Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business and our expectations with respect to liquidity and capital resources, includes forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those risks and uncertainties described in the “Item 3. Key Information—D. Risk Factors” and “Special Note Regarding Forward-Looking Statements” sections in this Annual Report. Our actual results could differ materially from the results described in or implied by these forward-looking statements. Recent Events and Transactions Litigation with Qualcomm and Nuvia On August 31, 2022, we sued Qualcomm Inc. and Qualcomm Technologies, Inc. (together, “Qualcomm”) and Nuvia, Inc. (“Nuvia”) in the U.S. District Court for the District of Delaware alleging that, inter alia, Qualcomm and Nuvia breached the termination provisions of Nuvia’s Architecture License Agreement (the “Nuvia ALA”) with us by failing to destroy technology Nuvia developed under the Nuvia ALA, which we terminated in March 2022 based on Nuvia’s failure to obtain our consent to the assignment of the Nuvia ALA to Qualcomm. Our complaint sought, among other things, specific performance of the Nuvia ALA termination provisions to require Qualcomm and Nuvia to stop using and to destroy the relevant Nuvia technology, and to stop their improper use of our trademarks with their related products. The claims were tried to a jury in December 2024. The jury failed to reach a complete verdict on the three issues presented to it. The jury concluded that certain technology was licensed to Qualcomm under the Qualcomm license and that Qualcomm had not breached the Nuvia ALA but failed to reach a verdict on whether Nuvia breached the Nuvia ALA. Both parties filed post-trial motions seeking judgment as a matter of law, and we also sought a new trial on the issues that were tried. On September 30, 2025, the Court affirmed the jury verdict on the issues on which it reached a conclusion and granted Qualcomm judgment as a matter of law in its favor to conclude that Nuvia did not breach the Nuvia ALA. We have filed an appeal with the United States Court of Appeals for the Third Circuit, which is currently pending. On April 18, 2024, Qualcomm brought a new action in Delaware against Arm Holdings plc, asserting claims that were rejected for inclusion in the original action. In this new action, Qualcomm asserted that we failed to satisfy certain delivery obligations under Qualcomm’s Architecture License Agreement with us (the “Qualcomm ALA”). On December 16, 2024, Qualcomm amended its complaint to add allegations relating to an Arm notice of breach of the Qualcomm ALA and related tort and anti-competition claims. In 2025, Qualcomm amended its complaint again to add claims relating to an alleged breach of Qualcomm’s Technology License Agreement. On January 7, 2026, Qualcomm’s motion seeking to add Arm Limited, our wholly-owned subsidiary through which we have historically conducted our business, to the April 2024 lawsuit was denied. Subsequently, Qualcomm filed a separate lawsuit against Arm Limited seeking to make the April 2024 lawsuit’s allegations against Arm Limited. In March 2026, the lawsuit against Arm Limited was consolidated with the April 2024 lawsuit against us. On March 30, 2026, Qualcomm filed an amended complaint against only Arm Limited seeking to add another breach of contract claim. We have moved to strike this new claim. We disagree with the assertions made by Qualcomm (as referred to above) and intend to vigorously defend against them. The case is expected to go to trial in the fourth calendar quarter of 2026. Definitive Agreement with Cadence Design Systems, Inc. On August 26, 2025, the Company completed the sale of its Artisan foundation IP business, consisting of standard cell libraries, memory compilers, and general-purpose I/Os to Cadence Design Systems, Inc. (“Cadence”) pursuant to the terms of the definitive agreement entered into in April 2025. For the fiscal year ended March 31, 2026, the Company recognized pre-tax gain on business divestiture of $131.0 million in other non-operating income (loss), net in the Consolidated Income Statements. This transaction did not meet the criteria for presentation as discontinued operations as it does not represent a 66 strategic shift that has a major effect on the Company's operations or financial results. In connection with the sale, the Company entered into a transition services agreement pursuant to which the Company and Cadence are providing certain transition support services to each other for a period of up to eighteen months following completion of the sale. The amounts of the transition services are not material. Definitive Agreement with DreamBig Semiconductor, Inc. In October 2025, the Company entered into a definitive agreement to acquire all of the outstanding equity interests of DreamBig Semiconductor, Inc. (“DreamBig”) for approximately $265.0 million in cash, subject to purchase price adjustments. The addition of DreamBig’s advanced networking capabilities, technology, and engineering expertise is expected to enhance the Company’s portfolio and help it deliver more complete solutions. The transaction is expected to close by the end of the second quarter of the fiscal year ending March 31, 2027, subject to customary closing conditions, including the receipt of regulatory approvals. A. Operating results Overview Arm architects, develops, and licenses our high-performance, and energy-efficient Arm compute platforms, and as of March 2026, we have expanded our offerings to include Arm-designed silicon products with the introduction of the Arm AGI CPU. Our CPU products address diverse requirements for performance, power, and specific use cases. Our complementary products include GPU and NPU accelerators, system IP, such as interconnects, and others. The world’s leading technology companies rely on the Arm compute platform to develop their products. Companies utilizing the Arm compute platform can add desired functionality, such as GPUs, NPUs, Wi-Fi connectivity, image processing, and video processing to create a product to meet the needs of their end market. Arm powers everything from the tiniest of sensors to the most powerful supercomputers. The Arm compute platform is the most pervasive architecture in the world and supports a global community of more than 22 million developers. Our platform runs the vast majority of the world’s software, including the operating systems and applications for smartphones, tablets and PCs, data centers and networking equipment, and vehicles, as well as the embedded operating systems in devices such as smart cameras, thermostats, drones and industrial robotics. We believe our platform is well positioned to benefit from the growth in AI workloads. Arm CPUs already run AI workloads in billions of devices from the edge to the cloud, including smartphones, cameras, digital TVs, cars and AI data centers. The CPU is vital in all AI systems, whether it is handling the AI workload entirely or in combination with a co-processor, such as a GPU or an NPU, which specializes in the acceleration of ML algorithms. With the rise of agentic AI and as AI workloads continue to proliferate and grow in complexity, there is heightened emphasis on power-efficient performance and flexibility. In the latest Arm architecture, CPUs, and GPUs, we have added new functionality and instructions to accelerate future AI algorithms and workloads. Our Business Model Our open and flexible business model provides access to high-quality CPU and other IP products from our compute platform for a wide range of potential customer types and end markets. Our primary business is licensing our IP products to semiconductor companies, OEMs, CSPs and other organizations to design their chips. Our customers license our IP products for a fee, which gives them access to our designs and enables them to create Arm-based chips. Once a chip has been designed and manufactured with our products, we receive a per-unit royalty on substantially all chips shipped. The royalty has typically been based on a percentage of the ASP of the chip or a fixed fee per unit, and it typically increases as more Arm products are included in the chip. As of March 2026, we also expanded our offerings to include Arm-designed silicon products with the introduction of the Arm AGI CPU, with production expected by the end of calendar year 2026. Our business model enables the widest range of customers with a broad set of options to access Arm products through an agreement best suited to their particular business needs. Our business model includes: •Arm Total Access Agreements: Under an Arm Total Access agreement, we license a portfolio of CPU designs and related technologies to a customer in return for an annual fee determined at execution of the agreement. We retain the right, from time to time, to add or remove specific products from the package. The agreement is for a fixed term and may limit the number of concurrent chip designs that may use products from the package. •Arm Flexible Access Agreements: Under an Arm Flexible Access agreement, we license a portfolio of CPU designs and related technologies to a customer in return for an annual fee determined at execution of the agreement. Unlike an Arm Total Access license, the package of products licensed pursuant to an Arm Flexible Access agreement will not contain our latest products. Although customers are free to experiment with products 67 contained in the Arm Flexible Access package, they must pay a single use license fee for specific products if they include Arm products in a final chip design “tape out,” when the final result of a semiconductor chip design is sent for manufacturing. As with an Arm Total Access agreement, we retain the right, from time to time, to add or remove specific products from the package. •Technology Licensing Agreements (TLA): Under a TLA, we license a single CPU design or other technology design to a customer in return for a fixed license fee. The license may be limited by term (i.e., the number of years during which the licensee is entitled to incorporate our products in new chip designs, but licensees typically have the right to manufacture designs perpetually) and/or by number of uses (i.e., the number of concurrent chip designs that may use our products). •Architecture License Agreements (ALA): Under an ALA, the licensee is allowed to develop their own highly customized CPU designs that is compliant with the Arm instruction set architecture (“ISA”) for a fixed architecture license fee. As the creation of an optimized CPU is very costly and time consuming, architecture licensees will often also license Arm CPU designs to use either as a complementary processor alongside the licensee’s Arm-compliant CPU design, or in other chips where the licensee’s own design is unsuitable. •Royalty Fees: We generate the majority of our revenue from customers who enter into license agreements, pursuant to which we receive royalty fees based on average selling price of the customer’s Arm-based chip or a fixed fee per chip. Royalty revenue is impacted primarily by the adoption of our products by the licensee as well as other factors, such as product lifecycles, customer’s business performance, market trends and global supply constraints. Components of Results of Operations Total Revenue Most of our licenses have two components: license fees and support and maintenance fees (recognized as license and other revenue) and per-chip royalties (recognized as royalty revenue). However, some licenses can have multiple payment milestones that are date-based or event-based (e.g., six months after the effective date of the contract or upon tape-out of the first chip design). We disaggregate revenue into the following categories for major product offerings: License and Other Revenue License and other revenue include revenue from licensing, software development tools, design services, training, support, and all other fees that do not constitute royalty revenue. The products licensed by us consist of design information and related documentation to enable a customer to design and manufacture semiconductor chips and related technology. Over the term of a license, contractual payments can generally range from hundreds of thousands of dollars to hundreds of millions of dollars, depending on the type of license, its duration, and the type of product that is being licensed. A license may be perpetual, use-limited or time-limited in its application. Delivery (i.e., providing the customer access to the licensed products) generally occurs within a short period after executing a license agreement. In some cases, we may license products that are still under development, in which case delivery can be many months, or even years, after executing a license agreement. We generate a significant proportion of our Licensing and other revenue from a relatively small number of customers. License fees are invoiced pursuant to an agreed schedule. Typically, the first invoice is generated upon signing of the license agreement, and licensing and other revenue is recognized upon delivery of the products. In addition to the license fees, our license agreements generally provide for customer support services, which consist of telephonic or e-mail support. Fees for customer support services are generally specified in the contract. Typically, no upgrades to the licensed products are provided, except those updates and upgrades provided on a when-and-if-available basis. Revenue from customer service support is recorded within other revenue. Arm Flexible Access agreements provide our customers with access to a wide range of processor, graphics, and systems products, especially older and less performant products. Arm Flexible Access agreements have two components: an annual low-cost portfolio license fee payable in installments and a license fee once they have reached “tape-out,” which occurs when the final result of our customer’s semiconductor chip design incorporating our products is sent for manufacturing, at which point they decide which of our products they wish to deploy in their chip. We believe that Arm 68 Flexible Access agreements are most suitable for smaller companies, including start-ups and business units of larger companies, that want to experiment with different configurations of our products before committing to a chip design. Arm Total Access agreements also provide our customers with access to a package of our products, including processor, graphics, and systems products. Arm Total Access customers have the option to license our most advanced processors as part of the package. Arm Total Access customers pay a periodic portfolio license fee to maintain access to our products. There are no additional fees payable by our customers under our Arm Total Access agreements upon tape-out because manufacturing design rights are included within the portfolio license fee and are reflected in the license pricing. We believe that Arm Total Access agreements are most suitable for larger, established, semiconductor companies who expect to deploy our products in a wide range of their products. We provide software development tools and a range of services to companies developing chips based on our products. These tools and services include, among others: (i) software development tools for engineers to write and debug software on Arm processors, (ii) design license and development services to customize technology IP tailored towards customers’ specific needs, (iii) training on our products and how to write software to utilize their functionality and capability, and (iv) support and maintenance, for which we generally require an annual fee for a minimum of one year. Royalty Revenue Royalties are generally either set as a percentage of the licensee’s average selling price per chip or as a fixed amount per chip. The royalty rates per chip typically reduce over time as the total volume of chips incorporating our products shipped increases; notwithstanding such reductions in royalty rates and fees per chip, license agreements with component manufacturing customers typically include a minimum royalty percentage or fee per chip. Royalty payment schedules in individual license agreements vary depending on the nature of the license and the degree of market acceptance of our products on the date the license agreement is executed. In addition, the amount of royalty payments in respect of our products can increase as the customer integrates more of our products into the chip. See “D. Trend Information—Key Factors and Trends Affecting Our Operating Results—Ability to Provide Our Customers with More Value Per Chip” for examples of how customers may incorporate multiple products in a single chip. License contracts require the licensee to issue royalty reports, including details of chip sales, to us on a quarterly basis. Royalty revenue is recognized on an accrual basis in the quarter in which the customers ship chips containing our products, using estimates from sales trends and judgment for several key attributes, including industry estimates of expected shipments, the mix of products sold, the percentage of markets using our products, and average selling price. Adjustments to revenue are required in subsequent periods to reflect changes in estimates as new information becomes available, primarily resulting from actual amounts subsequently reported by the licensees in the period following the accrual, including royalty audit resolutions. Revenue from External Customers and Related Parties We also separately present revenue derived from contracts with our external customers and those derived from related parties. Revenue from related parties is derived from Arm China, customers in which we have an equity method investment, and other entities related to us by virtue of common control by SoftBank Group. Cost of Sales Cost of sales (“COS”) is comprised primarily of the costs of providing technical support and training to our customers. Occasionally, some engineering costs may be classified as COS if one of our IP products is being customized as part of professional and design services that are directly attributable to revenue generation from customers. COS expenses consist primarily of employee-related expenses, project costs associated with professional services and the provision of support and maintenance to customers, along with expenses related to license development services revenue, amortization of developed technology, and allocated overhead. Employee-related expenses include salaries, bonuses, share-based compensation and associated benefits. Research and Development Research and development is at the heart of our business and critical to our future success. Accordingly, we have always invested, and intend to continue to invest, significant resources in our research and development program, including allocating resources to develop new products, including production silicon products, such as the Arm AGI CPU, CSS, 69 chiplets, complete chip solutions, and other more integrated compute products. In order to develop new products, we have recruited and hired engineers and other employees, and may in the future need to recruit and hire engineers or other employees or acquire companies, that possess the requisite expertise. To the extent that we do not have the technical expertise, financial resources or other capabilities for a particular research and development project with respect to new products or solutions, we have partnered, and may in the future partner, with third parties. Our vision to invest and develop new products is driven by our desire to maintain or increase our market share and create value for our customers. By developing and licensing innovative products, we allow our customers to focus their resources on competitive differentiation, unique to their own ability to differentiate. We have substantially increased our research and development investment to focus on long-term returns and to replicate the strong position that we maintain in smartphones and in other markets, such as automotive, networking equipment, cloud compute and industrial IoT. Each generation of processor is typically more advanced and more complex than the previous generation, which requires increased development efforts that may be partially offset by improvements in productivity. Consequently, each year we increase our research and development investment in line with the increased development needs of the next generation of products. Engineers are in high demand and well-remunerated, and accordingly our increased research and development activity will continue to result in an increase in costs, principally driven by salaries for such technical employees and the costs of tools they need. Research and development expenses consist primarily of employee-related expenses, including salaries, bonuses, share-based compensation, and benefits associated with employees in research and development functions, along with project materials costs, third-party fees paid to consultants, depreciation and amortization, allocated overhead, information technology and other development expenses. We receive government grants to compensate for certain research activities and we recognize the benefit as a reduction of the related expenses included in research and development expenses. Selling, General and Administrative Our engineering teams are well supported by vital selling, general and administrative functions. Selling, general and administrative expenses consist primarily of employee-related expenses, including salaries, bonuses, share-based compensation, and benefits associated with employees in sales and marketing, along with corporate and administrative functions, including accounting and legal professional services fees, depreciation and amortization, advertising expenses, allocated overhead, information technology and other corporate-related expenses. Disposal, Restructuring and Other Operating Expenses, Net In December 2023, we terminated an agreement with Arm China for certain software engineering-related services, which have been brought in-house. The contract termination costs are included in disposal, restructuring and other operating expenses, net in the Consolidated Income Statements. In October 2025, we commenced a restructuring plan to align our engineering workforce with strategic business activities. The expenses associated with this plan are included within disposal, restructuring and other operating expenses, net in the Consolidated Income Statements and consist of employee termination benefits and other related costs. Disposal expenses consist primarily of transaction costs, such as legal and professional fees, relating to various disposal activities. Restructuring and other operating expenses consist primarily of employee termination benefits and contract termination costs. Recognition of costs for employee termination benefits depends on whether employees are required to render service beyond a minimum retention period in order to receive the termination benefits. If employees are required to render service beyond a minimum retention period in order to receive the termination benefits, costs are recognized ratably over the applicable future service period. Otherwise, costs are recognized when we have committed to a restructuring plan and have communicated those actions to employees. Employee termination benefits covered by existing benefit arrangements are recognized when we have committed to a restructuring plan and the termination benefits are probable and estimable. Income (Loss) from Equity Investments, Net Income (loss) from equity investments, net includes changes in the fair value of certain equity method investments for which we elect to apply fair value accounting or at the net asset value (“NAV”), our proportionate share of equity method investee income or loss for certain equity method investments, and gains and losses on other marketable and non-marketable securities. Our proportionate share of income or loss from equity method investments accounted for under the equity method is recognized in the subsequent quarter of which such income or loss is recognized by our investee. 70 Interest Income, Net Interest income consists primarily of interest received on cash and cash equivalents, short-term investments that we hold with various financial institutions, and loans receivable. Interest expense consists primarily of interest on finance leases. Other Non-Operating Income (Loss), Net Other non-operating income (loss), net consists of one-time gains and losses and other miscellaneous income and expense items unrelated to our core operations, including gains or losses arising from changes in the fair value of derivative financial instruments, gains or losses on realized and unrealized foreign currency exchange including foreign exchange contracts, changes in the fair value of convertible loans receivable, and gains or losses on business divestitures. Income Tax Benefit (Expense) Income tax benefit (expense) consists of income taxes incurred in the United Kingdom and the foreign jurisdictions in which we operate. For additional information, including a reconciliation of the United Kingdom statutory income tax rate to our effective tax rate, see Note 16 - Income Taxes. 71 Results of Operations The following table sets forth the components of operations from our annual audited Consolidated Income Statements and such data as a percentage of total revenue on an absolute basis, for the periods indicated: Fiscal Year Ended March 31, (in millions, except percentages) 2026 % of revenue 2025 % of revenue 2024 % of revenue Revenue: Revenue from external customers $ 3,421 70 % $ 3,184 79 % $ 2,509 78 % Revenue from related parties 1,499 30 % 823 21 % 724 22 % Total revenue 4,920 100 % 4,007 100 % 3,233 100 % Cost of sales (121) 2 % (121) 3 % (154) 5 % Gross profit (loss) 4,799 98 % 3,886 97 % 3,079 95 % Operating expenses: Research and development (2,776) 56 % (2,071) 52 % (1,979) 61 % Selling, general and administrative (1,115) 23 % (984) 25 % (983) 30 % Disposal, restructuring and other operating expenses, net (8) 0 % — 0 % (6) 0 % Total operating expenses (3,899) 79 % (3,055) 76 % (2,968) 92 % Operating income (loss) 900 18 % 831 21 % 111 3 % Income (loss) from equity investments, net 14 — % (237) 6 % (20) 1 % Interest income, net 111 2 % 116 3 % 110 3 % Other non-operating income (loss), net 132 3 % 10 0 % 11 0 % Income (loss) before income taxes 1,157 24 % 720 18 % 212 7 % Income tax benefit (expense) (253) 5 % 72 2 % 94 3 % Net income (loss) $ 904 18 % $ 792 20 % $ 306 9 % Percentages are calculated from the amounts presented and may not add to their respective totals due to rounding. Comparison of Performance for the Fiscal Years Ended March 31, 2026 and 2025 Total revenue Fiscal Year Ended March 31, External Customers Related Parties Total (in millions, except percentages) 2026 2025 % Change 2026 2025 % Change 2026 2025 % Change License and Other Revenue $ 1,298 $ 1,421 (9) % $ 1,009 $ 418 141 % $ 2,307 $ 1,839 25 % Royalty Revenue 2,123 1,763 20 % 490 405 21 % 2,613 2,168 21 % $ 3,421 $ 3,184 7 % $ 1,499 $ 823 82 % $ 4,920 $ 4,007 23 % Total revenue increased $913 million, or 23%, to $4,920 million during the fiscal year ended March 31, 2026, from total revenue of $4,007 million during the fiscal year ended March 31, 2025. License and other revenue increased $468 million, or 25%, during the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily driven by continued strong demand for Arm IP, as well as fluctuation in timing and size of multiple high-value license agreements and contributions from backlog into the current period from arrangements entered in prior periods. Royalty revenue increased $445 million, or 21%, during the fiscal year ended March 31, 2026 as compared to the fiscal 72 year ended March 31, 2025, driven by an improved mix of products with higher royalty rates per chip, such as Armv9 technology. Revenue from external customers increased $237 million, or 7%, during the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, driven by a $360 million, or 20%, increase in royalty revenue, offset by a $123 million, or 9%, decrease in license and other revenue. Revenue from related parties increased $676 million, or 82%, during the fiscal year ended March 31, 2026 as compared to the fiscal year ended March 31, 2025, primarily driven by a $591 million, or 141%, increase in license and other revenue and a $85 million, or 21%, increase in royalty revenue. The drivers for the changes in revenue from external customers for both periods were broadly aligned with the overall trends in license and other revenue and royalty revenue described above, with external customer revenue reflecting strong growth in royalty revenue that outweighed the decline in license and other revenue. For additional financial information relating to our revenue from related parties, see “Item 8. Financial Information—Note 20—Related Party Transactions” in the Notes to the Consolidated Financial Statements included in this Annual Report. In March 2026, we announced the expansion of our compute platform into production silicon products with the Arm AGI CPU, which did not have a material impact to our revenue for the fiscal year ended March 31, 2026. During the fiscal years ended March 31, 2026 and 2025, revenue from sales to customers outside of the U.S. accounted for approximately 64% and approximately 57% of total revenue, respectively. Less than 2% of our total revenue is denominated in currencies other than U.S. dollars, and the impact of changes in foreign exchange rates on our revenue for the fiscal years ended March 31, 2026 and 2025 was immaterial. Cost of sales Fiscal Year Ended March 31, (in millions, except percentages) 2026 2025 % Change Cost of sales $ (121) $ (121) — % Cost of sales remained flat during the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily due to decreases in activities associated with professional and design services, offset by increases in salaries and related expenses, share-based compensation costs and depreciation. Research and development Fiscal Year Ended March 31, (in millions, except percentages) 2026 2025 % Change Research and development $ (2,776) $ (2,071) 34 % Research and development expenses increased by $705 million, or 34%, during the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily due to increases in research and development expenses related to investments in next generation products, such as the Arm AGI CPU. The increase was primarily due to increases in salaries and related expenses as a result of headcount growth from hiring, share-based compensation costs, cloud services and IT expenses, engineering expenses, depreciation, allocated facility overhead and amortization, which was partially offset by an increase in research and development tax credits. Selling, general and administrative Fiscal Year Ended March 31, (in millions, except percentages) 2026 2025 % Change Selling, general and administrative $ (1,115) $ (984) 13 % Selling, general and administrative expenses increased by $131 million, or 13%, during the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily due to increases in salaries and related expenses as a result of headcount growth, share-based compensation costs, cloud services and IT expenses, professional services expenses, and marketing expenses, partially offset by decreases in provisions for current expected credit losses on loan 73 receivable and accounts receivable and relatively less costs associated with disposal activities recognized in the current year. Disposal, restructuring and other operating expenses, net Fiscal Year Ended March 31, (in millions, except percentages) 2026 2025 % Change 1 Disposal, restructuring and other operating expenses, net $ (8) $ — nm (1) Percentage changes +/- 1000% are considered not meaningful and are presented as "nm." Disposal, restructuring and other operating expenses, net for the fiscal year ended March 31, 2026 were $8 million, primarily due to costs associated with a restructuring plan to align our engineering workforce with strategic business activities. There were no disposal, restructuring and other operating expenses, net during the fiscal year ended March 31, 2025. Income (loss) from equity investments, net Fiscal Year Ended March 31, (in millions, except percentages) 2026 2025 % Change Income (loss) from equity investments, net $ 14 $ (237) (106) % Income (loss) from equity investments, net increased by $251 million, or 106%, for the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily due to a $246 million fair value loss with respect to our investment in Ampere Computing Holdings LLC (“Ampere”) in the fiscal year ended March 31, 2025 as well as realized and unrealized gains and losses related to equity method investments accounted for at fair value and non-marketable securities and unrealized losses related to equity investments in publicly listed companies. Interest income, net Fiscal Year Ended March 31, (in millions, except percentages) 2026 2025 % Change Interest income, net $ 111 $ 116 (4) % Interest income, net decreased by $5 million, or 4%, for the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily due to lower interest rate yields recognized on cash equivalents and short-term investments, offset by higher average cash equivalents balances. Other non-operating income (loss), net Fiscal Year Ended March 31, (in millions, except percentages) 2026 2025 % Change (1) Other non-operating income (loss), net $ 132 $ 10 nm (1) Percentage changes +/- 1000% are considered not meaningful and are presented as "nm." Other non-operating income (loss), net increased by $122 million, or nm, for the fiscal year ended March 31, 2026, as compared to the fiscal year ended March 31, 2025, primarily due to the gain on the sale of the Artisan foundation IP business and realized and unrealized foreign exchange gains. 74 Income tax benefit (expense) Fiscal Year Ended March 31, (in millions, except percentages) 2026 2025 % Change (1) Income tax benefit (expense) $ (253) $ 72 nm Effective tax rate 21.9 % (10.0) % (1) Percentage changes +/- 1000% are considered not meaningful and are presented as "nm." Our effective tax rate increased for the fiscal year ended March 31, 2026 as compared to the fiscal year ended March 31, 2025, primarily due to changes in withholding tax, unrecognized tax benefits and share-based compensation tax benefits. Comparison of Performance for the Fiscal Years Ended March 31, 2025 and 2024 Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Comparison of Performance for the Fiscal Years Ended March 31, 2025 and 2024” in our Annual Report on Form 20-F for the fiscal year ended March 31, 2025. B. Liquidity and capital resources We measure liquidity in terms of our ability to fund our cash obligations as they become due, including requirements of our business operations, working capital requirements, capital expenditures, contractual obligations, acquisitions and investments, and other commitments. We have historically funded, and intend to continue to fund, our operations primarily through cash generated from our business operations, partially supported by government research grants and tax credits. As of March 31, 2026, we had cash and cash equivalents of $2,751 million and short-term investments of $850 million. For the fiscal years ended March 31, 2026, 2025 and 2024, the government incentive benefit recognized in research and development expenses was $149 million, $114 million and $108 million, respectively. We believe that our cash and cash equivalents and short-term investments will be adequate to meet our liquidity requirements for at least the next 12 months and in the longer term. We continuously evaluate our liquidity and capital resources to ensure we can finance future capital requirements. Our future capital requirements will depend on several factors, including our revenue growth, the timing and extent of spending on research and development efforts and other growth initiatives, the timing of new products and services introductions, market acceptance of our products, and overall economic conditions. We could be required, or could elect, to seek additional funding through debt or equity financing; however, additional funds may not be available on terms acceptable to us, if at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, financial condition and prospects. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry.” The following table summarizes our cash flows for the periods indicated: Fiscal Year Ended March 31, (in millions) 2026 2025 2024 Net cash provided by (used for) operating activities $ 1,524 $ 397 $ 1,090 Net cash provided by (used for) investing activities $ (325) $ (35) $ (516) Net cash provided by (used for) financing activities $ (548) $ (202) $ (208) Effect of foreign exchange rate changes on cash and cash equivalents $ 15 $ 2 $ 3 Net increase (decrease) in cash and cash equivalents $ 666 $ 162 $ 369 Cash and cash equivalents at the beginning of the period $ 2,085 $ 1,923 $ 1,554 Cash and cash equivalents at the end of the period $ 2,751 $ 2,085 $ 1,923 75 Comparison of Cash Flows for the Fiscal Years Ended March 31, 2026 and 2025 Net Cash Provided by (Used for) Operating Activities Net cash provided by operating activities increased by $1,127 million to $1,524 million for the fiscal year ended March 31, 2026 as compared to the fiscal year ended March 31, 2025, primarily driven by higher net income of $112 million and certain non-cash items such as higher share-based compensation costs, changes in deferred income taxes, partially offset by equity investments due to fair value movements and changes in assets and liabilities and the gain on the sale of the Artisan foundation IP business. Changes in working capital were primarily driven by a $302 million decrease in cash used for other liabilities due to lower employment taxes payable on vested shares as compared to the prior fiscal year, a $176 million decrease in cash used for accrued compensation and benefits due to the replacement of cash bonuses with equity compensation, a $139 million increase in contract liabilities due to an increase in billings in advance of revenue recognition, a $130 million favorable cash flow movement related to accounts receivable due to revenue growth and the timing of payments from customers, and a $103 million favorable cash flow movement in contract assets due to the timing of revenue recognition. Net Cash Provided by (Used for) Investing Activities Net cash used for investing activities increased by $290 million to $325 million for the fiscal year ended March 31, 2026 as compared to the fiscal year ended March 31, 2025, primarily due to a $460 million increase in purchases of short term investments, a $326 million increase in purchases of property and equipment driven by data center and office expansions and computer hardware purchases, partially offset by $205 million in proceeds from sale or liquidation of equity investments, $127 million in proceeds from the sale of the Artisan foundation IP business, a $90 million increase in proceeds from maturity of short-term investments, $56 million in proceeds from settlement of loans, including convertible loans, and a $46 million decrease in purchases of equity investments. Net Cash Provided by (Used for) Financing Activities Net cash used for financing activities increased by $346 million to $548 million for the fiscal year ended March 31, 2026 as compared to the fiscal year ended March 31, 2025, primarily due to a $409 million increase in payments of withholding taxes on vested share-based awards resulting from the shift to a full withhold-to-cover method in satisfaction of tax obligations, partially offset by $74 million in proceeds from the Employee Stock Purchase Plan. Comparison of Cash Flows for the Fiscal Years Ended March 31, 2025 and 2024 Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—B. Liquidity and Capital Resources” in our Annual Report on Form 20-F for the fiscal year ended March 31, 2025. Contractual Obligations and Commitments Our material cash requirements include the following contractual and other obligations: Leases We have operating and finance lease arrangements for office space, data centers, equipment and other corporate assets. As of March 31, 2026, we had operating and finance lease payment obligations of $549 million and $62 million, respectively, with $50 million and $26 million, respectively, payable within 12 months of March 31, 2026. As of March 31, 2026, we had seven leases signed but not yet commenced. Purchase Obligations In the normal course of business, we contract with various third-party service providers for systems and services to perform certain day-to-day business activities. We enter into non-cancelable purchase commitments for cloud computing web services, data centers, software, license and services. As of March 31, 2026, we had outstanding non-cancelable purchase obligations of approximately $1,057 million with a remaining term of 12 months or longer for periods through 2036. 76 C. Research and development, patents and licenses, etc. Refer to “Item 4. Information on the Company—B. Business Overview—Research and Development”, “Item 4. Information on the Company—B. Business Overview—Intellectual Property,” “Item 5. Operating and Financial Review and Prospects—Components of Results of Operations—Research and Development,” “Item 5. Operating and Financial Review and Prospects—Comparison of Performance for the Fiscal Years Ended March 31, 2026 and 2025—Research and Development,” “Item 8. Financial Information—Note 1 - Description of Business and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in this Annual Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Comparison of Performance for the Fiscal Years Ended March 31, 2025 and 2024” in our Annual Report on Form 20-F for the fiscal year ended March 31, 2025 for discussion on our research and development policies. D. Trend information Key Factors and Trends Affecting Our Operating Results We believe that the growth of our business and our future success are dependent upon many factors, including those described in the section titled “Item 3. Key Information—D. Risk Factors” and elsewhere in this Annual Report as well as the factors described below. While each of these factors presents significant opportunities for us, these factors also pose challenges that we must successfully address in order to sustain the growth of our business and enhance our results of operations. Global Demand for Semiconductor Products and Cyclical Nature of the Semiconductor Industry Semiconductor chips are essential components in consumer, enterprise, and automotive electronics. Strong demand for electronics has resulted in sustained and increasing long-term demand for semiconductor chips, a significant percentage of which contain our products. Our revenue is, in part, affected by market conditions in the semiconductor industry, which is cyclical by nature and impacted by broad economic factors, such as worldwide gross domestic product and consumer and enterprise spending. While the semiconductor industry has experienced significant, prolonged, and sometimes sudden downturns in the past, we expect there to be continued and increasing demand for semiconductors over the long term as macro trends drive device manufacturers to produce more powerful and energy-efficient devices. Because our current revenue is dependent on the number of Arm-powered chips shipped by our customers, dislocations created by cyclical, economic factors generally affect demand for our customers’ chips and, consequently, may result in variability in our operating performance. Royalties are recognized on an accrual basis in the quarter in which the customer ships products incorporating our products. A material portion of the accrual is estimated using trend analysis of market and sales data as well as customer-specific financial information with a true-up in the following quarter based on actual sales data once received. Accordingly, differences between our estimated market trends and our customers’ forecasts of their chip shipments can lead to variability in our revenue. In addition, our expansion into production silicon may have materially different margin profiles, revenue recognition characteristics, and sales cycles compared to our IP licensing business. Impact of the Current Macroeconomic Environment and Geopolitical Events Uncertainty in the macroeconomic and geopolitical environment could significantly affect demand for our products and our results of operations. The range of events and trends that can impact our business and results of operations includes inflation and interest rates, supply chain disruptions, geopolitical pressures, the unknown impact of current and future trade regulations, such as new export controls and tariffs, and geopolitical turmoil, such as any changes in PRC-Taiwan relations, the war in Ukraine, and conflicts in the Middle East, including Iran, and fluctuation in foreign exchange rates. For example, the war in Ukraine and conflicts in the Middle East, including Iran, could lead to further market disruptions and exacerbate current supply chain constraints, including with respect to certain materials and metals that are essential in semiconductor manufacturing. The continuing evolution of global trade policies, and uncertainty in trade relations between the U.S. and the PRC and other major U.S. trade partners, has caused, and could continue to cause, market disruptions and supply chain constraints. Given the concentration of semiconductor manufacturing in East Asia (particularly in Taiwan), any potential escalation in geopolitical tensions in Asia, particularly with respect to Taiwan, could significantly disrupt existing semiconductor chip manufacturing and increase the prospect of increased interruption to the semiconductor chip supply across the world. The conflicts in Europe and the Middle East have caused no major interruption to our operations to date. 77 Ability to Provide Our Customers with More Value Per Chip Complex chips and chiplets are more difficult to develop and take longer to design, which increases the cost of the chip and the risk of delayed or missed timelines. We believe our ability to continue to develop more advanced products and offer increasingly comprehensive product packages, including providing more complete subsystems, such as Arm's CSS solutions which are pre-integrated and pre-verified configurations of Arm technology, will encourage greater use of our products by existing and prospective customers. For example, many licensees have historically combined multiple different Arm CPUs in a single chip, Arm CPUs with other Arm IP such as Arm GPUs, or deploy Arm CPU implementations with more than 100 cores. Increasing cost and time-to-market pressures mean some customers may be better served by the integration of our IP into a subsystem. For chips where our products have provided more value, we will typically receive higher royalty revenue per chip. Accordingly, we believe that our investments in higher performance, higher efficiency, and more specialized designs will drive greater demand for our products and higher value for our customers, which is expected to result in higher royalty revenue. Our future performance is dependent on our continued ability to provide value to customers, and our ability to drive additional value through technological innovation. Our Market Share Across End Markets Arm CPUs are the world’s most widely licensed and deployed processors. Our products are used in almost all smartphones, the majority of tablets and digital TVs, and a significant proportion of all chips with embedded processors, including for both consumer and enterprise applications. As new high-growth markets for electronics emerge, our customers require our more advanced processor designs. For example, AI demand is driving strong momentum for the Arm ecosystem. AI growth requires significantly more compute across all of our end markets from smartphones with better chat features, to automobiles with better driving and parking assist, to IoT microprocessors with embedded NPUs. Our operating and financial performance is dependent, in large part, upon maintaining our market share in the smartphone and consumer electronics markets and maintaining or growing market share in our other target markets, such as cloud and AI data centers. Increasing Design Wins with Flexible Licensing Models We have in the past and intend to continue to make significant investments in research and development to ensure that we can develop products suitable for new opportunities with existing and prospective customers. A key measure of our success is our customer design wins. Because we are often embedded within our customers’ research and development functions, we typically have significant, unique visibility into our customers’ product development pipelines, which we believe positions us to capture design wins to a greater extent than our competitors. A “design win” occurs when a customer decides to include an Arm CPU product or related technology within one of their chip designs. For customers who already license our products, a new design win does not necessarily require a customer to sign a new license. By licensing a portfolio of Arm products to our customers (rather than licensing a single CPU design or other technology design), we have made it easier and more compelling for customers to access and utilize more Arm products, further broadening our potential customer base and end-market penetration. Our licensing options provide greater flexibility to our customers and maximize our opportunities to secure more design wins for our products, which results in greater opportunities to increase our recurring royalty revenue. Performance of Arm China We utilize our commercial relationship with Arm China to access the PRC market for IP revenue, and substantially all of our PRC-related revenue is generated through the IPLA with Arm China, a related party. Arm China has the right to sublicense our processor technology pursuant to the IPLA. Our responsibility under the IPLA is to facilitate delivery of our processor technology to Arm China’s end customers in accordance with detailed instructions and other specifications from Arm China. Our revenue is calculated as a percentage of license and royalty fees earned by Arm China from sub-license arrangements entered into with its end customers. Where our revenue is earned as a percentage of the license fee received by Arm China, we categorize such revenue as our license revenue. Our share of Arm China’s royalties is categorized as royalty revenue in our financial statements. Despite our reliance on Arm China through our commercial relationship with it, both as a source of revenue and a conduit to the important PRC market, Arm China operates independently of us. Under the IPLA, Arm China’s payments due to us are determined based on the financial information that Arm China provides to us. Accordingly, we are dependent on Arm China providing us with reliable and timely financial information. Additionally, political actions, including trade and national security policies of the U.S. and PRC governments, such as tariffs, placing companies on restricted lists, or new end-use controls, have in the past, currently do and could in the future limit or prevent us, directly or through our commercial relationship with Arm China, from transacting business with certain PRC customers 78 or suppliers, limit, prevent or discourage certain PRC customers or suppliers from transacting business with us or Arm China, or make it more expensive to do so, which could adversely affect demand for our products. Total revenue derived from Arm China increased during the fiscal year ended March 31, 2026 as compared to the fiscal year ended March 31, 2025. License revenue for the fiscal year ended March 31, 2026 increased due to fluctuation in timing and size of multiple high-value license agreements and contributions from backlog into the current period from arrangements entered in prior periods. Royalty revenue for the fiscal year ended March 31, 2026 increased driven primarily by higher chip shipments and an improved mix of products with higher royalty rates per chip. Developments in Export Control Regulations The Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”), significantly extended the reach of U.S. export controls on the semiconductor industry, in particular advanced computing chips and services, in a series of rules and guidance published over the past year. The collective impact of the rules, described below, have in the past and may in the future reduce our ability to license our products directly to entities and end users in affected countries and could potentially harm our commercial relationships by limiting the ability of certain of our customers and partners to manufacture, ship, or receive chips and end products incorporating certain of our products. In January 2026, BIS published a new rule revising the U.S. export license review policy from “presumption of denial” to “case by case” review as it relates to specific NVIDIA H200 and AMD MI325X chips destined to China. The new rule also requires exporters to certify sufficient U.S. supply of the same or better product, that production will not divert global foundry capacity for similar or more advanced products for U.S. end users, sufficient security and Know Your Customer procedures, and independent, third-party testing in the United States to verify performance specifications. In parallel, the U.S. Government announced new tariffs imposing a 25% levy on U.S. imports of the same semiconductors and systems from any country, with broad exemptions for items destined for U.S. data centers or other qualifying uses. In September 2025, BIS published an interim final rule referred to as the “Affiliates Rule” to expand the export-related restrictions on explicitly named entities on the Entity List to any foreign entity owned 50% or more by an entity (or entities) on the Entity List or Military End User (“MEU”) List, or by certain Specially Designated Nationals (“SDNs”) on the SDN list published by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), whether directly or indirectly, individually or in the aggregate. The Affiliates Rule took effect on September 29, 2025. However, on November 1, 2025, following the latest round of U.S.-China trade negotiations, the White House issued a Fact Sheet announcing that implementation of the Affiliates Rule will be suspended for one year starting on November 10, 2025. In January 2025, BIS published the “Implementation of Additional Due Diligence Measures for Advanced Computing Integrated Circuits” interim final rule with a compliance date of January 31, 2025. This rule limits PRC entities seeking to manufacture or obtain advanced node chips from outside of the PRC, as well as designates approved entities outside of the PRC - chip designers, foundries, and Outsourced Semiconductor Assembly and Test (“OSAT”) vendors - as another mechanism to mitigate risk of diversion. The “Framework for Artificial Intelligence Diffusion” interim final rule (“AI Diffusion Rule”) was also introduced in January 2025 to impose a worldwide export license requirement on advanced computing products and a quota-like system for deploying such products across three tiers of countries. While the AI Diffusion Rule had a compliance date of May 15, 2025, BIS announced intent to rescind it on May 13, 2025. At the same time, BIS published new guidance on protecting supply chains against diversion of advanced computing chips and services and the risks associated with using PRC-made advanced computing chips. Also in May 2025, BIS directed major EDA software vendors in the U.S. to suspend delivery and support of all EDA software to customers in China. In early July 2025, following trade negotiations, the U.S. lifted the suspension allowing EDA vendors to resume delivery and support to customers in China. BIS rules published in September and December 2024 imposed additional U.S. export restrictions on advanced computing technologies and semiconductor manufacturing capability to the PRC and certain other countries suspected of supplying the PRC with such technologies and capabilities. These rules, which continue the focus on protecting U.S. national security and preventing diversion of products subject to U.S. export controls in the same manner as BIS rules published in October 2022 and October 2023: (i) established new restrictions on exporting, re-exporting, or transferring Gate all-around Field-Effect Transistor (“GAAFET”) and High Bandwidth Memory (“HBM”) technologies to the PRC and 79 other countries suspected of supplying the PRC with such technologies; (ii) significantly expanded restrictions on advanced semiconductor manufacturing equipment; (iii) added new entities to BIS’s Entity List; and (iv) clarified controls on software and software licenses. While we expect BIS to continue its steady pace of issuing new rules to restrict the most advanced semiconductors to China, risks related to additional (and potentially broader) restrictions remain susceptible to the course and outcomes of U.S.-China bilateral relations and trade negotiations. Investment in Technology and Product Development We continue to evaluate opportunities, potential investments and technical partnerships to develop new technologies and advanced products, including in the AI arena, and thereby expand beyond individual design IP elements to providing a more complete system and custom chips for specific applications, including, without limitation, RTL-based CSSs, GDSII-based CSSs, chiplets or complete chip solutions. For example, in March 2026, we announced the expansion of our compute platform into production silicon products with the introduction of the Arm AGI CPU. To remain competitive, we must continue to develop new applications and enhancements to our existing products and services, particularly as next generation technology is adopted by market participants. We intend to continue allocating resources to, and exploring, new markets and/or different products and solutions for existing and prospective customers in various end markets. Further, we have been, and may in the future be, engaged to advise on or design chips for certain existing customers and other third parties. Allocating and maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the evolving demands of the market is essential to our continued success. We expect to continue investing greater financial and other resources in furtherance of those efforts, exploring investment and/or acquisition opportunities, and engaging with one or more partners to provide technical, financial and/or other support. E. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses, and related disclosures. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. By their nature, estimates are subject to an inherent degree of uncertainty. Although we believe that the estimates and the assumptions supporting our assessments are reasonable, actual results could differ materially (either positively or negatively, as applicable) from our estimates, which could have a material effect on our consolidated financial statements. We believe that, of our significant accounting policies, which are described in “Item 8. Financial Information—Note 1 - Description of Business and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in this Annual Report, the following accounting policies involve a greater degree of management judgment and complexity. Accordingly, the following policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition, results of operations, and cash flows. Revenue Recognition Our revenue is derived from contracts with customers. We recognize revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is to recognize revenue upon the transfer of services or products to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services or products. We apply the five-step framework under ASC 606 to recognize revenue as described in our revenue recognition policy included in “Item 8. Financial Information—Note 1 - Description of Business and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in this Annual Report. The most critical judgments required in applying ASC 606 and our revenue recognition policy relate to the determination of distinct performance obligations, the evaluation of the standalone selling price (“SSP”) for each performance obligation, the assessment of the contract combination criteria and the estimates on sales-based royalty revenue accruals. 80 Determination of distinct performance obligations For our licensing arrangements, we grant customers the choice to acquire additional rights, goods, or services at contract inception (for example, renewals of offerings, version extensions through term renewals, additional future products, or additional usage of term license). Therefore, judgment is required in determining whether products and services are considered distinct performance obligations that should be accounted for separately. We utilize forward-looking information in identifying performance obligations for IP or their version extensions of architecture IP under development or future products and in considering if implicit promises exist in certain long-term contracts. Evaluation of the standalone selling price for each performance obligation Judgment is required to determine the SSP for each distinct performance obligation in the contract. Directly observable prices are generally not available for our products, so we estimate the SSP for each performance obligation by maximizing the use of observable inputs. Some of our performance obligations, such as support, maintenance services, and training services, have observable inputs that are used to determine the SSP of those distinct performance obligations. However, our licenses of products often have highly variable pricing as standalone sales are rare and pricing varies from one transaction to another. When offerings with highly variable pricing lack substantial direct costs to estimate SSP based on a cost-plus margin approach, the transaction price is allocated using the residual approach on the basis that we have identified the SSP for other performance obligations in the same contract. If two or more performance obligations have highly variable or uncertain pricing, we apply a combination of methods to estimate the SSPs, including utilizing list prices, contract prices, and effort estimates of future IP. Assessment of contract combination criteria In certain instances, we enter into multiple contracts with the same customer that are treated, for accounting purposes, as a single contract if the contracts are entered into at, or near, the same time and are interrelated. Judgment is required in evaluating whether various contracts are interrelated, which includes considerations as to whether they were negotiated as a package with a single commercial objective, where the amount of consideration on one contract is dependent on the performance of the other contract, or if some or all obligations in the contracts constitute a single performance obligation. Estimates on sales-based royalty revenue accruals For certain license arrangements, sales-based royalties are collected on customers’ chips that incorporate our products. Royalties are set either as a percentage of the licensee’s average selling price per chip or as a fixed amount per chip. Where arrangements include royalty buydowns or upfront minimum royalty commitments, we treat them as fixed contract consideration. Royalties are recognized on the licensee’s sales in the period in which they ship their Arm-powered chips to their end customers. Our estimates of royalty-based accruals take into consideration the macroeconomic effects of global events, such as geopolitical issues (such as trade bans or wars), and natural disasters, any of which may interrupt supply chain activities as well as demand for shipments of technology products. These estimates also involve the use of historical data and judgment for several key attributes, including industry estimates of expected shipments, the percentage of markets using our products, and average selling price. Generally, our estimates represent the then-current period’s shipments for which we expect our licensees to submit royalty statements in the following quarter in accordance with our license agreements. Upon receipt of royalty statements, including royalty audit resolutions, from the licensees with the actual reporting of sales-based royalties that we previously estimated, we record a favorable or unfavorable adjustment based on the difference, if any, between estimated and actual sales. Historically, actual amounts for sales-based royalties have been materially consistent with our estimates, and no significant adjustments have been required for prior-period royalty estimates. However, we can provide no assurances that material adjustments will not be required in future periods. Valuation of Equity Investments Measured at Fair Value Non-marketable securities Non-marketable securities represent either direct or indirect, through a capital fund, investments in unlisted early-stage development enterprises. For certain of these securities, we have elected to apply the NAV practical expedient, where NAV is the estimated fair value of the investments. For other investments, under the measurement alternative, these equity securities are recorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes resulting from the issuance of similar or identical securities in an orderly transaction by the same issuer. As of March 31, 2026 and 2025, non-marketable securities measured at NAV were $27 million and $16 million, respectively. 81 Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and preferences of the securities. Recording upward and downward adjustments to the carrying values of equity securities as a result of observable price changes requires quantitative assessments of the fair values of equity securities held. Equity Method Investments Equity method investments represent strategic investments in unlisted development enterprises. For certain of these investments, we have elected to apply the fair value option. Where applicable, the NAV practical expedient has been applied. Equity method investments measured at NAV as of March 31, 2026 and 2025 were $91 million and $100 million, respectively. Equity method investments measured at fair value as of March 31, 2026 and 2025 were $57 million and $200 million, respectively. We elected the fair value option for Acetone Limited and Ampere. We initially computed the fair value for our investments, consistent with the methodology and assumptions that market participants would use in their estimates of fair value, with the assistance of a third-party valuation specialist or based on inputs provided by the investee. The fair value computation is updated on a quarterly basis. The investments are classified within Level 3 in the fair value hierarchy because we estimate the fair value of the investments using (i) the market approach based on similar transactions, (ii) the market-calibration approach based on the guideline public company method and/or (iii) probability-weighted expected return approach, and/or (iv) subject to the availability of sufficient information, the income approach based on the discounted cash flow method. We consider numerous objective and subjective factors to determine the best estimate of fair value for our investees. These factors include forecasts, the financial condition of the investee and the prices paid for securities sold to third-party investors, if any, as well as the valuation of comparable companies. Impairment of investments Non-marketable equity securities under the measurement alternative are subject to periodic impairment analysis. The periodic impairment analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative factors considered include the investee’s financial condition and business outlook, industry and sector performance, market for technology, operational and financing cash flow activities, and other relevant events and factors affecting the investee. When indicators of impairment exist, we prepare a quantitative assessment of the fair value of the equity investments using both the market and income approaches, which require judgment and the use of estimates, including discount rates, investee revenue and costs, and comparable market data of private and public companies, among others. During the fiscal years ended March 31, 2026, 2025 and 2024, we recognized impairments of $0 million, $4 million and $3 million, respectively, on non-marketable equity securities. Equity method investments not measured under the fair value option are subject to periodic impairment reviews using the other-than-temporary impairment model, which considers the severity and duration of a decline in fair value below cost and our ability and intent to hold the investment for a sufficient period of time to allow for recovery. We did not recognize any impairments on equity method investments during the fiscal years ended March 31, 2026, 2025 and 2024. Ordinary Share Valuations In determining the fair value of ordinary shares, the Board of Directors considered the grant date fair value for share-based awards as of the closing price of the Company’s ADSs on Nasdaq on the day of grant. The Company generally recognizes share based compensation cost using the straight-line method over the requisite service period of the award, net of estimated forfeitures, except for awards that are subject to continuous service and satisfaction of certain Company performance conditions. For awards that are subject to continuous service and satisfaction of certain Company performance conditions, the Company revises its estimate of the number of shares expected to vest at each reporting date as a result of the effect of the Company’s performance conditions. The impact of the revision of the original estimates, if any, is recognized in the Consolidated Income Statements such that the cumulative expense reflects the revised estimate. Certain fixed monetary amount liability-classified awards were modified to equity-classified awards at the time of IPO and were converted to into a variable number of ADSs representing ordinary shares based on the IPO price of $51.00 per ADS. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in the IPO Prospectus for critical accounting estimates applicable prior to the IPO. 82 Share-based Compensation We expense share-based compensation over the requisite service periods of the awards, which generally is equivalent to the vesting term. Compensation expense is recorded only for those awards that are expected to vest. The fair value of RSUs is based on the grant date fair value for share-based awards based on the closing price of the Company’s ADSs on Nasdaq on the day of the grant. The Company granted PSUs with financial, strategic, and relative total shareholder return (“Relative TSR”) as the performance measures under the Omnibus Incentive Plan. The portion of PSUs granted with Relative TSR as the performance measure are assessed over a three-year performance period relative to the S&P 500 IT Sector Index and have the potential to vest between 0% and 200% of the original award amount depending on the Relative TSR achievement. To determine the grant date fair value of the market conditions component of the awards with Relative TSR-based performance measures, a Monte Carlo simulation model is used. Income Taxes We are subject to income taxes in the United Kingdom and other foreign jurisdictions. We make certain estimates and judgments in calculating our income tax expense and income tax assets and liabilities. We recognize the tax benefit of an uncertain tax position only if it is more likely than not that the tax position is sustainable upon examination by the taxing authority, based solely on its technical merits. We measure the tax benefit recognized as the largest amount of benefit that is more than 50% likely to be realized upon settlement with the taxing authority. We adjust our reserves for uncertain tax positions in accordance with the income tax accounting guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate due to new information. To the extent that the final outcome of these matters is different than the amounts recorded, our income tax expense would increase or decrease in the period in which such determination is made. We record a valuation allowance to reduce deferred tax assets to the net amount that is more likely than not to be realized. In assessing the need for a valuation allowance, we consider all available evidence, both positive and negative, including historical levels of income, estimates of future taxable income, and the feasibility of tax planning strategies. We regularly assess the need for a valuation allowance, and if we determine that an adjustment is needed, our income tax expense would increase or decrease in the period in which such determination is made.