Arm did the rare double on Wednesday. A record quarter, soft guidance, and a stock that jumped anyway.
Q4 revenue came in at $1.49 billion. Adjusted earnings per share - profit per share of stock - hit a record $0.60.
Then Arm told Wall Street to expect about $1.26 billion next quarter. That was a step down from the print investors just saw.
They didn't blink. Shares jumped about 13% in after-hours trading.
The reason for the rally is buried a few lines into the press release. Arm now has more than $2 billion in customer demand for its new AGI data center CPU.
That demand is spread across fiscal 2027 and 2028. It is also double what Arm forecast when the chip launched in late March.
Arm also said it has 50% market share for CPU compute among the top hyperscalers. The CPU is the brain of a data center.
The data center side, which used to be a side bet, is on track to become Arm's biggest business. Management said the segment will pass every other line as orders ramp.
Arm still gets a chunk of revenue from phones. That part of the business is slowing.
CEO Rene Haas said earlier this year that smartphone unit growth flipped negative. That is a sentence Arm investors did not expect to hear in 2026.
Phones used to be Arm's bread and butter. Its chip designs sit inside almost every smartphone shipped.
The firm is now telling investors that AI data center growth will more than make up for the slump. So far, the orders back that up.
The Q1 guidance is the tradeoff. Smartphone weakness shows up first in the headline numbers. AI demand shows up in the order book.
Arm stock is up about 84% in 2026 going into the print. That puts it among the best AI names of the year.
The valuation is steep. The price-to-earnings ratio sits north of 250.
That has split Wall Street. Goldman Sachs has a Sell rating with a $125 price target.
Wells Fargo just raised its target to $220 with an Overweight rating. That is a wide spread for one stock, and it maps onto how investors are reading the next year.
The question is whether to trust the order book or the soft guidance.
Arm is reporting more than $2 billion in demand stretching into fiscal 2028. That removes a lot of guesswork from the next several quarters.
The launch of the AGI CPU looks like a turning point. Arm has been pitching the chip as the next leg of growth, and the orders so far make that case.
The risk is the smartphone side. If phone demand keeps sliding, the data center growth has to do all the heavy lifting just to keep total revenue moving up.
Even with that risk, the order book gives Arm a clearer view of the next year than most chip names have right now. Wednesday's price action says the order book wins for now.
