# Smartphone troubles hamper Arm's AI success > Source: > Published: 2026-07-30 10:27:20+00:00 [Arm](/tag/arm/) Arm is continuing to rake in billions as the need for CPUs in AI data centres increases demand for its architecture, but a slip in demand from the smartphone market was enough to see its shares take a hit. The British chip company saw a 22% year-on-year increase in revenue for [ Q1 FY27](https://investors.arm.com/static-files/d8db20bd-7b96-486a-b99b-23315627d1ec?ref=thestack.technology), bringing in $1.29 billion, but CFO Jason Child said growth in its royalties business was slowing thanks to poor smartphone sales. In an earnings call Wednesday, he said: “I think we said last quarter that we’re expecting somewhere around 20% year-over-year for the next few years in royalties, including this year. Right now, if I had to guess, that’s probably somewhere closer to the high teens right now.” Despite the change in outlook, Arm’s overall earnings came in above expectations as it started to ship its first [ in-house processor](https://www.thestack.technology/arm-cpu-making-chips-first-company-history/), the Arm AGI CPU, and said it expected revenue from the chip to reach $15 billion by FY2031. ## Get the full story: Subscribe for free Join peers managing over $100 billion in annual IT spend and subscribe to unlock full access to The Stack’s analysis and events. [Subscribe now](https://www.thestack.technology/membership/) Already a member? [Sign in](https://www.thestack.technology/signin/)