Jason Child: Yeah. China was 25% of total revenues in Q3 and that’s up from 20% in Q2.
Ross Seymore: And then what was driving that? Because again, by that math, it seems like the was up, I don’t know, 30% and everything else kind of went down a little bit sequentially. Was that just the China handset market coming back to life? Was it more goodness beyond that? Just any color you could give on what drove that China growth that was so impressive.
Rene Haas: Yeah. We don’t break down the individual customers. But as I said, the China ecosystem tends to follow the rest of the world relative to the growth. So when we talk about growth in data centers and we talk about growth in automotive and, to your comment, certainly recovering the smartphone market helped.
Ross Seymore: Thank you.
Operator: Thank you. Our next question comes from the line of Charles Shi of Needham & Company. Please go ahead. Charles?
Charles Shi: Great. Thanks. I add my congratulations to our management team on the very strong results, very impressive. I do want to dig into a little bit more on the China and the related party side of the revenue, because when I look at your historical numbers, your Arm China contribution tracks almost identical to the related party transactions. There seems to be a little bit of a gap, seems to be expanding a little bit over the last quarter. And maybe related to that, you had very strong bookings in the last quarter, and this quarter, the booking actually comes down a little bit, but the licensing revenue actually was stronger than you expected. Was that the result of some of the earlier commencement of the licensing contracts that you probably signed a little bit earlier in the year, maybe in the prior quarter? And is that more of a timing that kind of surprised you to the upside? Thanks.
Jason Child: Yeah. So first on the related parties. So yes, typically, China has been most all of it. We did have an additional license deal that was roughly 5%, I guess, of total revenue, the difference between Arm China and the rest, that deal did come through this quarter. And so you’re right, that’s not something that’s been continuous but was a deal that came in this last quarter. In terms of the makeup of license revenue in general, we typically run somewhere around 40% to 50% of our license revenue was from backlog, so deals previously signed but relate to technology milestones that are delivered within the quarter. And then the remainder are new deals that are signed within the quarter. Clearly, we have good visibility into backlog and what our delivery is going to be.
And we have a pretty good insight into renewals or deals that have relatively long lead times. I think the one thing that we saw a little bit unique, both last quarter and this quarter, is with the increased kind of focus in AI and there just is a lot of focus on investing and building designs in AI, and so there’s been some shorter cycle deals that have come up, kind of, I would say, a little bit unique versus what we’ve seen in the past. And that’s the primary reason why we do need to spend a little more time this quarter to get our Arms around how much of that momentum will we continue to see next year. Does that answer your question?
Charles Shi: Yes. Thanks. If I may add that the China piece, your IP peers seems to be a little bit more cautious about what’s going to happen, I mean, in this year and actually kind of cautious you started that late last year, but your China revenue is still going very strong. How do we reconcile the differences here? I mean, this is my last question. Thank you so much.
Jason Child: Well, I wouldn’t say that we’re less cautious. I think our numbers have been strong. But from a forecast perspective, we’ve been forecasting that China likely goes down into the teens as a percentage of total revenue. This last quarter and the quarter before, we’ve just seen stronger recovery than we had previously expected. And that’s been certainly a nice positive surprise. In terms of going forward, we feel good about the progress we expect to deliver this quarter. And in 90 days, we’ll let you know if we think that progress is going to continue into next year.
Charles Shi: Appreciate the color. Thanks.
Jason Child: Thank you.
Operator: Thank you. Our next question comes from the line of Matt Ramsay of TD Cowen. Your question, please. Matt?
Matthew Ramsay: Thank you very much, guys. Good afternoon. I wanted to go back to the Armv9 conversation on a couple of points. I noticed that this is the first time and maybe I’m just dumb and didn’t see it, but I think this is the first time you had explicitly put in the shareholder letter and in writing that you were at least double royalty rates from v8 to v9. And I guess I wanted to ask you about that in a broader sense. Is that sort of across the board, across end markets and also across customers that are traditionally processor licensees and also ones that are traditionally architectural licensees and do the systems themselves? So I guess that’s the first part of the question. Is that a blanket statement across the board.
And the reason I ask it if you go back to lots of conversations around the IPO time frame, there were some aggressive ramps of royalty rates across your mobile business. And I think we were all trying to figure out whether the v8 penetration to v9 would drive those kind of expansion in results, or if you would need some significant contributions from sort of system license and the like to get those results. And so any context there about the applicability and breadth of that comment on doubling royalty rates on v9 would be really helpful. Thanks, guys.
Rene Haas: Yeah. Thanks, Matt. So I’ll attempt to answer it and let Jason and — if Jason wants to chime in. Yes, you’re right. This is the first time we’ve done it although we only have done 2 of these letters, so we don’t have a huge installed base to refer to. We wanted to provide some specific clarity because we had been receiving some level of questions around the thing you just asked about relative to how to think about v8 versus v9. The double, the V9 rate for the equivalent — double v9 for the equivalent v8 is sort of a rough guidepost. But in some cases, it’s quite a bit more. The Neoverse royalty rates have their own unique tables. The automotive royalty rates have their own unique tables. And some of the most high-performance CPUs that we ship into the client section have very, very significant lifted rates over version 8.
So double is a good rule of thumb for like-for-like. But in some cases, it’s even better than that. So that’s — but we did want to sort of provide just some clarity because we thought when folks look at the numbers in the absence of that context, there would just be a question of just help me work out how you got here. So Jason, I don’t know if there’s anything you want to add on to that.
Jason Child: No. I think to Rene’s earlier point, I understand we’re a little bit hard to model because we don’t really track to other companies. And because of we’re getting paid royalties on roughly 8 billion chips a quarter and just the slightest bit of mix either to more premium handsets or to more v9 versus v8, that turns out to be a pretty sensitive variable. And when you look at the growth from last quarter to this quarter and what we’re expecting from this quarter to next quarter, unit growth is very, very small. It’s really almost all coming from rate growth increases. And as we said back at IPO, we’re almost 100% on contract for next year. So really, we’re just seeing the manifestation of the work that was done in the last 2 years. We wanted to provide this v8 to v9 ratio as 1 way to help you guys be able to kind of see the progress and be able to model it. So I hope it’s helpful.
Rene Haas: Yeah, I can say that one thing that we had high confidence in when we started looking at the transition was v8 to v9, we knew we had increased rates, and we knew that the royalty picture would be better than what we were in the past. I think one of the benefits we’re getting, and I would use AI as sort of a driver for all this, is that the amount of v9 cores or the mix of v9 cores has been stronger than anticipated because people are putting more CPUs down, where they were not planning on putting as many or they may be putting a higher mix of v9 than v8. So that’s all driven, I think, good forward momentum for us.
Matthew Ramsay: No, that’s super helpful, guys. Just a quick clarification. Any comment on — I mean, the base rates may be different and obviously, different customers have different contracts, but all of that commentary at least directionally applicable to your architectural licensees as well? Thanks.
Jason Child: Yes. Yes, it is.
Operator: Thank you. Our next question comes from the line of Andrew Gardiner of Citi. Your question, please. Andrew?
