Ambarella's AI Pivot Pays Off: Strong Q3 Earnings and Optimistic Outlook
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Why Ambarella Technologies Stock Popped 7% Today | The Motley Fool
Ambarella (AMBA 4.92%) stock soared nearly 19% Wednesday morning after reporting a strong earnings beat last night. The stock has since given back about half its gains, but as of 11:20 a.m. ET is still up 7.7%. Analysts had forecast Ambarella to earn $0.04 per share on $79 million in sales. In fact, the company reported Q3 earnings of $0.11 per share, and sales of $82.6 million. Adding to the good news, Ambarella raised guidance for Q4 sales. Once upon a time, Ambarella was known as a maker of semiconductor chips for "action cameras" (think GoPros and similar action cams). That market seems to be going nowhere, however, and Ambarella has since pivoted to portray itself as an artificial intelligence (AI) stock, specializing in "edge AI semiconductors" and adopting the "AI envisioned" tag line for its products. The rebranding seems to be working. Sales in fiscal Q3 2025 (Ambarella's financial calendar runs a year ahead of the rest of us) surged 63% year over year. Profit margins seem better in AI chips as well, with Ambarella's gross margin rising 130 basis points to 60.6% in the quarter. On the bottom line, however, Ambarella is still losing money -- AI or no AI. While pro forma profits were positive and better than expected when calculated according to generally accepted accounting principles (GAAP), Ambarella ended up losing $0.58 per share in the quarter. The good news is that there's a chance Ambarella will turn profitable in Q4. Management raised sales guidance to a range from $76 million to $80 million, and predicted its gross margin will rise sequentially to at least 61.5% -- perhaps as high as 63%. Subtract expected operating expenses of $49 million to $52 million, and Ambarella could come very close to breaking even in Q4. If everything goes right, it might even earn a profit. Analysts aren't expecting Ambarella to turn profitable for years, however. If the company does turn profitable next quarter, it will surprise a lot of investors -- in a good way.
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Ambarella Stock Soars In After-Hours Trading Tuesday: What's Going On? - Ambarella (NASDAQ:AMBA)
Ambarella reports third-quarter adjusted earnings of 11 cents per share, beating estimates of 4 cents per share. Ambarella Inc AMBA shares are soaring in Tuesday's after-hours session on the heels of the company's third-quarter financial results. Here's a look at the key highlights from the quarter. What Happened: Ambarella reported third-quarter revenue of $82.65 million, beating analyst estimates of $79.03 million, according to Benzinga Pro. The company reported third-quarter adjusted earnings of 11 cents per share, beating estimates of four cents per share. "Company-specific factors are more than offsetting broad market weakness, and we are reporting 30% sequential revenue growth in fiscal Q3, above the high-end of our guidance range, with strength led again by our customers' new products, especially those incorporating our higher priced AI inference processors," said Fermi Wang, president and CEO of Ambarella. "Edge AI revenue represented about 70% of our total revenue, establishing a new record level, and this momentum is expected to enable growth in both our IoT and Auto markets in F2025 and F2026." Ambarella ended the quarter with $226.5 million in cash, cash equivalents and marketable debt securities, up from $222.3 million at the end of the prior year's quarter. See Also: Dell Technologies Shares Drop After Q3 Revenue Misses Estimates: Details What's Next: Ambarella expects fourth-quarter revenue to be between $76 million and $80 million. Fourth-quarter gross margin is expected to be between 61.5% and 63%, and operating expenses are expected to range between $49 million to $52 million. "With the anticipated revenue growth, we intend to drive positive operating leverage and build upon our 15 consecutive fiscal years of positive free-cash-flow," Ambarella's CEO added. AMBA Price Action: Ambarella shares were up 22.42% in extended trading at $83.75 at the time of publication Tuesday, per Benzinga Pro. Photo: Shutterstock. Market News and Data brought to you by Benzinga APIs
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Ambarella, formerly known for action camera chips, reports impressive Q3 earnings after rebranding as an AI company. The stock surges as the company beats analyst expectations and raises Q4 guidance.
Ambarella's Impressive Q3 Performance
Ambarella, a semiconductor company that has pivoted to focus on artificial intelligence (AI) technologies, reported strong third-quarter earnings that surpassed analyst expectations. The company's stock initially soared by nearly 19% following the announcement, settling at a 7.7% increase by mid-morning trading
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.The financial results were notably positive:
- Earnings per share: $0.11 (adjusted), beating the forecast of $0.04
- Revenue: $82.65 million, exceeding the expected $79 million
- Year-over-year sales growth: 63%
- Gross margin: 60.6%, up 130 basis points from the previous year
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Strategic Shift to AI
Ambarella's transformation from a maker of chips for action cameras to an AI-focused semiconductor company appears to be yielding positive results. The company now brands itself as a specialist in "edge AI semiconductors" with the tagline "AI envisioned" for its products
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.Fermi Wang, Ambarella's president and CEO, highlighted that edge AI revenue represented about 70% of total revenue, setting a new record. This momentum is expected to drive growth in both IoT and Auto markets in fiscal years 2025 and 2026
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.Financial Outlook and Challenges
Despite the strong top-line performance, Ambarella still faces profitability challenges:
- GAAP loss: $0.58 per share for Q3
- Cash position: $226.5 million, slightly up from $222.3 million in the previous year
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However, the company's Q4 guidance suggests potential for improvement:
- Projected revenue: $76 million to $80 million
- Expected gross margin: 61.5% to 63%
- Anticipated operating expenses: $49 million to $52 million
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This guidance indicates that Ambarella could come close to breaking even or potentially turning a profit in Q4, which would be earlier than analysts' current expectations
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Industry Impact and Future Prospects
Ambarella's success in pivoting to AI technologies reflects broader trends in the semiconductor industry, where companies are increasingly focusing on AI-related products to drive growth. The company's ability to offset broad market weakness with its AI offerings suggests a strong product-market fit and potential for continued expansion in the AI semiconductor space
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.The company's management emphasized their intention to leverage anticipated revenue growth to drive positive operating leverage and build upon 15 consecutive fiscal years of positive free cash flow
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. This focus on financial discipline alongside technological innovation positions Ambarella as a potentially significant player in the evolving AI chip market.References
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