Good day, and thank you for standing by. Welcome to the Arm first quarter fiscal year 2027 webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ian Thornton, Vice President of Investor Relations. Please go ahead. Thank you, and welcome to our first quarter fiscal 2027 earnings call. On the call are Rene Haas, Arm's Chief Executive Officer, and Jason Child, Arm's Chief Financial Officer. Today's call contains forward-looking information about the company and its financial results. While these statements represent our best current judgment, our business is subjected to many risks and uncertainties that could cause actual results to differ materially. Important risk factors that may affect our business and future financial results are described in our annual report on Form 20-F filed with the SEC. Arm assumes no obligation to update any forward-looking statements. We will also refer to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in our shareholder letter, as can a discussion of certain projected non-GAAP financial measures that we are not able to reconcile without unreasonable effort and supplemental financial information. Our earnings materials are available at investors.arm.com. With that, I'll turn the call over to Rene. Thank you, Ian, and welcome everyone. Arm delivered a record first quarter and a strong start to fiscal 2027. Our results reflect growing demand for the Arm compute platform as AI expands across cloud infrastructure, edge devices, and the physical world. Revenue reached $1.29 billion, up 22% year-over-year, driven by record first quarter licensing and royalty revenue. Royalty revenue grew 22% to $715 million. Licensing revenue grew 23% to $574 million, and non-GAAP EPS increased 29% to $0.45, above the high end of our guidance. AI is changing where and how compute happens. We're seeing that in the data center, where the transition to Arm continues to accelerate, and we're seeing it beyond the data center as AI expands into PCs, smartphones, and physical AI applications. Across each of these markets, customers are increasingly standardizing on the Arm compute platform. These trends are the driving demand for the Arm AGI CPU. We introduced the Arm AGI CPU in March to give customers another way to deploy the Arm compute platform. Since that time, we've made significant progress. Initial product has now been delivered to multiple customers, and we have secured the manufacturing capacity needed to support the $1 billion opportunity we outlined last quarter across fiscal 2027 and fiscal 2028. Demand now exceeds $2 billion as we continue to add new customers, including multiple customers in the U.S. and China, while the overall value of our pipeline has continued to strengthen. We're also working closely with our manufacturing and supply chain partners to expand capacity. Our confidence in achieving upside to our $1 billion opportunity for the Arm AGI CPU business has increased in the past 90 days. This momentum is part of a much broader shift already taking place across our Neoverse business. Data center royalties more than doubled year-over-year once again as adoption of Arm Neoverse continues to expand. The pace at which Arm is becoming the CPU foundation for AI infrastructure is accelerating. Arm Neoverse shipments have now surpassed 1.5 billion cores, with the most recent 500 million shipping in just the last nine months, where the first one billion took six years. The world's leading AI infrastructure providers continue to validate that trend. NVIDIA has now brought Vera into production. Built on Arm, Vera delivers up to 50% higher CPU performance and 2x greater energy efficiency than comparable x86 systems and will serve as the CPU foundation for NVIDIA's next generation AI infrastructure. Google has stated that its Arm-based Axion CPU is a core component of its AI infrastructure strategy and the host CPU for its latest TPU AI systems. AWS announced plans to deploy tens of millions of Graviton5 cores to power agentic AI workloads. Microsoft expanded Azure Cobalt 200 virtual machines built on Arm Neoverse CSS. Additionally, Qualcomm has also announced plans to enter the AI data center CPU market with its Arm-based Dragonfly C1000. Each of these companies is approaching AI infrastructure differently, but they're all moving in the same direction. Arm-based CPUs are becoming central to next generation AI infrastructure. IDC reported that spending on Arm-based accelerated server platforms has nearly doubled in the past two quarters and has now surpassed x86 platforms. We're witnessing both the rapid expansion of AI infrastructure and Arm's growing role within it. Our opportunity extends well beyond the data center. As AI moves into production, customers are increasingly focused on the economics of deploying AI at scale. Whether AI runs across the cloud, the edge, or ultimately the physical world, efficient compute is becoming just as important as model capability. Bringing AI closer to where data is created improves performance, reduces latency, enhances privacy, and lowers infrastructure costs. This is where Arm has always differentiated itself. The result is a new generation of computing devices spanning into two distinct categories. Efficient AI PCs designed for mobility, and more powerful agentic systems capable of running sophisticated models locally. NVIDIA introduced RTX Spark, the first agentic PC built on Arm's compute subsystems, enabling sophisticated AI agents and larger AI models which can run locally. For on-the-go AI PCs, those same OEMs continue expanding the Windows on Arm ecosystem with new Snapdragon-powered AI PCs, while Google's continued investment in AI-enabled Chromebooks is broadening access to on-device AI. As AI drives the transition to the next generation of personal computing, Arm's opportunity continues to grow across an expanding range of AI-enabled devices. The same economics extend into the physical world. Vehicles, robots, industrial systems, and autonomous machines increasingly rely on efficient, secure, and real-time Arm-based compute to sense, reason, and act autonomously. NVIDIA recently expanded its physical AI platform with Cosmos 3 and the Isaac GR00T humanoid robotics platform powered by Jetson Thor, which combines an Arm-based CPU with an NVIDIA Blackwell GPU. Arm's software ecosystem continues to expand and now supports more than 22 million developers worldwide. During the quarter, Arm introduced Performix with support from Microsoft, MongoDB, Redis, and SAP, helping developers and AI agents analyze and optimize workloads running on Arm-based infrastructure. We also expanded our AI developer tools, including the Arm MCP Server, which has surpassed 10,000 Docker downloads and integrates Arm's expertise into leading AI developer environments. From cloud infrastructure to PCs and physical AI, developers can build on the same Arm architecture and software ecosystem. Customers can deploy Arm through IP, compute subsystems, or silicon, depending on what best fits their business. In every case, they're building on the same Arm compute platform, software ecosystem, and developer community. As AI becomes part of every cloud, every device, and every sector, the industry is increasingly converging on a common compute platform. We believe that convergence will define the next decade of computing. AI is changing where and how compute happens, Arm is at the center of it. With that, I'll turn it over to Jason. Thank you, Rene. We have started fiscal year 2027 with another strong quarter, delivering the highest first quarter revenue in our history. Total revenue grew 22% year-on-year to $1.29 billion. Royalty revenue grew 22% year-on-year to $715 million. Also, our highest ever figure for Q1. Once again, the largest driver of royalty growth was cloud AI. Data center royalty revenue continues to more than double year-on-year, reflecting our sustained momentum across the market. This is being driven by the continued ramp of Arm-based server chips at all the major hyperscalers, alongside increasing deployments of data center networking chips, particularly DPUs and SmartNICs, where Arm technology is deployed in nearly all leading products. Edge AI royalty revenue continued to grow despite a soft end market in smartphones. We continue to benefit from higher royalty rates as Armv9 and Compute Subsystems continue to increase their penetration into smartphones, tablets, and other consumer electronic devices. These drivers more than offset the decline in smartphone sales due to higher memory prices. Physical AI also made a strong contribution to royalty growth, supported by the continued secular expansion of ADAS and autonomous systems built on Arm technology. Turning now to licensing. License and other revenue was $574 million, up 23% year-on-year, also a record for Q1. Growth was driven by strong demand for next-generation architectures, and deeper strategic engagements with key customers. This quarter, we signed multiple high-value agreements as existing customers renewed long-term licenses. Some of the world's largest hyperscalers, automotive and robotics companies, and handset OEMs all secured access to Arm's future roadmap for their next generation of products. Of the $574 million of licensed revenue, our agreement with SoftBank for technology licensing and design services contributed $193 million. We expect the quarterly run rate for the rest of the year to be around $200 million. As always, licensing revenue varies quarter-to-quarter due to timing and size of high-value deals. We continue to focus on annualized contract value, or ACV, as a key indicator of the underlying licensing trend. ACV grew 13% year-on-year, maintaining strong momentum. This continues to be above our long-term expectation for licensed revenue growth. As Rene mentioned, customer demand for Arm AGI CPU remains very strong. In this quarter, even more customers have wanted to place orders with us. We've secured the manufacturing capacity needed to support the initial $1 billion opportunity. We have made progress to secure additional supply, as well as optimizing our customer mix and commercial terms. Our confidence in achieving more than $1 billion has increased in the past 90 days. We will provide an update at our Q3 results, which is when we will have better visibility of Q4 2027 and fiscal 2028. Turning to operating expenses and profits. Non-GAAP operating expense was $733 million, up 18% year-on-year due to the ongoing R&D investment. This was about $27 million below our guidance due to timing, as our spending plan for the year remains largely unchanged. We are expanding our engineering teams to support increasing customer demand while advancing the technologies that will underpin future growth, including next-generation architectures, Compute Subsystems, and the Arm AGI CPU product family. Non-GAAP operating income was $531 million, resulting in a non-GAAP operating margin of about 41%, up 200 basis points year-on-year. Non-GAAP EPS was $0.45, driven by both higher revenue and slightly lower OPEX than expected. More importantly, even at these elevated levels of investment, we generated free cash flow of $665 million in the quarter and $1.4 billion over the trailing 12 months, giving us the flexibility to continue to invest for long-term growth. Turning now to guidance. For Q2, we expect revenue of $1.38 billion ±$50 million. At the midpoint, this represents revenue growth of about 22% year-on-year. We expect license and other revenue to be up about 30% year-on-year and royalty revenue to be up in the low teens year-on-year. We expect our non-GAAP operating expense to be approximately $780 million and our non-GAAP EPS to be $0.47 ±$0.04. Looking ahead, we continue to see strong customer demand across our business. Combined with the expansion of our technology portfolio and deepening strategic customer relationships, this gives us confidence in our long-term growth outlook. With that, I'll turn the call back to the operator for Q&A. Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now go to our first question. One moment, please. Our first question today comes from the line of Joe Quatrochi from Wells Fargo. Please go ahead. Yeah, thanks for taking the questions. Maybe just first, can you give us a little bit more detail on just the confidence that's increased in terms of the upside to the $1 billion for AGI revenue? Is there any clarity you can provide just on, is it better wafer supply? Customers getting access to memory? Any help there? Yeah, I'll take that question. I think in general, it's all of the above. If I look back to the call we had 90 days ago, we had committed to supply of a billion dollars. We talked about demand pipeline of $2 billion, and we were working to secure supply for that delta between one and two. 90 days later, the demand picture has even gotten better, as Jason mentioned, north of $2 billion. Our ability to secure that supply for the north of $1 billion, our confidence has increased in the last 90 days, and I would say it's across all of those areas. Making a chip is complex relative to supply chain. You have wafers, you have substrates, you have test capacity, you have memory. All of those areas, our confidence level in being able to secure the supply necessary has gotten better. That's the commentary we're stating at this time. Maybe just as a follow-up to that, on top of the extra above billion dollars of AGI revenue that you now think you can do, how do we think about the gross margin structure relative to what you were thinking about for the original billion dollars? Yeah. No change at this time. I think last quarter we said there was probably going to be somewhere in the high 30% range, maybe low 40%s for the first generation for really in Q4 of this year as well as for next year. I'd say over the next couple of years, we do expect to get to 50%, but that's going to basically just entail us actually bringing more of some of the work that maybe an ASIC has helped us with in the past and brings some of that work in-house, so that'll probably take a couple of years. Those are our initial expectations, so no real change from last quarter. Obviously, with some of the price increases and things that have happened, we're still kind of working through how to digest those and what needs to affect our pricing. Those are some of the things that we're going to work through, and as I said in my prepared remarks, we'll provide a much more detailed update for both the revenue and margin profile before we go into Q4, so we'll do that at the end of Q3. Thank you. Thank you. Thank you. We will now take the next question. The question comes from the line of Sebastien Naji from William Blair. Please go ahead. Thank you, and good afternoon. My question is on the smartphone market. Because of the much higher memory handset costs, handset OEMs are absorbing meaningfully more BOM inflation. They are starting to raise prices. I think, given that smartphone royalties remain a significant portion of your overall royalty base, can you maybe just talk a little bit about what you are seeing in terms of unit demand and mix? How this impacts your royalty revenue outlook for the fiscal year? I'll take the first part of the question and let Jason then talk about some of the details around the numbers. Generally speaking, we have been somewhat isolated from the negative growth of the smartphone market because of the fact that we have moved the vast majority of the customers to Armv9, in some cases CSS, and in some cases the second version of CSS. What that's all contributed to has been an increase in royalty growth. Whereas the smartphone market has been going, projected to be down by some level of double digits, we are projecting double-digit growth in royalty in the smartphone market. Vis-a-vis exactly how that translates to the forward guidance and forecast, I'll let Jason go into some more color. I think there's obviously others that are reporting this week and key partners that we'll learn more from. When we look at our forecast, we mostly try to look at the industry projections across the entire industry. IDC is of course, one of the things we look at. Then of course we update for partner mix, where we have slightly different royalties based on whether it's CSS or Armv9 or Armv8, et cetera. When we add all that together, we have seen some incremental slowdowns versus what was expected at the beginning of the year. I think the new piece was initially the expectation was just going to affect the lower end of the market, and now we are seeing all parts of the market, even some upper and mid-tier being affected. That's maybe an incremental for us. As a result, I would say, I think going into the year, we probably thought 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, but hard to say until we learn more about the next couple of quarters. I'd say right now, we do think royalties will come down a bit in this next quarter. We guided to kind of the low to mid-teens for Q2, and we'll give you a better update next quarter. I think the one thing I would make sure you don't lose sight of is the good news is the overperformance that we've been seeing in cloud AI continues to help offset that. While there is weakness on the smartphone side, the overperformance on the cloud AI business continues to accelerate. That's the piece that gives us confidence in full year and next year's numbers. Again, we'll give you more updates over the next couple of quarters. Great. Okay. That's very helpful. I appreciate all the color. Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone. In the interest of time, please limit yourself to one question only, and rejoin the queue for any follow-ups. Thank you. We will now go to the next question. The next question today comes from the line of Gary Mobley from StoneX Group. Please go ahead. Hi, everybody. Thanks for taking my question. You highlighted maybe a little bit of upside to the demand profile for the next two years, $2 billion plus, I think to paraphrase correctly. What about the demand pipeline for the out years fiscal year 2029 through 2031? I assume the $15 billion in projected AGI revenue expected for 2031 contemplates all the supply chain-related headwinds. That is a supply served revenue, correct? I will let Jason comment further in terms of any forward-looking comments he wants to make, but I will say what has changed since March is that, to your point, clearly supply is an issue across a number of different factors. The outlook that we gave at that time was based upon our view of the supply picture. On the flip side, we did say at that event that the CPU TAM we thought was about $100 billion in those outer years. Going back, you may recall that prior to that, most folks were talking about a number of around $50 billion - $60 billion. When we talked about the $100 billion number in March, there was some surprise around it and there was a lot of back and forth in terms of justifying that number. Since that time, a number of my peers have talked about numbers quite a bit bigger than that, in some cases up to $200 billion. I think all of that is really being driven by the increase of overall compute capacity, which will be inference-based. All of that inference-based compute is going to largely be running agentic workloads, and the agentic workloads are essentially capacity constrained in terms of throughput by the number of CPUs you have. As inference demand goes up, which it clearly is, and as agentic demand goes up, as it clearly is, that means an increase in CPU demand. We're not changing the numbers at all, but there are a lot of indicators that the numbers that we talked about back in March, relative to our view of the TAM, may have been conservative. Jason, do you want to add anything to that? Yeah. I think, in general, as Rene said, the TAM back when we did the event, when we took it up to $100 billion, we said $100+ billion. Obviously, it's gone up to, I think now the most recent estimate is $220 billion sitting on from a variety of sources. I think our expectation is if you flow through the same kind of market share that we were expecting at $100 billion, could it be much higher if in fact the market's at $200+ billion? Well, certainly it could be. The constraints over the next couple years, so let's say the, for us, FY 2027 or calendar 2026 or FY 2028, which is, I guess, calendar 2027, supply chain's pretty tight. Maybe there's upside to get to this $2 billion or $2+ billion, and we'll provide updates on that over the next couple of quarters. To go beyond that, the supply chain is going to loosen or at least expand quite a bit as we get it into calendar 2028 and 2029 or for us, FY 2029 and FY 2030. Right now, if you look at wafer capacity and memory capacity, you probably know as well as I do, I think there's estimates that the capacity's going up somewhere between 70%-100%, depending on your assumptions on wafer and some of the different partners that can help there, and even more so on the memory side. Our expectations are there certainly is potential to beat the number that we give externally. Certainly, internally, we do have higher targets. Until we start to see the supply chain capacity come online, we're mostly focused on just trying to get to the $2 billion number next year. We'll provide updates, of course, later, as we learn more. Thank you. Our next question today comes from the line of Tom O'Malley from Barclays. Please go ahead. Hey, guys. Thanks for taking my question. Last week, AMD hosted an analyst day and talked about a $220 billion TAM by the end of the decade, and kind of underneath that, the largest contributor was agentic AI. They laid out traditional CPU, they laid out head nodes, and then agentic applications. I was curious, when you look at your silicon business longer term, where do you see that fitting in? Is that going to cover all three of those sub-buckets? In your early wins and your early pipeline, is there one way that that's leaning or another? Just would like to get a flavor of what you foresee for that silicon business. Yeah. I'm sorry, could you repeat those three categories so I make sure I've got the definitions right? Yeah. Traditional server, and then you have head nodes, and then you have agentic applications. Got it. Yeah. Our Arm AGI CPU is going to play in all three. When we talked about the customers that we had signed up back at the Arm Everywhere event, we had folks like Cerebras and OpenAI, which were largely around head node type applications. We also talked about Meta and Cloudflare, which are around agentic applications, but also general purpose server. We've also just talked about OCI Oracle. The Arm AGI CPU is a very good fit for all of those, to be quite candid, which is why we are very optimistic about the demand. We did talk about quite a number of customers that day. We were very specific about inside the cloud, the agentic workloads. It's a pretty broad term because the agents are running through the head node, but they're also running through the general purpose racks that sit inside the data center. Short answer is, those three categories that you defined, as described earlier, the Arm AGI CPU is a great fit for all three, and we have customers in all three. Thank you. Your next question comes from the line of Vivek Arya from Bank of America. Please go ahead. Thanks for taking my question. I had a near and a long-term question on your AGI CPU. Near term, I'm very curious, what is preventing Arm from securing supply for just $1 billion? I mean, it's a $50 billion market, right? There are a number of foundries who can make it. I'm just curious what is preventing Arm from getting that extra billion a year from now. Longer term, Rene, when I look at the three players that have Arm-based CPUs in AI, whether it's NVIDIA or Amazon or Google, they each have their proprietary accelerators also, which are often co-designed with the CPU. Don't you think that restricts Arm's opportunity given that you have a CPU-only offering, or is your intention to add other things to that CPU-only offering over time? Thank you. I'll take both parts of that question, and Jason, you can add on. I'm glad you think a billion dollars is not a big number. There are a lot of folks just trying to secure extra supply up to $50 million. It is a very tight market across everything. Whether it's memory, whether it's test equipment, whether it's substrates, whether it's TSMC wafers. It's a very, very tight world. I think even my compatriots who are in the CPU business for a living and have their own fabs have not been able to supply the demand. We are more optimistic than we were 90 days ago, which is great. Demand has increased, but we feel better about the supply side. On the proprietary accelerators, if I understood your question correctly, a couple of proof points that is an area that we can certainly play in. First off, at Google, they have used Axion as an interface into their TPUs, away from x86. Clearly there's a space for Arm to exist with custom accelerators. If your question was around the Arm AGI CPU specifically, there has been some announcements made by NVIDIA about NVLink Fusion, and it's a very interesting platform approach where they're offering a mix and match, where you could take a Vera CPU and plug it into a proprietary accelerator, or you could take a CPU made by someone else in the Arm family and connect it into a Rubin accelerator. We don't have anything to announce around that today, but there are absolutely paths for Arm to connect to custom accelerators, whether it's through a self-hosted design done internally and/or connecting to something through something like NVLink Fusion. Thank you. Our next question today comes from the line of Vijay Rakesh from Mizuho. Please go ahead. Yeah. Hey, Rene and Jason. Good to hear you guys got some capacity on the agentic AI CPU side. I was wondering, when you look at your agentic AI CPUs, are they mostly in the 128 core? I know core count is important. When do you expect the next, the 192 or 256 core CPUs coming out, and if any color on the ASIC side as well? For Jason, do you expect to start breaking out the silicon side of revenues, the agent CPU side? Because that seems to be becoming bigger and bigger, I guess. Thanks. Yeah. Thank you for the question. On the product side, nothing to tell you specifically today about the roadmap, and where we're going with that. The Arm AGI CPU today is 128 core based design. There are instances in the market, using Arm, that are better, or actually greater number of cores, and that's Graviton5, which is 192 cores. Certainly, the direction of travel is more cores. The reason for that is for running agentic workloads, more cores is a better outcome, because the software overhead is simpler. You can run virtual machines or virtual jobs on single cores, and they're going to be much more efficient in terms of throughput. While I don't have anything to talk about today in terms of the roadmap and the core count, it's not a stretch to think that the next generation designs are going to have more and more cores, because that's clearly the direction of travel. I'll let Jason comment on the second part of the question. Yeah. On the revenue breakout, well first, as soon as we start shipping, which will be at the end of this year, that's the first milestone. Then once it becomes at least 10% of revenue, we'll break it out separately as a third line. Separate from license, separate from royalties, lastly, there'll be silicon revenue. I would expect that, based on our forecast, that that should be broken out then in FY 2028. Thank you. Your next question today comes from the line of Charles Shi from Needham & Company. Please go ahead. Hi. Thanks for taking my question. Jason, I think if I hear correctly, you are talking about maybe royalty revenue growth this year instead of 20%, probably going to be high teens, because of all the things happening in the smartphone, incremental weakness, et cetera. Anything we should be looking at at the moment, let's say on the licensing side, that can show up with a little bit of upside to offset the incremental weakness on the royalty side? Maybe on that topic, what's the early view on maybe FY 2029, which is largely CY 2028, and do you think a 20% royalty is still a good number? I want to get some thoughts there. Thank you. In terms of guidance for Q2, we did lower, I think maybe what our expectations were a couple of quarters ago. We didn't guide to it, but I think our expectations were they were going to be a little higher. We're now guiding to 13% royalty growth in Q2. We also increased our license growth. Overall, on a combined basis, we're actually ahead of where we'd expected to be. I would expect similar trends for the rest of the year, and that is any softness or weakness that we experience in royalties will be at, I would say, at least as much licensed revenue to overcome that. I don't really expect overall to be any sort of a slowdown. The thing that could change is we continue to see the cloud AI business overperform. In particular, we're really seeing strong deployments from some of our partners like Google with their Axion, as it's branded, with all the new TPU deployments. Certainly Amazon, certainly with Vera at NVIDIA, Amazon with Graviton. We have other hyperscalers that are also exceeding their plans, and increasing their trajectory and their velocity. There is certainly some possible upsides on royalties throughout the year. If I had to say right now, I would not expect there to be weakness across the overall business. It just might be some weakness in the smartphone side of the business, and we'll just have to wait and see how the cloud AI business, if it's able to overcome all of it or just some of it. We'll have to update you as we go later into the year. Then, in terms of 2029 I'm sorry, 2028 and 2029. I think the 20%+ royalty growth that we provided, I think that's very much still intact. The things that are happening right now, the only real weakness in royalties is really on the smartphone side, in particular to some of the memory issues there. While they're certainly having a tough year this year, I think most of the partners that we talk to seem to think that there's going to be stronger recovery in the back half of the year. I would expect that the year-on-year growth rates by next year should be kind of back in line as we start to lap some of these challenges. Then, of course, as we continue to see the AI deployments continue to grow at the level they have been, that we should be able to again be in that 20% range next year and beyond. Thank you. Our next question today comes from the line of Krish Sankar from TD Cowen. Please go ahead. Hi. Thanks for taking my question. This is Steven calling behalf Krish. Rene, I had a question on low-cost AI models, just with the recent cycle of headlines around low-cost AI, whether from China or elsewhere. Do you see the proliferation of low-cost AI being a net positive or negative for your AGI CPU franchise, given your market positioning? Also, if you could also walk us through how low-cost AI might be a pro or con for your IP business, like for both data center and the edge side of things. Thank you. Thank you for the question. I'm going to presume that when you say low-cost AI, you're referring to open source models, open weights, et cetera. If the world moves to something that's more open source based, AKA open weights, for us, I think it's somewhere between a net neutral to a net positive. I start with net neutral from the perspective of, we're somewhat agnostic relative to whether it's a closed frontier model or an open source model. Those models all require CPUs. They all require the IP that we deliver for people to build custom chips. Whether it's an opportunity for Arm AGI CPU or the IP or compute subsystems, we're going to be required independent of what those models are. Frankly, just given the nature of the workloads that need to get run, they're kind of independent of the hardware underneath it. You need CPUs to run agents, whether that's open source or closed source. There's a very interesting argument about to be made relative to the potential of those open source models being much more differentiated, smaller, more efficient, that could run in different edge footprints. If that were to happen, it'd be a great thing for Arm, just given the footprint that we have in smaller edge devices. Right now, the most sophisticated models that are the closed models all are literally 100% cloud based. The RTX Spark that was announced is a very interesting product where you could potentially run some smaller models locally. I think open source has traditionally shown that whether it's in this area or any other software domain, widely broadens the choice relative to how you run different things. In other words, open source leads to higher innovation and differentiation. I think it's either neutral to a positive, depending on where it goes at the edges, but probably the most important thing to remember about Arm, and it applies here as well, is we're pretty agnostic to the top layer. All of that will need to run on our CPUs and our IP. Thank you. We will now take our final question for today. Our final question comes from the line of Timm Schulze-Melander from Rothschild & Co. Please go ahead. Yeah. Great. Thanks for taking my questions. I had two. One was a more kind of operational question, maybe for Jason. Just talking about the timing and the sequential quarter-to-quarter cadence of R&D. You talked about how it had come in below your expectations. I just wonder maybe if you could talk about how that kind of comes to pass. Is it kind of a milestone-based thing, and that maybe they're not met so that the cost slips a quarter or two? Is it a capitalization issue? Just what are the things that dictate the timing of R&D cost in the P&L? I had a quick follow-up on the CPU. Sure. With OpEx, we did come in a little bit lower. When it comes to OpEx, you have to break out R&D. You have to break it down into really two buckets. You have the people or developer costs, and then you have the tools that they're using, which is typically emulation, cloud spend, et cetera. In this last quarter, we did come in a little bit below. That would be more not on the people side, because that was pretty much right in line. I would say it was really more on kind of the tools that were utilized and necessary versus what our forecast was. I think for the most part, you should think about kind of banking that savings that we delivered in Q1. Going forward, our estimates, I think, are pretty similar, maybe a little bit lower. Overall again, you can bank the savings from Q1 and then assume that for us, they are just at a high level, it's going to grow by kind of mid-single digit percentage quarter on quarter, the overall OpEx. The things that can move, it's less around the total number of engineers, because that number is one that we can forecast and we're pretty consistent with. It's really just about w hat is the tool of utilization that's necessary. Certainly with things like emulation and cloud spend, that's going to flex a little bit based on what are we learning on the latest developments, and do we need to increase some of our testing or are we kind of done. As a result, we're getting better and better at forecasting this. It does move around a little bit, because we've really only been doing this now for the last year or two. I would expect our variance probably to get smaller, going forward. Got it. Just to circle back on the AGI CPU conversion of customer engagement and interest, as you've described, being able to kind of bring that across the Rubicon and book it as a firm order. Just wanted to understand, just kind of circle back just confirm what we're talking about here. We're talking about maybe early calendar 2027, as you come into the December quarter report, that you should have more visibility. I guess one of the things I'm just thinking about is there a concern or is it possible or probable that you get into a kind of a golden screw type situation that you've got 99% covered, but because there's tightness, you're missing one small component that could kind of stymie that? Or is it really not quite that vulnerable to one single sort of small component to be missing? Thank you. If I make sure I answer your question, is as we get closer to fulfilling the demand for the product, is there still some risk at the 11th hour that one critical component that we haven't secured could tip the whole thing over? No, there's not a concern of that. We are very confident in terms of the partners we're working with. We have a very good understanding of their capabilities and their upside capabilities. There isn't one single point of failure that, to your point, of the 1% that could cause an issue. Thank you. This concludes today's Q&A. I will now hand back to Rene for closing remarks. Thank you. The quarter for us is really a tale of two stories. One is the core business itself, the IP business, continues to perform extremely well. A record first quarter. We are guiding ahead of expectations, as Jason had mentioned, and our results were beyond expectations. The growth is really being driven by the data center. Arm continues to increase its market share, and we have many key customers now shipping Neoverse cores, which as I mentioned before, have now surpassed 1.5 billion. We also now have our new business, the Arm AGI CPU business, which we just announced back in March. The confidence level we have in the success of that product only continues to increase. As we talked about, the demand is greater than what we shared 90 days ago. At the same time, our confidence to fulfill that demand has also increased. All in all, very proud of the results that we've achieved, a great quarter for the company, and thank you all for your interest and questions. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.