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AMBARELLA INC (AMBA)·Q2 2026 Earnings Summary

Executive Summary

  • Ambarella delivered Q2 FY26 revenue of $95.5M, up 49.9% YoY and 11.2% QoQ, with non-GAAP EPS of $0.15; GAAP gross margin was 58.9% and non-GAAP gross margin 60.5% .
  • The company guided Q3 FY26 revenue to $100–$108M and raised FY26 revenue growth to 31–35% (~$379M midpoint), citing breadth in edge AI demand (portable video, drones, edge infrastructure) and higher ASPs on 5nm AI SoCs .
  • Versus Wall Street, Q2 beat on revenue ($95.5M vs $90.0M*), beat on EPS ($0.15 vs $0.054*), but EBITDA was below consensus (actual approximately -$18.7M* vs $7.3M*) .
  • IoT comprised slightly over 75% of Q2 revenue and grew in the low teens; automotive grew mid-single digits; WT Microelectronics represented 71% of revenue (distribution concentration risk) .
  • Management sees continued edge AI momentum across portable video and robotics, while auto autonomy wins are lower frequency and longer time to revenue; seasonality expected into Q4 due to consumer cycles .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and profitability: revenue above high end of prior guide ($95.5M vs $86–$94M), non-GAAP EPS positive ($0.15), cash and marketable securities rose to $261.2M .
  • Broadening edge AI applications: production ramps in portable AI video, first robotic aerial drone win (Insta360), and first edge infrastructure win (N1 SoC), supporting higher ASPs .
  • Raised FY26 outlook and record trajectory: FY26 revenue growth increased to 31–35%, with Q3 and FY26 midpoints implying all-time record revenue levels; management emphasized market leadership with 36M edge AI processors shipped .

What Went Wrong

  • Margin mix and EBITDA: non-GAAP GM at low end of guide (60.5% due to product mix), and EBITDA below consensus (S&P), reflecting ongoing GAAP losses (GAAP net loss $20.0M; GAAP EPS -$0.47) .
  • Segment concentration and distributor exposure: WT Microelectronics accounted for 71% of revenue; IoT breadth is positive but introduces consumer-cycle seasonality and potential inventory risks (monitored via monthly checks) .
  • Automotive autonomy cadence: OEM decisions remain lower frequency with delays; adoption trends skew to lower-cost L2+ safety features, elongating time-to-revenue versus faster-moving IoT markets .

Financial Results

P&L and Cash Metrics (Quarterly progression, oldest → newest)

MetricQ4 FY25Q1 FY26Q2 FY26
Revenue ($USD Millions)$84.0 $85.9 $95.5
GAAP Gross Margin %60.0% 60.0% 58.9%
Non-GAAP Gross Margin %62.0% 62.0% 60.5%
GAAP EPS (Diluted) ($)-$0.48 -$0.58 -$0.47
Non-GAAP EPS (Diluted) ($)$0.11 $0.07 $0.15
Total Operating Expenses (GAAP) ($M)$75.7 $77.4 $78.2
Loss from Operations (GAAP) ($M)$(25.4) $(25.9) $(22.0)
Net Loss (GAAP) ($M)$(20.2) $(24.3) $(20.0)
Cash + Marketable Securities ($M)$250.3 $259.4 $261.2

YoY Comparison

MetricQ2 FY25Q2 FY26YoY Change
Revenue ($USD Millions)$63.7 $95.5 +49.9%
GAAP Gross Margin %60.8% 58.9% -190 bps
Non-GAAP Gross Margin %63.3% 60.5% -280 bps
GAAP EPS (Diluted) ($)-$0.85 -$0.47 +$0.38
Non-GAAP EPS (Diluted) ($)-$0.13 $0.15 +$0.28

KPIs and Operating Metrics

KPIQ2 FY26
IoT Revenue Mix (% of total)Slightly >75%
Automotive Revenue Mix (% of total)Low 20% range
DSO (Days)40
Inventory Days85
Operating Cash Flow ($M)$5.5
Capex ($M)$4.1
Free Cash Flow ($M)$1.4
WT Microelectronics Revenue Share (%)71%

Actual vs Consensus (S&P Global)

MetricQ1 FY26Q2 FY26
Revenue ($M)Actual: $85.9 ; Consensus: $84.0*Actual: $95.5 ; Consensus: $90.0*
EPS (Diluted, Non-GAAP) ($)Actual: $0.07 ; Consensus: $0.038*Actual: $0.15 ; Consensus: $0.054*
EBITDA ($M)Actual: -$22.6*; Consensus: $5.6*Actual: -$18.7*; Consensus: $7.3*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q2 FY26$86.0–$94.0 Actual $95.5 Beat vs guide high-end
Revenue ($M)Q3 FY26—$100.0–$108.0 New guide (implies record)
Gross Margin (Non-GAAP) (%)Q3 FY26—60.0–61.5 New guide
Operating Expenses (Non-GAAP) ($M)Q3 FY26—$54.0–$57.0 New guide
Net Interest & Other Income ($M)Q3 FY26—~$2.0 New guide
Tax Expense (Non-GAAP) ($M)Q3 FY26—~$0.8 New guide
Diluted Share Count (M)Q3 FY26—~43.7 New guide
FY Revenue Growth (%)FY2619–25% (~$348M midpoint) 31–35% (~$379M midpoint) Raised

Earnings Call Themes & Trends

TopicQ4 FY25 (Prev.)Q1 FY26 (Prev.)Q2 FY26 (Current)Trend
Edge AI penetration (portable video, IoT)>70% of revenue from edge AI; CV5/CV7 ramps Record AI revenue; infrastructure SoC development Portable video ramps; drones entering production; broad IoT growth Strengthening
Edge infrastructure (N1)Early roadmap discussion Extending reach into edge AI infrastructure First customer win; production expected in FY27 Emerging
Automotive autonomy (L2+)Focus on CV7/CP380 families Continued bids; longer cycles OEM delays; skew to lower-cost L2+ safety; wins remain lower frequency Slower cadence
Process technology5nm ramps —2nm projects on track, target production early 2027 Advancing
Seasonality & consumer cycles——Q3/Q4 seasonality tied to consumer-driven categories Evident
Supply chain/inventory discipline——Monthly inventory checks; no abnormal build observed Stable
Revenue concentration——WT Microelectronics at 71% Elevated risk

Management Commentary

  • “We are increasing our fiscal 2026 revenue growth estimate to a range of 31% to 35%, or approximately $379 million at the midpoint… The midpoint of our new third quarter and full year fiscal 2026 revenue guidance would represent all-time record quarterly and fiscal year total revenue for Ambarella.” — Fermi Wang, President & CEO .
  • “IoT in fiscal Q2 represented slightly more than 75% of our revenue… Non-GAAP gross margin… 60.5% at the low end of our prior guidance… Non-GAAP operating expense in Q2 was $53.4 million…” — John Young, CFO .
  • “Arashi Vision (Insta360) launched the world’s first 8K 360-degree drone on the Anti-Gravity brand, powered by our CV5 AI SoC… portable video and robotic… represent new emerging edge AI applications.” — Fermi Wang .
  • “A global networking customer is rolling out a compact on-premises network AI client with multimodal intelligence… built on our N1 SoC… selected for power efficiency, bandwidth savings, and low BOM cost.” — Fermi Wang .

Q&A Highlights

  • IoT vs Automotive: Management will continue investing in both; IoT growth is faster given shorter cycles and breadth, while auto autonomy wins are lower frequency and likely to outgrow IoT post-2027 with major OEM programs .
  • Drones and robotics: Multiple companies are entering aerial drones; energy efficiency is a differentiator; edge AI autonomy trends drive new use cases across robotics .
  • Seasonality: Q3 guide implies typical consumer-cycle seasonality into Q4; portable video categories contribute to seasonal patterns .
  • Demand integrity: Monthly inventory reviews with customers/distributors show no abnormal build or tariff-related pull-ins; internal checkpoints corroborate .
  • Platform enablement: Cooper development platform improves portability across Ambarella chips and speeds SDK/model workflow; ongoing enhancements expected .
  • Mix disclosure: Automotive grew mid-single digits, IoT grew low-teens; IoT roughly 75% of revenue in Q2; distributor WT Microelectronics accounted for 71% of revenue .

Estimates Context

  • Q2 FY26: Revenue beat ($95.5M vs $90.0M*), EPS beat ($0.15 vs $0.054*), EBITDA missed (actual approximately -$18.7M* vs $7.3M*) — implies stronger top-line with mix and ongoing GAAP losses weighing on EBITDA.* .
  • Q3 FY26: Street revenue estimate ~$104.1M* aligns with company midpoint of $104M; EPS estimate ~$0.206* vs guided gross margin/OpEx suggests modest upside if mix improves.* .
  • FY26: Street revenue estimate $379.8M* closely tracks raised guidance midpoint ($379M), implying consensus will likely move to the upper end; 50/50 growth split between units and ASP underscores pricing power in 5nm AI SoCs .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Ambarella’s edge AI breadth is the core driver: portable video, drones, and on-prem edge infrastructure are scaling, lifting ASPs and revenue guidance; this is a multi-vertical narrative that can sustain momentum even as auto autonomy timelines elongate .
  • Near-term setup: Q3 guide to record revenue with non-GAAP GM 60–61.5%; seasonality likely into Q4 — use pullbacks on seasonal narrative to accumulate if breadth/ASP thesis holds .
  • Watch mix and margins: Non-GAAP GM landed at low end due to product mix; sustained IoT strength with high-ASP 5nm could support margin improvement; EBITDA optics vs Street deserve monitoring .
  • Concentration risks: WT Microelectronics at 71% and IoT exposure bring distributor and consumer-cycle sensitivity — any shift in fulfillment or inventory could swing quarterlies; management is monitoring monthly .
  • Auto autonomy is optionality, not the core near-term driver: expect slower decision cadence and a focus on lower-cost L2+ safety; potential step-up post-2027 with CP380/L2+/L4 programs .
  • Platform leverage and roadmap: Cooper platform and 2nm progression (target early 2027 production) strengthen the technical moat and customer portability across SoCs .
  • Consensus alignment: Street is close to management’s raised FY guide; upside likely requires continued portable video/drones momentum and edge infrastructure ramp execution; downside risks include mix compression and any change in consumer demand.* .
Notes:
- All non-estimate figures and management commentary are sourced from Ambarella’s Q2 FY26 8-K/press release and earnings call transcript.
- Values marked with * are retrieved from S&P Global (consensus estimates).