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AMBARELLA INC (AMBA)·Q4 2025 Earnings Summary

Executive Summary

  • Ambarella delivered a strong Q4 FY2025: revenue $84.0M, up 62.8% YoY and 1.7% QoQ; non-GAAP EPS $0.11 and non-GAAP gross margin 62.0% .
  • Revenue exceeded the high end of prior guidance by ~5%, with non-GAAP OpEx below guidance and a one-time U.S. grant lifting other income; momentum was led by 5nm CV5 and first production revenue from CV7 .
  • Q1 FY2026 guidance: revenue $81–$87M, non-GAAP GM 61.0%–62.5%, non-GAAP OpEx $50–$53M; auto down sequentially, IoT flat to slightly up; FY2026 outlook calls for mid- to high-teens revenue growth, tempered by tariff/policy conservatism .
  • Edge AI reached >70% of revenue in Q4 and FY25; management emphasized successive “waves” of new products (CV5, CV7) and ongoing CV3 development as catalysts for operating leverage and long-term growth .

What Went Well and What Went Wrong

What Went Well

  • Record AI revenue and mix: “we exited the year with more than 70% of our total revenue from edge AI…cumulatively shipped about 30 million edge AI processors” .
  • Product ramps: CV5 led results and CV7 generated production revenue for the first time in Q4; Q4 revenue beat guidance high end by ~5% .
  • Cost control and cash flow: Q4 non-GAAP OpEx was $48.7M (below guidance), operating cash inflow $25.4M, free cash flow $21.2M; 16th consecutive fiscal year of positive FCF .

What Went Wrong

  • Automotive softness: auto down slightly QoQ in Q4 and guided down for Q1; management cited OEM cost sensitivity and policy/tariff uncertainty affecting customer behavior .
  • Margin mix: Q4 non-GAAP GM 62.0% was slightly below the guidance midpoint due to product mix; legacy video processors continue a slow secular decline .
  • CV3 funnel volatility: 6-year auto funnel decreased to ~$2.2B from $2.4B YoY amid program delays/cancellations, especially in U.S./Europe; L2+ adoption slower than expected .

Financial Results

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$63.724 $82.653 $84.015
GAAP Gross Margin %60.8% 60.6% 60.0%
Non-GAAP Gross Margin %63.3% 62.6% 62.0%
GAAP EPS ($)$(0.85) $(0.58) $(0.48)
Non-GAAP EPS ($)$(0.13) $0.11 $0.11
YoY Revenue Growth %Q2 2025Q3 2025Q4 2025
Growth vs prior year+3% +63% +62.8%
Q4 2025 Actual vs GuidanceRevenueNon-GAAP GMNon-GAAP OpEx
Prior Guidance (Nov)$76–$80M 61.5%–63.0% $49–$52M
Actual$84.015M 62.0% $48.7M
OutcomeBeat In range Lower than guided
KPIsQ3 2025Q4 2025
Cash & Marketable Securities ($M)$226.5 $250.3
Receivables DSO (days)38 33
Inventory Days94 97
Inventory $ Seq Δ / YoY Δ—−5.9% seq / +18.5% YoY
Operating Cash Flow ($M)$6.6 $25.4
Free Cash Flow ($M)$4.1 $21.2
10%+ Customer ConcentrationWT Micro 66% WT Micro 60.9%
Edge AI Share of Revenue~70% >70% record

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q4 2025$76–$80 Actual $84.015 Beat vs prior guidance
Non-GAAP GM (%)Q4 202561.5–63.0 Actual 62.0 In range
Non-GAAP OpEx ($M)Q4 202549–52 Actual 48.7 Lower than guided
Revenue ($M)Q1 2026N/A81–87 New guidance
Non-GAAP GM (%)Q1 2026N/A61.0–62.5 New guidance
Non-GAAP OpEx ($M)Q1 2026N/A50–53 New guidance
Net Interest & Other ($M)Q1 2026N/A~1.8 New guidance
Non-GAAP Tax ($M)Q1 2026N/A~0.6 New guidance
Diluted Shares (M)Q1 2026N/A~43.4 New guidance
Segment Sequential OutlookQ1 2026N/AAuto down; IoT flat/slightly up New guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 FY2025)Current Period (Q4 FY2025)Trend
AI/technology initiativesCV5 ramp, CV7 and CV3-AD families; vision-language model demos; ASP uplift from new products CV7 first production revenue; DeepSeek reasoning models on CV7/N1; focus on edge AI processing efficiency Strengthening product wave narrative; broader AI at the edge
Supply chain/inventoryInventory digestion largely done; DSOs down; inventory days down in Q2/Q3 DSOs improved to 33; inventory days up to 97; working capital improvements drove cash Operational KPIs improving despite mix changes
Tariffs/macroMixed environment; seasonality normalizing in Q4 Policy conservatism; potential tariff impacts; customers re-evaluating supply chains Heightened policy watch; conservative H2 FY2026 stance
Product performanceCV5 likely >1M units; IoT growth; legacy video processors rebound temporary CV5 leads; CV7 begins production revenue; auto down slightly; IoT up mid-single digits New product waves driving growth; auto cautious
Regional trendsRevenue mix balanced; pipeline diversified; China ~15% exposure U.S. largest; Japan/Korea/Europe strong; China ~15% revenue/pipeline Stable geographic exposure profile
R&D executionCV3-AD655 silicon; 2nm roadmap; scalable software stack Two 2nm chips in flight; tape-out late 2025, samples early 2026; CV3 revenue expected FY2027 Continued investment; timelines clarified

Management Commentary

  • “We exited the year with more than 70% of our total revenue from edge AI…Cumulatively, we have shipped about 30 million edge AI processors” — Fermi Wang, CEO .
  • “For the first time, we generated production revenue from the CV7 family [in Q4]” — Fermi Wang .
  • “We anticipate mid to high teens revenue growth [in FY2026]…with conservatism built into our outlook for the second half” — Fermi Wang .
  • “Q4 non-GAAP operating expense was $48.7 million, below the low end of our prior guidance…Operating cash inflow was $25.4 million” — John Young, CFO .
  • “We expect Q1 non-GAAP gross margin to be 61% to 62.5%…non-GAAP OpEx $50M to $53M…diluted share count ~43.4M” — John Young .

Q&A Highlights

  • New product growth drivers: CV5 and CV7 to represent >50% of FY2026 incremental revenue; legacy video processors to decline ~10–15% annually, CV2 to grow .
  • Automotive outlook: sequential declines small; driven by OEM cost sensitivity and tariff uncertainties; IoT to grow faster than auto in FY2026, but auto still up YoY .
  • L2+ adoption: Slower than expected; Ambarella positioning CV3 on low-power, BOM savings and scalable software (Level 2 to Level 4) to address OEM pain points .
  • 2nm roadmap: Two chips (camera and N1-like) targeting edge AI power/performance; tape-out late 2025, samples early 2026, potential production end of 2026 .
  • Customer concentration: WT Micro 60.9% of Q4 revenue (Asia fulfillment partner), indicating breadth but also logistics partner reliance .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 FY2025 EPS and revenue was unavailable at the time of analysis due to a data access limit. As a result, estimate comparison is not provided. If required, we can update with S&P Global consensus once access is restored.

Key Takeaways for Investors

  • Ambarella is executing on successive “waves” of edge AI products (CV5 now, CV7 beginning production revenue), supporting revenue growth and operating leverage despite macro uncertainty .
  • Q4 outperformance versus guidance (revenue, OpEx) and healthy non-GAAP margin reflects disciplined expense control and favorable mix; watch margin variability tied to product mix and legacy processor runoff .
  • Automotive remains a growth vector with CV3, but timing is uncertain; L2+ adoption and OEM cost sensitivity warrant conservative expectations near term .
  • FY2026 outlook mid- to high-teens growth assumes stable policy backdrop; tariff/geopolitical risks could affect customer supply chains and demand elasticity, particularly in China/Mexico/Canada .
  • Edge AI penetration (>70% of revenue) and ASP uplift from CV5/CV7 underpin the medium-term thesis; monitor CV7 ramps and VLM/GenAI deployments at the edge as incremental catalysts .
  • Cash and working capital metrics improved materially; continued positive FCF (16th straight year) provides flexibility to invest in 2nm and software stack differentiation .
  • Near-term trading: positive skew from Q4 beat and Q1 guide above typical seasonality, balanced by auto caution and margin mix; any updates on CV7 traction or CV3 design wins could drive narrative upside .