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Can Ambarella Bolster Growth with Edge AI and AI Inference Chips?

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Key Points

  • Ambarella develops system-on-a-chip (SOC) processors for AI-powered computer vision applications in security cameras, drones, automobiles, and the Internet of Things (IoT).
  • Ambarella expects inventory normalization to be completed soon with its clients as AI tailwinds should accelerate revenues in fiscal 2025.
  • Ambarella raised its fiscal 2025 revenue estimates in anticipation of edge AI and inferencing wins.
  • 5 stocks we like better than Ambarella

Ambarella Today

Ambarella, Inc. stock logo
AMBAAMBA 90-day performance
-0.44 (-0.76%)
(As of 01:44 PM ET)
52-Week Range
Price Target

Ambarella Inc. NASDAQ: AMBA is a semiconductor developer focused on creating system-on-a-chip (SoCs) optimized for computer vision applications. Ambarella is actively participating in the edge artificial intelligence (AI) revolution. Its SoCs integrate image signal processors (ISPs) and hardware accelerators to optimize AI inferencing on the edge possible. Ambarella chips are used in drones, security cameras, the Internet of Things (IoT), and advanced driver assistance systems (ADAS), but applications with edge AI are expansive.

Ambarella competes in the computer and technology sector with chip makers, including Mobileye Global Inc. NASDAQ: MBLY, NVIDIA Co. NASDAQ: NVDA, and QUALCOMM Inc. NASDAQ: QCOM.

What is Edge AI and How Does Ambarella Fit Into It?

The term edge, as in edge computing and edge AI, refers to real-time processing applications on the device itself rather than through centralized cloud servers at a data center. Edge processing is faster, has lower latency, and provides improved security. Ambarella's SoCs are designed to perform on the edge so that processing and data analysis are instantaneous and accessible on the device with low power consumption.

What is AI Inferencing?

AI inferencing involves trained AI models using new data to make predictions or draw conclusions. For example, like a trained puppy identifying a new toy, AI uses prior training to recognize and react to new inputs. As new data enters the picture, AI makes its classification or prediction about it. AI inferencing can be used in self-driving cars, spam filters, product recommendations, and facial recognition software.

Ambarella AMBA stock chart

AMBA Forms a Daily Pennant Pattern Following its Bull Flag Breakout Gap

The daily candlestick chart on AMBA formed a bull flag breakout pattern on its fiscal Q1 2025 earnings report. The flagpole peaked at $51.47 before the flag pullback formed, which was comprised of parallel upper and lower trendlines indicating lower highs and lower lows. Shares gapped to $54.40 and peaked at $59.99. From there, a series of lower highs and higher lows formed a symmetrical triangle following the gap, making it a pennant pattern. The daily relative strength index (RSI) peaked at the 74-band and slipped back down to the 63-band. Pullback support levels are at $54.50, $51.47, $49.80, and $47.73.  

Ambarella Beats Top and Bottom Line Consensus Estimates

Ambarella reported a fiscal Q1 2025 EPS loss of 26 cents, which was 5 cents better than consensus estimates. Revenues fell 12.3% YoY to $54.47 million, beating $53.98 million consensus estimates. Non-GAAP gross margin was 63.4% compared to 63.1% in the year-ago period. Non-GAAP net loss was $10.5 million compared to a GAAP net loss of $6 million in the year-ago period. Ambarella closed the quarter with $203.3 million in cash and cash equivalents.

Ambarella Raises Fiscal Q2 2025 Guidance

Ambarella expects fiscal Q2 2025 revenues of $60 million to $64 million, beating $59.41 million consensus estimates. Gross margin on a non-GAAP basis is expected between 62.5% and 64%. Ambarella is expecting AI tailwinds to accelerate revenues.

Waiting for Inventory Normalization and AI Tailwinds to Kick In

Ambarella CEO Ferma Wang noted they are seeing early signs from the proliferation of AI inferencing at the network edge combined with the breadth of its customer engagements leading to multiple applications for revenue growth. The company received its first win with an electric vehicle (EV) original equipment manufacturer (OEM) with its CV3-AD line of AI domain controllers. Ambarella gained multiple AI inference winds in the IoT segment.

Wang summed it up, “We continue to anticipate revenue growth in fiscal 2025 driven by both a cyclical tailwind as our customers’ inventory levels normalize and the secular growth of our AI inference portfolio.”

Ambarella analyst ratings and price targets are on MarketBeat. 

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Jea Yu
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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Ambarella (AMBA)
2.2839 of 5 stars
2.28 / 5 stars
$57.73-0.8%N/A-13.55Moderate Buy$69.75
Mobileye Global (MBLY)
3.8116 of 5 stars
3.81 / 5 stars
$23.24-3.1%N/A-110.66Moderate Buy$37.44
4.7191 of 5 stars
4.72 / 5 stars
$122.89-0.5%0.03%71.87Moderate Buy$131.59
4.7503 of 5 stars
4.75 / 5 stars
$193.16-0.9%1.76%25.96Moderate Buy$197.54
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