ARM Revenue Breakdown: External Customers and Related Parties

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This page covers ARM Holdings’ revenue categorized by category, consisting of external customers and related parties.

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For other key statistics of ARM Holdings, you may find more information on this page: ARM key statistics.

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Definitions

To help readers understand the content better, the following terms and glossaries have been provided.

Revenue from External Customers: Arm’s revenue from external customers represents the money the company generates from completely independent, third-party businesses on the open global market.

In Arm’s SEC filings, total revenue is strictly split into two categories: revenue from Related Parties (interconnected entities like Arm China or SoftBank affiliates) and revenue from External Customers. External customer revenue is the truest indicator of Arm’s competitive strength and market share in the open tech ecosystem.

1. Who are Arm’s “External Customers”?

External customers include any company that has no structural, managerial, or ownership ties to Arm Holdings or its parent company, SoftBank. These are independent global companies that design, manufacture, or use semiconductors.

Examples of Arm’s external customers include:

• Tech Giants & Hyperscalers: Apple, Google, Microsoft, and Amazon (AWS).
• Semiconductor Giants: NVIDIA, Qualcomm, MediaTek, AMD, Intel, NXP, and Marvell.
• Foundries: TSMC and Samsung Electronics.

2. What Form Does This Revenue Take?

Revenue from external customers is earned through Arm’s two core business streams, standard across the open market:

• License Fees (Upfront/Subscription): Paid by external customers to gain access to Arm’s intellectual property (IP) and chip architectures. This is heavily driven by programs like Arm Total Access (ATA), where companies pay recurring commercial subscription fees to design future AI, mobile, or data center chips.

• Royalty Fees (Per Unit Shipped): Paid by external customers every single time they physically ship a chip containing Arm IP. For example, when Apple ships an iPhone utilizing an Arm-based A-series processor, or when NVIDIA scales its Grace CPUs in a data center, a percentage of that chip’s selling price (or a fixed fee) is sent back to Arm as an external royalty.

3. Why It Is a Vital Metric for Wall Street

When analysts evaluate Arm, they look closely at the ratio between external customer revenue and related-party revenue for several key reasons:

Diversification and Core Strength

• A healthy, growing external revenue stream proves that Arm’s business model can thrive purely on market demand. It shows that the world’s most dominant tech companies are actively choosing to build on Arm’s architecture (like the premium-tier Armv9) rather than seeking alternative open-source architectures like RISC-V.

Lower Operational Risk

• Unlike revenue from related parties—which for Arm is heavily concentrated in Arm China and subject to intense geopolitical friction and complex joint-venture oversight—external revenue is distributed globally across hundreds of distinct companies. If one external customer has a bad quarter, Arm’s broader ecosystem absorbs the impact.

High Gross Margins

• Because external revenue is purely IP-based (licensing out software designs rather than fabricating physical silicon), it carries near-100% gross margins. Almost every dollar earned from an external customer flows directly down to bolster Arm’s operating profit.

Revenue from Related Parties: ARM’s revenue from related parties represents the specific portion of a company’s total sales and income generated by doing business with entities it has a close, pre-existing relationship with (such as a parent company, sister subsidiaries, joint ventures, or major equity stakeholders).

For Arm Holdings, this line item is a highly scrutinized metric in its SEC filings because it tracks how much of Arm’s financial growth is driven by the open market versus its own interconnected corporate family.

1. Where Does Arm’s Related-Party Revenue Come From?

When Arm lists “Revenue from Related Parties” in its financial statements, it is almost exclusively looking at two major buckets:

A. Arm China (The Largest Contributor)

Arm Holdings does not directly sell or license its technology in the massive Chinese market. Instead, it relies on Arm Technology (China) Co., Ltd. (Arm China).

• Because Arm Holdings only owns a non-controlling minority stake in Arm China, Arm China is treated as an unconsolidated affiliate (a related party).

• When Arm China licenses chip designs to Chinese tech companies (like Xiaomi or Alibaba), it collects the money, keeps a cut, and sends the rest back to Arm Holdings as software licenses and royalties.

• This flow of money is recorded by Arm as Related Party Revenue. It routinely accounts for over 15% to 20% of Arm’s total global revenue.

B. SoftBank and Portfolio Companies

Because the SoftBank Group owns roughly 90% of Arm, any revenue Arm generates from SoftBank itself or SoftBank’s heavily-funded “Vision Fund” ecosystem is classified here. For example:

• A SoftBank-backed autonomous driving or AI robotics startup licensing Arm’s latest v9 architecture.

• Direct engineering or consulting services Arm provides to SoftBank corporate entities.

2. Why Do Analysts and Investors Track It So Closely?

In Arm’s financial reports, you will typically see revenue split cleanly into two columns: Revenue from Non-related Parties (the open market) and Revenue from Related Parties. Investors isolate this number for three major reasons:

• Ecosystem Transparency: Investors want to see that Arm is capable of growing its business natively with independent customers (like Apple, Google, and Nvidia) rather than relying on its parent company, SoftBank, to “buy” its own products to artificially inflate revenue.

• Geopolitical & Structural Risk: Because the vast majority of Arm’s related party revenue is tied up in Arm China, any management disputes, intellectual property leaks, or regulatory crackdowns by the Chinese government directly threaten this specific revenue stream.

• The “Arm’s Length” Pricing Check: Regulatory bodies like the SEC require Arm to prove that it is charging Arm China or SoftBank affiliates the exact same market rates it would charge an outside company.

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FAQs

To help readers understand the content better, the following FAQs have been provided.

Why are ARM’s revenue from related parties on the increase?

The substantial increase in the proportion of Arm Holdings’ related parties revenue—climbing from 18% in FY2022 to 30.5% in FY2026—is primarily driven by two massive structural shifts: the roaring success of Armv9 technology in the Chinese market and SoftBank’s aggressive expansion into AI infrastructure.

The underlying factors accelerating this trend highlight why it has outpaced Arm’s external open-market growth.

1. The Armv9 Premium Tier Surge via Arm China

By far, the largest driver of Arm’s related party revenue is Arm Technology (China) Co., Ltd. (Arm China). Because Arm Holdings owns a non-controlling minority stake in Arm China, it is classified as an unconsolidated affiliate (a related party).

• The Shift to Premium Armv9: Between FY2022 and FY2026, the global semiconductor market aggressively migrated to Arm’s next-generation Armv9 architecture. Armv9 commands roughly double the royalty rates of the older Armv8 architecture.

• The AI and Edge Device Boom in China: Major Chinese tech giants (like Xiaomi, Vivo, Oppo, and Alibaba) heavily adopted Armv9 for premium smartphones and local AI edge devices. Because Arm China is the exclusive conduit for these sales, the skyrocketing royalty collection in China flows straight back to Arm Holdings as a massive wave of Related Party Revenue.

2. SoftBank’s Structural Pivots and AI Infrastructure Projects

SoftBank Group Corp. owns roughly 90% of Arm Holdings. In the years following Arm’s 2023 IPO leading up to 2026, SoftBank shifted its focus toward becoming an AI infrastructure powerhouse.

• Vision Fund Ecosystem Licensing: SoftBank has deeply funded a vast web of portfolio startups specializing in robotics, autonomous driving, and specialized AI hardware. To accelerate these startups, SoftBank has channeled them into Arm’s ecosystem, creating a spike in licensing deals between Arm and SoftBank-backed entities.

• Direct Collaborative Tech Development: SoftBank has undertaken massive capital deployments to build its own AI data centers and custom sovereign AI clusters. When SoftBank entities contract Arm for engineering services, custom designs, or compute subsystem licenses, the cash is recorded as related party revenue.

3. High Adoption of Arm Compute Subsystems (CSS)

Arm shifted its business strategy away from just selling basic blueprints to selling Compute Subsystems (CSS)—highly integrated, ready-to-print chip configurations.

• CSS delivers immensely higher value, allowing Arm to charge a much larger fee per chip or design.

• Because Arm China and SoftBank’s corporate affiliates have been first-movers in adopting and deploying these premium CSS packages for cloud and specialized hardware, the revenue generated from these specific related entities has swelled rapidly in dollar value compared to traditional third-party licensing.

The Strategic Balance

While this trend shows that Arm’s corporate family is highly lucrative, it creates a unique dynamic for Wall Street analysts.

On one hand, it proves that Arm’s internal network (especially in China) is incredibly effective at sweeping up AI market share. On the other hand, investors track this carefully to ensure that Arm’s independent External Customer Revenue (deals with companies like Apple, NVIDIA, and Google) remains robust, preventing the company from becoming overly reliant on its parent organization and geopolitical joint ventures.

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Insight & Summary of ARM’s Revenue from External Customers & Related Parties

The following analysis consolidates the trends observed across ARM’s revenue from external customers and related parties for the 2022–2026 period.

• External Customer Revenue: The Resilient Foundation Revenue from external customers — the broader semiconductor ecosystem beyond SoftBank-affiliated entities — has grown from $2,219M (FY2022) to $3,421M (FY2026), with a FY2024–FY2026 average of $3,038M and average growth of 19.4%. The trajectory is not without volatility: external revenue contracted -8.7% in FY2023 during the semiconductor industry downturn before recovering strongly at +23.9% (FY2024) and +26.9% (FY2025).

  The FY2026 external growth deceleration to just 7.4% — against 26.9% in FY2025 — is the most notable feature of the external segment and reflects both a slowing of licensing deal velocity with external customers and a high base from two consecutive years of strong performance. Within the external segment, royalty revenue ($2,123M, FY2026) now exceeds licensing revenue ($1,298M) by a meaningful margin and has grown in every year of the dataset, confirming that the royalty compounding effect — driven by ARM-designed chips achieving increasing volume across smartphone, automotive, and AI server markets — is operating independently of the more variable licensing cycle.

• Related Parties Revenue: The FY2026 Inflection Related party revenue — primarily reflecting transactions with Arm China (a separately-managed joint venture) and other SoftBank-affiliated entities — has grown from $484M (FY2022) to $1,499M (FY2026), with the FY2026 result representing an 82.1% single-year surge that is the most significant event in this dataset.

  The composition of the FY2026 spike is analytically critical: related party licensing revenue jumped from $418M (FY2025) to $1,009M (FY2026), a 141.4% increase in a single year, while related party royalty grew more modestly from $405M to $490M (+21.0%). The licensing surge suggests one or more large, potentially multi-year technology licensing agreements were executed with a related entity — most plausibly Arm China — in FY2026. This is qualitatively different from the steady royalty-driven growth of the external segment.

  The FY2024–FY2026 average related party revenue of $1,015M at 24.5% mix reflects a portfolio that has moved well beyond its FY2022–FY2023 base of 18–24% mix share. Whether the FY2026 related party licensing level ($1,009M) is repeatable — or represents a lumpy multi-year deal booked in a single period — is the most important qualitative variable for assessing FY2027 revenue expectations.

• Category Mix: A Structural Shift Warranting Monitoring The revenue category mix has shifted materially. External customers have declined from 82.1% (FY2022) to 69.5% (FY2026), while related parties have grown from 17.9% to 30.5% — nearly doubling their mix contribution in four years. The FY2024–FY2026 average mix of 75.5% external / 24.5% related represents a structurally different profile from the FY2022–FY2023 period.

  For investors, the rising related-party mix warrants consideration on two dimensions: (1) revenue quality — related-party transactions are governed by internal transfer pricing and may carry different margin profiles than arm’s-length external deals; (2) concentration risk — if a material portion of the FY2026 related-party licensing is attributable to a single entity or a renegotiated Arm China licensing agreement, the sustainability of that revenue stream depends on the counterparty relationship rather than market-driven demand. ARM’s disclosures note that Arm China is the primary related party and operates under a separate management structure, which adds an additional layer of governance complexity compared to external customer revenue.

• Structural Takeaway: Total revenue of $4,920M (FY2026) and 22.8% growth confirm that ARM’s topline trajectory remains strong. The FY2024–FY2026 average of $4,053M at 22.5% growth is a high-quality growth rate for a company of this scale. The divergence in the underlying components — decelerating external growth (7.4%) versus surging related-party growth (82.1%) in FY2026 — is the key analytical tension in the dataset. If external customer growth re-accelerates in FY2027 as the AI and automotive design cycles produce higher royalty volumes, and related-party revenue normalises from the FY2026 licensing peak, the mix will rebalance toward external customers and the overall quality of ARM’s revenue base will improve. Conversely, if external growth remains subdued and related-party revenue sustains at FY2026 levels, investor scrutiny of the related-party segment will intensify.

The table below combines all key ARM’s revenue from external customers and related parties metrics into a single view for the latest three fiscal years.

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External Customers Revenue from Licensing & Royalty

The definition of ARM’s revenue by category is available here: external customers revenue and related parties revenue.

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Related Parties Revenue from Licensing & Royalty

The definition of ARM’s revenue by category is available here: external customers revenue and related parties revenue.

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Total Revenue from External Customers & Related Parties

The definition of ARM’s revenue by category is available here: external customers revenue and related parties revenue.

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Revenue Mix from External Customers & Related Parties

The definition of ARM’s revenue by category is available here: external customers revenue and related parties revenue.

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References and Credits

1. All financial figures presented were obtained and referenced from ARM’s quarterly and annual reports published on the company’s investor relations page: ARM Financial Reports.

2. Pexels Images.

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Disclosure

We may use artificial intelligence (AI) tools to assist us in writing some of the text in this article. However, the data is directly obtained from original sources (usually the quarterly and annual reports) and meticulously cross-checked by our editors multiple times to ensure its accuracy and reliability.

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