Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ambarella Inc (NASDAQ:AMBA) achieved record AI revenue in Q4 and for the full fiscal year 2025.
• Revenue increased 2% sequentially, exceeding the high end of guidance by 5%.
• Fiscal 2025 revenue increased 26% year over year, with both units and average selling price rising.
• The company returned to non-GAAP profitability in the second half of fiscal 2025.
• Ambarella Inc (NASDAQ:AMBA) has maintained positive free cash flow for 16 consecutive years.

Negative Points

• Non-GAAP gross margin for fiscal Q4 was slightly lower than the midpoint of prior guidance due to product mix.
• There is uncertainty related to government policy decisions, which could impact the second half of fiscal 2026.
• Automotive revenue is expected to decline sequentially in Q1 fiscal 2026.
• The company faces potential indirect impacts from tariffs affecting customer supply chains.
• The older VP video processor product line is expected to continue a slow decline.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with AMBA.

Q: Can you elaborate on the revenue growth drivers for fiscal '26, particularly regarding the CB5 and CB7 product families? A: (Dr. Fermi Wong, President and CEO) The CB5 and CB7 product families are expected to account for more than half of our growth in fiscal '26. Our older VP video processor products will see a gradual decline, while the CV2 family will continue to experience healthy growth. Overall, the growth will be driven by the CB5, CB7, and CV2 families, with the VP products declining at a slow rate.

Q: What factors are influencing the sequential decline in automotive revenue for the January and April quarters? A: (Dr. Fermi Wong, President and CEO) The decline in automotive revenue is minor and not related to previous inventory corrections. While no customers have indicated inventory accumulation due to new government policies, there are concerns about potential indirect impacts from tariffs, which have led us to incorporate some conservatism into our second-half guidance.

Q: How is the investment interest in ADAS evolving, especially with recent developments like Tesla's FSD and BYD's Gods Eye? A: (Dr. Fermi Wong, President and CEO) There is strong demand for AI in ADAS, particularly for Level 2+ systems. OEMs are becoming more cost-sensitive, seeking value products to upgrade from Level 2 to Level 2+ or Level 3. Our CV3 family is well-positioned to address these cost concerns and is viewed positively in the market.

Q: Can you provide more details on the significance of open-source reasoning models like DeepSee for Ambarella? A: (Dr. Fermi Wong, President and CEO) Open-source reasoning models like DeepSee allow us to run advanced models on our chips, such as the N1655 and CV75. This capability enables better model performance at the edge and allows customers to fine-tune models for specific applications, expanding potential use cases and enhancing our market opportunities.

Q: What is the outlook for the 2-nanometer technology development, and how will it impact your product offerings? A: (Dr. Fermi Wong, President and CEO) We are evaluating 2-nanometer technology and expect significant improvements in power consumption and die size. We are working on two projects: one for traditional camera markets and another for a new product type. We anticipate sampling chips late this year and aim for production by the end of 2026.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.