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Share-based Compensation | 3 Months Ended
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Jun. 30, 2025
Share-Based Payment Arrangement [Abstract] |
Share-based Compensation | 9 - Share-based Compensation RSUs and performance share units (“PSUs”) were granted to employees, certain executive officers, and non-executive directors of the Company and require continuous service through the vesting date. The Company expenses share-based compensation over the requisite service period of the awards, which is generally equivalent to the vesting term. Compensation cost is recorded only for those awards expected to vest. The fair value of RSUs is determined on the date of grant for equity-classified awards. The Company estimates forfeitures based on employee level, economic conditions, time remaining to vest and historical forfeiture experience. Restricted Share Units – 2022 Arm Limited RSU Award Plan (“2022 RSU Plan”) The table below identifies the award activity under the 2022 RSU Plan:
(in millions, except per award amount) |  | Awards (1) |  | Weighted Average Grant Date Fair Value Per Award (1)
Outstanding as of March 31, 2025 |  | 7 |  | $ | 47.34 |
Vested |  | (2) |  | $ | 60.36 |
Outstanding and expected to vest as of June 30, 2025 |  | 5 |  | $ | 48.05 |
(1) Awards and weighted average grant date per award exclude shares related to certain executive awards that currently have no grant date as the future performance objectives have not yet been defined and/or communicated to participants of the plan. As of June 30, 2025, there was $224.7 million of total unrecognized compensation cost related to awards issued under the 2022 RSU Plan, which are expected to be recognized over a weighted-average period of 0.5 years and there were no liability-classified RSUs under the 2022 RSU Plan. Omnibus Incentive Plan In August 2023, the Company’s Board of Directors adopted the Arm Holdings plc 2023 Omnibus Incentive Plan (the “Omnibus Incentive Plan”), which became effective in September 2023. The maximum number of ordinary shares that may be issued under the Omnibus Incentive Plan is equal to the sum of (i) 20,500,000 ordinary shares and (ii) an annual increase on April 1 of each year beginning on April 1, 2024 and ending on April 1, 2028, equal to the lesser of (A) 2% of the aggregate number of ordinary shares outstanding on March 31 of the immediately preceding fiscal year and (B) such smaller number of ordinary shares as determined by the Company’s Board of Directors or the Remuneration Committee of the Board of Directors (the “Remuneration Committee”). In October 2023, the Company started to grant RSUs and PSUs under the Omnibus Incentive Plan to employees, including executives of the Company. The RSUs and PSUs granted neither carry rights to dividends nor voting rights until the shares are issued or transferred to the recipient. The Omnibus Incentive Plan allows for either cash or share settlement of the awards by tranche, if applicable, at the discretion of the Remuneration Committee. At the time of issuance, the Company intended to settle the RSUs and PSUs in shares at the vesting date and such awards are accounted for as equity-classified awards. The RSUs were granted to existing employees and new hires of the Company and its subsidiaries, Arm Technology Israel Ltd., the Company’s Israeli subsidiary, and Arm France SAS and vest in tranches, require continuous service through the vesting date and are subject to graded vesting over a period of three to four years. RSUs granted to employees and new hires of subsidiaries in Israel and France substantially share the same terms as the existing RSUs under the 2022 RSU Plan with differences limited to the vesting sc hedules and, in the case of grants to hires of subsidiaries in France, holding period. PSUs were awarded to executives of the Company and include a portion that vests over a three-year continuous service period and another portion that is subject to continuous service and satisfaction of certain Company performance conditions. The time-based portio n of the PSUs vest over a three-year period. The PSUs that are subject to continuous service and satisfaction of certain Company performance conditions vest upon the satisfaction of performance metrics as established for each one-year performance period and have the potential to vest between 0% and 200% of the original award amount depending on the achievement of annual performance metrics. In accordance with the terms of the Omnibus Incentive Plan, on April 1, 2025, the total number of ordinary shares available for issuance under the Omnibus Incentive Plan and the ESPP increased by an aggregate of 8,452,110 ordinary shares, or 0.8% of the aggregate number of ordinary shares outstanding as of March 31, 2025, as determined by the Remuneration Committee. During the three months ended June 30, 2025, the Company granted PSUs with relative total shareholder return (“Relative TSR”) as the performance measure under the Omnibus Incentive Plan. PSUs granted with Relative TSR as the performance measure are measured 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. The Company recognizes compensation expense for the Relative TSR awards over the requisite service period based on the grant date fair value. The table below identifies all award activity under the Omnibus Incentive Plan:
(in millions, except per award amount) |  | Awards (1) |  | Weighted Average Grant Date Fair Value Per Award (1)
Outstanding as of March 31, 2025 |  | 11 |  |  | $ | 118.24 |
Granted |  | 11 |  |  | $ | 116.45 |
Vested |  | (3) |  |  | $ | 117.33 |
Outstanding and expected to vest as of June 30, 2025 |  | 19 |  |  | $ | 117.38 |
(1) Awards and weighted average grant date per award exclude shares related to PSUs that currently have no grant date as the future performance objectives have not yet been defined and/or communicated to participants of the plan. Other than PSUs with Relative TSR-based performance measures, the Company uses the closing ADS price of the Company on the date of grant as the fair value of awards. As of June 30, 2025, there was $2,065.7 million of total unrecognized compensation cost related to awards issued under the Omnibus Incentive Plan, which is expected to be recognized over a weighted-average period of 1.6 years. Employee Stock Purchase Plan In August 2024 and September 2024, the Company’s Board of Directors adopted and the Company’s shareholders approved, respectively, the Employee Stock Purchase Plan (“ESPP”). The maximum number of shares that may be granted under the ESPP is equal to the number of shares available for issuance under the Omnibus Incentive Plan, and each share granted under the ESPP reduces the number of shares available for issuance under the Omnibus Incentive Plan and its sub-plans by one share. The ESPP provides for one or more offering periods, and each offering will be for any period of between six and 24 calendar months as determined by the Remuneration Committee. Subject to any limitations contained therein, the ESPP allows eligible employees to purchase the Company’s ordinary shares or ADSs through payroll deductions of up to 10% of eligible compensation, subject to a cap of $25,000 per year (as calculated based on applicable tax rules). Eligible employees may be granted ESPP options to acquire ordinary shares or ADSs at a fixed price, which may be set at a discount of up to 15% of the lesser of (1) the fair market value of the ordinary shares or ADSs on the day before the offering period start date or (2) the fair market value of the ordinary shares or ADSs on the day before the purchase date at the end of the offering period. Employees may withdraw from the ESPP during specified periods and receive a full refund of accumulated payroll contributions. Employees who cease working at the Company during an offering period are treated as withdrawing from the ESPP. The first purchase period under the ESPP commenced during the fiscal year ended March 31, 2025. The assessed fair value at grant date of shares that may be granted, for the six month offering period commencing March 1, 2025, was $42.64 per share. As of June 30, 2025, there was $4.5 million of total unrecognized compensation cost related to the ESPP expected to be recognized over the remaining term of the offering period beginning on April 1, 2025. As of June 30, 2025, no ordinary shares or ADSs have been purchased under the ESPP. Share-based Compensation Cost A summary of share-based compensation cost recognized in the Condensed Consolidated Income Statements is as follows:
|  | Three Months Ended June 30,
(in millions) |  | 2025 |  | 2024
Cost of sales |  | $ | 7 |  |  | $ | 6 |
Research and development |  | 174 |  |  | 129 |
Selling, general and administrative |  | 60 |  |  | 47 |
Pre-tax share-based compensation cost |  | $ | 241 |  |  | $ | 182 |
Less: income tax effect |  | 46 |  |  | 12 |
Net share-based compensation cost |  | $ | 195 |  |  | $ | 170 |
No share-based compensation cost was capitalized for the three months ended June 30, 2025 and 2024.

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