The documentation is not very clear, but I believe that fscanf(arduino, '%c') is the same as fscanf(arduino) and that this reads as many characters as are available, not just one. So, if you want to read just one character at a time, then:
s(i) = fscanf(arduino, '%c', 1); %read just one character
If you meant to read all characters then you can't store multiple characters as a single element i of a vector, so you'll have to read the text as element of a cell array or a string array:
s{i} = fscanf(arduino, '%c');
%or
s(i) = string(fscanf(arduino, '%c'));
