Free cash flow remains volatile, evidenced by a swing from a negative 34.9% margin in 2025Q1 to a peak of 69.8% in 2024Q4, reflecting significant working capital fluctuations.
| Cash from Operations | 1.52B | 397M | 1.09B | 739M | 458M |
| Operating CF Margin % | 30.98% | 9.91% | 33.71% | 27.58% | 16.94% |
| Operating CF Growth % | 283.88% | -63.58% | 47.5% | 61.35% | - |
| Net Income | 904M | 792M | 306M | 524M | 549M |
| Depreciation & Amortization | 249M | 182.9M | 162M | 170M | 185M |
| Stock-Based Compensation | 0 | 0 | 1.04B | 79M | 26M |
| Deferred Taxes | 15M | -218M | -273M | -34M | -76M |
| Other Non-Cash Items | 958M | 1.11B | 53M | 73M | -38M |
| Working Capital Changes | -602M | -1.47B | -195M | -73M | -188M |
| Change in Receivables | -510M | -743M | -89M | 125M | -219M |
| Change in Inventory | 0 | 0 | 0 | 0 | 0 |
| Change in Payables | 0 | 0 | 0 | 0 | 0 |
| Cash from Investing | -325M | -35M | -516M | -138M | -619M |
| Capital Expenditures | -575M | -239M | -92M | -93M | -75M |
| CapEx % of Revenue | 11.69% | 5.96% | 2.85% | 3.47% | 2.77% |
| Acquisitions | 127M | -57M | -32M | -15M | -8M |
| Investments | - | - | - | - | - |
| Other Investing | 39M | 1M | -51M | 0 | 0 |
| Cash from Financing | -548M | -202M | -208M | -42M | -32M |
| Debt Issued (Net) | 0 | 0 | 0 | 0 | 50M |
| Equity Issued (Net) | 74M | 0 | 0 | 0 | 0 |
| Dividends Paid | 0 | 0 | 0 | 0 | 0 |
| Share Repurchases | 0 | 0 | 0 | 0 | 0 |
| Other Financing | -622M | -202M | -208M | -42M | -82M |
| Net Change in Cash | 666M | 162M | 369M | 550M | -210M |
| Free Cash Flow | 979M | 178M | 947M | 646M | 383M |
| FCF Margin % | 19.9% | 4.44% | 29.29% | 24.11% | 14.17% |
| FCF Growth % | 450% | -81.2% | 46.59% | 68.67% | - |
| FCF per Share | 0.92 | 0.17 | 0.91 | 0.63 | 0.37 |
| FCF Conversion (FCF/Net Income) | 1.69x | 0.50x | 3.56x | 1.41x | 0.83x |
| Interest Paid | 0 | 0 | 0 | 0 | 1M |
| Taxes Paid | 0 | 0 | 188M | 159M | 141M |
Working capital volatility
Based on reported financial data, the relationship between net income and operating cash flow is highly inconsistent, with OCF/NI ratios swinging from a low of -1.30 in 2025Q1 to a high of 3.56 in 2024Q3, indicating significant volatility in cash conversion quality.
The wide variance between net income and operating cash flow suggests that GAAP earnings are heavily influenced by non-cash items and timing differences in revenue recognition. Investors should monitor whether this instability reflects genuine operational friction or merely the lumpy nature of licensing contract milestones.
As reported in recent filings, free cash flow margins have demonstrated extreme sensitivity, ranging from a negative 34.9% in 2025Q1 to a peak of 69.8% in 2024Q4, highlighting a lack of predictability in the company's ability to convert revenue into liquid capital.
The erratic FCF trajectory appears to be driven by the timing of large licensing deals rather than a steady, recurring cash flow stream. This inconsistency makes it difficult to rely on current FCF generation as a stable baseline for long-term valuation models.
According to quarterly statements, capital expenditures have trended upward, reaching a peak of $184 million in 2026Q3, which represents a significant increase in capital intensity relative to revenue compared to the 2.0% ratio observed in 2024Q4.
The rising capex-to-revenue ratio suggests that the company is intensifying its investment in infrastructure to support the v9 architecture and data center expansion. This shift warrants further investigation into whether these expenditures are maintenance-focused or represent a permanent increase in the cost of staying competitive.
Based on the provided cash flow statements, working capital changes have been a major source of volatility, including a massive $726 million outflow in 2025Q1, which suggests that the company's cash generation is highly susceptible to timing differences in customer payments.
The frequent and large swings in working capital indicate that the company's cash flow is not yet synchronized with its revenue recognition cycle. This suggests that management may face challenges in managing receivables or that licensing agreements involve complex payment terms that delay cash realization.
As reported in financial disclosures, stock-based compensation has consistently acted as a significant non-cash expense, reaching $265 million in 2026Q2, which effectively masks the true cash cost of talent acquisition required to maintain the company's architectural moat.
While SBC is a non-cash add-back, it represents a real economic cost to shareholders through dilution that is not captured in the operating cash flow statement. Analysts should adjust cash flow metrics to account for this persistent expense to better understand the company's true free cash generation.
Quick answers to the most common questions about buying ARM stock.
Arm Holdings plc American Depositary Shares (ARM) generated $1.52B in net cash from operating activities in 2026. This reflects the cash generated directly from core business operations.
Arm Holdings plc American Depositary Shares (ARM) generated $979.0M in free cash flow in 2026. Free cash flow is the cash left over after capital expenditures, which can be used to pay dividends, repurchase shares, or pay down debt.
Arm Holdings plc American Depositary Shares (ARM) spent $575.0M on capital expenditures in 2026. CapEx represents the cash invested in physical assets like property, plant, and equipment to maintain or grow the business.