Ambiq Micro, Inc. (AMBQ) Earnings

Management highlights

### Overall Business Momentum - The market for human-centric edge AI (HAI) is growing faster than management expected at the start of 2026, and AMBIC has started the year with stronger-than-expected momentum driven by its ultra-low power system-on-chip (SOC) platform. - Net sales for Q1 2026 exceeded management's prior guidance, with strong year-over-year and sequential growth from Q4 2025, driven by broad-based demand for edge AI solutions across the customer base. More than 80% of shipped units run AI algorithms, with new ramps for upcoming customer product launches and one new major customer entering mass production during the quarter. - Inventory remains lean, and the company is seeing an increasing number of expedited shipment requests, confirming healthy demand across all end markets. ### Market and Product Diversification - Personal wearable devices remain a key growth driver, with adoption expanding to new form factors including smart rings, display-less bands, and smart eyewear. Wearables are evolving from basic consumer devices to sophisticated health and wellness platforms. - Expansion into healthcare, industrial, and smart home/buildings non-wearable markets is gaining meaningful traction. Key high-growth non-wearable use cases include ECG monitoring, glucose monitoring, bike computing, smart pens, battery monitors, remote controls, and livestock tracking. - AMBIC's scalable SOC portfolio supports applications ranging from entry-level designs to advanced feature-rich use cases, enabling edge AI deployments such as real-time health monitoring, intelligent audio, predictive maintenance, and smart sensing/automation. - The company regularly releases new software tools to enhance edge AI capabilities; its new Compression Kit software combines with AMBIC's ultra-low power hardware to enable multi-day battery life while storing large volumes of raw sensor data and supporting real-time anomaly detection for next-generation medical devices. Compression Kit is currently restricted for use only with AMBIC hardware. ### Product Roadmap Progress - Three new products (Apollo 340, Atomic 110, Atomic 120) are in parallel development to meet growing customer demand: - Atomic 110 remains on track for tape-out by the end of 2026, with initial customer ramping starting in late 2027. - Atomic 120 is seeing strong early customer interest, particularly for smart glasses, which require the combination of high performance and ultra-low power that the product is designed to deliver; the company is currently engaged with potential alpha customers. - Apollo 340 is generating strong customer interest due to its compelling price-to-value positioning. It is on track to sample in the first half of 2027, with initial customer ramps by the end of 2027 and material revenue starting in 2028. It will enable expansion into higher-volume, more diverse use cases including medical devices, industrial/smart grid sensors, and smart rings, complementing the higher-performance Atomic product line. ### Financial Operational Highlights - Non-GAAP gross profit totaled $11.6 million in Q1 2026, up 56.2% year-over-year. Non-GAAP gross margin was 46.2%, down 90 basis points year-over-year due to a non-recurring credit in Q1 2025; excluding this one-time impact, non-GAAP gross margin increased 210 basis points year-over-year. - Non-GAAP R&D expense was $10.1 million, up 43.3% year-over-year, reflecting accelerated investment in product development across the Apollo and Atomic platforms. - Non-GAAP SG&A expense was $8.1 million, up 31.8% year-over-year, driven by increased go-to-market capabilities and public company infrastructure investments. - Non-GAAP net loss was $5 million in Q1 2026, a $200,000 improvement year-over-year. The company ended the quarter with $204.5 million in cash and cash equivalents and no debt, providing strong financial flexibility for strategic growth investments.

Guidance

• Second quarter 2026 net sales are expected to be between $31 million and $32 million, representing approximately 75% year-over-year growth. Management views this step-up in revenue as a new higher baseline, not a peak, as launched programs will continue to scale alongside additional new customer ramps. • Second quarter 2026 non-GAAP gross margin is expected to be between 45% and 46%, supported by yield improvements and ongoing scaling of the Apollo 5 platform. • Second quarter 2026 non-GAAP operating expense is expected to be between $21 million and $22 million, including $1.7 million in IP purchase costs, reflecting continued strategic growth investments. Non-GAAP loss per share is expected to be between $0.23 and $0.29, based on 21.38 million weighted average shares outstanding. • Full year 2026 total non-GAAP operating expense is expected to be approximately $85 million, including $7 million to $10 million in required IP purchases for product development, driven by increased engineering headcount and flexible contract engineering resources. • Full year 2026 gross margins are expected to be roughly flat year-over-year, as yield improvements will be offset by broader industry input cost dynamics. • Year-over-year net sales growth in the second half of 2026 is expected to be similar to the first half growth rate, which is projected at ~65% year-over-year. Fourth quarter seasonality is still expected, in line with historical trends. • Profitability timeline: At current planned investment levels and 46% gross margins, the company needs ~$47 million in quarterly revenue to reach profitability. Accelerated product development investments are intended to pull forward future revenue growth, which could move profitability from the prior expectation of mid-2028 to early 2028, or potentially the second half of 2027.

Segment performance

AMBIC does not disclose full formal segment revenue breakdowns in the call, but key segment data is provided: 1) Consumer Wearables: Represented the majority of Q1 2026 revenue, and remains the company's core growth driver. Revenue from non-wearable segments (medical, industrial, smart home/buildings) grew 100% year-over-year in Q1 2026. Management expects total non-wearable segment revenue to more than double in full year 2026. One quarter of the company's sales pipeline is currently tied to non-wearable end markets. 2) Revenue concentration: The company's three largest customers accounted for 71% of total Q1 2026 net sales, down from 86% in Q1 2025, showing successful revenue diversification across new customers. Sales to end customers in China represented 13.7% of total Q1 2026 net sales, up from 6.2% in the year-ago quarter. Overall Q1 2026 net sales totaled $25.1 million, an increase of 59.3% year-over-year.

Risks & headwinds

• Industry-wide input cost increases for substrates and other component parts are out of the company's control and are expected to offset some yield improvement gains, putting pressure on gross margins. • Very short lead time demand increases, driven by faster-than-expected market growth and expedited shipment requests, can create manufacturing constraints. Some orders cannot be fulfilled due to physically insufficient lead times, even with strong manufacturing partner support, leaving unmet demand on the table. • The company remains dependent on a concentrated set of large customers, even as diversification progresses: the top three customers still account for 71% of total revenue as of Q1 2026. • Actual results may differ materially from management's forward-looking expectations due to unidentified risks, as outlined in the company's SEC filings including its most recent Form 10-K.

Analyst Q&A

• Q: What share of AMBIC's sales pipeline is non-wearables, what was Q1 revenue split between wearables and other segments, and what is the updated timeline for profitability after strong recent results?

  A: One quarter of AMBIC's pipeline is non-wearables, and non-wearable revenue grew 100% year-over-year in Q1. To reach profitability at current 46% gross margins and ~$21 million quarterly operating expenses, AMBIC needs ~$47 million in quarterly revenue. Current product development investments are intended to pull future revenue forward, which could move profitability from mid-2028 to early 2028, or potentially even the second half of 2027.

• Q: What factors are driving the expected doubling of non-wearable revenue in 2026, and could the new customer that entered production in Q1 become more than 10% of 2026 total revenue?

  A: The fastest growing non-wearable market is medical, driven by demand for ECG and glucose monitoring use cases; additional high-adoption non-wearable use cases include bike computing, smart pens, battery monitors, remote controls, and livestock tracking. It is possible that the new Q1 production customer will reach more than 10% of total 2026 revenue.

• Q: Is the confirmation that second half 2026 year-over-year growth will match first half growth correct? What factors are keeping gross margins flat, and can AMBIC pass input cost increases to customers?

  A: The confirmation is correct; the business has reached a new higher revenue baseline in 2026, and the fourth quarter seasonal slowdown remains in line with expectations. Yield improvements for the ramping Apollo 5 platform are offset by industry-wide increases to substrate and other component costs, leading to flat overall margins. AMBIC passes expedite material costs to customers, and is strategically selective about implementing average selling price (ASP) uplifts for new business to remain competitive.

• Q: Are expedited requests driven by supply constraints from TSMC and other manufacturing partners, and is AMBIC leaving demand unmet?

  A: AMBIC has strong partnerships with both front-end and back-end manufacturing partners that can support normal lead time demand. The market is growing faster than expected, so very short-notice demand increases for expedited orders are sometimes physically impossible to fulfill, resulting in some unmet demand. All demand within normal lead times is fully supported.