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01/10 19:40
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture. Revenue growth is strong, but there are concerns about tariffs, supply chain, economic factors, and competitive pressures. The Q&A highlights geopolitical uncertainties and lack of clarity in management's responses. Gross margin decline and increased expenses are negative factors, but the share repurchase program is a positive. Given the market cap, these mixed signals likely result in a neutral stock price reaction.
Revenue $85,900,000, up 57.6% year over year due to strength in h AI business and increased average selling prices.
Non-GAAP Gross Margin 62%, slightly above prior guidance due to favorable product mix.
Non-GAAP Operating Expense $51,800,000, slightly above prior guidance due to higher engineering costs on new and existing chip development projects.
Net Interest and Other Income $2,200,000, up from prior guidance of $1,800,000 due to higher other income.
Non-GAAP Net Profit $3,000,000 or $0.07 per diluted share.
Cash and Marketable Securities $259,400,000, up $56,000,000 year over year due to working capital improvements associated with increased revenue.
Operating Cash Inflow $14,800,000 for the quarter.
Capital Expenditures $4,600,000 for the quarter.
Free Cash Flow $10,200,000 for the quarter.
Days Sales Outstanding Decreased from 33 days to 31 days.
Days of Inventory Increased from 97 days to 98 days.
Inventory Dollars Increased 14% to support strong demand outlook.
New Product Introductions: Leading enterprise security camera company introduced two new products based on our CV 72, offering very high resolution and advanced AI analytics. A third product, a wearable device supporting multiple modalities, was also introduced to the market, based on our A6LM video processor.
AI SoC Development: We are developing a new AI SoC product family to enhance our edge AI infrastructure roadmap.
AI Product Demonstrations: Ambarella demonstrated its leadership in Gen AI at the IAC West Security Show with 18 product demonstrations, including the latest Gen AI and Vision AI capabilities.
Market Expansion in IoT: IoT applications increased to mid single digits sequentially and now represent about three quarters of our total revenue.
Automotive Market Growth: Automotive revenue was up more than 20% year over year, despite a low single-digit sequential decline.
Edge Infrastructure Market: We are addressing the edge infrastructure market with the N1 family and developing new AI SoC products for this segment.
Revenue Growth: First quarter revenue was $85,900,000, up 57.6% year over year, driven by strength in h AI business.
Gross Margin: Non GAAP gross margin for fiscal Q1 was 62%, slightly above the midpoint of prior guidance due to favorable product mix.
Free Cash Flow: Generated positive free cash flow of $10,200,000 for the quarter.
Increased Revenue Guidance: Fiscal 2026 revenue growth estimate increased to 19% to 25%, approximately $348,000,000 at the midpoint.
Focus on AI Infrastructure: We are shifting some resources to enhance our edge infrastructure capabilities while maintaining focus on automotive ADAS.
Geopolitical Uncertainty: The company acknowledges high geopolitical uncertainty, which could impact their business operations and revenue projections. They have built in some uncertainty into their guidance for the second half of the fiscal year.
Tariff Impact: While the company does not expect a material direct impact from current tariffs, there is concern about potential indirect impacts, leading to a larger than normal range of guidance.
Supply Chain Challenges: Conversations with customers indicate that they are not building inventory, which could lead to supply chain challenges if demand increases unexpectedly.
Economic Factors: The company is cautious about the economic environment, which could affect their revenue growth and overall business performance.
Competitive Pressures: The company faces competition in the edge AI infrastructure market from general-purpose processors like FPGAs and GPUs, which could impact their market share and pricing strategies.
Operating Expenses: There is an anticipated increase in operating expenses due to new product development costs, which could affect profitability.
Gross Margin Decline: A decline in gross margin is expected in the next quarter, driven by customer ordering patterns and product mix.
Revenue Growth: Fiscal 2026 revenue growth estimate increased to 19% to 25%, approximately $348 million at the midpoint.
AI Revenue Contribution: AGI revenue constituted more than 75% of Q1 revenue, marking the fourth consecutive quarter of record AI revenue.
New Product Development: Developing a new AI SoC product family to enhance edge AI infrastructure roadmap.
Market Expansion: Targeting over 20 different automotive and IoT AI applications with a projected SAM growth rate in the high teens, reaching nearly $13 billion by fiscal 2031.
Customer Engagement: High customer interest and design activities around advanced AI products demonstrated at IAC West Security Show.
Q2 Revenue Outlook: Anticipated Q2 revenue range of $86 million to $94 million, with a midpoint of $90 million.
Gross Margin Expectations: Expected Q2 non-GAAP gross margin in the range of 60.5% to 62%.
Operating Expenses: Projected Q2 non-GAAP operating expenses between $52.5 million and $55.5 million.
Free Cash Flow: Generated positive free cash flow of $10.2 million in Q1.
Share Repurchase Program: Board approved an extension of the current share repurchase program for an additional 12 months.
Share Repurchase Program: Ambarella’s Board of Directors approved an extension of the current share repurchase program for an additional twelve months ending 06/30/2026. During the first quarter, 24,152 shares were purchased for a total consideration of approximately $1,000,000. As of today, there is approximately $48,000,000 available under the repurchase authorization.
The company shows strong revenue growth potential and optimistic guidance, particularly in edge AI and IoT markets. Despite slower automotive project timelines, high demand in drones and wearable cameras, along with a strategic focus on AI and robotics, indicate strong future prospects. While management avoided specifics, the overall sentiment is positive, with growth opportunities outweighing uncertainties. The market cap suggests moderate volatility, supporting a positive stock reaction.
Ambarella's earnings call highlights strong revenue growth estimates, record AI revenue, and a positive outlook on edge AI and IoT applications. The Q&A section supports this with positive customer feedback and strong growth expectations in IoT and automotive sectors. Despite some vague responses on industry consolidation, the overall sentiment remains upbeat. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction.
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