Arm Holdings shares rose 13% in premarket trading on Wednesday after the company launched its first in-house data center processor and set a new long-term revenue target. The chip, called the AGI CPU, marks a break from Arm’s usual model of licensing technology to other semiconductor companies.
Arm said the new chip business could generate $15 billion in annual revenue by 2031, while total yearly revenue could reach $25 billion within five years.
Arm Holdings introduced the AGI CPU at an event in San Francisco on Tuesday. The company said the processor is built for AI inference in data centers, where demand for computing power has increased with the expansion of AI services. The announcement pushed Arm shares sharply higher before the opening bell.
The company said the AGI CPU can feature up to 136 cores and consume 300 watts of power. Taiwan Semiconductor Manufacturing Co. will manufacture the product. Arm also projected earnings of $9 a share within five years, compared with analyst estimates of $1.75 a share for the current fiscal year.
Arm said annual sales from the new chip unit could surpass revenue from its existing business. It expects the current intellectual property and licensing division to grow to about $10 billion over the same period. That would leave total annual revenue at roughly $25 billion, up from about $5 billion in 2025.
Meta will be the first major customer for Arm’s new processor. The company also named OpenAI, Cloudflare, SAP, and SK Telecom among the initial buyers or deployment partners. Arm said these companies plan to use the AGI CPU in their infrastructure.
The AGI CPU is designed to work alongside accelerator chips from companies such as NVIDIA. Arm said the processor helps coordinate computing tasks, prepare data, and run parts of the response process for AI queries. This makes it part of the server layer that supports large-scale AI systems.
Meta said it “worked alongside Arm to develop the Arm AGI CPU to deploy an efficient compute platform that significantly improves our data center performance density.” Arm Chief Executive Officer Rene Haas added, “The product that we’re building is not only compelling — but we actually have customers who are lined up to buy it.”
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Arm Holdings built its business by licensing instruction sets and processor designs to other chipmakers. That model helped the company maintain very high margins, since it did not carry the production costs tied to selling full chips. The new strategy changes that by placing the firm directly in the processor market.
Chief Financial Officer Jason Child said the licensing business remains stronger on margin, but chip sales can produce more gross profit dollars. He explained that on a theoretical $1,000 chip, Arm earns about 5% in licensing revenue if a customer uses its instruction set. The return rises when Arm provides designs and grows further when Arm sells the chip itself.
The move also places Arm in closer competition with Intel and AMD in data center CPUs. At the same time, it adds a new layer to Arm’s relationship with customers that both license its technology and build chips internally. Arm said off-the-shelf systems using the AGI CPU are already available from companies such as Quanta and Super Micro, with wider volumes expected in the second half of this year.