Ambarella Soars 11% as Q4 Earnings and Revenues Crush Estimates

Ambarella, Inc.‘s (AMBA Quick QuoteAMBA – Free Report) shares soared 11.3% during Wednesday’s extended trading session following the company’s reported stronger-than-expected fourth-quarter fiscal 2025 results. It reported fourth-quarter non-GAAP earnings of 11 cents per share, which compared favorably with the Zacks Consensus Estimate of a loss of a penny. The bottom line also experienced a robust improvement from the year-ago quarter’s loss of 24 cents per share.

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Ambarella’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 356.3%.

Ambarella’s fourth-quarter revenues soared 62.8% year over year to $84 million and beat the Zacks Consensus Estimate of $78.1 million. Quarterly revenues also exceeded management’s guidance range of $76-$80 million.

The stronger-than-expected top-line performance was primarily driven by momentum in the Internet of Things (IoT) and auto business segments, complemented by an increasing demand for AI-based processors.

Ambarella’s Q4 Details

Ambarella had one logistics and original design manufacturer (ODM) 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 60.9% of the company’s fourth-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 fourth quarter of fiscal 2025 was 62%, which was 50 basis points lower than the year-ago quarter’s 62.5% primarily due to unfavorable product mix. Non-GAAP operating expense in the fourth quarter was $48.7 million, below the low end of management’s prior guidance range of $49-$52 million, driven by continued expense management and the timing of spending between quarters.

AMBA’s Balance Sheet & Cash Flow

Ambarella’s cash, cash equivalents and marketable debt securities on hand at the end of the fourth quarter of fiscal 2025 were $250.3 million, compared with $226.5 million at the end of the prior quarter and $219.9 million at the end of the same quarter a year ago.

AMBA generated an operating cash flow of $25.4 million and a free cash flow of $21.2 million. In fiscal 2025, the company generated operating cash flow and free cash flow of $33.8 million and $23.5 million, respectively.

Ambarella’s Impressive Q1 Guidance

Ambarella anticipates that the new product momentum will help the company post better-than-normal seasonal results in the first quarter of fiscal 2026. It forecasts first-quarter revenues between $81 million and $87 million, with auto down sequentially while IoT is flat to slightly up quarter on quarter. The Zacks Consensus Estimate for revenues is pinned at $73.9 million, indicating a year-over-year rise of 35.7%.

For the fiscal first quarter, the non-GAAP gross margin is anticipated in the band of 61-62.5%. Non-GAAP operating expenses are projected in the range of $50-$53 million.

The consensus mark for first-quarter non-GAAP loss per share is pinned at 9 cents compared with the year-ago quarter’s loss of 26 cents.

Ambarella’s Zacks Rank & Stocks to Consider

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

Atlassian (TEAM Quick QuoteTEAM – Free Report) , Zscaler (ZS Quick QuoteZS – Free Report) and Fortinet (FTNT Quick QuoteFTNT – Free Report) are some stocks that investors can consider in the broader Zacks Computer and Technology sector. TEAM, ZS and FTNT carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Atlassian’s shares have soared 40.3% in the past year. The Zacks Consensus Estimate for TEAM’s fiscal 2025 earnings is pegged at $3.44 per share, indicating a 17.4% year-over-year increase.

Zscaler’s shares have plunged 19.2% in the past year. The Zacks Consensus Estimate for ZS’ fiscal 2025 bottom line is pinned at $2.99 per share, indicating a year-over-year decline of 6.3%.

Fortinet’s shares have gained 56.1% in the past year. The Zacks Consensus Estimate for FTNT’s full-year 2025 earnings is pegged at $2.43 per share, suggesting a year-over-year increase of 2.5%.