After gaining yesterday following its fiscal third-quarter earnings report on Wednesday night, Arm Holdings (ARM +11.66%) was moving higher for a second straight session as the momentum from the post-earnings rally continued, the tech sector bounced back after a days-long slide, and Amazon became the latest hyperscaler to give a blockbuster forecast for capital expenditures for 2026.
As of 1:39 p.m. ET, the stock was up 10.2% on the news.
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Arm gets a second look
Arm stock actually sold off in after-hours trading on its earnings report on Wednesday, seemingly on fears of weak smartphone sales this year, due to the memory shortage. However, the company pushed back on those fears in its earnings call, and investors seemed to focus instead on more bullish metrics, such as its data center royalty revenue, which more than doubled in the quarter from a year ago.
Arm's business is evolving as it now makes more complex components like compute subsystems (CSS), which earn a much higher royalty rate than older chip designs.
On Friday, Arm seemed to benefit from a broad tailwind in the stock market as the "risk-on" trade returned after a brutal sell-off in risk assets like software stocks and Bitcoin.
Additionally, Amazon, the last of the big hyperscalers to report earnings, said it expects to invest about $200 billion in capital expenditures, which should drive more demand for Arm-based chips.
Amazon already uses Arm CPUs in its Graviton chips, and Arm's growth in the data center shows it's ready to capitalize on an increase in capex.
NASDAQ: ARM
Key Data Points
What's next for Arm
With big tech companies set to spend more than $600 billion on capex this year, semiconductor companies, including Arm, look set for a huge windfall.
Meanwhile, Arm's power-efficient chips give it an advantage not just in the data center, but in newer areas of AI like the edge and physical AI.
As the AI boom rolls on, the future looks bright for Arm.
