ARM's (ARM) core royalty business remains solid, supported by growing adoption of its ARMv9 architecture and compute subsystems that drive higher average selling prices, RBC Capital Markets said in a note Wednesday.

The firm said ARMv9 adoption continues to broaden beyond flagship smartphones and carries about double the royalty rate of previous generations.

RBC analysts noted compute subsystems are in early stages of adoption and further increase royalty potential for the company.

Rising AI adoption is also driving interest in custom chip design and benefiting ARM's licensing business as customers pursue in-house chips across markets, the firm said.

RBC initiated coverage of ARM with an outperform rating and a price target of $140.

Shares of ARM were up over 2% in recent Thursday trading.

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