Ambarella Inc. shares experienced a significant after-hours plunge of 5.16% following the release of the company's first quarter fiscal 2027 financial results. The edge AI semiconductor company reported its earnings after the market close, triggering the downward movement in extended trading.

The company's results showed revenue of $100.4 million, representing a 16.9% year-over-year increase and slightly exceeding analyst estimates of $100.1 million. However, investors focused on the contraction in profitability metrics, with GAAP gross margin declining to 58.4% from 60.0% in the same period last year. Non-GAAP gross margin also decreased to 59.9% from 62.0% year-over-year.

While Ambarella reported improved bottom-line results with a reduced GAAP net loss of $18.1 million compared to $24.3 million in the prior year period, and non-GAAP net profit increasing to $5.0 million from $3.0 million, the margin pressure appeared to concern investors. The company also provided second quarter revenue guidance of $105 million to $111 million, which may have fallen short of some market expectations. Concurrently, Ambarella announced a long-term edge AI agreement with Hanwha, valued at over $800 million in potential revenue across more than ten years, though this positive development was overshadowed by the earnings concerns.