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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November, 2024

Commission File Number 001-41800

Arm Holdings plc

110 Fulbourn Road
Cambridge CB1 9NJ
United Kingdom
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒    Form 40-F ☐

Quarterly report for the three and six months ended September 30, 2024.


Incorporation by Reference

This Report on Form 6-K shall be deemed to be incorporated by reference into the registration statement on Form S-8 of Arm Holdings plc (File No. 333-274544), including the prospectus forming a part of such registration statement, and to be a part thereof from the date on which this Report on Form 6-K is filed with the U.S. Securities and Exchange Commission (the “SEC”), to the extent not superseded by documents or reports subsequently filed or furnished.


Background and Certain Defined Terms

In this Report, unless otherwise specified, “the Company,” “Arm,” “we,” “our” and “us” refer to Arm Holdings plc and its wholly owned subsidiaries, as the context may require. “The Company” refers (1) to Arm Limited before the corporate reorganization and (2) to Arm Holdings plc after the corporate reorganization.

The term “Annual Report” refers to Arm’s annual report on Form 20-F for the fiscal year ended March 31, 2024, filed with the SEC on May 29, 2024.



Table of Contents

Page
Condensed Consolidated Income Statements for the three and six months ended September 30, 2024 and 2023
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended September 30, 2024 and 2023
Condensed Consolidated Balance Sheets as of September 30, 2024 and March 31, 2024
Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended September 30, 2024 and 2023
Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2024 and 2023



Forward-Looking Statements
The following discussion and analysis of our financial condition, results of operations and notes to the unaudited condensed consolidated financial statements included herein contains forward-looking statements that reflect our plans, beliefs, expectations and current views with respect to, among other things, future events and financial performance. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. There are many factors that could cause or contribute to such differences, including, but not limited to, those identified below and those discussed in “Item 3. Key Information—D. Risk Factors” in our Annual Report.
This Report on Form 6-K (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact could be deemed forward-looking statements, including without limitation, statements relating to our future operations, results of operations and other matters that are based on our current expectations, estimates, assumptions and projections. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “is/are likely to,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target,” “continue,” “ongoing” or similar words or phrases, or the negative of these words or phrases. The inclusion of forward-looking statements in this Quarterly Report, including in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved or that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. The forward-looking statements included in this Quarterly Report are based on management’s current beliefs, assumptions and expectations of our future economic performance, considering the information currently available to management. While we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. All such factors are difficult to predict, represent uncertainties that may materially affect actual results and may be beyond our control. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors or to assess the impact of each such risk factor on the Company. Any forward-looking statement in this Quarterly Report speaks only as of the date on which this Quarterly Report is furnished, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which this Quarterly Report is furnished except as required by applicable law. If one or more risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements.
3
Arm Holdings plc
Condensed Consolidated Income Statements
(in millions, except per share amounts)
(Unaudited)


Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
Revenue:
Revenue from external customers$652 $644 $1,467 $1,179 
Revenue from related parties192 162 316 302 
Total revenue844 806 1,783 1,481 
Cost of sales(32)(46)(65)(77)
Gross profit 812 760 1,718 1,404 
Operating expenses:
Research and development(507)(626)(992)(963)
Selling, general and administrative(241)(290)(480)(486)
Total operating expense(748)(916)(1,472)(1,449)
Operating income (loss)64 (156)246 (45)
Income (loss) from equity investments, net(10)(5)14 (12)
Interest income, net29 28 61 52 
Other non-operating income (loss), net(19)14 (13)13 
Income (loss) before income taxes 64 (119)308 8 
Income tax benefit (expense) 43 9 22 (13)
Net income (loss)$107 $(110)$330 $(5)
Net income (loss) per share attributable to ordinary shareholders
Basic $0.10 $(0.11)$0.32 $0.00 
Diluted$0.10 $(0.11)$0.31 $0.00 
Weighted average ordinary shares outstanding
Basic1,0491,0251,0471,025
Diluted1,0631,0251,0611,025
See accompanying notes to the condensed consolidated financial statements.
4
Arm Holdings plc
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(Unaudited)


Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
Net income (loss)$107 $(110)$330 $(5)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments25 (16)24 (10)
Net change of the effective portion of designated cash flow hedges14 (14)15 (14)
Total comprehensive income (loss) $146 $(140)$369 $(29)
    
See accompanying notes to the condensed consolidated financial statements.
5
Arm Holdings plc
Condensed Consolidated Balance Sheets
(in millions, except par value)
(Unaudited)

As of
September 30,
2024		March 31,
2024
Assets:
Current assets:
Cash and cash equivalents$1,498 $1,923 
Short-term investments860 1,000 
Accounts receivable, net (including receivables from related parties of $164 and $182 as of September 30, 2024 and March 31, 2024, respectively)
1,006 781 
Contract assets (including contract assets from related parties of $55 and $22 as of September 30, 2024 and March 31, 2024, respectively)
454 336 
Prepaid expenses and other current assets246 157 
Total current assets4,064 4,197 
Non-current assets:
Property and equipment, net291 215 
Operating lease right-of-use assets232 205 
Equity investments (including investments held at fair value of $561 and $573 as of September 30, 2024 and March 31, 2024, respectively)
796 741 
Goodwill1,641 1,625 
Intangible assets, net184 152 
Deferred tax assets351 282 
Non-current portion of contract assets
273 240 
Other non-current assets254 270 
Total non-current assets4,022 3,730 
Total assets$8,086 $7,927 
Liabilities:
Current liabilities:
Accrued compensation and benefits$104 $298 
Tax liabilities148 147 
Contract liabilities (including contract liabilities from related parties of $107 and $107 as of September 30, 2024 and March 31, 2024, respectively)
218 198 
Operating lease liabilities29 27 
Other current liabilities (including payables to related parties of $12 and $7 as of September 30, 2024 and March 31, 2024, respectively)
400 835 
Total current liabilities899 1,505 
Non-current liabilities:
Non-current portion of accrued compensation21 20 
Deferred tax liabilities131 135 
Non-current portion of contract liabilities704 717 
Non-current portion of operating lease liabilities229 194 
Other non-current liabilities90 61 
Total non-current liabilities1,175 1,127 
Total liabilities2,074 2,632 
Commitments and contingencies (Note 12)




6
Arm Holdings plc
Condensed Consolidated Balance Sheets
(in millions, except par value)
(Unaudited)


As of
September 30,
2024		March 31,
2024
Shareholders’ equity:
Ordinary shares, $0.001 par value; 1,088 shares authorized and 1,051 shares issued and outstanding as of September 30, 2024; and 1,088 shares authorized and 1,040 shares issued and outstanding as of March 31, 2024
2 2 
Additional paid-in capital2,519 2,171 
Accumulated other comprehensive income (loss)410 371 
Retained earnings3,081 2,751 
Total shareholders’ equity6,012 5,295 
Total liabilities and shareholders’ equity$8,086 $7,927 
See accompanying notes to the condensed consolidated financial statements.
7
Arm Holdings plc
Condensed Consolidated Statements of Shareholders’ Equity
(in millions)
(Unaudited)

Three Months Ended September 30, 2024
Ordinary Shares
Number of
Shares		AmountAdditional Paid-
in Capital		Accumulated
Other
Comprehensive
Income (Loss)		Retained
Earnings		Total
Shareholders’
Equity
Balance as of June 30, 20241,048$2 $2,316 $371 $2,974 $5,663 
Net income (loss)—— — — 107 107 
Net change in fair value of the effective portion of designated cash flow hedges, net of tax—— — 14 — 14 
Foreign currency translation adjustments, net of tax—— — 25 — 25 
Share-based compensation cost—— 218 — — 218 
Issuance of vested shares from share-based payment arrangements3— — — — — 
Tax withholding on vested shares from share-based payment arrangements—— (15)— — (15)
Balance as of September 30, 20241,051$2 $2,519 $410 $3,081 $6,012 

Three Months Ended September 30, 2023
Ordinary Shares
Number of
Shares		AmountAdditional Paid-
in Capital		Accumulated
Other
Comprehensive
Income (Loss)		Retained
Earnings		Total
Shareholders’
Equity
Balance as of June 30, 20231,025$2 $1,275 $382 $2,562 $4,221 
Net income (loss)—— — — (110)(110)
Net change in fair value of the effective portion of designated cash flow hedges, net of tax—— — (14)— (14)
Foreign currency translation adjustments, net of tax—— — (16)— (16)
Share-based compensation cost—— 384 — — 384 
Tax withholding on vested shares from share-based payment arrangements—— (23)— — (23)
Reclassification of RSU awards previously liability-classified (1)
—— 343 — — 343 
Distribution to majority ordinary shareholder related to Pelion IOT Limited—— — — (12)(12)
Balance as of September 30, 20231,025$2 $1,979 $352 $2,440 $4,773 
(1)     Includes approximately $129 million of share-based compensation cost recognized in the three months ended September 30, 2023 for restricted share units (“RSU”) awards previously liability-classified.


8
Arm Holdings plc
Condensed Consolidated Statements of Shareholders’ Equity
(in millions)
(Unaudited)
Six Months Ended September 30, 2024
Ordinary Shares
Number of
Shares		AmountAdditional Paid-
in Capital		Accumulated
Other
Comprehensive
Income (Loss)		Retained
Earnings		Total
Shareholders’
Equity
Balance as of March 31, 20241,040$2 $2,171 $371 $2,751 $5,295 
Net income (loss)—— — — 330 330 
Net change in fair value of the effective portion of designated cash flow hedges, net of tax—— — 15 — 15 
Foreign currency translation adjustments, net of tax—— — 24 — 24 
Share-based compensation cost—— 400 — — 400 
Issuance of vested shares from share-based payment arrangements11 — — — — — 
Tax withholding on vested shares from share-based payment arrangements—— (52)— — (52)
Balance as of September 30, 20241,051$2 $2,519 $410 $3,081 $6,012 

Six Months Ended September 30, 2023
Ordinary Shares
Number of
Shares		AmountAdditional Paid-
in Capital		Accumulated
Other
Comprehensive
Income (Loss)		Retained
Earnings		Total
Shareholders’
Equity
Balance as of March 31, 20231,025$2 $1,216 $376 $2,457 $4,051 
Net income (loss)—— — — (5)(5)
Net change in fair value of the effective portion of designated cash flow hedges, net of tax—— — (14)— (14)
Foreign currency translation adjustments, net of tax—— — (10)— (10)
Share-based compensation cost—— 443 — — 443 
Tax withholding on vested shares from share-based payment arrangements—— (23)— — (23)
Reclassification of RSU awards previously liability-classified (1)
—— 343 — — 343 
Distribution to majority ordinary shareholder related to Pelion IOT Limited—— — — (12)(12)
Balance as of September 30, 20231,025$2 $1,979 $352 $2,440 $4,773 
(1)    Includes approximately $212 million of share-based compensation cost recognized in the six months ended September 30, 2023 for RSU awards previously liability-classified.
See accompanying notes to the condensed consolidated financial statements.
9
Table of Contents
Arm Holdings plc
Condensed Consolidated Statements of Cash Flows
(in millions)
(Unaudited)


Six Months Ended September 30,
20242023
Cash flows provided by (used for) operating activities:
Net income (loss)
$330 $(5)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization
87 82 
Deferred income taxes
(11)(17)
(Income) loss from equity investments, net
(14)12 
Share-based compensation cost
400 653 
Operating lease expense
18 17 
Other non-cash operating activities, net
12 (3)
Changes in assets and liabilities:
Accounts receivable, net (including receivables from related parties)
(225)135 
Contract assets, net (including contract assets from related parties)
(151)(87)
Prepaid expenses and other assets
(56)13 
Accrued compensation and benefits
(193)(442)
Contract liabilities (including contract liabilities from related parties)
7 (72)
Tax liabilities
(68)(64)
Operating lease liabilities
(21)(17)
Other liabilities (including payables to related parties)
(399)(92)
Net cash provided by (used for) operating activities
$(284)$113 
Cash flows provided by (used for) investing activities
Purchases of short-term investments(65)(385)
Proceeds from maturity of short-term investments205 246 
Purchases of equity investments
(41)(11)
Purchases of intangible assets
(16)(13)
Purchases of property and equipment
(82)(60)
Net cash provided by (used for) investing activities
$1 $(223)
Cash flows provided by (used for) financing activities
Payments of intangible asset obligations(31)(21)
Other financing activities, net
(21)(6)
Payments of withholding tax on vested shares(97)(12)
Net cash provided by (used for) financing activities
$(149)$(39)
Effect of foreign exchange rate changes on cash and cash equivalents
7 1 
Net increase (decrease) in cash and cash equivalents
(425)(148)
Cash and cash equivalents at the beginning of the period
1,923 1,554 
Cash and cash equivalents at the end of the period
$1,498 $1,406 






10
Table of Contents
Arm Holdings plc
Condensed Consolidated Statements of Cash Flows
(in millions)
(Unaudited)


Six Months Ended September 30,
20242023
Non-cash investing and financing activities:
Non-cash additions in property and equipment $39 $5 
Non-cash additions in intangible assets$62 $38 
Non-cash additions in operating lease right-of-use assets$42 $13 
Non-cash additions of operating lease liabilities $43 $13 
Non-cash additions to equity investments from conversion of certain receivables$— $4 
Non-cash distributions to shareholders$— $12 
Non-cash withholding tax on vested shares$14 $11 
Non-cash reclassification of share-based compensation costs$— $343 

See accompanying notes to the condensed consolidated financial statements.
11
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)

1 - Description of Business and Summary of Significant Accounting Policies
Description of Business
Arm Holdings plc and its wholly owned subsidiaries (the “Company” and also referred to as “we,” “our” or “us”) is a global leader in the semiconductor industry. The Company’s principal operations are the licensing, marketing, research and development of microprocessors, systems intellectual property (“IP”), graphics processing units, physical IP and associated systems IP, software, tools and other related services.
Corporate Reorganization
In September 2023, the Company completed a board approved corporate reorganization which involved (1) the shareholders of Arm Limited exchanging each of the ordinary shares held by them in Arm Limited for newly issued ordinary shares of Arm Holdings Limited; and (2) the re-registration of Arm Holdings Limited as a public limited company under the laws of England and Wales at which time its name was changed to Arm Holdings plc. This corporate reorganization was solely for the purpose of reorganizing the Company’s corporate structure, in which Arm Limited became a wholly owned subsidiary of the holding company, Arm Holdings plc. This transfer of equity resulted in the issuance of ordinary shares of Arm Holdings plc to shareholders in the same class and the same number of ordinary shares as their previous shareholding in Arm Limited. As a result of the corporate reorganization between entities under common control, the historical consolidated financial statements of the Company were retrospectively adjusted for the change in reporting entity. Therefore, the historical consolidated financial statements of Arm Limited became the historical consolidated financial statements of Arm Holdings plc as of the date of the corporate reorganization.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the fiscal year ended March 31, 2024, in our Annual Report.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, which are necessary for the fair statement of the unaudited condensed consolidated balance sheets, income statements, statements of comprehensive income, shareholders’ equity and cash flows for these interim periods. The results for the interim periods are not necessarily indicative of results for the full fiscal year.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries and the Arm Employee Benefit Trust (the “EBT”). All intercompany balances and transactions have been eliminated in consolidation.
The financial statements consolidate all of the Company’s affiliates, and the entities where the Company holds a controlling financial interest, because the Company holds a majority voting interest. The Company reevaluates whether there is a controlling financial interest in all entities when rights and interests change.
12
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates include, but are not limited to, revenue recognition, allowance for expected credit losses, income taxes, share-based compensation, impairment considerations for long-lived assets, fair value estimates and impairment for investments. The Company evaluates these estimates on an ongoing basis and revises estimates as circumstances change. The Company bases its estimates on historical experience, anticipated results, trends, and other various assumptions that it believes are reasonable. Actual results could differ materially from the Company’s estimates.
Recently issued accounting pronouncements not yet adopted
Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures: In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, which requires incremental reportable segment disclosures. The new standard requires that a public entity disclose significant segment expenses, the title and position of the chief operating decision maker (“CODM”), and how the CODM uses the reported measures in assessing performance and deciding how to allocate resources. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. This ASU will result in additional required disclosures being included in our consolidated financial statements when adopted. The Company will adopt this standard in the annual financial statements for the fiscal year beginning April 1, 2024 and interim periods within the fiscal year beginning April 1, 2025.
Income Taxes (Topic 740), Improvements to Income Tax Disclosures: In December 2023, the FASB issued ASU 2023-09, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in additional required disclosures being included in our consolidated financial statements when adopted. The Company will adopt this standard for the fiscal year beginning April 1, 2025.
Recently issued SEC final rules not yet adopted
In March 2024, the SEC adopted final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which requires a registrant to disclose climate-related risks that are reasonably likely to have a material impact on its business strategy, results of operations and financial condition. The rules include disclosures relating to climate-related risks and risk management, a registrant's governance of such risks, the financial impact on the audited financial statements, and greenhouse gas emissions. The disclosures will be required prospectively, with information for prior periods required only to the extent it was previously disclosed in an SEC filing. The earliest adoption date starts from the registrant's fiscal year beginning calendar 2025, which is the Company's fiscal year ending March 31, 2026. On April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. The Company is currently evaluating the impact of the adoption of these final rules on its consolidated financial statements and disclosures.
13
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
2 - Balance Sheet Components
Certain balance sheet components are as follows:
Prepaid expenses and other current assets consist of:
As of
(in millions)September 30, 2024March 31, 2024
Research and development tax credit receivables$107 $68 
Prepayments71 49 
Other receivables68 40 
Total prepaid expenses and other current assets$246 $157 
Accrued compensation and benefits consist of:
As of
(in millions)September 30, 2024March 31, 2024
Accrued bonus, commissions, and cash awards$11 $190 
Accrued vacation and sabbatical84 83 
Accrued salaries and fringe benefits9 25 
Total accrued compensation and benefits$104 $298 
Other current liabilities consist of:
As of
(in millions)September 30, 2024March 31, 2024
Employee related payroll taxes and payables (1)
$192 $674 
Accrued expenses and fees105 83 
Electronic design automation liabilities57 40 
Trade payables (including payables to related parties of $12 and $7 as of September 30, 2024 and March 31, 2024, respectively)
34 26 
Customer deposits7 7 
Finance lease liabilities5 5 
Total other current liabilities$400 $835 
(1)    Employee related payroll taxes and payables are primarily related to vested RSUs during the quarter and paid in the subsequent quarter.
3 - Revenue
Revenue Recognition
Revenue for the Company’s major product offerings consists of the following:
License and Other Revenue
•Intellectual property license — The Company generally licenses IP under non-exclusive license agreements that provide usage rights for specific applications for a finite or perpetual term. These licenses are made available electronically to address the customer-specific business requirements. These arrangements generally have distinct
14
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
performance obligations that consist of transferring the licensed IPs, version extensions of architecture IP or releases of specified IPs, and support services. Support services consist of a stand-ready obligation to provide technical support, patches, and bug fixes over the support term. Revenue allocated to the IP license is recognized at a point in time upon the delivery or beginning of the license term, whichever is later. Revenue allocated to distinct version extensions of architecture IP or releases of specified IP, excluding when-and-if-available minor updates over the support term, are recognized at a point in time upon the delivery or beginning of license term, whichever is later.
Certain license agreements provide customers with the right to access a library of current and future IPs on an unlimited basis over the contractual period depending on the terms of the applicable contract. These licensing arrangements represent stand-ready obligations in that the timing of the delivery of the underlying IPs is within the control of the customer and the extent of use in any given period does not diminish the remaining performance obligation. The contract consideration related to these arrangements is recognized ratably over the term of the contract in line with when the control of the performance obligations is transferred.
Certain subscription license agreements include unspecified future IPs that are provided on a when-and-if-available basis, representing a stand-ready obligation. The contract consideration allocated to the stand-ready obligation is recognized on a ratable basis over the term of the contract, commencing upon the later of the effective date of the agreement and the transfer of the initial available IP license.
•Software sales, including development systems — Sales of software, including development systems, which are not specifically designed for a given license (such as off-the-shelf software), are recognized upon delivery when control has been transferred and customer can begin to use and benefit from the license.
•Professional services — Services (such as training, professional and design services) that the Company provides, which are not essential to the functionality of the IP, are separately stated and priced in the contract and accounted for separately. Training revenue is recognized as services are performed. Revenue from professional and design services are recognized over time using the input method based on engineering labor hours expended to date relative to the estimated total effort required. For such professional and design services, the Company has an enforceable right to payment for performance completed to date, which includes a reasonable profit margin and the performance of such services do not create an asset with an alternative use. In certain arrangements, the Company also provides customers with professional and design services, as a stand-ready obligation, that are recognized on a ratable basis over the term of the contract.
•Support and maintenance — Support and maintenance is a stand-ready obligation to the customer that is both provided and consumed simultaneously. Revenue is recognized on a straight-line basis over the period for which support and maintenance is contractually agreed pursuant to the license.
Royalty Revenue
For most IP license agreements, royalties are collected on products that incorporate the Company’s IP. Royalties are recognized on an accrual basis in the quarter in which the customer ships their products, based on the Company’s technology that it contains. This estimation process for the royalty revenue accrual is based on a combination of methodologies, including the use of historical sales trends and macroeconomic factors for predictive analysis, the analysis of customer royalty reports and their sales trends and forecasts, as well as data and forecasts from third-party industry research providers. Data considered includes revenue, unit shipments, average selling price, product mix, market share and market penetration. Adjustments to revenue are required in subsequent periods to reflect changes in estimates as new information becomes available, primarily resulting from actual amounts subsequently reported by the licensees in the period following the accrual, including royalty audit resolutions.
15
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
Disaggregation of Revenue
A summary of the Company’s disaggregated revenue is as follows:
Three Months Ended September 30,
External CustomersRelated PartiesTotal
(in millions)202420232024202320242023
License and Other Revenue (1)
$240 $294 $90 $94 $330 $388 
Royalty Revenue412 350 102 68 514 418 
$652 $644 $192 $162 $844 $806 
(1)    Includes over-time revenue of $120 million and $30 million, and point-in-time revenue of $210 million and $358 million, for the three months ended September 30, 2024 and 2023, respectively.
Six Months Ended September 30,
External CustomersRelated PartiesTotal
(in millions)202420232024202320242023
License and Other Revenue (1)
$681 $474 $121 $189 $802 $663 
Royalty Revenue786 705 195 113 981 818 
$1,467 $1,179 $316 $302 $1,783 $1,481 
(1)    Includes over-time revenue of $196 million and $47 million, and point-in-time revenue of $606 million and $616 million, for the six months ended September 30, 2024 and 2023, respectively.
Revenue by geographic region is allocated to individual countries based on the principal headquarters of the customers. The geographical locations are not necessarily indicative of the country in which the customer sells products containing the Company’s technology IP. The following table summarizes information pertaining to revenue from customers based on the principal headquarters address by geographic regions:
Three Months Ended September 30,Six Months Ended September 30,
(in millions)2024202320242023
United States$292 $331 $850 $623 
PRC (1)
193 178 321 319 
Taiwan155 166 270 281 
Republic of Korea76 62 139 107 
Other countries128 69 203 151 
Total$844 $806 $1,783 $1,481 
(1)    “PRC” means the People’s Republic of China, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region, but excluding Taiwan.
16
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
Receivables
A summary of the components of accounts receivable, net is as follows:
As of
(in millions)September 30, 2024March 31, 2024
Trade receivables$617 $405 
Royalty receivables408 379 
Total gross receivables1,025 784 
Allowance for current expected credit losses(19)(3)
Total accounts receivables, net$1,006 $781 
A summary of the movement in the allowance for current expected credit losses is as follows:
(in millions)Total
Balance as of March 31, 2024
$3 
Additional provision16 
Balance as of September 30, 2024
$19 
Contract Assets
The timing of revenue recognition may differ from the timing of invoicing to customers. When revenue recognized exceeds the amount billed to the customer, the Company records a contract asset. Contract assets increased by $538.2 million and $663.9 million due to the timing of billings to customers, which fell into subsequent periods, as of September 30, 2024 and March 31, 2024, respectively, offset by $387.0 million and $357.4 million of contract assets transferred to accounts receivable, as of September 30, 2024 and March 31, 2024, respectively. The balance and activity for loss allowances related to contract assets was immaterial for all periods presented.
Contract Liabilities
A reconciliation of the movement in contract liabilities is as follows:
(in millions)Total
Balance as of March 31, 2024
$915 
Customer prepayment and billing in advance of performance180 
Revenue recognized in the period that was included in the contract liability balance at the beginning of the period(98)
Revenue recognized in the period that was included in the contract liability balance during the period(75)
Balance as of September 30, 2024
$922 
Satisfied Performance Obligations
For the three months ended September 30, 2024 and 2023, revenue recognized from previously satisfied performance obligations in prior reporting periods was $516.5 million and $421.5 million, respectively. For the six months ended September 30, 2024 and 2023, revenue recognized from previously satisfied performance obligations in prior reporting periods was $987.3 million and $820.8 million, respectively. These amounts primarily represent royalties earned during the period.
17
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.
The Company has elected to exclude potential future royalty receipts from the disclosure of remaining performance obligations. In certain arrangements, the Company’s right to consideration may not correspond directly with the performance of obligations. Revenue recognition for specified IP occurs upon delivery or beginning of license term, whichever is later. For certain subscription offerings, revenue allocated to unspecified future IP is recognized over-time, on a straight-line basis over the delivery period, commencing upon the later of the effective date of the arrangement and the transfer of the initial available IP license.
As of September 30, 2024, the aggregate transaction price allocated to remaining performance obligations was $2,385.0 million and there were no non-cancellable or non-refundable committed funds received from certain customers, where the parties are in negotiations regarding the enforceable rights and obligations of the arrangement.
The Company expects to recognize approximately 27% of the remaining performance obligations as revenue over the next 12 months, 16% over the subsequent 13-to 24-month period, and the remainder thereafter.
4 - Equity Investments
A summary of the components of equity investments is as follows:
As of
(in millions)September 30, 2024March 31, 2024
Equity method investments under fair value option$561 $573 
Equity investment in publicly listed company84 — 
Equity method investments under equity method11 11 
Non-marketable equity securities140 157 
Total equity investments$796 $741 
Income (loss) from equity investments, net is as follows:
Three Months Ended September 30,Six Months Ended September 30,
(in millions)2024202320242023
Equity investment in publicly listed company$2 $— $29 $— 
Equity method investments (1)
(12)(4)(12)(14)
Non-marketable equity securities (includes NAV)— (1)(3)2 
Total income (loss) from equity investments, net$(10)$(5)$14 $(12)
(1)Includes equity method investments where the Company elected the fair value option, including those under the net asset value (“NAV”) practical expedient, along with investments accounted for under the equity method.
Equity method investments under fair value option
The Company elected the fair value option to account for certain equity method investments in Acetone Limited and Ampere Computing Holdings LLC (“Ampere”). See discussion below, along with Note 7 - Fair Value, for further information.
18
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company holds equity method investments in funds accounted for under the fair value option that apply the NAV practical expedient. The estimated fair values of the Company’s equity securities at fair value that qualify for the NAV practical expedient were provided by the funds based on the indicated market values of the underlying assets or investment portfolios. As of September 30, 2024 and March 31, 2024, the carrying value of equity method investments under the fair value option measured at NAV was $104.0 million and $106.2 million, respectively.
For the three months ended September 30, 2024 and 2023, the Company recognized gains and (losses) from changes in fair value of $(2.4) million and $2.1 million, respectively, for equity method investments accounted for under the NAV practical expedient. For the six months ended September 30, 2024 and 2023, the Company recognized gains and (losses) from changes in fair value of $(2.8) million and $1.6 million, respectively, for equity method investments accounted for under the NAV practical expedient. Changes in fair value are recorded through income (loss) from equity investments, net in the Condensed Consolidated Income Statements.
Acetone Limited
As of September 30, 2024 and March 31, 2024, the carrying value of the Company’s equity method investment in Acetone Limited was $67.5 million and $76.5 million, respectively. For the three months ended September 30, 2024 and 2023, the Company recognized fair value losses of $9.0 million and $6.0 million, respectively, for its investment in Acetone Limited in income (loss) from equity investments, net in the Condensed Consolidated Income Statements. For the six months ended September 30, 2024 and 2023, the Company recognized fair value losses of $9.0 million and $15.6 million, respectively, for its investment in Acetone Limited in income (loss) from equity investments, net in the Condensed Consolidated Income Statements.
Ampere
As of September 30, 2024 and March 31, 2024, the carrying value of the Company’s equity method investment in Ampere was $389.8 million. For the three and six months ended September 30, 2024 and 2023, the Company did not recognize any fair value gains or losses for its investment in Ampere.
As of September 30, 2024 and March 31, 2024, the outstanding balance of the convertible promissory note with Ampere was $33.1 million and $32.4 million, respectively, which is included in other non-current assets on the Condensed Consolidated Balance Sheets. The Company’s maximum exposure to loss is the amounts invested in, and advanced to, Ampere as of September 30, 2024.
Equity investment in publicly listed company
In June 2024, the Company purchased $35.3 million of Raspberry Pi Holdings plc’s (“Raspberry Pi”) ordinary shares in the initial public offering of Raspberry Pi, which is now a publicly listed company. As of September 30, 2024, the carrying value for this equity investment was $84.2 million, which included a pre-initial public offering investment carrying value of $20.0 million classified as non-marketable equity securities as of March 31, 2024. For the three and six months ended September 30, 2024, the Company recognized fair value gains of $1.9 million and $28.9 million, respectively, for its equity investment in Raspberry Pi in income (loss) from equity investments, net in the Condensed Consolidated Income Statements.
Non-marketable Equity Securities
Non-marketable securities are those for which the Company does not have significant influence or control. These represent either direct or indirect, through a capital fund, investments in unlisted early-stage development enterprises which are generating value for shareholders through research and development activities. The Company holds equity interests in certain funds which are accounted for under the NAV practical expedient. As of September 30, 2024 and March 31, 2024, the carrying value of assets measured at NAV was $16.3 million and $17.8 million, respectively.
19
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
For the three months ended September 30, 2024 and 2023, the Company recognized gains and (losses) of $0.1 million and $(0.3) million, respectively, from changes in fair value for non-marketable securities accounted for under the NAV practical expedient. For the six months ended September 30, 2024 and 2023, the Company recognized gains and (losses) of $(1.6) million and $2.2 million, respectively, from changes in fair value for non-marketable securities accounted for under the NAV practical expedient.
In June 2023, the Company entered into a subscription letter with a subsidiary of SoftBank Vision Fund L.P. (“SoftBank Vision Fund”) and Kigen (UK) Limited (“Kigen”), an entity of which SoftBank Vision Fund indirectly owned 85% of the share capital on a fully diluted basis with the remainder comprising management incentives. Pursuant to the subscription letter, the Company and this subsidiary of SoftBank Vision Fund each invested $10.0 million paid in cash in exchange for preference shares of Kigen. During the three months ended September 30, 2024, the Company invested another $5.0 million in cash in exchange for preference shares of Kigen. As of September 30, 2024, the carrying value of the Company’s preference shares of Kigen was $15.0 million. The preference shares are convertible into common shares of Kigen and are entitled to full dividends, distribution and voting rights. The Company does not have significant influence or control over Kigen and elected to apply the measurement alternative for this investment.
The Company elected to apply the measurement alternative to all other non-marketable equity securities. Under the measurement alternative, these equity securities are recorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes in orderly transactions.
The components of gains and (losses), which primarily include unrealized gains and losses on non-marketable securities inclusive of those measured under the NAV practical expedient, are as follows:
Three Months Ended September 30,Six Months Ended September 30,
(in millions)2024202320242023
Observable price adjustments on non-marketable equity securities (includes NAV)$— $(1)$(2)$2 
Impairment of non-marketable equity securities — — (1)— 
Total income (loss) from equity investments in non-marketable securities, net $— $(1)$(3)$2 
All equity method investments held by the Company are considered long-term to enable ecosystem growth and are classified as non-current assets. For the three months ended September 30, 2024 and 2023, the Company recognized $1.0 million and $1.8 million, respectively, in dividends from equity investments measured using the NAV practical expedient. For the six months ended September 30, 2024 and 2023, the Company recognized $1.1 million and $2.1 million, respectively, in dividends from equity investments measured using the NAV practical expedient. The total amount of financial commitments to existing investees of the Company not provided for in the condensed consolidated financial statements was $19.1 million and $19.9 million as of September 30, 2024 and March 31, 2024, respectively.
20
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
5 - Financial Instruments
Loans and Other Receivables
Loans and other receivables carried at amortized cost, included in other non-current assets on the Condensed Consolidated Balance Sheets, is as follows:
As of
(in millions)September 30, 2024March 31, 2024
Loans and other receivables carried at amortized cost
Loans receivable$27 $26 
Other receivables10 12
Allowance for current expected credit losses(20)(19)
Loans and other receivables carried at amortized cost, net$17 $19 
The allowance for current expected credit losses reflects the Company’s best estimate of expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions.
Loans receivable
As of September 30, 2024 and March 31, 2024, the Company had a loan receivable of $16.4 million and $16.2 million, respectively, from Arduino SA (“Arduino”), a related party, that was fully impaired for the periods presented.
As of September 30, 2024 and March 31, 2024, the Company had a four-year loan of $3.2 million and $3.1 million, respectively, issued to Cerfe Labs, Inc, a related party, that was fully impaired for the periods presented.
The remaining balance of loans receivables as of September 30, 2024 and March 31, 2024 comprised two five-year loans totaling $7.4 million and $6.9 million, respectively, issued to Allia Limited.
Other receivables
As of September 30, 2024 and March 31, 2024, balances included in other receivables pertain to lease deposits and other receivables.
Convertible Loans Receivable
In December 2021, the Company acquired a $29.0 million principal balance convertible loan in Ampere, which is included in other non-current assets on the Condensed Consolidated Balance Sheets. The Company elected the fair value option to measure this convertible loan receivable for which changes in fair value are recorded in other non-operating income (loss), net in the Condensed Consolidated Income Statements. For the three months ended September 30, 2024, the Company did not recognize any gains on this convertible loan receivable. For the three months ended September 30, 2023, the Company recognized gains on this convertible loan receivable of $1.0 million. For the six months ended September 30, 2024 and 2023, the Company recognized gains on this convertible loan receivable of $1.0 million and $1.0 million, respectively.
6 - Derivatives
The Company uses derivative financial instruments, specifically foreign currency forward contracts, to mitigate exposure from certain foreign currency risk. Certain forecasted transactions, specifically British Pound Sterling (“GBP”) denominated cash flows in the form of research and development and selling, general and administrative expenses are exposed to foreign currency risk.
21
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of September 30, 2024, the notional value of outstanding foreign currency forward contracts was £360.0 million and the fair value was $21.0 million. As of March 31, 2024, the notional value of outstanding foreign currency forward contracts was £728.0 million and the fair value was $0.1 million.
The following table presents the notional amounts of the Company’s outstanding derivative instruments:
As of
(in millions)September 30, 2024March 31, 2024
Designated as cash flow hedges
Foreign currency forward contracts$461 $919 
The following table presents the fair value of the Company’s outstanding derivative instruments:
Derivative AssetsDerivative Liabilities
As ofAs of
(in millions)September 30,
2024		March 31,
2024		September 30,
2024		March 31,
2024
Designated as cash flow hedges
Foreign currency forward contracts$21 $4 $— $4 
Cash Flow Hedge Gains (Losses)
The following table presents net gains (losses) on foreign currency forward contracts designated as cash flow hedges:
Three Months Ended September 30,Six Months Ended September 30,
(in millions)2024202320242023
Condensed Consolidated Statements of Comprehensive Income:
Change in gains (losses) recognized in accumulated other comprehensive income on cash flow hedge derivatives$29 $(12)$25 $(2)
(Gains) losses reclassified from Accumulated other comprehensive income into income(10)(6)(5)(16)
Income tax benefit (expense) on cash flow hedges(5)4 (5)4 
Net change in fair value of the effective portion of designated cash flow hedges, net of tax (1)
$14 $(14)$15 $(14)
Condensed Consolidated Income Statements, before tax:
Research and development$6 $3 $3 $9 
Selling, general and administrative expenses$4 $3 $2 $7 
(1)    All amounts reported in accumulated other comprehensive income at the reporting date are expected to be reclassified into earnings within the next 18 months.
For the three and six months ended September 30, 2024 and 2023, the Company’s cash flow hedges were highly effective with immaterial amounts of ineffectiveness recorded in the Condensed Consolidated Income Statements for these designated cash flow hedges, and all components of each derivative instrument’s gain or loss were included in the assessment of hedge effectiveness.
22
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company classifies foreign currency forward contracts as Level 2 fair value measurements pursuant to the fair value hierarchy. See Note 7 - Fair Value, for further details.
7 - Fair Value
To provide an indication about the reliability of the inputs used in determining fair value, the Company classifies its fair value financial instruments into the three levels prescribed under GAAP. An explanation of each level follows the tables and qualitative disclosures below.
The following table presents the Company’s fair value hierarchy for assets and liabilities measured and recognized at fair value, excluding investments where the NAV practical expedient has been elected, on a recurring basis:
As of September 30, 2024As of March 31, 2024
(in millions)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Financial assets
Money market funds$1,378 $— $— $1,378 $1,744 $— $— $1,744 
Short-term investments (1)
860 — — 860 1,000 — — 1,000 
Equity investments (2)
84 — 457 541 — — 466 466 
Convertible loans receivable— — 33 33 — — 32 32 
Foreign currency forward contracts— 21 — 21 — 4 — 4 
Total financial assets$2,322 $21 $490 $2,833 $2,744 $4 $498 $3,246 
Financial liabilities
Foreign currency forward contracts$— $— $— $— $— $4 $— $4 
Total financial liabilities$— $— $— $— $— $4 $— $4 
(1)Short-term investments represent term deposits with banks with a maturity between 3 and 12 months.
(2)In accordance with Accounting Standards Codification (“ASC”) Subtopic 820-10, Fair Value Measurements, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.
In June 2024, Raspberry Pi, a company in which the Company has an equity investment, listed its shares publicly and became actively traded in the market. Given the investment now has a published price quotation in an active market, the investment no longer qualifies for the measurement alternative and the equity investment is now measured at fair value (Level 1) prospectively in accordance with ASC 820, Fair Value Measurements, as of the date of the remeasurement event, the initial public offering of Raspberry Pi.
The following tables summarize changes in the fair value, along with other activity associated with the Company’s Level 3 financial assets and liabilities:
Equity Method Investments
Three Months Ended September 30,Six Months Ended September 30,
(in millions)2024202320242023
Fair value of financial assets at the beginning of the period$466 $472 $466 $482 
Fair value losses recognized in the Condensed Consolidated Income Statements(9)(6)(9)(16)
Fair value at the end of the period$457 $466 $457 $466 
23
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
Convertible Loans Receivable
Three Months Ended September 30,Six Months Ended September 30,
(in millions)2024202320242023
Fair value of financial assets at the beginning of the period$33 $31 $32 $31 
Fair value gains recognized in the Condensed Consolidated Income Statements— 1 1 1 
Fair value at the end of the period$33 $32 $33 $32 
See below for a description of the valuation techniques and inputs used in the fair value measurement of Level 3 investments including equity method investments, convertible loans receivable, and currency exchange contracts.
Equity Method Investments
The Company elected the fair value option in accordance with the guidance in ASC 825, Financial Instruments (“ASC 825”), for its investments in Acetone Limited and Ampere. The Company initially computed the fair value for its investments consistent with the methodology and assumptions that market participants would use in their estimates of fair value with the assistance of a third-party valuation specialist or based on inputs from the investee. The fair value computation is updated on a quarterly basis. The investments are classified within Level 3 in the fair value hierarchy because the Company estimates the fair value of the investments using the (i) the market-calibration approach based on the guideline public company method, (ii) subject to availability of sufficient information, the income approach based on the discounted cash flow method, or (iii) the probability-weighted, expected return (“PWER”) approach.
The market-calibration approach considers valuation multiples that are calibrated to the valuation as of the prior valuation date (i.e., quarterly) based on: (a) changes in the broader market or industry; (b) changes in the guideline public companies; and (c) changes in the investee’s operating and financial performance. The fair value computation under this approach includes a key assumption for the range of valuation multiples (i.e., enterprise value or revenue), which requires significant professional judgment by the valuation specialist and is based on observable inputs (e.g., market data) and unobservable inputs (e.g., market participant assumptions).
The PWER approach is based on discrete future exit scenarios to determine the value of various equity securities. Under the PWER approach, the share value today is based on the probability-weighted, present value of expected future distributions, taking into account the rights and preferences of each debt and equity class. The Company considers an initial public offering scenario, a sale scenario, and a scenario assuming continued operation as a private entity for future exit scenarios. The fair value computation under this approach includes key assumptions for time to liquidity outcomes, discounted rate, and present value factors.
24
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following tables provide quantitative information related to certain key assumptions utilized in the valuation of equity method investments accounted for under the fair value option:
As of September 30, 2024 and March 31, 2024
(in millions)Fair value as of September 30, 2024Fair value as of March 31, 2024Valuation TechniqueUnobservable InputsRange of Estimates
Equity Method Investments$457$466Acetone Limited – Market-Calibration or discounted cash flowLTM Revenue Multiple
1.2x - 1.4x
Ampere – PWERProbability of exit event100%
Time to future exit scenario1.5 years
Discount rate17.6%
Convertible Loans Receivable—Ampere
In December 2021, the Company acquired a $29.0 million convertible promissory note in Ampere, which is included in other non-current assets on the Condensed Consolidated Balance Sheets. As of September 30, 2024 and March 31, 2024, the Company’s maximum exposure to loss is the amounts invested in, and advanced to, Ampere. As of September 30, 2024 and March 31, 2024, the Company has not converted any of its convertible promissory note into equity.
The fair value of the Ampere convertible loan is based upon significant unobservable inputs, including the use of a probability weighted discounted cash flows model, requiring the Company to develop its own assumptions. Therefore, the Company has categorized this asset as a Level 3 financial asset.
Some of the more significant unobservable inputs used in the fair value measurement of the convertible loan include applicable discount rates, the likelihood and projected timing of repayment or conversion, and projected cash flows in support of the estimated enterprise value of Ampere. Changes in these assumptions, while holding other inputs constant, could result in a significant change in the fair value of the convertible loan.
If the amortized cost of the convertible loan exceeds its estimated fair value, the security is deemed to be impaired, and must be evaluated for the recognition of credit losses. Impairment resulting from credit losses is recognized within earnings, while impairment resulting from other factors is recognized in other comprehensive income (loss). As of September 30, 2024 and March 31, 2024, the Company has not recognized any credit losses related to this convertible loan.
The fair value calculated using significant unobservable inputs did not differ materially from the amortized cost basis as of September 30, 2024 and March 31, 2024.
Currency Exchange Contracts
For currency exchange contracts, these contracts are valued at the present value of future cash flows based on forward exchange rates at the balance sheet date.
25
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
8 - Shareholders’ Equity
Employee Benefit Trust
In September 2023, the Company established the EBT, constituted by a trust deed entered into by the Company and a professional trustee, with the principal purpose to facilitate the efficient and flexible settlement of share-based compensation arrangements with employees. The Company has the power to appoint and remove the trustee and therefore, consolidates the trust. The EBT may acquire newly issued ordinary shares or American Depositary Shares (“ADSs”), each representing one ordinary share of the Company, at a nominal value or the trustee of the EBT has the power to acquire ordinary shares or ADSs of the Company in the open market, which purchases may be funded by one or more loans from the Company to the EBT or non-repayable gifts made by the Company to the EBT. As of September 30, 2024 and March 31, 2024, the EBT held a nominal number and 1 million, respectively, of ADSs purchased from the Company at par value. The market value of ADSs held by the EBT on September 30, 2024 and March 31, 2024 was $0.1 million and $75.4 million, respectively. These ADSs are expected to be transferred out of the EBT to settle future vesting of share-based compensation for employees. As the EBT is consolidated by the Company, ordinary shares or ADSs held by the EBT are considered authorized and issued but not outstanding for the computation of earnings per share.
9 - Share-based Compensation
Share-based Compensation
RSUs and performance share units (“PSUs”) were granted to employees, certain executive officers, and non-executive directors of the Company and require continuous service through the vesting date.
The Company expenses share-based compensation over the requisite service period of the awards, which is generally equivalent to the vesting term. Compensation cost is recorded only for those awards expected to vest.
The fair value of RSUs is determined on the date of grant for equity-classified awards.
The Company estimates forfeitures based on employee level, economic conditions, time remaining to vest and historical forfeiture experience.
During the six months ended September 30, 2024, the Company has granted PSUs for the first time, with Relative Total Shareholder Return (“TSR”) as the performance measure under the Omnibus Incentive Plan (as defined below). PSUs granted with TSR as the performance measure are measured over the full three-year performance period relative to the S&P 500 IT Sector Index and have the potential to vest between 0% and 200% of the original award amount depending on the relative TSR achievement. To determine the grant date fair value of the awards with TSR-based performance measures, a Monte Carlo simulation model is used. We recognize compensation expense for the market-based TSR awards over the requisite service period based on the grant date fair value.
Employee Stock Purchase Plan
In August 2024 and September 2024, the Company’s Board of Directors adopted and the Company’s shareholders approved, respectively, the Company’s 2024 Employee Stock Purchase Plan (the “ESPP”). The maximum number of shares that may be granted under the ESPP is equal to the number of shares available for issuance under the Omnibus Incentive Plan, and each share granted under the ESPP reduces the number of shares available for issuance under the Omnibus Incentive Plan and its sub-plans by one share.
The ESPP provides for one or more offering periods, and each offering will be for any period of between six and 24 calendar months as determined by the Remuneration Committee of the Company’s Board of Directors (the “Remuneration Committee”). Subject to any limitations contained therein, the ESPP allows eligible employees to purchase the Company’s ordinary shares or ADSs through payroll deductions of up to 10% of eligible compensation, subject to a cap of $25,000 per year (as calculated based on applicable tax rules). Eligible employees may be granted ESPP options to acquire ordinary shares or ADSs at a fixed price, which may be set at a discount of up to 15% of the lesser of (1) the fair market value of the
26
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
ordinary shares or ADSs on the day before the offering period start date or (2) the fair market value of the ordinary shares or ADSs on the day before the purchase date at the end of the offering period. Employees may withdraw from the ESPP during specified periods and receive a full refund of accumulated payroll contributions. Employees who cease working at the Company during an offering period are treated as withdrawing from the ESPP.
The Company expects the first purchase period under the ESPP to commence during the fiscal year ending March 31, 2025. As of September 30, 2024, no ordinary shares or ADSs have been purchased under the ESPP.
Restricted Share Units – 2022 Arm Limited RSU Award Plan (“2022 RSU Plan”)
The table below identifies the award activity under the 2022 RSU Plan:
(in millions, except per share amounts)
Awards (1)
Weighted Average Grant Date Fair Value Per Award (1)
Outstanding as of March 31, 2024
23 $42.30 
Granted1 $91.43 
Vested(10)$42.54 
Cancelled and forfeited(2)$41.36 
Outstanding and expected to vest as of September 30, 2024
12 $44.23 
(1)    Awards and weighted average grant date per share exclude shares related to certain executive awards that currently have no grant date as the future performance objectives have not yet been defined and/or communicated to participants of the plan.
As of September 30, 2024, there was $480.6 million total unrecognized compensation cost related to awards issued under the 2022 RSU Plan which are expected to be recognized over a weighted-average period of 0.7 years.
Omnibus Incentive Plan
In August 2023, the Company’s Board of Directors adopted the Omnibus Incentive Plan (the “Omnibus Incentive Plan”) which became effective in September 2023. The maximum number of ordinary shares that may be issued under the Omnibus Incentive Plan is equal to the sum of (i) 20,500,000 ordinary shares and (ii) an annual increase on April 1 of each year beginning on April 1, 2024 and ending on April 1, 2028, equal to the lesser of (A) 2% of the aggregate number of ordinary shares outstanding on March 31 of the immediately preceding fiscal year and (B) such smaller number of ordinary shares as determined by the Company’s Board of Directors or the Remuneration Committee. No more than 20,500,000 ordinary shares may be issued under the Omnibus Incentive Plan upon the exercise of incentive stock options.
In October 2023, the Company started to grant RSUs and PSUs under the Omnibus Incentive Plan to employees, including executives of the Company. The RSUs and PSUs granted neither carry rights to dividends nor voting rights until the shares are issued or transferred to the recipient. The Omnibus Incentive Plan allows for either cash or share settlement of the awards by tranche, if applicable, at the discretion of the Remuneration Committee. At the time of issuance, the Company intended to settle the RSUs and PSUs in shares at the vesting date and such awards are accounted for as equity-classified awards. The RSUs were granted to existing employees and new hires of the Company and its subsidiaries, Arm Israel and Arm France SAS and vest in tranches, require continuous service through the vesting date and are subject to graded vesting over a period of three to four years. RSUs granted to employees and new hires of subsidiaries in Israel and France substantially share the same terms as the existing RSUs under the 2022 RSU Plan with differences limited to the vesting schedules and holding period for France. Awards were granted to executives of the Company and include a portion that vests over a three-year continuous service period, a portion that is subject to continuous service and satisfaction of certain Company performance conditions, and another portion that is subject to continuous service and to TSR measured over the full three-year performance period relative to the S&P 500 IT Sector Index. The time-based portion of the RSUs vest over a three-year period. The portion of the PSUs that are subject to continuous service and satisfaction of certain Company performance conditions vest upon the satisfaction of performance metrics as established for each one-year performance period and have the potential to vest between 0% and 200% of the original award amount depending on the achievement of
27
Arm Holdings plc
Notes to Condensed Consolidated Financial Statements
(unaudited)
annual performance metrics. The portion of the PSUs that are subject to continuous service and are measured over the full three-year performance period to relative TSR have the potential to vest between 0% and 200% of the original award amount depending on the relative TSR achievement.
The table below identifies all award activity under the Omnibus Incentive Plan:
(in millions, except per share amounts)
Awards (1)
Weighted Average Grant Date Fair Value Per Award (1)
Outstanding as of March 31, 2024
2 $68.13 
Granted10 $119.32 
Vested
(1)$56.53 
Cancelled and forfeited
— $111.43 
Outstanding and expected to vest as of September 30, 2024
11 $113.20 
(1)    Awards and weighted average grant date per share exclude shares related to PSUs that currently have no grant date as the future performance objectives have not yet been defined and/or communicated to participants of the plan.
As of September 30, 2024, there was $1,065.5 million total unrecognized compensation cost related to awards issued under the Omnibus Incentive Plan, which is expected to be recognized over a weighted-average period of 1.6 years.
Share-based Compensation Cost
A summary of share-based compensation cost recognized in the Condensed Consolidated Income Statements is as follows:
Three Months Ended September 30,Six Months Ended September 30,
(in millions)2024202320242023
Cost of sales
$7 $20 $13 $26 
Research and development
154 349 283 452 
Selling, general and administrative
57 149 104 198 
Pre-tax share-based compensation cost$218 $518 $400 $676 
Less: income tax effect30 41 42 70 
Net share-based compensation cost$188 $477 $358 $606 
No share-based compensation cost was capitalized for the three and six months ended September 30, 2024 and 2023.
10 - Income Taxes
For the three months ended September 30, 2024 and 2023, income tax benefit (expense) was $43.0 million and $9.0 million, respectively. For the six months ended September 30, 2024 and 2023, income tax benefit (expense) was $22.0 million and $(13.0) million, respectively. For the three months ended September 30, 2024 and 2023, the income tax benefit (expense) as a percentage of income before taxes was 67.2% and (7.6)%, respectively. For the six months ended September 30, 2024 and 2023, the income tax benefit (expense) as a percentage of income before taxes was 7.1% and (162.5)%, respectively.
The effective rate decreased compared to the same period last year primarily due to windfall tax benefits associated with share-based compensation arising in the three and six months ended September 30, 2024. Additionally, a $25.0 million contingency was released in the three months ended September 30, 2024, following the resolution of a tax inquiry.
For the three months ended September 30, 2024 and 2023, the effective rate differed from the U.K. statutory rate of 25% in both periods, primarily due to patent box, research and development tax credits and the tax impact of share-based
28
Arm Holdings plc