AMBARELLA INC Q1 FY2026 earnings call

Key Points

• Excellent start to fiscal year 2026 with Q1 revenue in upper half of guidance driven by AI business strength.
• AGI revenue over 75% of Q1 revenue for fourth consecutive record AI quarter.
• IoT applications up mid-single digit sequentially, now ~75% of total revenue; automotive down low single digit sequentially but up >20% YOY.
• Upcoming investor events in June: Bank of America's Technology Conference, Redburn Atlantic's West Coast Bus Tour, Trivariate Research and NH Investment Securities Bus Tour, and non-deal roadshow in Baltimore, Boston, New York City.
• Demonstrated GenAI and Vision AI capabilities at IAC West Security Show with 18 product demonstrations.
• Customer product introductions: Insta360's 360-degree X5 camera, Huawei's machine vision co-coder reader, various automotive OEMs using Ambarella's chips in security, IoT, and automotive sectors.

First quarter revenue was $85.9 million, in the upper half of guidance due to strength in AI business. AGI revenue, defined as products integrating proprietary deep learning AI accelerators, was more than 75% of Q1 revenue, the fourth consecutive quarter of record AI revenue. IoT applications increased mid-single digit sequentially and now represent about three-quarters of total revenue. Automotive business declined low single digit sequentially but was up more than 20% year-over-year.

Fiscal 2026

• Increased fiscal 2026 revenue growth estimate to 19%-25% range (~$348M midpoint) from prior mid-high teens estimate.

Q2 2026

• Anticipated Q2 revenue range: $86 million to $94 million ($90M midpoint).
• Non-GAAP gross margins for Q2 expected 60.5%-62%.
• Non-GAAP operating expenses for Q2 expected $52.5 million to $55.5 million, driven by new product development costs.

• Geopolitical uncertainty impacting guidance and potential indirect impact from tariffs.
• Uncertainty in supply chain and customer inventory building.

Q: Could you explain the change in the growth profile for the year and if it's related to tariff pull-in?

A: Fermi Wang stated there's uncertainty due to geopolitical situation, so they built in uncertainty in guidance, but still high confidence in second-half growth. Louis Gerhardy added it's about uncertain environment and normal seasonality might still occur.

Q: What does edge infrastructure mean and new products for it?

A: Fermi Wang explained edge infrastructure involves integrating multiple endpoints with servers to run advanced AI models, and they're developing new AI SoC products leveraging third-generation AI accelerator.

Q: Would there be a change in seasonality with strong product cycle?

A: Fermi Wang said seasonality is a question mark due to geopolitical uncertainty, but normal seasonality might still happen though guidance range reflects uncertainty.

Q: How does the competitive landscape shift for edge infrastructure market?

A: Louis Gerhardy mentioned they approach with more efficient solutions in terms of performance per watt compared to general-purpose processors like FPGAs and GPUs.

Q: How have customer supply chain conversations progressed?

A: Fermi Wang said customers are not building inventory, but geopolitical situation could change, causing uncertainty in second half.

Q: What's driving the decline in gross margin next quarter?

A: John Young said it's a combination of customer ordering patterns and product mix.

Q: Comment on China market for security cameras and market share?

A: Fermi Wang said they don't include China numbers in security camera market metrics, and outside China, they have majority market share in mid and high end of security cameras.

Q: Is the second chip for edge infrastructure product new or long-planned?

A: Fermi Wang said it's a response to end market demand, leveraging current architecture and software, with fast development and controlled cost.

Q: Why were accounts payable trends higher than normal?

A: John Young said it's related to building inventory to support demand.