Ambarella Q3 2026 Earnings Report

Ambarella EPS Results

• Actual EPS: $0.27
• Consensus EPS: $0.21
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $0.11

Ambarella Revenue Results

• Actual Revenue: $108.45 million
• Expected Revenue: $104.11 million
• Beat/Miss: Beat by +$4.34 million
• YoY Revenue Growth: +31.20%

Ambarella Announcement Details

• Quarter: Q3 2026
• Date: 11/25/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, November 25, 2025
• Conference Call Time: 4:30PM ET

Ambarella (NASDAQ:AMBA) is a fabless semiconductor company that develops low-power system-on-chip (SoC) solutions for video processing and artificial intelligence at the edge. Its technology is designed to help devices capture, process, analyze and transmit high-quality video while reducing the need to send data to cloud-based systems.

The company’s product portfolio includes its CVflow family of AI vision processors, video processors and related software. These solutions support computer vision and machine learning applications in security cameras, automotive systems, advanced driver-assistance systems, robotics, industrial equipment and consumer devices.

Founded in 2004 and headquartered in Santa Clara, California, Ambarella serves customers and markets globally through its semiconductor products and technology partnerships. The company became publicly traded on the Nasdaq in 2012. Ambarella is led by President and Chief Executive Officer Fermi Wang, who co-founded the company.

Ambarella Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Ambarella reported record quarterly revenue of $108.5 million (up 31.2% YoY), with Edge AI representing ~80% of sales, and raised fiscal 2026 revenue guidance to 36–38% growth (~$390M midpoint).
• Positive Sentiment: Average selling prices are rising (SoC blended ASP up ~20% YoY) and advanced-node products (5nm) accounted for >45% of Q3 revenue, with third‑generation AI SoCs expected to further boost ASP and value per design.
• Positive Sentiment: Strong cash generation and liquidity: cash and marketable securities of $295.3 million, operating cash inflow of $34.3 million and free cash flow of $31.4 million in the quarter.
• Negative Sentiment: Customer concentration risk: one logistics partner, WT Microelectronics, accounted for 70.2% of revenue in Q3, creating a material single‑counterparty exposure.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to Ambarella's 3rd Quarter Fiscal Year 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, we'll open up the call for questions. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's call is being recorded. I will now turn the call over to your speaker, Louis Gerhardy, Vice President, Corporate Development. Please go ahead.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

Thank you, Victor. Good afternoon, and thank you for joining our 3rd Quarter Fiscal Year 2026 Financial Results Conference Call. On the call with me today is Dr. Fermi Wang, President and CEO, and John Young, CFO. The primary purpose of today's call is to provide you with information regarding the results for our 3rd Quarter Fiscal Year 2026. The discussions today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth, and demand for our solutions, among other things. These statements are based on currently available information and subject to risks, uncertainties, and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. You are under no obligation to update these statements.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

These risks, uncertainties, and assumptions, as well as other information on potential risk factors that could affect our financial results, are more fully described in the documents we file with the SEC. Before starting the call, we hope to see you at one of the following investor events that we have scheduled during the 4th Quarter: December 2nd and 3rd, we will be at the UBS Global Technology and AI Conference in Scottsdale. December 9th and 10th at NASDAQ's London Conference. January 6th, from 4:00 to 5:30 P.M. at our CES location, we'll be hosting a technology and product briefing. January 6th to 10th, we'll be hosting more than a dozen sell-side analyst tours of our CES demonstrations, again at our CES location in Las Vegas. January 17th at the Needham Conference in New York.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

Access to our 3rd Quarter Fiscal Year 2026 results press release, transcripts, historical results, SEC filings, and a replay of today's call can be found on the investor relations page of our website. The content of today's call, as well as the materials posted on our website are Ambarella's property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter. John will review the financial results, and then we will be available for your questions. Fermi?

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Thank you, Louis. Good afternoon, and thank you for joining our call today. Before we proceed, I want to let you know that Les Kohn, our co-founder and CEO, will be stepping down from the board of directors to become our chief technology advisor. He will continue to oversee our technology direction and development, but without management responsibilities and with reduced time commitments. Les and I have worked closely since 1994 across four companies. I am grateful that Les will continue as my close partner for over 31 years and beyond, and he's truly the best I could wish for. I'm happy he will have more time to pursue his passions, but I will definitely miss our daily conversations on various topics. Turning to our fiscal third quarter, we are reporting another strong quarter with both revenue and non-GAAP EPS exceeding expectations.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

We achieved record quarterly revenue of $108.5 million, slightly above the high end of our guidance range. Edge AI revenue, which we define as a product that integrates one of our proprietary deep learning AI accelerators, was about 80% of our total revenue, representing our sixth consecutive quarter of record edge AI revenue. We have increased our Fiscal 2026 revenue guidance, which projects an all-time fiscal year total revenue record for Ambarella. The strength in our average selling price and the breadth of demand, we are raising our Fiscal 2026 revenue growth guidance to a range of 36% to 38%, or approximately $390 million at midpoint. This compares with our prior estimate provided on August 28th for 31% to 35% year-over-year growth, or approximately $379 million at midpoint. These results are very encouraging, but I'm even more excited about the Edge AI opportunity ahead of us.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

There are three key factors behind our enthusiasm and our strong commitment to Edge AI. First, the breadth of applications demanding Edge AI technology and our product is expanding. Second, the AI performance requirement for our product roadmap is expected to continue to rise, driving robust new product cycles. Third, our ASP has been increasing, and in the long run, we continue to see an excellent opportunity to capture more value per design. I'll elaborate on those points. First, AI at Edge is becoming more prevalent, driving an increasing breadth of applications in both enterprise and consumer-driven markets. Our Edge AI business started in enterprise security, followed by automotive safety, smart home, telematics, and more recently, the portable video market, which includes action cameras, panorama cameras, and the body-worn cameras.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Looking ahead, high-value shipments into the aerial drone market are expected to commence this quarter, representing just the beginning of our realization of the large robotic market opportunity. There is also strong interest from existing and new customers in our Edge infrastructure products and the roadmaps, and we are committed to develop this incremental opportunity. In addition, ADAS and the vehicle autonomy remain large markets that can leverage our technology to a very high degree. Second, we see a large opportunity to execute at Edge the increasingly complex AI technologies currently implemented at the core of the network or in the data center. The challenge and our opportunity is that the solutions used at the core of the network are often not suitable for the Edge, where the Edge performance requirement is rising.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

In the Edge market, low power consumption, real-time processing, privacy, security, small form factors, thermal, network bandwidth efficiency, and lower price points are critical. At Ambarella, we continue to invest heavily in our proprietary Edge AI SoC technology and products to support this unique and increasingly complex Edge AI requirements. For example, our 10-nanometer CV2 family supports CNN networks, and our 5-nanometer embedding, our third-generation AI processors, is scaling our customer into more complex CNN and generative AI applications simultaneously. Third, we see an excellent opportunity to continue to increase our ASP. The shift from CPU workload to high-level of accelerated computing, or AI, is well underway. The adoption of increasingly complex data center technology for the Edge is another driver. Finally, the extension of roadmap beyond Edge endpoints and into the Edge infrastructure and auto autonomy is also expected, in particular, to boost our ASP.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

For example, our SoC blended ASP in Q3 was up about 20% year-over-year, and as our third-generation AI SoCs and the offered new product become a more material portion of our revenue. We anticipate further increase in the value we earn per design win. I will now describe some of the representative customer engagements that reflect the factors I just described. In the enterprise security market, we are very pleased to share a significant milestone with our customer, SPARSH, who became India's first security camera manufacturer to receive STQC certification for its complete range of cameras. At the heart of the collaboration is our CB28. This gives us a tremendous start to accelerate our adoption in a rapidly growing and mainly in India market. Infinity, spun out of Bosch, announced their Autodome 7100i moving PTZ camera with built-in AI analytics, ultra HD imaging based on CB72.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

They have also announced their Diamond thermal security camera that is based on CB22, which runs their CNN models to detect and classify objects accurately up to 2,000 ft. Workato announced their upcoming CB75-based AM64 Access Station Pro, which enables secure physical access with AI facial recognition powered face unlock alongside traditional badge and a mobile access method. The company also launched a new CR63E remote security camera that leverages the power efficiency of our CB75. They also expand the CB72-based multi-sensor security camera product line, including CH53, CH63, and CY63. Motorola has developed their Axial Halo 4 smart sensor on our CB25, which is an all-in-one environmental monitoring and a security device that is designed for areas where cameras are restricted to detect events like smoke, fire, and audio anomalies.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

In the robotics smart home market, one of our customers, Whisker, announced the Litter-Robot 5 Pro, their first model with facial recognition that supports true night vision equipped AI powered camera based on our CB28. We are seeing great momentum in our portable video market with Arash, who released two models this quarter. The X4 Air at just 165 g is the new lightest compact 8K 360 action camera. It is based on CB5 and is first in the range to support 8K 30 frames per second active HDR. Arash also launched the latest version of their body-worn camera, Go Ultra. Based on CB52, it captures 4K 60 frames per second video and a 50-megapixel photo with improved performance even in low-light environments. In our automotive safety, ADAS, and telematics business, I would like to share some key customer wins during the quarter.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Zeekr, a unit of Geely, has developed their in-cabin DVR system, CB28, for the 9X full-size luxury model. At XPeng, expanding their global market presence, they have built all their driver management systems for all their export models on CB28. Solera, a global leader of vehicle lifecycle management, announced their new ASAR 5 AI-powered smart camera in October based on our CB22. In a first for Solera, the ASAR 5 camera is powered by AI plus AI human intelligence, a revolutionary approach in fleet telematics that combines AI-based analysis with human oversight to improve safety, efficiency, and operations. From these representative customer engagements I just described, the strength of our current product portfolio is clearly represented.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

With seven examples from the 10-nanometer CV2 family and seven examples from our 5-nanometer generation, these products, all available today, offer customers a wide variety of options ranging from CNN to transformer network processing, one-to-many sensor input, support for multiple sensing modalities, all at a wide range of price points. Our new product roadmap will expand this portfolio further. In addition to our comprehensive and expanding AI SoC portfolio, another important distinguishing characteristic of our portfolio is the advanced BISI technology we offer to customers at edge. For example, 5-nanometer-based products represent more than 45% of our total Q3 revenue, with products based on more advanced nodes in development. In summary, the first three quarters of Fiscal 2026 are steps in the right direction with strong revenue growth, new product execution, profitability, and with our cumulative year-to-date free cash flow of almost 14.8%.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

We continue to forecast a large Edge serviceable available market of $12.9 billion by Fiscal Year 2031. We recognize the Edge AI market is still in the early innings of development, and to successfully address this large set, we remain highly committed to our R&D investments that enable us to build upon our existing leadership position. I hope to see you January 6th at our CES 2026 product and technology briefing, which will give you a chance to learn about new technologies and products and meet a broad set of our management team. With that, John, we'll now discuss the Q3 results and the Q4 outlook.

[John Young, CFO at Ambarella Inc.]

Thanks, Fermi. I'll now review the financial highlights for the 3rd Quarter of Fiscal Year 2026 ending October 31st, 2025. I will also provide a financial outlook for our 4th Quarter of Fiscal Year 2026 ending January 31st, 2026.

[John Young, CFO at Ambarella Inc.]

I'll be discussing non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation and acquisition-related expenses adjusted for the impact of taxes. For Fiscal Q3, revenue was $108.5 million, above the high end of our prior financial range of $100 to $108 million, up 13.5% from the prior quarter and up 31.2% year-over-year. Sequentially, automotive revenue increased in the low single digits, and IoT increased in the mid-teens, with IoT growth led by the adoption of edge AI in enterprise security and portable video applications. Non-GAAP gross margin for Fiscal Q3 was 60.9%, slightly above the midpoint of our prior guidance range of 60% to 61.5% due to product spend.

[John Young, CFO at Ambarella Inc.]

Non-GAAP operating expense in Q3 was $55.3 million, slightly below the midpoint of our prior guidance range of $54 to $57 million. Q3 net interest and other income was $2.1 million. Q3 non-GAAP tax provision was approximately $900,000. We reported a non-GAAP net profit of $11.9 million, or $0.27 per diluted share in Q3. Now, I will turn to our balance sheet and cash flow. Fiscal Q3 cash and marketable securities reached $295.3 million, increasing $34.1 million from the prior quarter and $68.8 million from the same quarter a year ago. Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue. Receivables days sales outstanding decreased from 41 days in the prior quarter to 36 days, and days of inventory decreased from 85 to 76 days. Operating cash inflow was $34.3 million for the quarter.

[John Young, CFO at Ambarella Inc.]

Capital expenditures for tangible and intangible assets were $2.9 million for the quarter. Free cash flow was $31.4 million. We had one logistics company representing 10% or more of our revenue, WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 70.2% of revenue for the third quarter. I will now discuss the outlook for the 4th Quarter of Fiscal Year 2026. The breadth of our Edge AI business is expanding, together with strong unit volume and average selling prices. As a result, in Q4, we forecast revenue in the range of $97 to $103 million, or $100 million at the midpoint, with a higher percentage of revenue coming from our high-volume customers. Sequentially, due to seasonality, we expect a mid to high single-digit decline in both our automotive and IoT businesses.

[John Young, CFO at Ambarella Inc.]

We expect Fiscal Q4 non-GAAP gross margin to be in the range of 59% to 60.5%. We expect non-GAAP OPEX in the fourth quarter to be in the range of $55 to $58 million, with the increase compared to Q3 driven primarily by employee-related and CES expenses. We estimate net interest and other income to be approximately $2 million, our non-GAAP tax expense to be approximately $600,000, and our diluted share count to be approximately 44.5 million shares. Thank you for joining our call today. With that, I'll turn the call over to the operator for questions.

[Operator]

Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.

[Operator]

Please limit yourself to one question and one follow-up in the interest of time. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Tore Svanberg from Stifel. Your line is open.

[Tore Svanberg, Managing Director and Senior Semiconductor Analyst at Stifel]

Yes. Thank you. And congrats on the record quarter. As my first question, when we think about that, let's call it 36% to 38% growth for fiscal 2026, how much of that is unit versus ASP? Because obviously, CV now is becoming a pretty high percentage, but even within CV, obviously, you have ASP increases. Yeah, just trying to understand how much of the growth has been driven by ASP versus units.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Right. I think both of them contribute to our growth.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

I will say I don't have an exact number, but if I have to guess, it's probably half and a half. I think our unit growth definitely continues to contribute from the CV side, but ASP growth is also significant, like we talked about in the script. I think that both of them contribute to our end results.

[Tore Svanberg, Managing Director and Senior Semiconductor Analyst at Stifel]

Yeah. Thank you, Fermi. That's very helpful. As my follow-up, you talked about the portable video market. Could you just add some more color there? I mean, it sounds like you have some new design wins. These are obviously AI-based drones, but just I know you've been in that market for a while, and obviously, that market sort of faded, and now it seems to be coming back. How should we just think about that market driving growth for Ambarella going forward? Thank you.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Right. When we talk about portable, there are multiple different product lines in there. I want to be a little bit more specific on that. In fact, we talked about action sports camera, like you said, we have been there for many years. The new category is a panorama camera that Arash is famous for. Also, we talked about drones that is also part of the portable video. In addition to that, our wearable camera, web camera, video conferencing product, all of them are part of the portable device because that's where our customers are focusing on. Overall, that's an area that is providing a big portion of our growth this year. We believe that this market is going to continue to grow.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

In fact, I have to say that I'm a little surprised by the size of the market that's growing over the year, but definitely, the momentum is there. Our job is trying to not only secure our market share, but hopefully, that can grow some market share in the future.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

Hey, Tore, it's Louis. It's just technically, we call it portable video and other. There are a lot of things in there, as Fermi said.

[Tore Svanberg, Managing Director and Senior Semiconductor Analyst at Stifel]

Yeah. Thank you for that. Congrats again.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of Ross Seymore from Deutsche Bank. Your line is open.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Hi, guys. Thanks for asking a couple of questions, and congrats to Les.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

I guess first, you talked about the breadth of your business, especially in the Edge IoT side of things or Edge AI, IoT, whatever you guys are calling it now. Can you just talk a little bit about the consumer versus kind of the enterprise side? Now, I guess where I'm going is the portable side is great, but we've seen volatility around any sort of consumer applications in years past and cycles past. I just wondered how you're managing that in this instance.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

Hey, Ross. It's Louis. The split is roughly 50/50, 50% kind of enterprise CapEx-driven and 50% consumer. Within that 50% that's consumer, you've got some kind of consumer durable, things like, say, smart home cameras that get replaced every five or six years.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

But then you also have consumer discretionary, which I think is some of the more volatile things you were referring to. It is pretty evenly split at the highest level between the CapEx-driven markets and the consumer, but different types of consumer spending.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

I guess one for John. How are we thinking about gross margin as we look into next year, just conceptually, what the pluses and minuses would be? I know you have the long-term target of the 59% to 62%. You are a little closer to the lower end of that in your fourth quarter guide. Just running through any of the puts and takes would be helpful.

[John Young, CFO at Ambarella Inc.]

Yeah, Ross. Thanks. As you said, our long-term model is 59% to 62%. As we said in our Q4 guide, the composition of gross margin really depends on the contribution of our high-volume customers.

[John Young, CFO at Ambarella Inc.]

Whatever the gross margin is from quarter to quarter, at least in the near term, that's a primary driver.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Great. Thank you.

[John Young, CFO at Ambarella Inc.]

Yep.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of Joe Moore from Morgan Stanley. Your line is open.

[Joe Moore, Research Analyst at Morgan Stanley]

Yeah. Great. Thank you. I also wanted to ask about that gross margin target. I guess just as you've kind of refocused the business around a lot of exciting opportunities, is there any chance to really fully participate in some of the consumer markets that you might accept lower gross margin in exchange for growth? I guess you've talked a lot on this call about average selling price. Sort of what's driving that focus is ASP versus kind of gross profit dollar per device, things like that.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

Yeah. Thanks.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

As far as the ASP goes, that is primarily a function of the technology and features that come with these more advanced technology tape-outs that we're doing and products that we're developing on our roadmap. As far as the gross margin goes, like I said, 59% to 62%, I think as far as consumer, on a case-by-case basis, depending on the volume that we see, the opportunities that we see, we're not opposed to gross margins that are maybe not strictly within the 59% to 62% range. The goal at the corporate level is to, over the long term, stay in that range.

[Joe Moore, Research Analyst at Morgan Stanley]

Great. Thank you for that. I guess there's a lot of enthusiasm for drones, which is a market that you've kind of been in in the past.

[Joe Moore, Research Analyst at Morgan Stanley]

Can you talk about what are the new elements of that market that probably might drive you to a higher content over time? Is it sort of you think about delivery drones and industrial drones and things like that? Is that a pretty big category for you down the road?

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Right. First of all, we were big in the past, as you said, but we stopped in that market because of geopolitical situation, not because of our technology solutions. This time, we came back because we continue to believe a few things. First of all, there was a dominant player, but I think that in the U.S., the market is wide open at this point for everybody to fight in that capacity. With our video technology, particularly our Paranoma camera that we help our customers to build, it is well suited for this space.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

First of all, the driver for us is continuing to provide the best video solution in the drone market. More importantly, I think moving forward, is all the drones going to be autonomous in the future? We kind of talking, say, today's drones are level two, and level three, level four drones come in and are probably going to drive faster than an autonomous driving car. We believe that in order to have a level three drone, that it will require a really powerful chip in addition to the video processing. That's really played to our strength also, that our investment in autonomous driving directly applies to here. From the technology point of view, the video processing plus AI is the key driver. As you said, today, the biggest market opportunity for us is consumer for video capture.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Moving forward, we start seeing opportunities on the commercial side, which are going to continue to drive the growth. We are excited that, first of all, we have really technology that we think is differentiated in this market. More importantly, the service market for us is growing fast. That is the two reasons that we feel excited about this market.

[Joe Moore, Research Analyst at Morgan Stanley]

Great. Thank you.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of Christopher Rolland from Susquehanna. Your line is open.

[Christopher Rolland, Managing Director and Senior Equity Analyst at Susquehanna Financial Group]

Hey, guys. Thanks for the question. Congrats on the results. I guess my first question is around an update, perhaps, for the infrastructure opportunity and the N1655.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Yeah. First of all, we announced our first design wins last quarter. After that, we continue to see very strong design win activity and interest from different types of customers.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

In fact, in the last few months, we see customers who want using video-centric products and also customers who want to use N1655 for non-video-centric products. We are starting a wide range of opportunities. We are also continuing to see our chance to not only build up, but also win new designs in the near future. We are totally committed to this market with N1655 and the new roadmap that we were going to talk about in the near future.

[Christopher Rolland, Managing Director and Senior Equity Analyst at Susquehanna Financial Group]

Thank you, Fermi. Perhaps if there are any updates on two other opportunities, I guess the first would be the home security market with AI feature integration. The second would be any kind of design activity. I know it's further out, but around humanoid robots. I think that would be interesting as well.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Right. First of all, for the home security, I think we do have design wins with our CV75 that we haven't announced yet, but definitely is in design. However, I think this is a market that's price-sensitive. I think the progress or the movement towards this Gen AI type of the home security camera based on the camera solution, not the cloud solution. We've really focused on just Edge AI for this market. With that, I think that market is not developing as fast as we expect, but we do have design wins. We hope we can talk about sometime next year. From the humanoid, I think this is a long-term market that we definitely want to participate. However, I think it will take time to get to a humanoid. I think there's multiple steps for robotics from today's situation to the humanoid.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

I think, like I said, even drone, if you treat drone as a robotic application, there's a level two to level five. I think humanoid is like level five of drones for your different application. There is an intermediate step we go through. We definitely have design wins and also design activities in those steps that will lead us into the humanoid. I just want to be more specific. We're offering two types of solutions to the robotics today. One is for people only interested with the video technology. They want to have a really powerful eye that not only can see the object, but also can do a quick object detection based on CNN network. We have that kind of solution based on our CV2 family or CV72, CV73 solution. That's one product line we're providing.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

The other product line we're providing to the robots is really a brand, right? Our N1655 type of solution can be a central processor for any type of a robotic outlayer. I think we're offering these two solutions. For a humanoid solution, it will take time to develop a really central domain controller like an autonomous driving car. That kind of solution will be required to do a humanoid solution in the future.

[Christopher Rolland, Managing Director and Senior Equity Analyst at Susquehanna Financial Group]

Excellent. Thanks so much.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of Suji de Silva from Roth Capital. Your line is open.

[Suji de Silva, Managing Director and Senior Research Analyst at Roth Capital Partners]

John and Les, best of luck with the next step of your transition here.

[Suji de Silva, Managing Director and Senior Research Analyst at Roth Capital Partners]

Maybe in the Edge AI market, looking ahead to calendar 2026, perhaps, which of the two or three segments would you describe as the highest kind of growth opportunity for you as a drones or other areas? Any color there would be helpful. Thanks.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

I think drones definitely, what we call that, is going to be a growth area for us. I also believe that even for the Edge endpoint, we continue to see multiple opportunities coming up with different types of products. For example, wearable camera, we talk about this for many years. Right now, we are excited because wearable camera is not only for policemen anymore. We start seeing that goes to totally different commercial utilization. That is just another example that the technology becomes ready. Low power and also AI on the camera, all of that enables a new application for wearable camera.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

That's another really high growth area that we're seeing. It's not only we're saying that, if you follow our customers, you'll see that our customers are saying similar things. Those Edge endpoints definitely are a growth area for us. I also want to bring the attention to the Edge infrastructure we talked about last quarter. I think although that not immediately you're going to see high revenue growth, I think long term, that will be a very important market for us. We'll definitely cover our thoughts on edge infrastructure at CES and give you more insight on our plan.

[Suji de Silva, Managing Director and Senior Research Analyst at Roth Capital Partners]

Okay. Great. Fermi, one specific question on drones. Do you have any visibility in your pipeline beyond consumer commercial, perhaps into any government programs, or is that going to be a separate part of the market handling that versus you guys?

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

In fact, all customers, in fact, it's not really us. It's all customers. All customers.

[Suji de Silva, Managing Director and Senior Research Analyst at Roth Capital Partners]

Right, right

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

I think all the customers have the desire to serve multiple different segments. Most customers are focusing on consumer commercial. I don't think that government usage is a real focus for most of our customers yet.

[Suji de Silva, Managing Director and Senior Research Analyst at Roth Capital Partners]

Okay. Great. Thanks, Fermi.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of Martin Yang from OpCo. Your line is open.

[Martin Yang, Research Analyst at Oppenheimer & Co. Inc.]

Hi. Thank you for taking my question. First question on IoT, especially with growing customers like Arash. Could you maybe comment on this customer's growth and its relative contribution to your overall ASP and margins?

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Right. First of all, Arash is, I think, the largest customer in our top 10 list. Their revenue roughly doubled from last year to this year.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

They are using multiple chips and selling to multiple ODNs. It's hard for us to track exactly their revenue contribution, but we have no doubt they are the largest customer right now.

[Martin Yang, Research Analyst at Oppenheimer & Co. Inc.]

Thank you. Another question on drones. When you're referring to next year's product, are those drones using your image processing capabilities, or do you expect them to deploy AI functions that relate to autonomous flying capabilities?

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Both. I think that, like I said, there are two types of solutions we're offering. Some of them using just a video plus AI to apply CNN type network for simpler AI functions. There will definitely be customers using our AI for flying to avoid objects, to determine the flying path. Both of them.

[Martin Yang, Research Analyst at Oppenheimer & Co. Inc.]

Got it. Thank you, Fermi. That's it for me.

[Operator]

Thank you. One moment for our next question.

[Operator]

Our next question will come from the line of Quinn Bolton from Needham & Company. Your line is open.

[Quinn Bolton, Managing Director of Equity Research at Needham & Company]

Hey, guys. I know the focus of the business has sort of shifted to Edge AI and the future Edge infrastructure. In the past, you gave us sort of an automotive funnel. You have not provided that. Just wondering, how should we be thinking about how are you guys approaching the automotive market? Do you still see opportunities in level two plus, or are you kind of de-emphasizing some of the automotive applications?

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Okay. Thank you for that question because we did not de-commit from that market. In fact, we continue to focus on the market. We are engaging multiple OEM Tier 1s at this point for autonomous driving level two, level two plus, some even level three.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

From that engineering activity and business development activity point of view, we are oriented on this market. Definitely that from the funnel discussion point of view, like I said, last quarter, we will provide a funnel discussion in the next quarter release. The one modification that we'll do, we will stop using a probability-weighted matrix. We are trying to give you just direct opportunity we're looking at. That will be the one change we're going to offer. We will definitely provide more guidance on how we look at this market.

[Quinn Bolton, Managing Director of Equity Research at Needham & Company]

Got it. Thanks for that, Fermi. I guess for John, just you mentioned that it sounds like the mix towards high-volume customers pushing the gross margin down to the lower half of your long-term range. Can you give us just beyond the January quarter?

[Quinn Bolton, Managing Director of Equity Research at Needham & Company]

Do you think that mix continues to be pretty heavy with higher volume customers, or do you see this as sort of a temporary shift just for the January quarter and it normalizes beyond that?

[John Young, CFO at Ambarella Inc.]

Thanks, Quinn. Yeah. At this point, we do not want to give a guide with regard beyond Q4. I think that commentary with regard to Q4 will continue to be relevant going forward, the ratio of high-volume customers to the total revenue for the quarter.

[Quinn Bolton, Managing Director of Equity Research at Needham & Company]

Sorry, John. You cut out there a little bit. Did you say that the mix would stay pretty similar beyond January?

[John Young, CFO at Ambarella Inc.]

No. What I tried to say was that we do not want to make any guide beyond Q4, but that the commentary about Q4 with the ratio of high-volume customers to the total revenue, that dynamic will continue to be a factor going forward.

[John Young, CFO at Ambarella Inc.]

To the extent that the high-volume folks are a higher percentage of the revenue, that will have its impact.

[Quinn Bolton, Managing Director of Equity Research at Needham & Company]

Got it. Okay. Thank you.

[Operator]

Thank you. Once again, that's star one one for any questions, star one one. One moment for next follow-up. We have a follow-up question for Tore Svanberg from Stifel. Your line is open.

[Tore Svanberg, Managing Director and Senior Semiconductor Analyst at Stifel]

Yes. Thank you. John, just a follow-up for you. This year, you guys demonstrated some pretty good operating leverage. I'm just thinking as we look at Fiscal 2027 and OPEX growth, obviously, you're not giving a growth target per se, but we should assume that OPEX would grow at a slower pace than revenue growth for fiscal 2027?

[John Young, CFO at Ambarella Inc.]

Thanks, Tore. Yeah.

[John Young, CFO at Ambarella Inc.]

We're not giving a guide at this point, but I think what we have said in the past, kind of as you articulated, is that long term, we expect to create operating leverage by having revenue and obviously gross profit outpace the increase in OPEX on a non-GAAP basis.

[Tore Svanberg, Managing Director and Senior Semiconductor Analyst at Stifel]

Great. Thank you.

[Operator]

Thank you. One moment for our next question. Our next question will come from Kevin Cassidy from Rosenblatt. Your line is open.

[Kevin Cassidy, Managing Director and Senior Research Analyst at Rosenblatt Securities]

Yes. Thanks for taking my question. And congratulations to Les for a legendary career. Again, I'm interested in that, but I want to know how much of your software and development that you've been able to work on with the automobiles for L2 to L4, can you apply? Is it a relatively easy market for you to transition into, or are there other software or other issues that would happen in robotics that isn't in automotive?

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

I think, Kevin, you point out that it's really a great direction because, like I continue to say, autonomous driving is just a special kind of robots. And so is a drone. In fact, if you look at the details of functions inside an autonomous driving car, level three drone, and also robots, at the end, it's really a bunch of sensor fusion. You make a decision on your environment, and you decide pattern planning, then you control either a car or drone or some mobile robots moving around performance connections. From that point of view, a lot of hardware have a commonality. In fact, a lot of software development, particularly on the sensor fusion side with the perception, there's a huge reuse on all the robotic applications.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

In fact, we definitely believe that a lot of our investment, both on hardware and software side for autonomous driving, will directly apply to all the future drone and other robotic applications that we're talking about.

[Kevin Cassidy, Managing Director and Senior Research Analyst at Rosenblatt Securities]

Okay. Great. Thanks.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of Ross Seymour from Deutsche Bank. Your line is open.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Hi guys. Thanks for asking a couple of follow-ups. On the consumer percentage being about half of your IoT business, what was that mix last fiscal year and a year ago?

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

I don't have that figure for you, but I would say a dominant part of our mix was enterprise, CapEx-driven markets.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Got it. Thanks, Louis. I guess the follow-up to that, if the consumer business does sound like it has increased, does that change seasonality of your company?

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

I know kind of the first and the fourth quarters tend to be, relatively speaking, the weakest sequentials, and then the mid two quarters are the largest. Does that change at all, either directionally or kind of magnitude, just because consumer is a bigger portion than it used to be?

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

Yeah.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Go ahead.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

Yes. That's a very good point. And the answer is yes. I would look at the next question is what's normal. Really, the last three, four, or five years hasn't been very normal. I would look at the last 10 years because those first five years and the 10 years did have more consumer like you're asking about. I would look at the averages over that 10-year period rather than just the last two or three years, which really weren't normal.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Maybe one last follow-up.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

How do we think about taxes, either dollars or percentages, next year and the year after? I know it kind of goes between the dollars and percentages, and the former might be more applicable, but just an idea of how we should think about that.

[Louis Gerhardy, Vice President of Corporate Development and Investor Relations at Ambarella Inc.]

Yeah. Thanks, Ross. We tend to think about it from a dollars perspective as opposed to a rate based on the way the company is structured and where the profits are located in various jurisdictions internationally. I would expect the dollars will increase, but they will increase with revenue, but it will not be a significant change to the story. I think on a full-year basis, if you look at the rate on a non-GAAP basis, that will give you some indication to be able to model going forward, I would say.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Thank you.

[Operator]

Thank you.

[Operator]

That's all the time we have for question-and-answer session. I want to like to turn it back over to Dr. Fermi Wang for any closing remarks.

[Fermi Wang, CEO and Co-founder at Ambarella Inc.]

Thank you. Thank you all for joining our call today. I hope to see some of you join our January event at CES. Thank you.

Participants

Executives

• Louis Gerhardy, Vice President of Corporate Development and Investor Relations
• Fermi Wang, CEO and Co-founder
• John Young, CFO

Analysts

• Tore Svanberg, Managing Director and Senior Semiconductor Analyst at Stifel
• Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank
• Joe Moore, Research Analyst at Morgan Stanley
• Christopher Rolland, Managing Director and Senior Equity Analyst at Susquehanna Financial Group
• Suji de Silva, Managing Director and Senior Research Analyst at Roth Capital Partners
• Martin Yang, Research Analyst at Oppenheimer & Co. Inc.
• Quinn Bolton, Managing Director of Equity Research at Needham & Company
• Kevin Cassidy, Managing Director and Senior Research Analyst at Rosenblatt Securities