Shares of Arm Holdings slid 6.37% to ARS 16,470 as a Delaware jury began deliberating a lawsuit that strikes at the heart of the chip designer's revenue engine. Qualcomm, one of Arm's largest customers, is seeking to quit paying royalties — potentially worth billions of dollars — to Arm for up to five years. The trial arrives alongside broader semiconductor weakness, with the SOXX chip index down 2.52% on rising yields and inflation fears.
Qualcomm Accounts for Nearly a Tenth of Arm's Sales — and Wants Out. Qualcomm accounted for 9% of the chip designer's total revenue in the fiscal year ended March 31, 2026.
Royalty revenue was Arm's largest revenue line in fiscal 2025, bringing in $1.76 billion of $3.18 billion total (55%). A five-year royalty freeze from a customer of that size would not just dent a single quarter — it would remove a recurring stream that investors prize because it grows each time a licensee ships more chips.
The Price-Per-Chip Fight Reveals a Deeper Strategic Tension. Beyond the immediate royalty freeze, Qualcomm highlighted that Arm was seeking an approximately 1,800% increase in royalty payments between its ninth and tenth architecture versions, while Arm challenged Qualcomm's reliance on an older 2013 licensing arrangement that placed a royalty ceiling of $1.88 per chip.
Arm's attorney argued that agreement dates from an era of smaller smartphone chips and is underpriced in 2026's market, where some data center chips have 288 processor cores. The outcome will set a precedent for how Arm prices every future architecture upgrade — and whether it can extract more value as chips grow larger and more complex.
The Judge Holds a Key Lever on Damages. A five-year hold on royalty payments could be a major sales impact for Arm, but Judge Maryellen Noreika is weighing whether to throw out that contract term, which could mean Qualcomm would only be able to seek a smaller amount of damages. If the clause survives, the financial exposure balloons; if it's struck, Arm's downside narrows considerably.
A Worst-Case Verdict Could Embolden Other Licensees. Qualcomm's agreement with Arm runs through 2033. Should Qualcomm succeed, other major licensees may use the ruling as leverage to renegotiate their own terms — threatening Arm's ability to lift royalty rates across the board just as it bets its growth story on pricier next-generation chip designs and data-center expansion.