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Where revenue enters the chip-design value chain
A design becomes commercial revenue when a customer pays for something the company provides: access to reusable IP, a shipped chip, a system, software, or engineering work. The revenue mechanism depends on what the company sells and what its customer receives. One design can also contribute to more than one revenue stream—for example, a company may license IP up front and earn royalties as products using that IP ship.
| Business model | What the customer receives | How revenue is earned | Documented example |
|---|---|---|---|
| IP licensing and royalties | Rights to use processor or other semiconductor IP in a product | License-access fees and, under some agreements, royalties as chips ship | Arm |
| Chip and system sales | Processors, accelerators, or integrated systems | Sales of products; the offering may also include networking, software, and services | NVIDIA and AMD |
| Design software, IP, and services | Design tools, semiconductor IP, custom IP, or engineering help | Product and maintenance revenue, licensing, and services revenue | Cadence |
| Software around a chip platform | Software and platform capabilities, with some separately licensed products | Paid software licenses for specified offerings; not necessarily a separate fee for every platform component | NVIDIA |
How licensing and royalties monetize a design
A company that owns or develops reusable chip IP can license it to a customer that incorporates it into a chip. Arm describes charging a fee for access to licensed designs, followed by a per-unit royalty on substantially all chips shipped using its products. In Arm’s filing, royalties have typically been calculated either as a percentage of a chip’s average selling price or as a fixed fee per unit; the terms vary by license and contract, so there is no single royalty rate that applies to every chip.
This model can produce revenue at two different points: when a customer obtains access to the IP and later as licensed chips ship. Arm says royalties tend to increase when a chip includes more Arm products, and that chips may ship for years and platforms may be reused, creating a longer-running stream of royalty revenue. That does not establish a payment schedule or rate for any particular agreement. Arm’s fiscal 2026 filing describes the model directly: “Once a chip has been designed and manufactured with our products, we receive a per-unit royalty on substantially all chips shipped.”
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How chip sales can expand into systems and platforms
A chip designer can sell processors or accelerators as products, often through OEMs, ODMs, integrators, or distributors. The customer may buy a component for a larger product, rather than buying directly from the chip designer. At a more integrated end of the market, a company can combine compute hardware with networking, software, and services in a larger offering.
NVIDIA describes its data-center business as a platform spanning processors, interconnects, software, systems, and services. It says customers often receive offerings as rack-scale systems, subsystems, or modules. Its filing also identifies paid licenses for NVIDIA AI Enterprise and vGPU software. This supports a distinction between software integrated into a platform and named software products sold under paid licenses; it does not mean every software component is separately charged.
AMD’s Data Center segment offers another product-sales example, but it is not limited to AI accelerators: it includes server CPUs, GPUs, DPUs, AI NICs, FPGAs, and adaptive SoCs. The two companies’ filings illustrate different product scopes; they do not establish that every chip company sells complete systems or that customers always buy from the designer itself. NVIDIA’s filing and AMD’s filing describe their respective offerings.
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How design tools, custom IP, and engineering earn revenue
Not every company that earns money from chip design sells the resulting chip. Electronic design automation (EDA) providers sell software and related products used in semiconductor design and validation, while specialist providers may license semiconductor IP or perform custom engineering.
Cadence reports product and maintenance revenue that includes software and semiconductor-IP licensing, emulation hardware sales and leases, and related maintenance. Its services revenue includes engineering services, fixed-fee customized IP, and cloud solutions that combine software, hardware, and services over time. The company also describes support for complex IC work such as verification, digital implementation, packaging, board design, analog and mixed-signal design, and system-level design. Those categories show why a design-services company’s revenue should not be mistaken for chip sales. Cadence’s fiscal 2025 filing sets out these offerings.
Who manufactures the chip—and why it matters
The designer and the manufacturer can be different companies. NVIDIA says it uses foundries including TSMC and Samsung for wafer production, and subcontractors for assembly, testing, and packaging. AMD likewise describes third-party foundries for wafer production and outside partners for assembly, test, marking, and packaging. These are examples of outsourced production arrangements, not evidence that all semiconductor companies use the same model or outsource every manufacturing step.
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- Multi-GPU Scaling for Local AI Clusters: PCIe 5.0 and 2-slot design support dense multi-GPU builds for local AI training and inference clusters
- Diecast Shroud and Backplate: Wave-pattern design cuts memory temperature by up to 16%, keeping clocks steady during long AI training runs
- Phase-Change GPU Thermal Pad: Delivers superior thermal conductivity for consistent performance and longevity under heavy AI loads
When production is contracted out, the chip designer can still earn revenue from its product or IP, while foundries and other partners perform manufacturing and related work. The filings do not provide customer-level pricing, the unit economics of a particular AI design, or comparable margins for an individual chip, so those economics should not be inferred from corporate revenue totals. See the arrangements described in NVIDIA’s filing and AMD’s filing.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What company revenue figures do—and do not—show
Reported figures help show the scale of a business model, but they are not automatically measures of revenue from AI chips. The following figures are company-reported results for the fiscal years indicated:
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|---|---|---|
| AMD, fiscal 2025 | $34.6 billion net revenue, up 34% from $25.8 billion in fiscal 2024 | Company-wide revenue, not AI-chip revenue |
| AMD, fiscal 2025 | $16.6 billion Data Center net revenue, up 32% from $12.6 billion in fiscal 2024 | A segment that includes AI accelerators and other data-center products. AMD attributed the increase primarily to demand for fifth-generation EPYC processors and Instinct MI350 Series GPUs. |
| AMD, fiscal 2025 | 50% gross margin, compared with 49% in fiscal 2024 | Corporate gross margin, not an AI-chip margin. AMD attributed the increase primarily to product mix and reported about $440 million in net inventory and related charges associated with U.S. export controls on MI308 data-center GPUs. |
| AMD, fiscal 2025 | $8.1 billion research-and-development expense, up 25% from $6.5 billion in fiscal 2024 | Company-wide R&D expense; AMD said the increase was primarily due to higher employee-related costs and headcount in support of its AI strategy. |
| Cadence, fiscal 2025 | $5.297 billion total revenue: $4.822 billion, or 91%, from product and maintenance; $475 million, or 9%, from services | Product and maintenance includes software and semiconductor-IP licensing, emulation hardware, and maintenance; these are not chip-sales categories. |
AMD’s full Data Center segment figure cannot be relabeled as AI-chip revenue because the segment includes products beyond accelerators. Likewise, Cadence’s product-and-maintenance revenue reflects tools, IP, hardware, and maintenance rather than revenue from selling finished chips. The company filings provide these figures and category definitions: AMD’s fiscal 2025 Form 10-K and Cadence’s fiscal 2025 Form 10-K.
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- AI & Ray Tracing Boost - Tensor of the 5th generation and RT cores of the 4th generation
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- 4 × DisplayPort 2.1 - Multi-monitor support for professional workflows
What determines whether a design wins business
A design must compete for customers, but technical performance alone is not the whole purchase decision. Arm lists price, performance, energy efficiency, customization, quality, software availability, support, brand recognition, and financial strength among the factors customers may consider. The relative importance of those criteria can vary by product and buyer; they are not a universal ranking, nor do they establish the economics of a specific AI chip. Arm’s filing identifies these competitive factors.
For a reader evaluating a company’s AI exposure, the practical check is to identify the actual revenue line and what it includes: licensing and royalties, chip products, systems, software, services, or a broad segment containing several product types. A company-wide total or segment label alone cannot isolate sales from one AI-chip design.
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