The stock needs roughly $7 billion of fiscal 2028 sales at a still-rich multiple. I expect about $7.2 billion, but silicon at 40% gross margin forces a much lower multiple and a $155 share price.
Key points
- $314 billion of equity value is 61 times trailing sales of $5.16 billion and 302 times trailing GAAP earnings.
- High-30s to low-40s percent AGI CPU gross margin, versus 97% on IP, is management’s own starting range for fiscal 2028.
- $200 million a quarter of SoftBank-related licensing is 15% of run-rate sales and is not an independent customer.
The call
The price requires fiscal 2028 sales near $7 billion still valued like a pure IP royalty company. Trailing sales of $5.16 billion already cost 61 times; GAAP earnings of $0.97 a share cost 302 times. Stock compensation of $1.15 billion over the last four quarters is larger than GAAP net income.
I expect about $5.9 billion of fiscal 2027 sales and $7.2 billion in fiscal 2028, with roughly $0.8 billion of that silicon. That mix is worth 25 times IP sales and 4 times silicon sales, or $155 a share. The market is too optimistic: it treats demand talk of more than $2 billion as if it were booked high-margin royalties.
Revenue by quarter ($ billions)SEC XBRL through Q1 FY27; Q2 FY27E is company midpoint; later bars are my estimates
Valuation
| Item | Figure |
|---|
| FY28 IP and license sales (my estimate) | $6.4 billion |
| Multiple on IP sales | 25 times |
| FY28 silicon sales (my estimate) | $0.8 billion |
| Multiple on silicon sales | 4 times |
| Net cash | $3.9 billion |
| Equity value / diluted shares | $167 billion / 1.08 billion = $155 |
Twenty-five times IP sales is still a premium to mature semiconductor IP. Four times silicon sales matches a 40% gross-margin foundry-sourced CPU. If silicon is delayed, the IP multiple can stay high, but then sales miss; if silicon ships, the mix multiple falls. Either path is a large gap versus $294.
From $294 to $155: what the multiple must give backMy FY28 sales mix and multiples; net cash added last
Risks
- Cloud royalties more than doubling again could lift IP sales faster than I model.
- AGI CPU could reach 50% gross margin sooner if Arm in-sources packaging.
- A SoftBank control event or Qualcomm litigation win could re-rate the name independently of sales mix.
What would change my mind
A Q3 update that books silicon at IP-like margins, or royalty growth that stays above 25% while smartphone units keep falling.