Rosenblatt analysts adjusted their price target for Arm Holdings (NASDAQ:ARM) upwards to $180.00 from $140.00, continuing to recommend a Buy rating. Currently, Arm shares are up more than 9% intra-day.

The analysts shared insights from a recent visit to Cambridge, where they gained further confidence in the company’s trajectory. The analysts noted an acceleration in royalty trends, driven by more strategic and increasingly AI-focused licensing agreements. This acceleration is expected to boost royalty rates to double digits by the end of the decade, a significant increase from the current mid-single digits, and sooner than previously anticipated. This shift is projected to alter the company’s revenue model, with royalties making up over 80% of its income.

The analysts believe that Arm’s price-to-earnings (P/E) ratio can sustain levels above 50% due to the secular changes and royalty increases, estimating a royalty rate of ~10% by the decade’s end or earlier.

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