Sustainable Growth Advisers, LP on Arm Holdings
Thesis
Arm remains a long-term holding because SGA sees sustained growth in licensing and royalties as Arm-based CPUs gain adoption across data centers and AI workloads. Management's guidance reinforced confidence in roughly 20% revenue growth, while share gains versus x86 architectures and an expanding roster of partners support the long-term opportunity. SGA also highlights strong pricing power, highly recurring revenues and rising royalty rates as Arm captures more value across the compute stack. The firm still views Arm as a high-quality long-term compounder, although it trimmed the position to a below-average weight after the stock's strong performance.
“We continue to view the company as a high-quality, long-term compounder well-positioned to benefit from the proliferation of AI and power efficient computing.”
Key risks
- Valuation after strong share-price performance
- Expected weakness in handset markets