Ambarella's AI Pivot Pays Off: Strong Q3 Earnings and Optimistic Outlook

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.

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