AMBA Q2 2026: $95.5M Revenue Tops Guidance on IoT, Drone Wins
- Diverse Growth Drivers in Emerging Markets: Management highlighted strong design wins in portable video, robotic aerial drones, and edge infrastructure—segments with rapidly expanding opportunities. These new applications, combined with the broad adjustment from traditional security cameras to innovative IoT products, underscore Ambarella's ability to capture transformative market share in high-growth areas.
- Strong Revenue Beat and Record Momentum: The quarter’s results exceeded guidance with revenue of $95,500,000 and marked the fifth consecutive quarter of record AGI revenue. This robust performance, driven by both unit growth and rising average selling prices, supports a bullish outlook for sustainable, accelerated revenue growth.
- Unified Technology Platform Driving Scalability: The company’s investment in its COOPER development platform and a unified hardware/software architecture enables seamless migration across its diverse portfolio. This technological advantage enhances customer support and streamlines product development, positioning Ambarella to effectively scale its presence across multiple high-growth markets.
- Automotive Business Uncertainty: Management highlighted that design wins in the automotive segment—specifically for level two-plus solutions—are proceeding at a lower frequency with expectations for significant wins only in the 2027–2028 timeframe. This lag creates uncertainty about the revenue mix and growth sustainability from the auto side.
- Seasonal Downturn and Demand Volatility: The guidance indicates lower revenue expectations in Q4 due to seasonality, with concerns over potential demand pull-ins and inventory fluctuations amid tariff pressures. This cyclical weakness poses risks for near-term performance.
- Concentration and Legal Risks: A substantial portion of shipments comes from key customers like Insta360, whose ongoing litigation introduces uncertainty. The dependence on a few large, high-impact clients may expose the company to disruptions if legal outcomes or customer order flows change.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Automotive Business Uncertainty and Pipeline Volatility | Discussed in Q3 2025 with project delays, cancellations, and slower Level 2+ adoption ( ), in Q4 2025 with tariff and government policy uncertainties affecting design wins ( ), and in Q1 2026 with high geopolitical uncertainty and cautious supply chain conversations ( ). | Q2 2026 emphasized slower adoption rates for Level 2+ systems, delays in design wins, and lower frequency of decisions while noting significant lifetime revenue opportunities in the automotive autonomy market ( ). | Consistent focus on uncertainty with short‑term challenges balanced by long‑term optimism. |
IoT and Edge AI Market Expansion | Q3 2025 highlighted robust product adoption and record AI revenue ( ); Q4 2025 showed over 30% YoY IoT revenue growth driven by 5‑nm products ( ); Q1 2026 stressed diverse IoT applications including enterprise security, video conferencing, and industrial automation ( ). | Q2 2026 reported low‑teens revenue growth in IoT, a first win in edge AI infrastructure with the NYC55 SoC, and sustained expansion into portable video, robotic aerial drones, and other AGI applications ( ). | Continued acceleration of market expansion with broader applications and deeper customer engagement. |
Chip Innovation and New Product Pipeline | Q3 2025 emphasized revenue waves from new product ramps (CV5, CV7) and quantified growth ( ); Q4 2025 detailed 5‑nm and early 2‑nm technology developments along with renewed product mix ( ); Q1 2026 focused on launching a new AI SoC family for edge infrastructure and robotics ( ). | Q2 2026 underscored success of five‑nanometer AI SoCs, highlighted the unified Cooper platform, and mentioned ongoing bids (e.g., the CV380 family for automotive) bolstering the product pipeline ( ). | Steady momentum with continued diversification of products and entry into new application areas. |
Advanced Semiconductor Technology and Gen AI Integration | Q3 2025 featured early 2‑nm technology projects and Gen AI demos running a 3‑billion parameter model ( ); Q4 2025 showcased DeepSeek and vision‑language model processing on CV7 and N1 families ( ); Q1 2026 demonstrated Gen AI capabilities on CV75/CV72 and stressed advanced AI accelerator benefits ( ). | Q2 2026 highlighted five‑nanometer AI SoCs powering flagship products like Insta360’s 8K drone and announced the first win in edge AI infrastructure with integrated Gen AI features, enhancing natural language search capabilities ( ). | Ongoing integration of advanced semiconductor processes with generative AI, moving from demonstration to production. |
Revenue Growth Outperformance and Demand Volatility | Q3 2025 reported 30% sequential growth with record AI revenue ( ); Q4 2025 achieved record AI revenue with 2% sequential gain and strong YoY performance ( ); Q1 2026 noted revenue above guidance despite seasonal factors and high growth estimates ( ). | Q2 2026 delivered revenue of $95.5 million—above guidance—with an 11.2% sequential and 49.9% YoY increase, leading to an upward revision of fiscal 2026 growth estimates ( ). | Consistent robust revenue growth, with seasonality and volatility managed effectively. |
Geopolitical and Supply Chain Risks | Q3 2025 noted risks from U.S./China supply chain separation and potential tariff impacts ( ); Q4 2025 flagged tariff uncertainties and geographic dependency particularly affecting China, Mexico, and Canada ( ); Q1 2026 reiterated high geopolitical uncertainty and close monitoring of supply chain conversations ( ). | Q2 2026 confirmed that despite ongoing geopolitical risks, internal monitoring shows no unusual inventory build‑up, reflecting steady supply chain oversight ( ). | Persistent risks continue but are being managed through enhanced monitoring and proactive customer engagement. |
Legacy Product Margin Pressure | Q3 2025 highlighted that legacy products (including video processors) were being sold at lower‑than‑planned margins, contributing to margin pressure and operating at the low end of guidance ( ). | No specific mention of legacy product margin pressure was noted in Q2 2026. | The issue has diminished in focus, suggesting improved product mix or de‑emphasis of legacy lines. |
Customer Concentration and Legal Risks | Q3 2025 cited WT Microelectronics at 66% and Chicony at 11% of revenue ( ); Q4 2025 noted WT Microelectronics represented around 60‑63% of revenue ( ); Q1 2026 reported WT Microelectronics at 63.1%, with no significant legal issues mentioned ( ). | Q2 2026 disclosed increased concentration with WT Microelectronics accounting for 71% of revenue and mentioned the Insta360 lawsuit, though guidance assumed business as usual with no legal impact ( ). | Customer concentration remains high and slightly increased, while legal risks are acknowledged but not currently material. |
Emerging Markets Expansion in New Application Segments | Q4 2025 described expansion into fleet management, ADAS, vision‑language models, and AI edge servers ( ); Q1 2026 discussed growth in the edge infrastructure market and diversification beyond traditional security into varied IoT applications ( ). | Q2 2026 emphasized strong momentum in emerging segments including portable video, robotics (aerial drones), and edge AI infrastructure, alongside continued bids in automotive applications ( ). | Growing diversification into new application segments is broadening the market focus and revenue potential. |
Execution Risks in AI Chip Development | Q3 2025 and Q4 2025 discussed ambitious development plans such as 2‑nanometer projects and aggressive timelines, though without explicit mention of major execution hurdles ( ); Q1 2026 noted high R&D spend and ongoing investment without detailing risks ( ). | Q2 2026 focused on progress with five‑nanometer AI SoCs and product wins without any explicit mention of execution risks in chip development ( ). | Execution risks remain unaddressed explicitly, suggesting stable confidence in current development processes and timelines. |
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Business Focus
Q: IoT outperformed auto—what’s the strategy?
A: Management remains committed to both IoT and automotive, noting that though IoT’s current momentum is robust thanks to broad design wins, they expect auto to eventually outperform around 2027–2028 while leveraging the same core hardware architecture. -
Growth Drivers
Q: Is revenue growth driven by units or ASP?
A: The leadership explained that the incremental revenue growth is roughly split 50/50 between increased unit shipments and higher average selling prices, reflecting a balanced mix in their strategy. -
IoT Segmentation
Q: How do security and non-security IoT segments compare?
A: While the traditional security segment remains sizable, non-security applications—especially portable video—are growing faster and are becoming significant revenue drivers. -
Demand Check
Q: How do you monitor demand pull-ins amid tariffs?
A: Management carefully reviews monthly customer and distributor inventory levels and holds regular discussions to ensure that current demand is organic, with no abnormal buildup detected. -
Drone Trends
Q: Are autonomous drones becoming a key focus?
A: Management sees a strong trend in the robotic aerial drone market, expecting ongoing design wins to fuel growth in both consumer and commercial applications. -
Process Technology
Q: What is the timeline for advancing to 2nm?
A: The company is actively working on 2nm projects, with a goal of taking customers to production in early 2027, underscoring its continuous push for technological innovation. -
Development Platform
Q: What’s the feedback on the unified development platform?
A: Customers have given highly positive feedback on the unified Coop development platform, which simplifies migrating across chip generations and accelerates deployment of AI solutions. -
Portable Video Base
Q: Is the portable video segment reliant on one customer?
A: While Insta360 is a major contributor, management highlighted that the portable video market spans across seven different product lines, and they are counting on diversified design wins; furthermore, ongoing litigation with Insta360 is not expected to impact forecasts.
Research analysts covering AMBARELLA.