How does ARM make money?

ARM generates revenue in two primary ways when it comes to licensing its intellectual property (IP) to partners.

ARM's licensing model allows it to create a steady stream of income through upfront fees and ongoing royalties. This model is beneficial for both ARM and its partners, as it provides a clear and predictable revenue stream for ARM and enables partners to use ARM's technology in their products.

The first source of income is a fixed upfront license fee. This fee is paid by the partner to ARM upon the delivery of the IP. It serves as a one-time payment for accessing ARM's technology.

The second source of revenue is variable royalties. These royalties are earned by ARM based on the number of chips that its partners ship that contain ARM IP.

For every chip that includes ARM's technology, the partner is required to pay a royalty to ARM. This royalty is variable and depends on various factors, such as the volume of chips shipped and the specific terms of the licensing agreement.