half of 2025

Key Points

• Arm shares soared on the announcement of the Stargate Project.

• The company continued to deliver solid growth on the top and bottom lines.

• 10 stocks we like better than Arm Holdings ›

Shares of Arm Holdings (NASDAQ: ARM) continued to march higher in the first half of the year, benefiting from the broader tailwinds in artificial intelligence (AI), market share gains, and solid growth in its earnings report.

Arm, which licenses its central processing unit (CPU) architecture to partners like Apple and Nvidia, is well positioned to capitalize on the data center boom and future growth in edge AI, as its architecture is more power-efficient than the competing x86 alternative used by Intel and AMD. As a result, Arm continues to earn a high valuation since it has a long runway of growth in the AI era.

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According to data from S&P Global Market Intelligence, the stock finished the first half of the year up 31%. As you can see from the chart below, Arm started the year on a high note before crashing on tariff-driven concerns and then recovered to nearly its previous peak.

ARM data by YCharts.

Arm rides the AI wave

Arm has one of the most resilient business models in the semiconductor sector, as it earns money when it signs its licensing agreements and on royalties when the products containing its designs are sold. That creates a long-term, high-margin revenue stream and is part of the reason the stock trades at a price-to-sales (P/S) ratio of 39 right now.

Through the first half of 2025, Arm jumped early in the year as it was named as one of the partners in the Stargate project, which plans to invest up to $500 billion in AI infrastructure. Softbank, the Japanese investment giant that owns roughly 90% of Arm, will be one of the lead partners, which could be an advantageous position for Arm. The stock soared on the news.

In its two quarterly reports, the company showed off solid growth on both the top and bottom lines, though the stock pulled back both times.

In May, during the fiscal fourth quarter, the stock fell in part due to management's decision not to provide full-year guidance, which was due to broader uncertainty in trade policy and the fact that its customers had also not provided guidance.

Overall revenue rose 34% to $1.24 billion, paced by strong licensing growth, and operating income was $410 million, showing its impressive margins.

Image source: Getty Images.

Can Arm keep climbing?

Arm still has a lot of growth in front of it, but given its high valuation, it may take time for the stock to move substantially higher. Still, the business is in an excellent position to capitalize on the AI boom. Investors may want to take advantage of any pullbacks in the stock over the rest of the year.

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Jeremy Bowman has positions in Advanced Micro Devices, Arm Holdings, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, and Nvidia. The Motley Fool recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.