Bank of America Securities downgraded Arm Holdings to "neutral" on Tuesday, citing concerns about a looming revenue slowdown. Analysts Vivek Arya and Duksan Jang warned that both licensing and royalty income will likely suffer from a projected drop in global smartphone shipments, driven by rising memory chip costs and supply constraints. Specifically, the firm sees licensing revenue falling 5% in fiscal 2026, a figure that currently excludes substantial fees from majority owner SoftBank.

Heavy reliance on SoftBank creates a potential circular financing risk that worries the investment community. Additionally, the transition to Arm's newest chip architecture is largely complete across the industry, which could dampen future royalty growth. While the stock dipped on the news, BofA still sees long-term upside in Arm's fundamental role across smartphones, servers, and automotive chips.