Ambarella NASDAQ: AMBA Chief Executive Officer Fermi Wang said the company’s edge AI opportunity is built around a broad silicon roadmap and a mature software stack that can help customers move quickly from application development to products.
Speaking with BofA semiconductor analyst Vivek Arya at the BofA Global Technology Conference, Wang said Ambarella’s differentiation comes from designing chips “algorithm-first,” with the company optimizing silicon and software around embedded AI workloads rather than relying on more general-purpose architectures.
“We think about application,” Wang said, adding that Ambarella focuses on power efficiency, die size, performance and video quality for target edge AI use cases. He said the company’s approach allows it to compete with larger semiconductor companies in selected markets despite its smaller scale.
Automotive Expected to Reach Record Revenue This Year
Wang said Ambarella expects automotive revenue to set a record this year, helped by growth outside the most-discussed autonomous driving applications. He pointed to commercial fleet opportunities, including telematics, fleet management, driver monitoring systems and related applications, as an increasingly solid growth engine.
In IoT, Wang identified robotics and drones as important opportunities, while cautioning that many robotics markets remain segmented and will take time to develop. In the nearer term, he said drones represent one of the largest robotics opportunities for Ambarella, particularly where products require perception, sensor fusion and decision-making capabilities similar to those used in autonomous driving.
Wang also highlighted what he called “edge infrastructure,” where customers aggregate feeds from multiple sensors or cameras into an appliance that can add generative AI capabilities without replacing existing equipment. He gave the example of a hotel using an appliance to process feeds from traditional cameras and enable AI functions across them.
Growth Outlook Tied to Edge AI Adoption
Asked how investors should think about Ambarella’s growth over the next three to five years, Wang said data center AI growth rates of 30% to 50% should not be applied to edge AI markets. He said Ambarella’s served available market is currently growing at about 18%, while the company’s guidance for this year is 10% to 15% growth. Wang also noted that some analysts are modeling about 15% growth next year.
Wang said Ambarella should be able to grow faster than its served available market over time, but added that the market is still waiting for silicon, software, customer applications and AI models to come together to enable new categories of edge AI products.
He said performance per watt will be a key metric for generative AI applications at the edge, especially for battery-powered devices. Wang described customer requirements that include 8K video at 60 frames per second with AI processing within a roughly 4-watt system power envelope, saying Ambarella is among the few suppliers able to address such constraints.
Hanwha Agreement Seen as Strategic Opportunity
Wang discussed Ambarella’s long-term agreement with Hanwha, describing the South Korean conglomerate as a diversified company with businesses including retail, banking, drones, robots and security cameras. He said Hanwha Vision, an Ambarella customer for about 15 years, evaluated AI solutions that could potentially be used more broadly across the Hanwha group.
Wang said Hanwha was looking for a product portfolio broad enough to address multiple opportunities and software mature enough to enable different applications quickly. He said those requirements aligned with Ambarella’s strengths.
In response to Arya’s reference to an $800 million opportunity over 10 years, Wang said Hanwha Vision currently represents a mid-single-digit percentage of Ambarella’s total revenue. He said Ambarella has less than 50% share of Hanwha Vision’s existing opportunity and could increase share, while newer chips could carry higher average selling prices.
Wang said the agreement could also help Ambarella support more applications across Hanwha by using Hanwha Vision’s camera products with different software and models. He said the company expects some positive revenue impact next year, though not an immediate step up to a much higher level.
Supply, Inventory and Margin Commentary
Wang said Ambarella’s 10% to 15% growth outlook is not limited by the company’s own supply. However, he said memory market conditions remain a concern for customers, as DRAM remains available but has become “extremely expensive.” He said customers may eventually need to pass higher memory costs on to their own customers, creating uncertainty around demand and supply availability.
On inventory, Wang said recent increases reflect both supply tightness and preparation for customer ramps. He said Samsung informed Ambarella that foundry supply could be tight next year, especially on 4-nanometer and 5-nanometer process nodes, and asked for purchase order commitments to secure capacity.
Wang said Ambarella’s gross margin guidance remains within its long-term range of 59% to 62%, with the current quarter guided at 59.75%, the same as the prior two quarters. He said product mix is the largest driver of margin changes, while some parts of the supply chain have raised prices, though not yet enough for Ambarella to decide to pass costs through to customers.
CV8, Drones and Software Platform
Wang said Ambarella’s first 2-nanometer chip, called CV8, taped out in January and is expected back in the company’s office within weeks. He said the company’s plan is for the chip to be ready for potential customer production in the second quarter of next year, subject to testing and customer readiness. He also said CV7, the company’s first 4-nanometer chip, is expected to ramp next year.
On drones, Wang said U.S. restrictions on some Chinese drone manufacturers have not yet translated into a major volume shift, partly because many drones already in the market have existing approvals. However, he said the changes should help U.S. suppliers over time. Ambarella has discussed 15 robotics design wins, including several drone wins, with a cumulative revenue pipeline of about $100 million, he said.
Wang also emphasized Ambarella’s Cooper Developer Platform, which he said took five years to develop and is used by nearly all of the company’s customers. He said the software supports about 200 model architectures and makes it easier for customers to move software across Ambarella chips with different performance levels. Wang said the platform is also important as Ambarella expands through indirect sales channels, including software partners, distributors and system integrators.
About Ambarella NASDAQ: AMBA
Ambarella, Inc is a global semiconductor company headquartered in Santa Clara, California, specializing in video compression, image processing and computer vision technologies. The company designs low-power, high-definition system-on-chip (SoC) solutions that enable the capture, processing and streaming of video in a variety of embedded applications. Ambarella's platforms combine advanced video encoding, multi-core central processing units and hardware accelerators to deliver high-resolution imaging with low power consumption.
Ambarella's product portfolio caters to multiple markets, including security and surveillance, automotive vision, wearable cameras, drones and robotics.
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