Ambarella Stock Soars 19% as Q2 Earnings and Revenues Crush Estimates

Ambarella, Inc. AMBA shares jumped 18.7% during Thursday’s extended trading session following the company’s stronger-than-expected second-quarter fiscal 2026 results. It reported second-quarter non-GAAP earnings of 15 cents per share, which surpassed the Zacks Consensus Estimate of 6 cents. The bottom line also experienced a robust improvement from the year-ago quarter’s loss of 13 cents per share.

Ambarella’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 400%.

Ambarella’s second-quarter revenues soared 49.9% year over year to $95.5 million and beat the Zacks Consensus Estimate of $90 million. Quarterly revenues also came ahead of management’s guidance of $86-$94 million.

The strong top-line performance was primarily driven by robust revenue growth across the Internet of Things (IoT) and automotive segments. IoT revenues, which accounted for 75% of second-quarter total sales, grew in low-teen percentage points sequentially, primarily driven by increased adoption of edge AI. The automotive segment’s revenues increased in the mid-single digits on a quarter-over-quarter basis.

Ambarella’s Q2 Details

Ambarella had one logistics and original design manufacturer customer that contributed more than 10% to total revenues in the reported quarter. WT Microelectronics, a partner in Taiwan that serves multiple customers in Asia, accounted for 71% of the company’s second-quarter revenues.

The solid momentum in Ambarella’s CV flow system-on-a-chip in professional IP cameras continued in the reported quarter. The company expects CV2, CV5 and CV7 to be the key drivers of its revenue growth in fiscal 2026.

The gross margin on a non-GAAP basis for the second quarter of fiscal 2025 was 60.5%, which came in at the low end of management’s guided range of 60.5-62% due to a product mix. Non-GAAP operating expenses during the quarter were $53.4 million, slightly below the midpoint of the prior guidance of $52.5-$55.5 million, due to lower engineering costs on new and existing chip development projects.

Balance Sheet & Cash Flow of AMBA

Ambarella’s cash, cash equivalents and marketable debt securities on hand at the end of the second quarter of fiscal 2026 were $261.2 million compared with $259.4 million at the end of the prior quarter and $219.8 million at the end of the same quarter a year ago.

During the second quarter of fiscal 2026, AMBA generated operating cash flow of $5.5 million and free cash flow of $1.4 million. In the first half of fiscal 2026, the company generated operating and free cash flows of $20.3 million and $11.6 million, respectively.

Ambarella Initiates Q3 Guidance

It forecasts third-quarter revenues between $100 million and $108 million. It expects mid-to-high single-digit sequential revenue growth in the automotive segment, while IoT revenues are anticipated to increase in the mid-teens percentage points. The Zacks Consensus Estimate for third-quarter revenues is pinned at $91.9 million, indicating a year-over-year rise of 11.2%.

For the fiscal third quarter, the non-GAAP gross margin is anticipated in the band of 60-61.5%. Non-GAAP operating expenses are projected in the range of $54-$57 million.

The consensus mark for third-quarter non-GAAP earnings per share is pinned at 7 cents.

For fiscal 2026, the company expects revenues to grow in the 31-35% range on a year-over-year basis. The Zacks Consensus Estimate for fiscal 2026 revenues is pegged at $351.1 million, indicating a year-over-year increase of 23.3%.

AMBA’s Zacks Rank and Stocks to Consider

Currently, Ambarella carries a Zacks Rank #3 (Hold).

F5 FFIV, Qualys QLYS and Arista Networks ANET are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. F5 and Qualys each sport a Zacks Rank #1 (Strong Buy) at present, while Arista Networks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for F5’s fiscal 2025 earnings has moved upward by 5.4% to $15.38 per share in the past 30 days, indicating 15% year-over-year growth. F5 shares have soared 57.5% in the trailing 12 months.

The Zacks Consensus Estimate for Qualys’ 2025 earnings has been revised upward by 18 cents to $6.35 per share in the past 30 days, suggesting a year-over-year increase of 3.6%. Qualys shares have gained 7.6% over the past year.

The Zacks Consensus Estimate for Arista Networks’ 2025 earnings has moved northward by 25 cents to $2.81 per share over the past 30 days and implies a year-over-year decrease of 23.8%. Arista Networks shares have jumped 57.2% over the past year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research