Earnings call transcript: Ambarella Q2 2025 beats EPS forecast, stock rises

Ambarella Inc. (AMBA) reported a significant earnings beat for its fiscal second quarter of 2025, posting an earnings per share (EPS) of $0.15, surpassing the forecast of $0.05 by a substantial margin. Revenue also exceeded expectations, coming in at $95.5 million, compared to the anticipated $90 million. Following the earnings announcement, Ambarella’s stock rose in after-hours trading, reflecting a positive investor sentiment. According to InvestingPro data, the stock has delivered an impressive 8.95% return over the past week, with analysts maintaining a positive outlook. InvestingPro subscribers have access to 10 additional key insights about AMBA’s performance and potential.

Key Takeaways

• Ambarella’s Q2 2025 EPS of $0.15 exceeded forecasts by 200%.
• Revenue growth was 49.9% year-over-year, reaching $95.5 million.
• After-hours trading saw Ambarella’s stock rise by 0.76%.
• The company launched its first edge AI infrastructure SoC, NYC55.
• Full fiscal year revenue growth guidance increased to 31-35%.

Company Performance

Ambarella demonstrated robust performance in Q2 2025, with revenue increasing by 49.9% year-over-year. The company attributed this growth to its expansion into new markets such as portable video, robotic aerial drones, and edge infrastructure. Ambarella’s strategic initiatives and innovation in AI technology have positioned it as a leader in edge AI processors, setting it apart from competitors in the rapidly evolving tech landscape.

Financial Highlights

• Revenue: $95.5 million, up 49.9% year-over-year and 11.2% sequentially.
• EPS: $0.15, a significant increase from forecasts.
• Non-GAAP gross margin: 60.5%.
• Non-GAAP net profit: $6.4 million.
• Cash and marketable securities: $261.2 million.

Earnings vs. Forecast

Ambarella’s EPS of $0.15 significantly surpassed the forecasted $0.05, marking a 200% surprise. Revenue also exceeded expectations, with a 6.11% surprise compared to the forecast. This strong performance highlights the company’s effective execution of its strategic initiatives and its ability to capitalize on market opportunities.

Market Reaction

Following the earnings announcement, Ambarella’s stock saw a positive reaction in after-hours trading, rising by 0.76% to $72.48. This movement indicates strong investor confidence in the company’s future prospects, especially considering the stock’s recent decline of 1.81% during regular trading hours. The stock’s performance remains within its 52-week range of $38.86 to $85.15. Notably, InvestingPro analysis shows that 11 analysts have recently revised their earnings expectations upward for the upcoming period, signaling growing optimism about the company’s trajectory.

Outlook & Guidance

Ambarella has revised its full fiscal year revenue growth guidance upward to 31-35%. The company expects Q3 2025 revenue to range between $100 million and $108 million. Ambarella continues to focus on expanding its presence in the IoT and automotive markets, anticipating that the automotive segment will outperform IoT in the coming years.

Executive Commentary

Dr. Fermi Wang, CEO, highlighted the company’s leadership in the edge AI market, stating, "We are the probably one or few, maybe only one shipping 36,000,000 units of HAI SoC so far put us as a leader of in that market." CFO John Young added, "Our estimate is that that growth is roughly fifty fifty between ASP and unit growth," emphasizing the balanced growth strategy.

Risks and Challenges

• Supply chain disruptions could impact production schedules and costs.
• Competitive pressure in the AI and semiconductor markets remains intense.
• Economic uncertainties and geopolitical tensions could affect market dynamics.
• Rapid technological advancements require continuous innovation and adaptation.
• Potential regulatory changes in key markets could pose compliance challenges.

Q&A

During the earnings call, analysts inquired about the company’s inventory levels and potential mergers and acquisitions. Ambarella confirmed there is no excessive inventory buildup and noted ongoing discussions about M&A, though no specific plans were disclosed. The company also received positive feedback on its Cooper development platform, indicating strong market interest and potential for future growth.

Full transcript - Ambarella Inc (AMBA) Q2 2026:

Towanda, Conference Call Operator: Hello, and welcome to Umbrella’s Second Quarter Fiscal Year twenty twenty six Earnings Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. I would now like to turn the conference over to Louis Gerhardy, Vice President of Corporate Development. You may begin.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Thank you, Towanda, and good afternoon. Thank you for joining our second quarter fiscal year twenty twenty six financial results conference call. On the call with me today is Doctor. Fermi Wang, President and CEO and John Young, CFO. The primary purpose of today’s call is to provide you with information regarding the results for our second quarter fiscal year twenty twenty six.

The discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results, financial prospects, market growth and demand for our solutions among other things. These statements are based on currently available information and subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, our actual results could differ materially from these forward looking statements. And we’re under no obligation to update these statements. These risks, uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results are more fully described in the documents we file with the SEC.

Before starting the call, I’d like to summarize our planned investor events for our third fiscal quarter. On September 3, we’ll participate in Citi’s Global TMT Conference in New York City. September 4, we’ll host KGI Securities Bus Tour in Santa Clara. On September 16, we’ll host Bernstein’s seventh Annual West Coast Semiconductor Bus Tour at our office in Santa Clara. And on September 1819, Craig Hallum will host us on a Midwestern NDR.

Access to our second quarter fiscal year twenty twenty six results press release, transcripts, historical results, SEC filings and a replay of today’s call can be found on the Investor Relations page of our website. The content of today’s call as well as the materials posted on our website are Ambarella’s property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter. John will review the financial results and outlook and will be available for your questions after that. Vermeer?

Dr. Fermi Wang, President and CEO, Ambarella: Thank you, Louis, and good afternoon. Thank you for joining our call today. Our strong momentum continued in our second quarter with revenue over $95,500,000 increasing 11% sequentially above the high end of our prior guidance range of 86,000,000 to $94,000,000 The second quarter results represent the fifth consecutive quarter of record AGI revenue. Furthermore, I’m proud to say the midpoint of our new third quarter and the full fiscal year twenty twenty six revenue guidance range represents all time record quarterly and the fiscal year total revenue for Ambarella. In our May 29 earning call, we increased our fiscal twenty twenty six revenue growth estimate to a range of 19% to 25% or approximately $348,000,000 at the midpoint.

With a strong order book, as well as our expectation for both our total unit ship and our average selling price to increase in fiscal twenty twenty six, we are increasing our fiscal twenty twenty six revenue growth estimate to a range of 31 to 35% or approximately $379,000,000 at the midpoint. Needless to say, it is a very exciting time for umbrella. Fundamentally after multi year period or significant AGI R and D investment, our broad product portfolio enable us to address a rising breadth of AGI applications. This increased the breadth not only drives our overall unit demand, but we continue to see very strong demand for our new five nanometer AI SoCs in both our existing and emerging AGI markets, which is driving our firm wide average ASP in price higher. I would like to double click on the rising breadth of AGAI applications I mentioned and focus on three applications we see as rapidly emerging for us, portable video, robotic aerial drones, and the edge infrastructure.

Our edge AI revenue began in the enterprise security market more than five years ago and was followed by an incremental edge AI application in a smart home, automotive safety, and the telematics markets, all of which are continuing their unique growth trajectories. Now this year, the year on top is the rising demand for our h AI associates from the portable video market, including action camera, panorama cameras, and the body worn cameras. In addition to portable video market, we expect to commence high volume shipment into the robotics market by the by the end of this fiscal year. You the unit volume in the robotic market is highly fragmented by application, form factors, and the customers. While our technology products and road map have enabled us to want to win one of the early high volume robotic application, partially autonomous aerial drones.

Portable video and robotic boats represent new emerging edge AI applications in the umbrella’s traditional market for IoT endpoints. Today, we are also announcing our first win in the edge AI infrastructure with our NYC55 SoC. This win is yet another example of the expanding breadth of our h AI business. And I’m encouraged by the interest in our n one h AI infrastructure road map from both new and existing customers. In the automotive autonomy market, the largest subset of robotic market, we are actively bidding on OEM projects with our CP three eighty family of advanced five nanometer central domain controller for l two plus to l four applications.

While offering significant lifetime revenue opportunities, the lower frequency of our decision, OEM program delays, and a longer time to revenue are causing our other edge AI applications to emerge more rapidly. Nevertheless, we remain highly focused on developing this business, and we will provide updates on our progress as wings occur. I will now describe some representative customer engagement during the quarter beginning with the two key customer design wins that validate our future vision and the strategy. In a rapidly growing robotic drone market, Arashi Vision also known as Insta360 launched the world’s first eight k 360 degree drone on this new anti gravity brand. Powered by our CV5 AI SoC, this drone features dual lens on both the top and the bottom, enabling enabling eight k 360 degree video recording.

The AI capacity in CV5 is fully utilized in this partially autonomous drone, and our product portfolio will enable the drone market to evolve rapidly to high levels of autonomy. The anti gravity a one is set to launch globally in January 2026. We are proud to see Ararj is very successfully differentiated their diverse portable video and now robotic aerial drone portfolio with AI features such as neural Neulet image signal processing, AI editing, and gesture gesture control leveraging our AI SoCs. A majority of Arash’s products are based on umbrella SoCs and approximately 70% of our actual shipments are exported. In the emerging a HAI infrastructure market, a global networking customer is rolling out a compact on premises network AI clients with multimodal intellect intelligence at the the event level built on our n one six five five AI SoC.

This appliance will add large language model powered natural language search, and we will select it because our power efficiency, network bandwidth saving, and low build of material cost. This is a great example of one of the green shoots I mentioned earlier. There are several other use cases being evaluated on our n one six five five SoC. Now automotive safety, ADAS, and the telematics business, I would like to share some key customer wins during the quarter. Sensera, a leading provider of a commercial fleet telematics solutions, has introduced its AI MultiCam platform.

Based on Ambarella’s CV 72 AI SoC, Sensera’s AI MultiCam delivers live 360 degree visibility and real time risk detection alerts on an in cap monitor with up to four times auxiliary HD camera updates. It is great design win for CV 72 that demonstrates more camera inputs and of this AI features on a single SoC. Audi is utilizing CV 22 FS for their left, right, immune functions in the EFI model initially in the China market. It enables them to provide intelligent context adaptive viewing mode on highways, parking, turning, and lane changes with dynamic image processing and display enhancement functions. Also in the newer market, BAIC STELETO H9 is utilizing CV22FS for their rear view electronic mirror.

They note that AI aided detection via camera input help them cut down blind spots by up to 60%. And a leading Chinese OEM will utilize our CV 22 SoC for their eight megapixel sensor designed specifically for the level two from ADAS functionality. A key capability they are enabling is small target detection at the long range. In the enterprise security segment, Honeywell’s in India has launched its their 50 series enterprise security cameras in three megapixel and five megapixel resolutions based on our CV 25 SoCs. India is a fast growing market with a drive for made in India products, creating new customer opportunity for us.

In the small home market, one of our long term customers in US has leveraged our h 32 SoCs to build multisensory, multimodal AI products available in the retail outlets today. They have built a nurseries device integrating video monitoring two way intercom, high noise generator, and the air quality sensor. They have also built a garage device that features carbon monocyte and heat detection, security camera, the intercom functionality. Also in the smart home market, NetML launched their indoor camera of advanced products that is built on eight six cell SoC in the European market. As you can see from this representative customer engagements, we continue to build design wins momentum in our existing AGI endpoints of occasion.

And we continue to successfully address incremental AGI applications such as robotic aerial drones and H infrastructure as the HAA market breadth expands. Having having shipped more than 36,000,000 HAA processors to hundreds of customers who have successfully ported hundreds of advanced customer AI models to our SoCs. There should be no doubt that Ambarella is a leader in h AI. HAI is expected to represent about 80% of our total revenue this year. We are focused exclusively on the unique needs of the HAI market, and we continue a rapid pace of innovation.

In conclusion, I would like to summarize the key points to cover today. First, we delivered q two results above the high end of our prior guidance, and we increased the midpoint of full year fiscal twenty twenty six revenue guidance by 9%. Second, the breadth of our edge AI applications we are successfully addressing is expanding. As seen with our ongoing ramp in a variety of portable video applications into the anticipated product production ramp for robotic aerial drones and edge infrastructure. Third, the growth of our HAI business is over occurring with our with our higher price HAI SOCs supporting the anticipated growth in our ASP.

Last, we are exclusively focused on the unique re requirements of the AGI market, and we remain an established AGI market leader who continue to innovate at a rapid pace. Now John will now discuss the Q2 results and the Q3 outlook in more detail.

John Young, CFO, Ambarella: Thank you, Fermi. I’ll now review the financial highlights for the second quarter fiscal year twenty twenty six ending 07/31/2025. I will also provide a financial outlook for our 2026 ending 10/31/2025. I’ll be discussing non GAAP results and ask that you refer to today’s press release for a detailed reconciliation of GAAP to non GAAP results. For non GAAP reporting, we have eliminated stock based compensation and acquisition related expenses adjusted for the impact of taxes.

For fiscal Q2, revenue was $95,500,000 above the high end of our prior guidance range of 86,000,000 to $94,000,000 up 11.2% from the prior quarter and up 49.9 year over year. Sequentially, automotive revenue increased in the mid single digits and IoT increased in the low teens with IoT growth led by the adoption of edge AI in portable video application. IoT in fiscal q two represented slightly more than 75% of our revenue and is spread across an increasing number of edge AI applications. Non GAAP gross margin for fiscal Q2 was 60.5% at the low end of our prior guidance range of 60.5% to 63% due to product mix. Non GAAP operating expense in Q2 was $53,400,000 below the midpoint of our prior guidance range of 52,500,000.0 to $55,500,000 primarily due to lower engineering related costs associated with the timing of product development.

Q2 net interest and other income was 2,200,000 comparing to our prior guidance of $1,800,000 The increase was primarily from higher interest income. Q2 non GAAP tax provision was approximately $200,000 We reported a non GAAP net profit of $6,400,000 or $0.15 per diluted share in Q2. Now I’ll turn to our balance sheet and cash flow. Fiscal Q2 cash and marketable securities reached $261,200,000 increasing $1,800,000 from the prior quarter and $41,400,000 from the same quarter a year ago. Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue, partially offset by increased expenditure on capital investments during the quarter.

Receivables days sales outstanding increased from thirty one days in the prior quarter to forty days, while days of inventory decreased from ninety eight days to eighty five days. Operating cash inflow was $5,500,000 for the quarter. Capital expenditures for tangible and intangible assets were $4,100,000 for the quarter. Free cash flow was $1,400,000 We had one logistics company representing 10% or more of our revenue, WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 71% of revenue for the second quarter. I’ll now discuss the outlook for the 2026.

The breadth of our Edge AI business is expanding with a strong unit and average selling price outlook. As a result, in Q3, we forecast revenue in the range of 100,000,000 to $108,000,000 or $104,000,000 at the midpoint. Sequentially, we expect mid to high single digit percent growth in our automotive business with our IoT business up in the mid teens. For fiscal twenty twenty six, we anticipate a revenue growth range of 31% to 35%. We expect fiscal Q3 non GAAP gross margin to be in the range of 60% to 61.5%.

We expect non GAAP OpEx in the third quarter to be in the range of 54,000,000 to $57,000,000 with the increase compared to Q2 driven by new product development costs. We estimate net interest and other income to be approximately $2,000,000 our non GAAP tax expense to be approximately $800,000 and our diluted share count to be approximately 43,700,000.0 shares. Thank you for joining our call today. And with that, I will turn the call over to the operator for questions.

Towanda, Conference Call Operator: Thank you. Our first question comes from the line of Christopher Rolland with Susquehanna. Your line is open.

Christopher Rolland, Analyst, Susquehanna: Hey, thanks so much for the question and congrats on a great quarter. So for my first question, I think for years, you guys pitched yourself kind of as the the the future of the company being automotive automotive first. But IoT at this point has just been an incredible outperformer. I think it outperformed auto by four x this year. So I guess my question is, are you thinking about IoT differently now?

Could there be a pivot in your business where you just double down spending around IT IoT versus auto, lean in to the development of IoT versus auto? And and and and when might we get to a point where auto outperforms IoT? Or is this not the case just given, you know, the great interest in in IoT? Thank you.

Dr. Fermi Wang, President and CEO, Ambarella: Right. Thank you for the question. I think it’s the first part to answer is, like I said in our script, that we are continue to focus on, our level two plus level four time driving, and we are working hard to continue to win design wins there. But also I pointed out that because, other AGI would AGAI business because of design shorter design cycle and the more available opportunity for us, we are making significant progress there. And we’re going to continue to focus on the AGAI market, including both autonomous driving as well as IoT.

But I want to point out that the fundamental hardware architecture between the HEA for the IoT side and the autonomous driving side are identical. Our CDP architecture, our image processing pipeline, our c our CPU investment, even the on the OS side, they are huge leverage between each two. So in front of OpEx expense side, the the leverage is very strong. Obviously, the go to market strategy from the marketing side, some of the sales side are different, but we are going to continue to focus on those area because I still believe, you know, long term, a time driving continue can keep drive our strength. But as you can see our our, announcement, we made a significant progress on the AGI in the IoT side, where that means we’re going to put also, more resources on this, than before to continue to make a progress and and try to collect more market share in this particular market.

Thank

Christopher Rolland, Analyst, Susquehanna: you for that, Fermi. And, yeah, just maybe back to the growth rates, just a couple of things. First of all, would you expect auto to outgrow IoT next year? Or is this really gonna be you’ve talked about I auto, and your c b three wins, I think, ramping in 2027. Would we have to wait for auto to outperform, at that point in time?

Thank you.

Dr. Fermi Wang, President and CEO, Ambarella: Right. So I think the auto will outperform IoT, but we have a major design wins with OEMs, like the one that we talk about in that kit, the VW case to the o. How do we wanna design? Yes. I think in a 2027, 2028 2028 time frame, we can see that that, auto growth will be will outperform IoT.

Right now, I think, in the foreseeable future that before we get any major design win from the automotive side, IoT will continue to have a very strong compute contribution, to our our income. In fact, that, you know, our current growth, you can see that the growth rate that we got from the just IoT side is significantly improved over the last few years.

Christopher Rolland, Analyst, Susquehanna: Our

Towanda, Conference Call Operator: next question comes from the line of Kevin Cassidy with Rosenblatt Securities.

Kevin Cassidy, Analyst, Rosenblatt Securities: Yes. Thanks for taking my question, and congratulations on the great results and outlook. You know, they you piqued my interest with the air the robotic aerial drones. You you mentioned, INSTA three sixty. Is there is this another trend of, will there be multiple companies coming out with these solutions, and are there, commercial applications, like, for deliveries?

Dr. Fermi Wang, President and CEO, Ambarella: Yeah. So first of all, I think for Insta360, their target market is commercial and the consumer, and the the volume is significant, compared to, what we have seen, in the market outside DGI. And then also that, are seeing definitely, there’s a market trend. A lot of different, companies in different countries are focusing on this drone, particular drone application. Now that autonomous driving on a car side become more popular technology, widely available, you can imagine that the autonomous drones will become popular.

With that, that will enable many different possible applications, in the near future. I think that potential trend is driving this this is really consistent with the robotic trend that we are seeing in other applications when the autonomy become popular and become possible, then the the possible applications with those robots or drones become, you know in the in the past was impossible, not definitely thinkable. So I think that we continue to engage multiple drone design wins activities, and we think that you’re going to continue to see us to report our success in this market.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Kevin, it’s Lewis. Just to kind of add on to that and maybe tie it into Chris’s question, This is just a great example of you’ve got multiple high bandwidth sensors in a real time application collecting data and driving higher and higher levels of autonomy just like in a vehicle, moving from l one to l four. You see the same sort of trend beginning in the aerial drone market and of course other robotic spaces. And it’s all happening with the same underlying AI inference accelerator. That’s that’s in common across all these markets, whether it’s auto autonomy, auto safety and telematics, or any of these IoT markets.

So we leverage the technology across a lot of different applications.

Kevin Cassidy, Analyst, Rosenblatt Securities: Right. Thanks. And, yeah, I guess your energy efficiency also is very useful. If you’re gonna be flying something, it has to have a battery and Absolutely. Efficiency is really important.

And, know, just you have so many exciting things happening with your new designs. I didn’t hear much, about your process technology or moving on to the next, generation. Is that still on track of moving to two nanometer?

Dr. Fermi Wang, President and CEO, Ambarella: Absolutely. In fact, we are our foundry partner continue to announce design wins, not only give us a lot more confidence, but also our potential customers. I think that, we will continue to work on two nanometer projects and still remain target to take our customer to production in early twenty twenty seven.

Kevin Cassidy, Analyst, Rosenblatt Securities: Great. Thank you. Congratulations again.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Thank you.

Towanda, Conference Call Operator: Our next question comes from the line of Quinn Bolton with Needham and Company. Your line is open.

Shadi, Analyst Representative, Needham and Company: Hey, guys. This is Shadi on for Quinn Bolton. Congrats on the strong results. My first question is on the guidance. Your q three guide implies a seasonally down q four.

And given all the progress you guys have been making and the Edge AI tailwind, this feels somewhat conservative. So just wanna get your thoughts and maybe the puts and takes as we think about q four.

Dr. Fermi Wang, President and CEO, Ambarella: Right. So first of all, I think that the seasonality that we are guiding for the for this q three and q four is increasing a range of compared to our previous year. So I don’t think that should be a surprise. But if you look at that, you know, a lot of the products, you sell the product become, driven by consumer cycles that will definitely explain to you that why we are seeing the seasonality based on our our guidance.

Shadi, Analyst Representative, Needham and Company: Got it. That makes sense. And then my follow-up is on the nonsecurity camera portion of the IoT business. How does Ambarella view this segment growing over the next few years? And at what point might the nonsecurity segment surpass the security camera segment of the IoT business?

Dr. Fermi Wang, President and CEO, Ambarella: Yeah. First of all, thank you for that question. I think that’s important. We’re internally, we’re looking at that also because, you know, all of the new application we announced today, none of that is really on the traditional security camera business. In fact, that from the drone robots to the, you know, portable video to the edge infrastructure, they are those are the really the new market we have been talking about that we haven’t shown much of result until this quarter.

And I think that I I I think enterprise or the the enterprise security and home security continue to be the combination continue to be a a large portion of compared to others, but I think that we do see that the growth rates on the non inter on non security portion of business will continue outpace on the other side.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Yeah. Just to be clear, Shadi, our security business, we expect to continue to deliver, you know, very good growth. But now you have these portable video and some of the robotics markets and other things kicking in that’s, as you observed are are causing, our other IoT business outside of security to contribute very nice growth for us.

Shadi, Analyst Representative, Needham and Company: Got it. Thanks for the color and congrats on the progress.

Dr. Fermi Wang, President and CEO, Ambarella: Thank you.

Towanda, Conference Call Operator: Please stand by for our next question. Our next question comes from the line of Liam Farr with Bank of America. Your line is open.

Liam, Analyst Representative, Bank of America: Hi, this is Liam on behalf of Vivek. Thank you very much for taking our question. There’s been a lot of media reports recently about M and A and industry consolidation. And I was wondering if you’re able to address kind of what role you expect industry consolidation to play and what your strategy looks like if you remain independent.

Dr. Fermi Wang, President and CEO, Ambarella: Right. So, obviously, we cannot address that that that the rumors. I think we just have no comment on that. But, however, I want to point out that, with today’s earning call, you can see that the AGAI, the importance on the strategy side of AGAI becomes so obvious in the market space. And with that, we we are the the probably one or few, maybe only one shipping 36,000,000 units of HAI SoC so far put us as a leader of in that market.

So with the combination, I I really think that the rumor base is that our strength and our focus on AGAI, and I think that will continue to pay pay very well for us.

Liam, Analyst Representative, Bank of America: Thank you. And then just as a follow-up, in terms of kind of going back to the IoT and auto side, clearly a strong quarter. What does the sustainability look like of these growth drivers through 2026? And where should we kind of expect more of upside trajectory more in the IoT or more in auto side? Thank you.

Dr. Fermi Wang, President and CEO, Ambarella: Right. So on the auto side, I think we definitely continue to work hard to get a secured first design win on the level two plus level three. That is really what push our our our growth trajectory beyond the what we have with automotive. And with IoT, we are really growing significantly this year over last year. And thank because look.

Thanks to the contribution of a few products ramping up by our customers. So we we believe that growth will maintain and we’re going to provide, the guidance for next year. And, we will definitely believe that, automotive and both IoT and automotive will continue their growth trend.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Yeah. Just to put a little more color on it. Hi. It’s Lewis. It’s not like there’s just a couple markets that are, you know, contributing to the growth.

You know, five, six years ago, it started for us in enterprise security, and it was public and smart home, then AI video telematics and commercial fleets, you know, certain in cabin, you know, e mirrors or driver monitoring. But now more recently, in IoT, you’ve had portable video, which is not just one thing. But it’s, you know, body worn cameras. It’s panorama cameras. It’s action cameras.

And now, we’re moving into robotics initially with aerial drones expected to become significant. So it’s not really like, are those are you in a couple markets and are they gonna, you know, static and how are they gonna do? It’s more about edge AI touching more and more different vertical applications. And that’s what’s been happening to the business.

John Young, CFO, Ambarella: Thank you.

Towanda, Conference Call Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Kyle Smith with Stifel. Your line is open.

Kyle Smith, Analyst, Stifel: Hey, guys. This is Kyle Smith on for Tore Sponberg at Stifel. Congratulations on the strong quarter. So I think it’s pretty clear that the strong revenue beat in guide is stemming from tangible design wins and product momentum. But that being said, could you provide more commentary on the process that management uses to check for any potential demand pull ins related to the tariff environment?

Are you speaking directly with customers or distributors, monitor monitoring yourself for any irregularities, or is it kind of a mix of multiple factors?

Dr. Fermi Wang, President and CEO, Ambarella: Yeah. So I think that’s a very important topic in in internally because, you know, we all going through this industrial wide inventory correction for the last three years. And every time we’re seeing a sound high, you know, growth of area, the first reaction is we best talk to customers. So in the past few years, we build a relationship with all the customer, and also our distributor to make sure that we review, inventory every month. And then based on that, we try to decide whether that we’ve seen any inventory build.

So far, I think throughout the process with this internal check, we haven’t seen any inventory build that beyond the normal practice. And also, we have you know, personally, every time I have a meeting with, you know, my my peers in our customer base, one of the topics always about supply chain and about the supply end. I got no feeling that nobody telling us that they are building excessive inventory worrying about geopolitical situation. So with that, that’s just from the feedback from customer. But more internally inside, we build some kind of a check checkpoint to understand, you know, look at the the customers the the older patterns and their then whether that’s associated with any product ramping up.

So if there’s any indication of extra inventory build, internally, we have some well, have some read along. So so far that, you know, based on the all of this internal and external discussion, I think that we feel, quite confident that we haven’t seen any meaningful, inventory buildup in our customers.

Kyle Smith, Analyst, Stifel: Perfect. Thank you. And you mentioned a lot of really exciting design wins in the prepared remarks. I’m curious what the customer response has been to the Cooper development platform, particularly within these new and emerging markets? Are there any specific components of the platform showing outsized positive feedback?

Dr. Fermi Wang, President and CEO, Ambarella: I I think, first of all, the coop the feedback on our Coupa development platform is very positive. Not only the the it help our customer to eat to move from one of the chip to another chip easily because Cooper platform cover all of of all the chips that we develop. And so that for our customer, it’s really become powerful tool for them develop what the the product wants and they can put, you know, use the the same product to many different chips of under umbrella. So that’s one most important thing. But because with the investment now, we can easily enable our customer to play with our to play out play with our SDK and also play with all the neural network we put into our our model garden and also enabling them, to learn how to use our, compiler to compile the, neural network to our hardware.

All of those feature, all integrate into this Cooper platform. So, of of course, I am not saying that’s perfect, but definitely with the benefit to customer, they all continue to give us great feedback about how we can continue to improve it so that they can enjoy the the the platform more.

Kyle Smith, Analyst, Stifel: Perfect. And if I could just sneak one more in. You know, contemplating this really outsized revenue growth, do you continue to expect, non GAAP OpEx to grow at around 10% annually, or should we maybe bake in a little bit higher OpEx going forward?

John Young, CFO, Ambarella: Yes. Thanks, Kyle, for the question. I think it’s reasonable if you take this a little bit higher than 10% is is probably reasonable. I think quarter over quarter I think year to date, we’re at about 12 or year to date, we’re at about 12% growth. I think we’ll probably stay in that range for the full year.

Towanda, Conference Call Operator: Our next question comes from the line of David O’Connor with BNP Paribas. Maybe

David O’Connor, Analyst, BNP Paribas: for me, just going back on the automotive side of things again and ADAS. You know, through this year, you know, the l two plus adoption rates, you know, have slowed, the software not ready, OEMs optimizing for price. I mean, you you guys have talked about this through the year. As we sit here in August and from your recent conversations with customers, can you talk about any changes there on how they’re viewing that kind of adoption on their next model? Any sign that they may be pulling it in?

Or just any kind of changes that you’re seeing there across the kind of, that would help kind of frame the backdrop for potential Right. C d three wins. I

Dr. Fermi Wang, President and CEO, Ambarella: think the scenario you described continues. And, we continue to see OEM coming up bidding on a, I would say, more low end level two plus than, you know, higher end than that because people like you said, OEM really focus on getting a proper cost than function features. In fact, even in China, recently, we start seeing a similar trend because Chinese government definitely trying to make sure that the time driving becomes safe and become the safety become the most important feature. So I I I really think that the total trend of auto autonomous driving is focusing on safety and also low end of the function function performance. For example, the the part that we announced a design win on a eight eight megapixel eight test in China.

Let’s just give you indication that while we continue to build on all kinds of different features and that we see more opportunity on the low end, level two plus and also eight dash opportunities.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Yeah, David. I mean, we still see very significant lifetime revenue opportunities in the auto autonomy market for sure. But there’s just you know, as Fermi mentioned earlier, there’s a lower frequency of decisions. You know, the market can be subject to delays like you referenced. And there’s a longer time to revenue.

So what’s been happening is all of these other edge AI markets have more than caught up and, you know, are are growing very rapidly for us now. But we still have these products and very much focused on landing these wins. It’s just the frequency of them isn’t as high.

John Young, CFO, Ambarella: That’s very helpful. Thanks.

David O’Connor, Analyst, BNP Paribas: Thanks, guys. Maybe one for John. Just on the incremental kind of growth year over year. With the new guide, you’re kind of up maybe 95,000,100 million dollars somewhere like that for the year. Is there any way you can kind of split that out, in terms of units versus ASP or contents?

Just kind of how you would break that down as kind of a percentage? Just half of it unit growth, half ASP? Any any kind of steer that would help us there at size, the kind of difference between those two drivers? Thanks, guys.

John Young, CFO, Ambarella: Yeah. Thanks, David. I think, you know, what we’ve been seeing through the throughout this year as it’s pulled together, you know, our estimate is that that growth is roughly fifty fifty between ASP and unit growth.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Very helpful. Thanks so much, guys. Thank you.

Towanda, Conference Call Operator: Please stand by for our next question. Our next question comes from the line of Gus Richard with Northland Capital Markets. Your line is open.

Louis Gerhardy, Vice President of Corporate Development, Ambarella0: Yes, thanks for taking my questions and my congratulations for the strong results. Just in the IoT market, could you give us a split between the security applications and the nonsecurity applications? And which of the nonsecurity applications are growing the most rapidly?

Dr. Fermi Wang, President and CEO, Ambarella: So in a nonsecurity application, I think that portable video definitely grow the fastest. And, in fact, that Insta360 using a CV file to build their next generation sports camera as well as the panorama 360 degree camera and the ASP is high and the unit number continue to grow. So that definitely is a faster growing market. I won’t be surprised we we see a lot of growth of in the future, see some growth on the drones drone side too because the ASP and unit number growth can be significant too. But, Gus, the auto business in q two, I

Louis Gerhardy, Vice President of Corporate Development, Ambarella: think John mentioned, grew in the mid single digits and IoT grew, you know, in the mid teens. And that would put, you know, auto in the low 20% range as a percent of revenue and IoT the balance.

Louis Gerhardy, Vice President of Corporate Development, Ambarella0: Yeah. Got it. And then, just in terms of the IoT business, you know, you’ve got a a wide diversity of applications, applications, and I would imagine that your customers need support from field application engineers. And I’m just wondering, is that a limitation? Is that something that, you need to bolster to to help accelerate growth?

You know, how are you thinking about customer support in that regard?

Dr. Fermi Wang, President and CEO, Ambarella: Right. So first of all, that unified hardware and software platform we just mentioned is really helpful because that means our field engineering can easily switch you from one customer to another customer. Although maybe a different location, different products, but the fundamental hardware and software are almost a sense. So from that point of view, we definitely can leverage our field engineers in different application. But you are right that our revenue growth and when we looking at a different customer base, we continue to add to our field engineering, which is part of our growth plan that John highlighted just a few minutes ago.

Louis Gerhardy, Vice President of Corporate Development, Ambarella0: Got it. Thanks so much.

Shadi, Analyst Representative, Needham and Company: Thank you.

Towanda, Conference Call Operator: Please standby for our next question. Our next question comes from the line of Martin Yang with Hopco. Your line is open.

Louis Gerhardy, Vice President of Corporate Development, Ambarella1: Hi, thank you for taking my question. So on the strength you called out on portable video products, can you

Louis Gerhardy, Vice President of Corporate Development, Ambarella: tell us if the strength

Louis Gerhardy, Vice President of Corporate Development, Ambarella1: is driven by a single key customer, or have you expanded your customer base with new design wins with new OEMs in the past quarter?

Dr. Fermi Wang, President and CEO, Ambarella: Well, we in fact, we continue to have a multiple customer base, in this space. But, however, Insta360 definitely is the largest one that we mentioned because they, you know, they switch from h 22 base video process only solution last year to to this year CV five based solution. That ASP growth definitely is one of the main reason we’ll continue to see the growth on the from from them. But I we continue to engage multiple, you know, portable video players, throughout our careers.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Hey, Martin. I think you’re familiar with the company, but, you know, we’re selling into, like, seven different portable video product lines there. That would include, you know, action, camera, sports, panorama, but, you know, also body worn, webcam, video conferencing, and now, you know, aerial drones. So it’s a lot of different, product categories. It’s not not just a few.

Right.

Louis Gerhardy, Vice President of Corporate Development, Ambarella1: Got it. Thank you. A follow-up question on Insta360. So in your guidance, do you assume business as usual with them without any potential impact from their ongoing lawsuit in The US?

Dr. Fermi Wang, President and CEO, Ambarella: Well, first of all, yeah, we look at it and, you know, it’s it’s not out in our position to make a judgment on the outcome of lawsuit. I will leave that to the two parties. Our assumption is based on the the the POs we receive from our customers, and that’s the only thing we’re counting on to forecast our business.

John Young, CFO, Ambarella: Got it. Thank you for that.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: That’s it. Thank you.

Towanda, Conference Call Operator: Thank you. Our next question comes from the line of Richard Shannon with Craig Hallum. Your line is open.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Great. Thanks, guys. Let me ask a question. First one is on the broader edge AI opportunity. You talked about your first design win hoping to ship near the end of this fiscal year.

Maybe you could describe what the pipeline looks like, maybe describe it, even quantify it, number of designs, opportunities, and kind of the any maybe new applications you’re seeing here versus what you described in the past. Edge infrastructure. I think Richard, was your question about just edge IoT overall or just the infrastructure? Edge in I’m sorry. I I misspoke.

Edge edge infrastructure. Sorry about that.

Dr. Fermi Wang, President and CEO, Ambarella: Right. Exactly. So first of all, you you know that we have been working on the n one n one six five five product and for a while talking to many customer. And this particular design win is our first design win that we can talk about. You can imagine that we’re definitely engaging with multiple customer, new and and old or existing customer with potential design wins.

And if you expect, we’ll continue to talk about our our progress in this particular market. And the particular I think the there are so many different type of potential appliance that people can build. But in general, you can imagine that this kind of appliance is really trying to aggregate multiple age endpoints and apply most of this AI models on that and to provide different services. That’s just in general terms to describe opportunity out there. And definitely, kind of appliance need to run not traditional computer vision, but more importantly, all the large language model or vision language model are the probably the focus area where our customer want.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Yeah. Richard, we talked about a a SAM for this market of, you know, in this year, this fiscal twenty six of being around $125,000,000 and in five years, you know, $500,000,000 And, you know, we feel those figures are conservative. We’re still learning about the market. As Fermi said, this is our first design win. But we’re pretty excited about the level of interest from customers, both new customers and existing customers for Ambarella.

Dr. Fermi Wang, President and CEO, Ambarella: And the success of this market will continue to drive up our average selling price.

Louis Gerhardy, Vice President of Corporate Development, Ambarella: Okay. Great. Thanks for that, guys. Second question here is on the portable video opportunity here and following on on on the questions and responses from past couple of questions here. To what degree are these opportunities or applications more consumer oriented versus enterprise in nature?

Well, it depends on the market. But I say overall across all seven that I just described for for, like, Insta360, more weighted to consumer. And, but they’re still being sold into enterprise applications. For example, body worn cameras is a market that, at least today, is very heavy enterprise and public safety driven. And that’s one of the categories.

But if you switch over to some of the other portable video markets, it might be more on the consumer side. And overall, I’d say, they are weighted more heavily to the consumer side, which is one of the factors that allows them to get to revenue faster. Okay, great. Thank you, guys.

John Young, CFO, Ambarella: Thank you.

Towanda, Conference Call Operator: Thank you. Ladies and gentlemen, I’m showing no further questions in the queue. I would now like to turn the call back over to Doctor. Fermi Wang, CEO, for closing remarks.

Dr. Fermi Wang, President and CEO, Ambarella: And thank you for joining us today. We are going to see you next time for sure. Thank you.

Towanda, Conference Call Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now

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