Ambarella Stock Gains as Q1 Earnings Beat Estimates, Sales Rise Y/Y

Ambarella, Inc.'s AMBA shares rose 1.61% during Thursday’s extended trading session following the company’s stronger-than-expected first-quarter fiscal 2026 results. It reported first-quarter non-GAAP earnings of 7 cents per share, which surpassed the Zacks Consensus Estimate of 4 cents. The bottom line also experienced a robust improvement from the year-ago quarter’s loss of 26 cents per share.

Ambarella’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 370.4%.

Ambarella’s first-quarter revenues soared 57.6% year over year to $85.9 million and beat the Zacks Consensus Estimate of $84 million. Quarterly revenues were toward the higher end of management’s guidance of $81-$87 million.

The strong top-line performance was primarily driven by record Edge AI revenues, which accounted for more than 75% of first-quarter revenues, marking the fourth consecutive quarter of record AI sales. This reflects the successful execution of the company’s edge AI strategy despite market volatility. IoT applications grew mid-single digits sequentially, while the automotive segment declined low single digits sequentially but delivered more than 20% growth year over year.

Ambarella, Inc. Price, Consensus and EPS Surprise

Ambarella, Inc. price-consensus-eps-surprise-chart | Ambarella, Inc. Quote

Ambarella’s Q1 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 63.1% of the company’s first-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.

Gross margin on a non-GAAP basis for the first quarter of fiscal 2025 was 62.0%, slightly above the mid-point of the previously guided range of 61-62.5% due to a favorable product mix. Non-GAAP operating expense during the quarter was $51.8 million, slightly above the mid-point of prior guidance of $50.0-$53.0 million, due in part to higher engineering costs on new and existing chip development projects. 

Balance Sheet & Cash Flow AMBA

Ambarella’s cash, cash equivalents and marketable debt securities on hand at the end of the first quarter of fiscal 2026 were $259.4 million compared with $250.3 million at the end of the prior quarter and $203.3 million at the end of the same quarter a year ago.

During the first quarter of fiscal 2026, AMBA generated an operating cash flow of $14.8 million and a free cash flow of $10.2 million.

Ambarella Initiates Q2 Guidance

It forecasts second-quarter revenues between $86 million and $94 million and expects mid-single-digit sequential revenue growth in IoT applications, with auto revenues expected to be slightly up versus the prior quarter. The Zacks Consensus Estimate for revenues is pinned at $85.41 million, indicating a year-over-year rise of 34.04%.

For the fiscal first quarter, the non-GAAP gross margin is anticipated in the band of 60.5-62%. Non-GAAP operating expenses are projected in the range of $52.5-$55.5 million.

The consensus mark for second-quarter non-GAAP earnings per share is pinned at 4 cents. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Ambarella’s Zacks Rank & Stocks to Consider

AMBA currently carries a Zacks Rank #3 (Hold).

Paylocity Holding PCTY, StoneCo STNE and BlackBerry BB are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.

PCTY, STNE and BB sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

PCTY shares have declined 5.1% year to date. The Zacks Consensus Estimate for PCTY’s full-year 2025 earnings is pegged at $6.95 per share, up by 4.51% over the past 30 days, indicating an increase of 0.99% from the year-ago quarter’s reported figure.

STNE shares have surged 68.2% year to date. The Zacks Consensus Estimate for STNE’s full-year 2025 earnings is pegged at $1.43 per share, up by 3.62% over the past 30 days, indicating a gain of 5.93% from the year-ago quarter’s reported figure.

BB shares have gained 5.5% year to date. The Zacks Consensus Estimate for BB’s full-year 2025 earnings per share is pegged at 10 cents, unchanged over the past 30 days, indicating a gain of 400% from the year-ago quarter’s reported figure.

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

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