AMBARELLA INC Q3 FY2025 earnings call

• Fermi Wang noted Q3 revenue was above guidance range, with auto and IoT up 30% sequentially. Fiscal 2025 revenue expected to grow 22%-24% y-o-y vs prior mid-teens estimate. - Mentioned new product waves: CV5 to continue, CV7 as second wave, CV3 AD family for Level 2+ in fiscal 2027. - Highlighted customer activities: Mercedes-Benz/Geely's smart number five, Xpeng's P7+, Honda/Dongfeng's Lingxi L, etc. in auto; Verkada, Bosch, Alarm.com using Ambarella chips in IoT. - Upcoming investor events in Q4: UBS Global Technology and AI Conference, etc.

Ambarella's third quarter revenue was $82.7 million, up 30% sequentially and 63% year-over-year. The auto business saw growth with existing ADAS (~$80 million this year) and the CV3 platform. IoT business had new customers for the CV server family, with examples like Verkada using CV72 and Bosch using CV22. AI revenue was a record, contributing to a higher blended average selling price. Automotive revenue this year for existing ADAS is ~$80 million, and the CV3 platform targets a larger but emerging opportunity. IoT revenue included new customers like Verkada and Bosch leveraging Ambarella's chips.

• Fiscal 2025 revenue expected to grow 22%-24% y-o-y. - Q4 revenue guidance $76M-$80M. - Non-GAAP gross margin for Q4 expected 61.5%-63%. - Non-GAAP OpEx for Q4 expected $49M-$52M.

• Market volatility affecting overall market weakness. - Automotive industry challenges: delays/cancellations in Level 2+ projects, slow Level 2+ market penetration. - Geopolitical risks potentially impacting revenue, though not specifically targeting Ambarella. - Margin pressure due to product mix changes, like legacy processors affecting gross margin in Q3.

Q: What changed in Q3 to drive the 30% sequential growth?

A: Q3 rebounded from inventory correction, with new product growth, especially from CV5 in auto and IoT.

Q: How does the automotive funnel change from $2.4B to $2.2B?

A: Pipeline has pushouts/cancellations due to OEMs pushing projects, price concerns, and software development issues, but still sees engagement in Level 2+ projects.

Q: Can you talk about CV mix and future gross margin?

A: CV5 units shipping over 1 million, video processor growth in Q3 is temporary; gross margin expected to move to long-term model of 59%-62% over time.

Q: What about Gen AI progress?

A: Gen AI is impacting customers, with engagement starting, and 2-nanometer process key for addressing Gen AI needs, with tape-out expected in Q4 next year.