Amazon Earnings Reveal Custom Chip Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy ARM?
Source: Fool
- Capital Expenditure Plans: Amazon's fourth-quarter earnings report revealed a $200 billion capital expenditure plan, which caused stock declines but underscores the company's strong commitment to future growth.
- Surge in Custom Chip Revenue: Amazon's custom chips, Graviton and Trainium, achieved over $10 billion in annual revenue with more than 100% year-over-year growth, indicating robust market demand and a potential standalone valuation of $100 billion.
- Enhanced Cloud Computing Capacity: CEO Andy Jassy noted that significant EC2 core computing capacity is being added daily, with most utilizing Graviton chips, which not only enhances service performance but may also strengthen competitive positioning in the cloud market.
- Arm's Growth Potential: With Graviton's success, Arm's data center royalty revenue doubled in the last quarter, and it is projected that data center revenue could surpass smartphone revenue in the next three years, highlighting Arm's critical role in the growing AI demand.
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Analyst Views on ARM
Wall Street analysts forecast ARM stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 123.780
Low
120.00
Averages
160.58
High
201.00
Current: 123.780
Low
120.00
Averages
160.58
High
201.00
About ARM
Arm Holdings plc is engaged in operating a global computing platform. It architects, develops, and licenses high-performance and energy-efficient Arm compute platforms. The Company’s principal operations and activities are the licensing, marketing, research and development of central processing unit (CPU) design intellectual property (IP), graphics processors, system IP, market optimized platform IP, and associated software, tools and other related services. Its complementary products include GPU and NPU accelerators, interconnect, and others. Its primary product offerings are CPU products that address diverse performance, power, and cost requirements. It offers a family of GPU and NPU products providing efficient computing acceleration and an optimal visual experience across a wide range of devices. Its CPU, GPU, and System IP products integrated into a foundational compute platform optimized for a specific end market.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Amazon Earnings Reveal Custom Chip Growth
- Capital Expenditure Plans: Amazon's fourth-quarter earnings report revealed a $200 billion capital expenditure plan, which caused stock declines but underscores the company's strong commitment to future growth.
- Surge in Custom Chip Revenue: Amazon's custom chips, Graviton and Trainium, achieved over $10 billion in annual revenue with more than 100% year-over-year growth, indicating robust market demand and a potential standalone valuation of $100 billion.
- Enhanced Cloud Computing Capacity: CEO Andy Jassy noted that significant EC2 core computing capacity is being added daily, with most utilizing Graviton chips, which not only enhances service performance but may also strengthen competitive positioning in the cloud market.
- Arm's Growth Potential: With Graviton's success, Arm's data center royalty revenue doubled in the last quarter, and it is projected that data center revenue could surpass smartphone revenue in the next three years, highlighting Arm's critical role in the growing AI demand.
See More
Amazon's Graviton Chip Demand Soars
- Custom Chip Growth: Amazon's Graviton and Trainium chips have surpassed a run rate of $10 billion in annual revenue, doubling year-over-year, indicating strong growth potential in the cloud computing market, with a possible standalone valuation of $100 billion.
- Data Center Revenue Doubling: Arm reported that its data center royalty revenue doubled in the last quarter, with expectations to surpass smartphone revenue in the next three years, highlighting the sustained growth driven by AI compute demand.
- Significant Performance Advantage: Amazon CEO Andy Jassy noted that Graviton instances outperform comparable x86 processors by over 40%, which is likely to drive increased spending on Arm CPUs in the cloud, enhancing its competitive position.
- Future Growth Potential: Arm management indicated that the growth of AI agents will drive more CPU usage for Graviton, especially with the upcoming Graviton 5 version, leading to higher royalty revenues and market share.
See More
Amazon's Earnings Report Highlights and Challenges
- Capital Expenditure Plans: Amazon plans to invest $200 billion in capital expenditures over the coming years, which has raised investor concerns but also reflects the company's confidence in future growth prospects.
- Custom Chip Growth: Amazon's custom chips, Graviton and Trainium, have surpassed a run rate of $10 billion in annual revenue, doubling year-over-year, and could be valued at $100 billion if treated as a standalone business, highlighting their strong performance in the cloud computing market.
- Core Cloud Capabilities: CEO Andy Jassy noted that Amazon is adding significant EC2 core computing capacity daily, with most of it utilizing Graviton, indicating ongoing investment and technological advantages in its cloud infrastructure.
- Arm's Revenue Growth: Arm Holdings generates over $1 billion in quarterly revenue, and with the success of Graviton, its data center royalty revenue is expected to surpass smartphone revenue in the next three years, showcasing its potential growth opportunities in the AI sector.
See More
Three Resilient Stocks to Invest In Now
- Shopify's Performance Recovery: Despite Shopify's stock dropping over 20% since late last year, its quarterly revenue grew by 30% year-over-year, and operating income improved by 35%, indicating resilience in the e-commerce sector, with future AI search orders increasing 15-fold likely to further boost performance.
- American Express Spending Strength: American Express shares have declined since December, yet customer spending at luxury retailers rose 15% and restaurant spending increased by 20% year-over-year, reflecting the financial resilience of its affluent customer base, suggesting a positive outlook for future earnings.
- Arm Holdings' Future Potential: Although Arm Holdings' stock is nearly 30% below its October peak, its business model as a chip designer positions it well for long-term growth in the AI chip market, which is projected to grow at an average annual rate of 28% through 2035.
- Optimistic AI Market Outlook: Despite skepticism about the value of AI investments, the demand for efficient processing chips continues to rise, with Arm's future royalty and licensing revenues already established over the past few years, poised to generate significant income for the company.
See More
US Stocks Rebound Led by Software and Chipmakers
- Market Rebound: The S&P 500 Index rose by 0.77%, the Dow Jones Industrial Average increased by 0.76%, and the Nasdaq 100 Index climbed by 1.09%, indicating a recovery after Monday's sharp declines, reflecting investor optimism regarding economic data.
- Software and Chip Stocks Surge: Following AI startup Anthropic PBC's emphasis on partnerships, software and chip manufacturers saw significant stock price increases, indicating growing market confidence in the integration of AI technologies, which could enhance their competitive positioning.
- Consumer Confidence Boost: The US February consumer confidence index rose by 2.2 to 91.2, surpassing expectations of 87.1, suggesting increased consumer optimism about the economic outlook, which may lead to higher consumer spending and positively impact economic growth.
- Interest Rates and Economic Data Focus: The market is discounting only a 2% chance of a rate cut at the Fed's March 17-18 meeting, indicating cautious investor sentiment regarding future monetary policy, while closely monitoring upcoming corporate earnings and economic data releases.
See More
Nvidia's Investment Activity Analysis
- Portfolio Adjustment: In Q4 2025, Nvidia actively adjusted its investment portfolio by selling stakes in Applied Digital and ARM Holdings while initiating a new position in a rising chip player whose stock has surged over 7,000% since its IPO, demonstrating Nvidia's strategic flexibility in AI investments.
- ARM Stake Changes: Nvidia's previous attempt to acquire ARM for $40 billion failed due to regulatory issues, but it maintains a 20-year licensing agreement for ARM technology, indicating a long-term reliance on ARM's architecture for developing various CPUs, which is crucial for its strategic positioning.
- Applied Digital Performance: Applied Digital reported a 177% year-over-year revenue growth in its second fiscal quarter of 2026, while narrowing losses from $143 million to $31.4 million; however, its $8.7 billion market cap is considered overvalued, prompting caution among investors.
- Collaboration with Intel: Nvidia announced a $5 billion investment in Intel, with plans to co-develop chips for data centers and computers, while Intel aims to invest over $100 billion in U.S. manufacturing, highlighting Nvidia's proactive role in fostering industry collaboration and technological advancement.
See More
Amazon Earnings Reveal Custom Chip Growth
- Capital Expenditure Plans: Amazon's fourth-quarter earnings report revealed a $200 billion capital expenditure plan, which caused stock declines but underscores the company's strong commitment to future growth.
- Surge in Custom Chip Revenue: Amazon's custom chips, Graviton and Trainium, achieved over $10 billion in annual revenue with more than 100% year-over-year growth, indicating robust market demand and a potential standalone valuation of $100 billion.
- Enhanced Cloud Computing Capacity: CEO Andy Jassy noted that significant EC2 core computing capacity is being added daily, with most utilizing Graviton chips, which not only enhances service performance but may also strengthen competitive positioning in the cloud market.
- Arm's Growth Potential: With Graviton's success, Arm's data center royalty revenue doubled in the last quarter, and it is projected that data center revenue could surpass smartphone revenue in the next three years, highlighting Arm's critical role in the growing AI demand.
See More
Amazon's Graviton Chip Demand Soars
- Custom Chip Growth: Amazon's Graviton and Trainium chips have surpassed a run rate of $10 billion in annual revenue, doubling year-over-year, indicating strong growth potential in the cloud computing market, with a possible standalone valuation of $100 billion.
- Data Center Revenue Doubling: Arm reported that its data center royalty revenue doubled in the last quarter, with expectations to surpass smartphone revenue in the next three years, highlighting the sustained growth driven by AI compute demand.
- Significant Performance Advantage: Amazon CEO Andy Jassy noted that Graviton instances outperform comparable x86 processors by over 40%, which is likely to drive increased spending on Arm CPUs in the cloud, enhancing its competitive position.
- Future Growth Potential: Arm management indicated that the growth of AI agents will drive more CPU usage for Graviton, especially with the upcoming Graviton 5 version, leading to higher royalty revenues and market share.
See More
Amazon's Earnings Report Highlights and Challenges
- Capital Expenditure Plans: Amazon plans to invest $200 billion in capital expenditures over the coming years, which has raised investor concerns but also reflects the company's confidence in future growth prospects.
- Custom Chip Growth: Amazon's custom chips, Graviton and Trainium, have surpassed a run rate of $10 billion in annual revenue, doubling year-over-year, and could be valued at $100 billion if treated as a standalone business, highlighting their strong performance in the cloud computing market.
- Core Cloud Capabilities: CEO Andy Jassy noted that Amazon is adding significant EC2 core computing capacity daily, with most of it utilizing Graviton, indicating ongoing investment and technological advantages in its cloud infrastructure.
- Arm's Revenue Growth: Arm Holdings generates over $1 billion in quarterly revenue, and with the success of Graviton, its data center royalty revenue is expected to surpass smartphone revenue in the next three years, showcasing its potential growth opportunities in the AI sector.
See More
Three Resilient Stocks to Invest In Now
- Shopify's Performance Recovery: Despite Shopify's stock dropping over 20% since late last year, its quarterly revenue grew by 30% year-over-year, and operating income improved by 35%, indicating resilience in the e-commerce sector, with future AI search orders increasing 15-fold likely to further boost performance.
- American Express Spending Strength: American Express shares have declined since December, yet customer spending at luxury retailers rose 15% and restaurant spending increased by 20% year-over-year, reflecting the financial resilience of its affluent customer base, suggesting a positive outlook for future earnings.
- Arm Holdings' Future Potential: Although Arm Holdings' stock is nearly 30% below its October peak, its business model as a chip designer positions it well for long-term growth in the AI chip market, which is projected to grow at an average annual rate of 28% through 2035.
- Optimistic AI Market Outlook: Despite skepticism about the value of AI investments, the demand for efficient processing chips continues to rise, with Arm's future royalty and licensing revenues already established over the past few years, poised to generate significant income for the company.
See More
US Stocks Rebound Led by Software and Chipmakers
- Market Rebound: The S&P 500 Index rose by 0.77%, the Dow Jones Industrial Average increased by 0.76%, and the Nasdaq 100 Index climbed by 1.09%, indicating a recovery after Monday's sharp declines, reflecting investor optimism regarding economic data.
- Software and Chip Stocks Surge: Following AI startup Anthropic PBC's emphasis on partnerships, software and chip manufacturers saw significant stock price increases, indicating growing market confidence in the integration of AI technologies, which could enhance their competitive positioning.
- Consumer Confidence Boost: The US February consumer confidence index rose by 2.2 to 91.2, surpassing expectations of 87.1, suggesting increased consumer optimism about the economic outlook, which may lead to higher consumer spending and positively impact economic growth.
- Interest Rates and Economic Data Focus: The market is discounting only a 2% chance of a rate cut at the Fed's March 17-18 meeting, indicating cautious investor sentiment regarding future monetary policy, while closely monitoring upcoming corporate earnings and economic data releases.
See More
Nvidia's Investment Activity Analysis
- Portfolio Adjustment: In Q4 2025, Nvidia actively adjusted its investment portfolio by selling stakes in Applied Digital and ARM Holdings while initiating a new position in a rising chip player whose stock has surged over 7,000% since its IPO, demonstrating Nvidia's strategic flexibility in AI investments.
- ARM Stake Changes: Nvidia's previous attempt to acquire ARM for $40 billion failed due to regulatory issues, but it maintains a 20-year licensing agreement for ARM technology, indicating a long-term reliance on ARM's architecture for developing various CPUs, which is crucial for its strategic positioning.
- Applied Digital Performance: Applied Digital reported a 177% year-over-year revenue growth in its second fiscal quarter of 2026, while narrowing losses from $143 million to $31.4 million; however, its $8.7 billion market cap is considered overvalued, prompting caution among investors.
- Collaboration with Intel: Nvidia announced a $5 billion investment in Intel, with plans to co-develop chips for data centers and computers, while Intel aims to invest over $100 billion in U.S. manufacturing, highlighting Nvidia's proactive role in fostering industry collaboration and technological advancement.
See More
