In this article, the rotor stress is analysed for a high-speed permanent magnet (PM) machine (HSPMM) with segmented magnets retained by a carbon-fibre sleeve. The influence of rotor PM segmentation is firstly considered in the stress analysis. It is found that when the segmented magnets are under tensile stress, significant sleeve stress concentration will occur due to magnet edging effect. By contrast, the PMs will benefit from the segmentation with reduced tangential stress. This stress reduction effect is enhanced when the number of PM segments is larger. Furthermore, the influence of PM segmentation on the worst operating scenario is determined. In order to avoid stress concentration due to PM segmentation, the design guidelines are then given by investigating the influence of sleeve thickness and interference fit. A new design scheme of sleeve thickness is proposed based on the identified worst case scenarios. Finally, a 6-slot 4-pole high speed PM machine with segmented magnets retained by carbon-fibre sleeve is prototyped and tested at the speed of 90 krpm. The rotor stability indirectly indicts the validity of the theoretical analysis and design scheme.