Arm Limited Q4 2018 Roadshow Slides Arm Limited is a subsidiary of 1 v1 © Arm 2018 Technology trends that will redefine all industries Artificial Intelligence in Autonomous Augmented Hyperscale cloud every device machines reality and connectivity Security and Privacy 2 © Arm 2018 Arm defines the technology that will redefine all industries Mobile and Networking Automotive Internet of Things Consumer and Servers and Robotics Artificial Intelligence in every device Autonomous machines Augmented reality Hyperscale cloud and connectivity Security and Privacy 3 © Arm 2018 Arm introduction Global leader in technology licensing • R&D outsourcing for semiconductor companies Innovative business model • Upfront licence fee – flexible licensing models • Ongoing royalties on partner sales • Technology reused across multiple applications Long-term, secular growth markets >1,650 licences 23 bn Arm-based chips Growing by >100 shipped in 2018 every year >525 potential ~15% CAGR over 4 © Arm 2018 royalty payers previous 5 years Arm’s business model Arm develops technology that is licensed to semiconductor companies Arm receives an upfront license fee and a royalty on every chip that contains its technology Business Development 1) Arm licenses 2) Partners develop technology to chips and ship chip Partners them to OEMs Technology SemiCo Arm License Fee Partner Chip shipment OEM Customer Per chip royalty Chip payment 3) OEMs sell products containing Arm-based 5 © Arm 2018 chips Arm’s strategy Maintain or gain share in long-term growth markets • From mobile phones to networking infrastructure and servers to embedded smart devices and automotive Increase value of Arm technology per smart device • Invest in developing more advanced processors with higher royalty rates • Physical IP and multimedia IP further increase Arm's value per chip Explore and exploit new opportunities in emerging applications created by the Internet of Things Invest to create a sustainable business, fit for the long term • Create superior returns by developing new technology that will deliver increased profits and cash generation in the future 6 © Arm 2018 Arm’s main growth markets Mobile and Consumer Devices Networking & Servers Embedded Markets $108bn $48bn $94bn TAM 2028 TAM 2028 TAM 2028 . Smartphones, tablets and laptops . Base stations, routers, switches, and . Automotive, white-goods, wearables, servers for cloud and data centres smart devices in industrial and utilities . Apps processor, modem, . Networks evolve to cope with increased . Microcontrollers, smartcards, embedded connectivity, touchscreen and image data at lower latency: virtualisation, connectivity chips sensors integration and programmability . 300 companies have licenced Arm . Growth coming from higher-value . Most major chip vendors have processors for use in embedded Arm technology such as Arm v8-A, announced Arm-based products computing devices octa core, multimedia 7 © Arm 2018 History of Arm Joint venture between Designed into first mobile Now all electronic devices can Acorn Computers and Apple phones and then smartphones use smart Arm technology 1990 1993 onwards Today 8 © Arm 2018 Smart devices contain many Arm processors Arm CPU Applications Processor chips can contain Apps Processor Chip Touchscreen and multiple Arm technologies Sensor Hub . Arm v8-A processor for OS and apps . Cortex-R controller for modem . Cortex-M controllers for peripherals WiFi . Arm Mali multimedia processors: Multiple cameras, GPU, video, display, camera, etc. front and rear . Arm physical IP SIM Sensor When new functions are added to smartphones it creates opportunity for new Arm IP Bluetooth Power Management Flash Controller Cellular Modem 9 © Arm 2018 GPS Arm-based chip shipments 22.9bn 21.3bn 20 146bn 33% Arm-based chips shipped to date Market share in 2018* 15 10 5 powered SoCs shipped (billions) SoCs powered - Arm 0 1991 Calendar Years 2018 * Note that market share is lower than previous shown as market definition has been expanded 10 © Arm 2018 Previous years’ market shares 2010-2017: 20%, 22%, 27%, 28%, 31%, 32%, 35% and 34%. Arm's opportunity continues to broaden 100 Semiconductor industry continues to grow: Total industry* 8% by volume, 3% by value over past five years 90 Chips with processors** 80 ARM shipments 70 Proportion of chips with processors is increasing 60 over the medium term: 75% in 2018 50 40 Billions of Chips 30 Over the medium term, Arm is gaining share 20 within the “chips with processors” segment of 10 the industry: 33% in 2018 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 * Data source: WSTS, April 2019 and Arm, Calendar years Industry volume excluding analog and memory ** Arm estimates 11 © Arm 2018 From revenue to profits License and royalty revenues similar to prior year reflecting weakness in industry FY 2018 Revenues $m %revs Software and services growing >50% Licensing 547 30% following two acquisitions in mid-2018 Royalty 1,098 60% Software and Services 191 10% Cost increase as Arm accelerates investment Total 1,836 100% in R&D for future product developments Costs ($m) 1,557 10% move in $/£ impacts profits by ~15% (forex impacts £ revenues and costs) Adjusted EBITDA ($m) 279 Operating Margin 15% Operating margins will be lower than in recent periods as investments grow faster than revenues Other expenses ($m) (1,442) IFRS EBIT ($m) 1,721 Includes sale of 51% stake in Arm China Excludes amortisation of intangibles related to the acquisition of Arm by SoftBank 12 © Arm 2018 Financial numbers aligned with SoftBank reporting periods (01 April 2018 to 31 March 2019) Qtr. ending Mar. 2019 – Financial summary Revenues ($m) Q4 2017 Q4 2018 Growth Licensing can fluctuate quarter to quarter. In Q4, Arm delivered a major new processor Licensing 156 213 37% triggering a revenue recognition event Royalty 269 247 -8% Software and Services 36 53 47% Royalty revenue growth declined, consistent Total ($m) 461 513 11% with weakness in wider industry COGS ($m) 32 28 -13% Includes $16m from recent acquisitions of R&D ($m) 163 186 14% Treasure Data and Stream Technologies SG&A ($m) 160 175 9% Costs ($m) 355 389 10% Arm is continue to increase investment Adjusted EBITDA ($m) 106 124 17% in R&D capacity Depreciation & amortisation ($m) 25 32 28% Other operating expenses ($m) 48 9 -82% IFRS EBIT ($m) 33 83 152% 13 © Arm 2018 Q4 Licensing: 32 is within the normal range The number of licenses for Cortex-M processors has been Historic licensing reduced since the introduction 60 of the DesignStart Pro (DS Pro) Average program in June 2017. Q1 = 16 DS Pro Cortex-M processors 50 Q3 Q2 Q3 Q3 are available for no upfront fee. 14 In Q4, 30 DS pro licenses were Q3 10 Q2 Q1 Q3 signed for Cortex-M processors 40 Q1 Q4 Average 10 Q2 = 9 Q2 5 Q4 30 Q4 Average Q4 Average = 5 Q4 Q3 Q2 = 4 Q4 Q1 Q1 Average Q2 = 4 20 Q1 3 Year 13 14 15 16 17 18 Cortex-A Cortex-R Cortex-M Mali 14 © Arm 2018 Licensing enables future royalties Arm signed 125 licences Q1 to Q4 2018 Arm’s current royalty revenues are derived from licences signed many years ago Growing base yields royalty revenues over long period Significant Royalty Potential $600m from Recent Licences +125 >550 licences signed 1500 1994-2009 +141 $500m since Q1 2015 +113 2010-2014 >550 +180 $400m 2015 to Present 1000 ~550 >1,650 $300m 500 >30% of Arm’s most recent $200m ~550 licences are drivers of future royalty revenue Cumulative Licences Cumulative ~550 $100m ~550 licences 0 Pre-2014 2015 2016 2017 YTD18 $0m H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 Financial Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 15 © Arm 2018 Calendar years Arm’s expanding opportunity 2018 2028 Market Share Market Value Market Value Mobile Applications $34bn processor 90% $47bn Other mobile chips $18bn 40% $30bn$23bn Infrastructure Networking $15bn 30% $20bn Data Center/Cloud $20bn 4% $28bn Automotive IVI and ADAS $7bn 75% $20bn $19bn Other automotive 10% $5bn chips $12bn 16 © Arm 2018 Arm’s expanding opportunity 2017 2026 Market Share Market Value Market Value Embedded Controller in 90% $7bn IoT Devices $30bn$20bn Microcontrollers/ 25% $18bn SIM Cards $22bn Other Consumer 40% $12bn Markets Electronics $37bn Other chips 35% $15bn $21bn All chips with 33% Total Market processors $150bn (current TAM) $250bn All addressable chips (future TAM) 25% $165bn $20bn $270bn 17 © Arm 2018 Establishing Arm China JV in Fiscal Q1 2018 Building a bigger business; built on strong foundations >150 10bn Licensees Chips shipped by Chinese partners using Arm processor technology Chinese95% designed SoC based on Growthx140 in volume shipment by Chinese Arm processor technology partners 2006-2017 Arm China will be able to better access new local technology opportunities, especially in server, smart meter/grids and IoT 18 © Arm 2018 Establishing Arm China JV in 2018 Building a bigger business; built on strong foundations Arm China JV establishment was initiated in >150 341 early Q1 2018 and completed at the end Q1 Customers to novate from Employees transferred Arm Limited to Arm China to Arm China in Q1 Novation (transfer) process or historical contracts resulted in a delay to contract signing in the H1 2018 ~20%Arm’s revenue came from 10Licenses signed-20 in a typical As expected, licensing completely recovered China in 2017 quarter with Chinese customers in H2 2018, and finished ahead of target Significant proportion of future revenues will be passed back to Arm Limited 19 © Arm 2018 Investment strategy Arm's current business Arm develops intellectual property (IP) blocks which are used in silicon chips Our partners combine Arm IP with their own IP to create complete chip designs We earn license fees when we deliver Arm IP to our partners and royalties when our partners ship chips that contain Arm IP Highly profitable and cash generative 20 © Arm 2018 Accelerating investment Investing to create to increase share gains new revenue streams .