Ambarella Shares Soar on AI-Driven Demand, Upbeat Guidance

Ambarella (AMBA) shares surged 20% on Friday after the chip designer unveiled second-quarter earnings that handily beat expectations and projected robust future growth. The rally underscores investor confidence in Ambarella’s strategic pivot towards edge AI applications.

Here’s a breakdown of the company’s performance against LSEG consensus estimates:

• Earnings: 15 cents per share adj. vs 5 cents per share expected
• Revenue: $96 million vs $90 million expected

Ambarella, a key player in system-on-chip semiconductors and software powering edge artificial intelligence, anticipates third-quarter revenue to land between $100 million and $108 million, exceeding the LSEG estimate of $91 million. This guidance signals continued strong demand for its AI-focused solutions.

Bolstering investor sentiment further, the company significantly revised its fiscal year revenue growth outlook upwards to a range of 31-35%, culminating in a projected $379 million at the midpoint. This figure surpasses the previously expected $350 million consensus from LSEG, indicating a substantial acceleration in Ambarella’s growth trajectory.

“After a multi-year period of significant edge AI R&D investment, our broad product portfolio enable us to address a rising breadth of edge AI applications,” CEO Fermi Wang told analysts during Thursday’s call, highlighting the company’s strategic foresight and execution in capturing the burgeoning edge AI market.

Wang specifically pointed to strength in “portable video, robotic aerial drones, and edge infrastructure” as key drivers of growth. These areas perfectly align with the increasing demand for decentralized, real-time data processing capabilities.

Edge computing, which involves processing and storing data directly on devices rather than relying on remote cloud data centers, is rapidly gaining traction due to its enhanced speed, security, and efficiency in applications like autonomous vehicles, smart cities, and industrial automation.

While Ambarella reported a net loss of $20 million, or 47 cents per share, for the second quarter, this represents a significant improvement compared to the $35 million loss (85 cents per share) recorded in the same quarter last year. This narrowing loss suggests that Ambarella’s investments in R&D and strategic focus on high-growth areas are beginning to pay off.

The company noted that stock-based compensation and the amortization of acquisition-related costs had a dampening effect on earnings, although it has not impacted the overall performance of the company