Arm usually makes money by licensing processor IP to chip companies, then collecting royalties when chips containing that licensed technology ship. A license gives a company rights to use specified designs or technology; it does not mean the company buys a finished Arm chip. Most licensees design, manufacture and sell their own chips.
How does Arm make money?
Arm’s model has two main revenue streams: license and other revenue, and royalties. License and other revenue can include fees for IP licenses, software development tools, design services, training, support and other non-royalty charges. Most licenses combine an upfront or ongoing license and support or maintenance component with royalties; some agreements instead include milestone payments. Arm’s SEC filing describes customers licensing products for a fee so they can develop Arm-based processors.
The customer uses the licensed technology to develop a chip, arranges its manufacture, and sells the finished product. Arm generally earns a royalty for each shipped chip that incorporates the licensed products. The license fee and the later per-chip royalty are separate parts of the commercial relationship.
What is an Arm license?
An Arm license is a contractual right to use specified Arm intellectual property and related technology under agreed conditions. The scope depends on the agreement: it may cover an Arm-designed processor implementation, access to a portfolio of products, or permission to develop a custom CPU compatible with the Arm instruction set architecture (ISA).
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The ISA is a set of rules and instructions that software can use to communicate with a processor. It is not itself a finished CPU design. That distinction matters: licensing an Arm-designed CPU gives the customer a design supplied by Arm, while an architecture license lets the customer create its own CPU design that complies with the Arm ISA.
Arm-designed CPU IP versus an architecture license
Implementation license: use a design supplied by Arm
An implementation license gives a customer access to an Arm-designed processor or other licensed technology design for incorporation into its chip. The customer still develops and sells its own chip; it is licensing a building block, not purchasing an already-made Arm processor.
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Architecture license: design a custom CPU
An architecture license permits a customer to develop its own highly customized CPU design that complies with the Arm ISA. Arm describes this as a distinct arrangement with a fixed architecture-license fee. Architecture licensees may also license Arm CPU designs for complementary processors or for products where their own design is unsuitable. Details and terms depend on the agreement. Arm’s February 4, 2026 Form 6-K discusses these licensing distinctions.
How portfolio-access agreements differ
Some customers need access to a broader range of Arm technology rather than a single processor design. Arm describes Total Access and Flexible Access as portfolio arrangements, but they serve different needs and do not automatically provide identical products or rights.
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| Arrangement | Typical fit and access | Important limits |
|---|---|---|
| Total Access | For customers using Arm products across multiple end markets; provides access to a portfolio of CPU designs and related technology for an annual fee. The portfolio can include products introduced during the agreement term. | The agreement may limit its term and the number of concurrent chip designs. Rights to manufacture a completed design may continue perpetually even after the right to begin new designs expires. |
| Flexible Access | Described as suitable for smaller companies, including startups and business units within larger companies, that want to explore product configurations before committing to a chip design. | Access terms and included products differ from Total Access; the agreement must be checked for its specific scope and rights. |
For a customer comparing these structures, the practical questions are whether it needs an Arm-designed implementation or the right to create a custom ISA-compliant CPU, how much IP breadth it needs and when, what design and term limits apply, and what development support is included. Public filings reviewed do not establish a standard price for these agreements.
How do Arm royalties work?
Arm says royalties are generally calculated either as a percentage of the licensee’s average selling price per chip or as a fixed amount per chip. The applicable basis and payment schedule are set by the customer’s contract; there is no single public rate that applies to all licensees. Arm’s SEC filing describes these royalty structures and notes that per-chip rates typically decline as cumulative shipments of chips incorporating the licensed products increase.
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Agreements with component-manufacturing customers typically include a minimum royalty percentage or a minimum fixed fee per chip. Payment schedules vary by license and can depend on the type of license and the expected market acceptance of the product when the agreement is signed. Those terms are negotiated, so an assumed industry-wide percentage would be misleading.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Does Arm sell its own chips?
Arm’s traditional business is licensing IP for other companies to use in their chips, but it is no longer accurate to describe Arm as only an IP licensor. In a filing, Arm said it introduced its own Arm-designed silicon product, the Arm AGI CPU, in March 2026 and expected production by the end of calendar 2026. That was a forward-looking expectation, not confirmation that production occurred or that the product is currently available. The filing is available at Arm’s SEC filings page.
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