Ambarella (NASDAQ:AMBA) executives used a conference interview with Cantor Fitzgerald semiconductor analyst C.J. Muse to reiterate the company’s growth outlook, describe the transition to an edge AI-focused product portfolio, and address investor questions tied to recent stock volatility and guidance conservatism.
Recent quarter, growth outlook, and ITC-related “FUD”
Louis Gerhardy, Ambarella’s VP of Corporate Development, said the company reported results roughly two weeks earlier that came in with revenue “in line,” while EPS was about $0.02 to $0.03 better than expected. He added that, for the company’s fiscal 2027, consensus revenue estimates “went up about 3%” after the report.
He also discussed an ITC decision that was issued late in the earnings call and initially created uncertainty about potential effects on a customer. Gerhardy said Ambarella’s sales team in China contacted the customer and concluded there was “no impact” from the ruling. He attributed a portion of the stock’s recent move—from about 70 to about 50, by his framing—to fear, uncertainty, and doubt related to that decision, combined with broader geopolitical uncertainty.
Why guidance implies deceleration despite new product cycles
Gerhardy said investors have questioned why guidance implies a slowdown from last year’s 37% growth to roughly 12.5% at the midpoint of the 10% to 15% range. He responded that Ambarella has a reputation for conservative guidance and cited fiscal 2026 as an example, when the company discussed mid- to high-teens growth but ultimately delivered 37% as customer order visibility improved and guidance was raised.
For the current year, Gerhardy said Ambarella believes it has “rich new product cycles,” but is not guiding higher because it wants to better understand how customers will take those products to market, including timing, adoption rates, and the slope of demand growth. He said the company intends to update guidance as those factors become clearer over the course of the year.
Ambarella’s shift to edge AI and how it defines the opportunity
Gerhardy described Ambarella’s evolution from a video processing company—focused historically on high-resolution, often battery-powered camera devices for human viewing—to an edge AI company. He said Ambarella began focusing on video analytics around 2015 and introduced its first proprietary AI accelerator in 2019, integrated with its perception engine into a single-chip AI SoC designed for the edge. That platform is intended to ingest data from various sensors or digital media and perform processing that enables machines to “perceive the world and make decisions” with partial or full autonomy.
According to Gerhardy, about 80% of Ambarella’s revenue now comes from edge AI, and the edge AI business grew about 50% last year. He said all of Ambarella’s current AI revenue is concentrated in “edge endpoint” devices (terminal nodes in a network, often battery-powered), but the company is also targeting “edge infrastructure,” described as the first point of aggregation where multiple endpoints feed into a single system that runs AI on aggregated data. He characterized edge infrastructure as a new business area, with a small amount of revenue expected this year.
Gerhardy offered two ways Ambarella quantifies “edge AI”:
- Compute range: approximately 1 to 500 “effective TOPS” performance, as he described it.
- Model capacity: support ranging from “tens of thousands” of parameters (for some CNN use cases) up to 34 billion parameter models on chips available today, with “line of sight” to 100 billion parameter models in the future.
End-market mix: IoT-led today, with robotics and edge infrastructure highlighted long term
Discussing fiscal 2026 revenue, Gerhardy said the company generated $390 million and described the business as 78% IoT and 22% automotive. Within IoT, he outlined three buckets:
- Security (about 45% of IoT revenue, by his estimate)
- Portable video (roughly similar in size to security)
- Other “green shoots” including access control, wearables, robotics, edge infrastructure, and enterprise video conferencing, which he said are currently not generating much revenue
In automotive, Gerhardy said about 95% of the segment’s revenue comes from telematics (safety/ADAS, “L1 to L2”), while about 5% comes from autonomy (“L2+ to L4”). He cited commercial trucking autonomy wins—mentioning Kodiak and Aurora as examples—but said Ambarella has not yet secured its “first material passenger vehicle win” on the autonomy side.
Looking longer term, Gerhardy identified three markets he views as the largest opportunities: robotics, automotive, and edge infrastructure.
Go-to-market changes: indirect channel and semi-custom strategy
Gerhardy said Ambarella has invested about $1.3 billion in edge AI R&D over roughly a decade, and noted that edge AI revenue has been generated for about six years, totaling about $1 billion cumulatively. He added that the company is now “turning the corner,” noting last year’s edge AI revenue and an AI R&D spend he cited as roughly $170 million.
To accelerate growth with its existing technology base, Ambarella is pursuing two new go-to-market approaches:
- Indirect sales channel: Aimed at serving smaller and mid-sized customers. Gerhardy said Ambarella currently has no channel presence and that this initiative is underway, but is not expected to generate revenue this year; he said it should begin contributing next year and could become material over time.
- Semi-custom chips: A new strategy where customers can incorporate Ambarella’s AI accelerator and/or perception module alongside their own IP, potentially with field-of-use exclusivity in specific markets. Gerhardy said the first semi-custom project is a “two nanometer gate-all-around” design, is IoT edge endpoint-related (not automotive), and is expected to begin generating revenue in the first half of fiscal 2028.
On product direction, Gerhardy said transformer-capable chips—such as the CV7 family and N1—are expected to enable both CNN and transformer networks, with CNNs remaining important for tasks like detection and classification. He suggested security cameras may be the first market to adopt Ambarella’s GenAI capabilities, with products potentially announced this year and revenue impact toward the end of the year.
Finally, on profitability, Gerhardy reiterated long-term gross margin guidance of 59% to 62% and said current results are near the low end of the range. He said the company previously chose to accept “slightly lower gross margins” to drive higher revenue and operating leverage against its AI investment base, resulting in operating margins and earnings that came in better than expected.
About Ambarella (NASDAQ:AMBA)
Ambarella, Inc is a global semiconductor company headquartered in Santa Clara, California, specializing in video compression, image processing and computer vision technologies. The company designs low-power, high-definition system-on-chip (SoC) solutions that enable the capture, processing and streaming of video in a variety of embedded applications. Ambarella’s platforms combine advanced video encoding, multi-core central processing units and hardware accelerators to deliver high-resolution imaging with low power consumption.
Ambarella’s product portfolio caters to multiple markets, including security and surveillance, automotive vision, wearable cameras, drones and robotics.
