It has been about a month since the last earnings report for Ambarella (AMBA). Shares have added about 2.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ambarella due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Ambarella’s Q3 Earnings and Revenues Beat Estimates

Ambarella reported stronger-than-expected earnings for the third quarter of fiscal 2025. It reported non-GAAP earnings of 11 cents per share for the quarter, beating the Zacks Consensus Estimate for earnings of 4 cents.

The bottom line also experienced a robust improvement from the year-ago quarter’s loss of 28 cents per share. The improvement was due to higher revenues and prudent expense management actions.

Third-quarter revenues of $82.7 million grew 63% year over year and 30% sequentially. The top line surpassed the consensus mark of $79 million. The robust sequential growth was primarily driven by momentum in the Internet of Things (IoT) and auto business segments, complemented by an increasing demand for AI-based processors

AMBA’s Q3 Customer & Market Details

Ambarella had two logistics and original design manufacturers (ODM) customers that contributed more than 10% to total revenues in the reported quarter. WT Microelectronics, a partner in Taiwan that serves multiple customers in Asia, accounted for 66% of the company’s third-quarter revenues. Chicony, an ODM manufacturer for multiple end customers contributed 11% of revenues for the quarter.

The solid momentum in AMBA’s CV flow system-on-a-chip in professional IP cameras continued in the reported quarter. The company expects the CV2 family to be the key driver of the company’s revenue growth in fiscal 2025.

Ambarella’s Q3 Operating Details

The non-GAAP gross margin was 62.6%, which remained unchanged from the year-ago quarter’s reported figure.

On a non-GAAP basis, operating expenses were $49.1 million. Non-GAAP operating expenses were approximately $0.9 million lower than the midpoint of the previous guidance range, due to ongoing expense management and the timing of expenditures between quarters.

Balance Sheet of AMBA

Ambarella’s cash, cash equivalents and marketable debt securities on hand at the end of the third quarter of fiscal 2025 was $226.5 million compared with $219.8 million at the end of the prior quarter and $222.3 million at the end of the same quarter a year ago. 

AMBA generated a positive operating cash flow of $6.6 million and a free cash flow of $4.1 million. In the first three quarters of fiscal 2025, the company generated operating cash flow and free cash flow of $8.4 million and $2.2 million, respectively.

Ambarella’s Impressive Q4 Guidance

Ambarella anticipates stable near-term revenues due to strong bookings. However, it expects a typical seasonal decline in the fourth quarter after a stronger-than-expected fiscal third quarter.

It forecasts fourth-quarter fiscal 2025 revenues between $76 million and $80 million, with IoT and auto, both flat to slightly down sequentially.

For the fiscal fourth quarter, the non-GAAP gross margin is anticipated in the band of 61.5-63%. Non-GAAP operating expenses are projected in the range of $49-$52 million.

The consensus mark for fourth-quarter loss per share is pinned at 13 cents compared with the year-ago quarter’s loss of 24 cents.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 13.32% due to these changes.

VGM Scores

At this time, Ambarella has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Ambarella has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Ambarella is part of the Zacks Electronics - Semiconductors industry. Over the past month, Infineon Technologies AG (IFNNY), a stock from the same industry, has gained 4.7%. The company reported its results for the quarter ended September 2024 more than a month ago.

Infineon Technologies reported revenues of $4.31 billion in the last reported quarter, representing a year-over-year change of -4.6%. EPS of $0.54 for the same period compares with $0.71 a year ago.

Infineon Technologies is expected to post earnings of $0.25 per share for the current quarter, representing a year-over-year change of -56.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -2%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Infineon Technologies. Also, the stock has a VGM Score of D.

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