Every Arm Holdings Investor Should Keep an Eye on This Number

Arm Holdings (NASDAQ: ARM) might not get as much attention as chip designer stocks like Nvidia, but it's one of the most important companies in the semiconductor industry. Its designs are found in more than 99% of smartphones. In fact, the company says it has the world's most pervasive CPU architecture, ahead of classic rivals like Intel and AMD. Arm also has a unique business model in the semiconductor industry. Rather than selling chips directly to its customers, the company licenses its designs, primarily for CPU architectures, and then collects royalty revenue when those products are sold. Typically, 60% to 70% of its revenue in a given quarter comes from royalties, with the remainder from technology licenses.Arm trades at a lofty valuation, but its unusual business model helps explain why it trades at a rich premium. Arm makes money in two ways: first from license contracts, then from royalties. It usually takes 2-3 years after a contract is signed before the product reaches the market and royalty payments begin.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool