| | | Ambarella raises fiscal 2026 revenue growth target to 31%-35% as edge AI demand accelerates
Aug. 29, 2025 12:13 AM ET
AI-Generated Earnings Calls Insights
Earnings Call Insights: Ambarella (AMBA) Q2 2026
Management View- CEO Feng-Ming Wang opened by highlighting, "Our strong momentum continued in our second quarter with revenue of $95.5 million, increasing 11% sequentially above the high end of our prior guidance range of $86 million to $94 million." He also announced, "With a strong order book as well as our expectation for both our total unit shipped and our average selling price to increase in fiscal 2026, we are increasing our fiscal 2026 revenue growth estimate to a range of 31% to 35% or approximately $379 million at the midpoint."
- Wang reported, "We continue to see very strong demand for our new 5-nanometer AI SoCs in both our existing and emerging edge AI markets, which is driving our firm-wide average ASP price higher." He detailed three rapidly emerging applications: portable video, robotic aerial drones, and edge infrastructure, noting, "We expect to commence high-volume shipments into the robotics market by the end of this fiscal year."
- Wang shared major customer wins, such as Arashi Vision launching the Antigravity A1 drone powered by Ambarella’s CV5 AI SoC and the company’s first win in edge AI infrastructure with the N1-655 SoC. Additional wins included Samsara’s AI Multicam platform, Audi and BAIC Stelato S9 for e-mirror functions, and Honeywell’s 50 Series security cameras in India.
- Wang concluded, "Edge AI is expected to represent about 80% of our total revenue this year."
- CFO John Young stated, "For fiscal Q2, revenue was $95.5 million, above the high end of our prior guidance range of $86 million to $94 million, up 11.2% from the prior quarter and up 49.9% year-over-year." He added, "Non-GAAP gross margin for fiscal Q2 was 60.5%, at the low end of our prior guidance range of 60.5% to 62% due to product mix."
Outlook- Wang announced, "The midpoint of our new third quarter and the full fiscal year 2026 revenue guidance range represents all-time record quarterly and fiscal year total revenue for Ambarella."
- Young provided, "In Q3, we forecast revenue in the range of $100 million to $108 million or $104 million 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 2026, we anticipate a revenue growth range of 31% to 35%."
- Guidance for fiscal Q3 non-GAAP gross margin is expected to be in the range of 60% to 61.5% and non-GAAP OpEx in the third quarter is anticipated to be in the range of $54 million to $57 million.
Financial Results- The company reported, "Q2 net interest and other income was $2.2 million. Q2 non-GAAP tax provision was approximately $200,000. We reported a non-GAAP net profit of $6.4 million or $0.15 per diluted share in Q2."
- Cash and marketable securities were $261.2 million at quarter end. Receivables days sales outstanding increased from 31 days in the prior quarter to 40 days, and days of inventory decreased from 98 days to 85 days. Operating cash inflow was $5.5 million, capital expenditures were $4.1 million, and free cash flow was $1.4 million.
- WT Microelectronics represented 71% of revenue for the second quarter.
Q&A- Christopher Adam Jackson Rolland, Susquehanna: Questioned whether IoT could become a larger focus than automotive. Wang responded that the company will "continue to focus on those two areas," leveraging hardware architecture across both but acknowledged IoT is currently contributing more to income.
- Kevin Edward Cassidy, Rosenblatt Securities: Asked about the drone market and process technology. Wang replied, "We will continue to work on the 2-nanometer project and still remain targeted to take our customers to production in early 2027."
- Shadi Mitwalli, Needham & Company: Asked about Q3 guidance implying a seasonally down Q4. Wang explained, "Some of the products become driven by consumer cycles, that will definitely explain to you, that's why we are seeing the seasonality based on our guidance."
- Liam Yevgeny Pharr, BofA Securities: Asked about M&A rumors and growth sustainability. Wang stated, "We just have no comment on that," and described continued growth for both IoT and automotive.
- Kyle Robert Smith, Stifel: Inquired about inventory and customer demand. Wang said, "We haven't seen any inventory build beyond the normal practice."
- David O'Connor, BNP Paribas: Asked about automotive ADAS adoption and growth drivers. Wang noted OEMs are focusing on "low end Level 2+ than higher end," while Young estimated growth is "roughly 50-50 between ASP and unit growth."
- Auguste Philip Richard, Northland Capital Markets: Requested IoT split between security and nonsecurity. Wang said portable video is "definitely grow the fastest."
- Zhihua Yang, Oppenheimer & Co.: Asked if portable video growth is driven by one customer. Wang credited multiple customers but identified Insta360 as the largest.
- Richard Cutts Shannon, Craig-Hallum: Asked about the edge infrastructure pipeline. Wang confirmed engagement with "multiple customers, new and old or existing customer with potential design wins."
Sentiment Analysis- Analysts' tone was generally positive, focusing on growth, market opportunities, and design wins, but included probing questions on seasonality, sustainability, and M&A rumors.
- Management maintained a confident and assertive tone in prepared remarks, emphasizing momentum and strategic execution. During Q&A, Wang and Young provided detailed, occasionally cautious answers, particularly around future automotive growth and inventory checks. Confidence was shown with phrases like, "we are increasing our fiscal 2026 revenue growth estimate."
- Compared to the previous quarter, the sentiment among management was more optimistic and assertive, while analysts remained positive but increasingly focused on the sustainability and sources of growth.
Quarter-over-Quarter Comparison- The Q2 earnings revealed a higher revenue growth trajectory, with the fiscal 2026 revenue estimate raised from 19%-25% in Q1 to 31%-35% in Q2.
- The emphasis on portable video, robotics, and edge infrastructure as new growth engines intensified, with more details provided on customer wins and applications.
- IoT's outperformance relative to automotive was more pronounced, and management reiterated plans to increase resource allocation to IoT while maintaining a focus on automotive long-term.
- Gross margin guidance was tightened downward slightly due to product mix compared to Q1.
- Management’s tone shifted from cautiously optimistic in Q1 to overtly confident in Q2, while analysts probed further into long-term sustainability and the potential for market shifts.
Risks and Concerns- Management highlighted seasonality in Q4 due to consumer cycles.
- No evidence of inventory build-ups was reported, with frequent checks in place.
- The automotive sector faces slower OEM program decisions and longer time to revenue, with more rapid growth occurring in other edge AI applications.
- Analyst concerns centered on the sustainability of growth, the impact of customer concentration, and the evolving market split between IoT and automotive.
- M&A rumors were addressed with no comment from management.
Final Takeaway
Ambarella's Q2 2026 call signaled a significant acceleration in revenue growth expectations, driven by strong demand and expanding applications for edge AI across IoT, robotics, and infrastructure markets. The company raised its fiscal 2026 revenue growth estimate to a range of 31% to 35%, highlighted record edge AI revenue, and confirmed its leadership position in this technology segment. Management underscored ongoing innovation, a robust customer pipeline, and increased resource allocation for high-growth IoT opportunities, while maintaining a long-term commitment to the automotive market and rigorous inventory oversight.
Read the full Earnings Call Transcript |
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