Buffett Brain · Research note
Score updated 22 Oct 2026 · analysis from 1 Jun 2026
ARM· Technology
Arm Holdings
Arm Holdings licenses a magnificent business at a ruinous price of 394 times earnings.
Buffett fit
Partial fit
Owner
52
Durability
72
Management
84
Price
0
Score updated 22 Oct 2026 · analysis from 1 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned all of Arm, I would admire the machine and wince at the meter.
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The durability here is real. Arm's designs are wired into a generation of devices, and the cost of ripping them out to switch architectures is painful, which is why I rate switching costs as the .
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Management has run the balance sheet the way I like. is a trivial 0.05, the company sits in a net cash position with net debt to EBITDA of negative 1.7, and actually exceeds reported net income at 1.08 times.
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There is no here, none at all. At 394 times earnings and an enterprise value of 390 times operating profit, the owner-earnings yield of 0.27 percent leaves no room for a stumble, let alone a recession or a lost customer.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1A of 94.6 percent shows a near-pure royalty model where each additional chip shipped costs almost nothing to serve.
- 2Revenue has compounded at 16.2 percent a year, a healthy clip for a business this entrenched.
- 3Switching costs are deep, reflected in a durability score of 72, because Arm's architecture is baked into a generation of devices.
- 4The balance sheet is fortress-like, with of only 0.05 and a net cash position of negative 1.7 net debt to EBITDA.
Concerns
7- 1Valuation is the overriding problem: at 394 times earnings and 390 times operating profit, the price prices in perfection and offers a 0.27 percent owner-earnings yield.
- 2 has fallen from a five year average of 10.7 percent to just 7.3 percent over the trailing twelve months.
- 3An of only 18.3 percent, despite a 94.6 percent , shows how much profit is consumed by research spending.
- 4Earnings have proven fragile, with a maximum historical decline of 41 percent, so the multiple rests on shaky ground.
Price history
$210+245.8%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Arm designs the instruction sets and processor blueprints that sit inside nearly every phone on earth, then collects an upfront license fee and a royalty on each chip a customer ships. That toll-booth model throws off a of 94.6 percent, because once a design is finished the next royalty costs almost nothing to produce. Revenue has compounded at 16.2 percent a year, yet the is only 18.3 percent because the company plows enormous sums back into engineering.
How this analysis has moved
The call has held across 5 reviews.
Sep 27, 2026 → Oct 22, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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