Ambarella Inc. ((AMBA)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Ambarella Inc. recently held its earnings call, revealing a positive sentiment driven by strong revenue growth and record performance in edge AI. The company has successfully penetrated new markets and experienced increased demand, despite facing challenges in the automotive sector and margin pressures. The outlook remains optimistic due to expansion into new markets and rising average selling prices (ASPs).
Record Revenue and Growth
Ambarella reported a remarkable Q2 FY2026 revenue of $95.5 million, marking an 11% sequential increase and surpassing prior guidance. This impressive performance has led the company to revise its FY2026 revenue growth estimate to 31%-35%, approximately $379 million at the midpoint.
Edge AI Revenue Momentum
The company continues to see strong momentum in its edge AI revenue, achieving record performance for the fifth consecutive quarter. Edge AI is expected to represent about 80% of Ambarella’s total revenue this year, underscoring its critical role in the company’s growth strategy.
New Market Penetration
Ambarella announced its first success in the edge AI infrastructure market with the N1-655 SoC. The company anticipates high-volume shipments into the robotics market by the end of the fiscal year, signaling a promising expansion into new sectors.
Increased ASP and Unit Demand
The company expects both unit shipments and average selling prices to rise in FY2026, contributing significantly to overall revenue growth. This increase reflects strong market demand and strategic pricing adjustments.
Strong Customer Engagement
Ambarella has secured key design wins, including partnerships with Arashi Vision for 8K 360-degree drones and Samsara for commercial fleet telematics solutions. These collaborations highlight the company’s robust customer engagement and innovative product offerings.
Automotive Market Challenges
Despite overall positive performance, Ambarella faces challenges in the automotive autonomy market. Delays and lower frequency of decisions, along with OEM program delays, have affected the pace of revenue growth from this segment.
Gross Margin Pressure
The company’s non-GAAP gross margin for Q2 was at the low end of the guidance range, coming in at 60.5%. This was primarily due to product mix, indicating some pressure on profitability.
Seasonal Revenue Expectations
Looking ahead, Ambarella’s guidance for Q3 implies a seasonally down Q4, reflecting potential challenges in maintaining the current growth trajectory. This seasonal expectation suggests cautious optimism as the company navigates market dynamics.
Forward-Looking Guidance
Ambarella’s forward-looking guidance is optimistic, with a forecasted Q3 FY2026 revenue range of $100 million to $108 million. The company expects mid- to high single-digit growth in the automotive business and mid-teens growth in the IoT sector. The focus remains on expanding edge AI applications across various markets, anticipated to account for about 80% of total revenue for the year.
In summary, Ambarella’s earnings call conveyed a positive sentiment, driven by strong revenue growth and record edge AI performance. While challenges exist in the automotive sector and margin pressures, the company’s strategic market expansion and rising ASPs provide a robust outlook. Key takeaways include record revenue, strong edge AI momentum, and promising new market penetration.