ARM Holdings ADR (ARM) faces near-term uncertainty that is likely more cyclical than structural, BofA Securities said in a Thursday note.

BofA analysts said that the company's slowdown for the year is cyclical not as structural as shown by the acceleration in the company's licensing contract value, which increased in the mid-teens year over year.

Although the company did not give a fiscal year 2026 outlook due to delays in deal closures and demand uncertainty on the tariff situation, its core drivers are still on track, the analysts said.

The company has also made progress on getting more customers to its more advanced Armv9-A architecture, which now brings in more than 30% of royalties, the analysts said, adding that they expect it to continue increasing through the second half of fiscal 2026 as mid-tier handsets and Compute Subsystem adoptions accelerate.

There is also a large opportunity in the data center space with several ARM-based AI server and networking products in major cloud deployments, they said.

BofA reiterated the company's stock rating at buy and lowered the price objective to $135 from $144.

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