PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Ambarella's unaudited condensed consolidated financial statements for Q2 and H1 FY2026, including core financial statements and detailed accounting notes [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$706.43 million** by July 31, 2025, with corresponding changes in liabilities and shareholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Total current assets | $343,872 | $320,551 | | Total assets | $706,431 | $688,968 | | Total current liabilities | $125,942 | $120,994 | | Total liabilities | $129,911 | $127,556 | | Total shareholders' equity | $576,520 | $561,412 | - Cash and cash equivalents decreased slightly from **$144.62 million** to **$142.74 million**[9](index=9&type=chunk) - Accounts receivable, net, increased from **$29.77 million** to **$42.90 million**, indicating higher sales or slower collections[9](index=9&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Revenue significantly increased for Q2 and H1 FY2026, leading to substantial reductions in operating and net losses despite higher operating expenses Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $95,511 | $63,724 | $181,383 | $118,197 | | Gross profit | $56,231 | $38,741 | $107,767 | $71,901 | | Total operating expenses | $78,220 | $75,028 | $155,614 | $147,633 | | Loss from operations | $(21,989) | $(36,287) | $(47,847) | $(75,732) | | Net loss | $(19,995) | $(34,889) | $(44,323) | $(72,821) | | Basic net loss per share | $(0.47) | $(0.85) | $(1.05) | $(1.78) | - Revenue increased by **49.9%** for the three months and **53.5%** for the six months ended July 31, 2025, compared to the same periods in the prior fiscal year[11](index=11&type=chunk) - Net loss per share improved from **$(0.85)** to **$(0.47)** for the three-month period and from **$(1.78)** to **$(1.05)** for the six-month period[11](index=11&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss decreased for Q2 and H1 FY2026, reflecting reduced net loss partially offset by changes in unrealized gains/losses on investments Condensed Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(19,995) | $(34,889) | $(44,323) | $(72,821) | | Other comprehensive income (loss), net of tax | $(267) | $407 | $292 | $18 | | Comprehensive loss | $(20,262) | $(34,482) | $(44,031) | $(72,803) | [Unaudited Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity increased to **$576.52 million** by July 31, 2025, primarily from equity plans and stock compensation, partially offset by net loss and repurchases Changes in Shareholders' Equity (in thousands) | Item | 6 Months Ended July 31, 2025 | | :------------------------------------------ | :--------------------------- | | Balance—January 31, 2025 | $561,412 | | Issuance of shares through employee equity plans | $6,713 | | Issuance of shares through employee stock purchase plan | $4,479 | | Stock repurchase | $(1,000) | | Stock-based compensation expense | $24,881 | | Other comprehensive income (loss) - net of tax | $559 | | Net loss | $(24,328) | | Balance—April 30, 2025 | $572,716 | | Issuance of shares through employee equity plans | $170 | | Stock-based compensation expense | $23,896 | | Other comprehensive income (loss) - net of tax | $(267) | | Net loss | $(19,995) | | Balance—July 31, 2025 | $576,520 | - Ordinary shares outstanding increased from **41,963,959** at January 31, 2025, to **42,674,711** at July 31, 2025[15](index=15&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased for H1 FY2026, while investing and financing activities used more cash due to investments and repurchases Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $20,307 | $1,787 | | Net cash provided by (used in) investing activities | $(21,099) | $5,757 | | Net cash provided by (used in) financing activities | $(656) | $1,467 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(1,448) | $9,011 | | Cash, cash equivalents and restricted cash at end of period | $143,181 | $153,932 | - The increase in operating cash flow was primarily due to a net profit adjusted for non-cash items in 2025, compared to a net loss in 2024[18](index=18&type=chunk) - Investing activities shifted from providing **$5.76 million** in 2024 to using **$21.10 million** in 2025, mainly due to increased investment purchases[18](index=18&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on Ambarella's accounting policies, financial instruments, inventory, and other crucial financial components [1. Organization and Summary of Significant Accounting Policies](index=9&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) Ambarella develops low-power semiconductor solutions with AI processing, advanced image signal processing, and HD/Ultra HD compression for various markets - Ambarella is a leading developer of low-power system-on-a-chip (SoC) semiconductors offering AI processing, advanced image signal processing, and high-definition (HD) and Ultra HD compression[20](index=20&type=chunk) - The company's system-on-a-chip (SoC) products integrate high-definition video processing, image processing, AI algorithms, audio processing, and system functions onto a single chip, targeting applications like video security, ADAS, and autonomous driving[20](index=20&type=chunk) - New accounting guidance (ASU 2023-09, ASU 2024-03, ASU 2025-05) is being evaluated, with ASU 2023-09 expected to impact financial disclosures for fiscal year ending January 31, 2026[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [2. Financial Instruments and Fair Value](index=13&type=section&id=2.%20Financial%20Instruments%20and%20Fair%20Value) The marketable debt securities portfolio increased to **$126.31 million**, primarily in corporate bonds and U.S. government securities, with most maturing within 1-5 years Marketable Debt Securities Portfolio (in thousands) | Category | July 31, 2025 Fair Value | January 31, 2025 Fair Value | | :------------------------ | :----------------------- | :-------------------------- | | Money market funds | $861 | $849 | | Fixed deposits | $7,001 | $3,000 | | Corporate bonds | $61,728 | $55,126 | | Asset-backed securities | $20,362 | $20,365 | | U.S. government securities | $36,354 | $30,152 | | Total | $126,306 | $109,492 | Contractual Maturities of Investments (in thousands) | Maturity Period | July 31, 2025 | January 31, 2025 | | :---------------- | :------------ | :--------------- | | Due within one year | $31,781 | $35,405 | | Due in 1 - 5 years | $94,068 | $74,087 | | Due in 5 - 15 years | $457 | — | | Total | $126,306 | $109,492 | - The fair value of money market funds and fixed deposits are classified within Level 1, while other debt securities are classified within Level 2[37](index=37&type=chunk) [3. Inventories](index=16&type=section&id=3.%20Inventories) Total inventories slightly decreased to **$33.81 million** by July 31, 2025, with a shift from finished goods to work-in-progress Inventories (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :-------------- | :------------ | :--------------- | | Work-in-progress | $22,234 | $20,546 | | Finished goods | $11,574 | $13,882 | | Total | $33,808 | $34,428 | [4. Property and Equipment, Net](index=16&type=section&id=4.%20Property%20and%20Equipment,%20Net) Net property and equipment increased to **$10.09 million** by July 31, 2025, primarily due to additions in computer hardware and construction in progress Property and Equipment, Net (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :--------------------------- | :------------ | :--------------- | | Computer hardware and software | $27,488 | $25,730 | | Tools and equipment | $9,226 | $8,625 | | Construction in progress | $861 | $307 | | Total property and equipment, net | $10,092 | $9,084 | - Depreciation expense was approximately **$1.2 million** for both three-month periods and **$2.3 million** and **$2.4 million** for the six-month periods ended July 31, 2025 and 2024, respectively[39](index=39&type=chunk) [5. Goodwill and Intangible Assets, Net](index=16&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets,%20Net) Goodwill remained constant at **$303.63 million**, while net intangible assets decreased to **$41.88 million** due to amortization, with **$7.0 million** in unamortized software licenses Intangible Assets, Net (in thousands) | Category | July 31, 2025 Net Carrying Amount | January 31, 2025 Net Carrying Amount | | :-------------------- | :-------------------------------- | :----------------------------------- | | Software licenses | $23,322 | $26,296 | | Developed technology | $9,696 | $11,211 | | Customer relationships | $7,700 | $8,433 | | Trade name | $1,161 | $1,339 | | Total | $41,879 | $47,279 | - Goodwill remained unchanged at **$303.63 million**[9](index=9&type=chunk) - Approximately **$7.0 million** of software licenses with alternative uses are not yet amortized, pending product release[43](index=43&type=chunk) [6. Accrued and Other Current Liabilities](index=17&type=section&id=6.%20Accrued%20and%20Other%20Current%20Liabilities) Accrued and other current liabilities decreased to **$76.19 million** by July 31, 2025, mainly due to lower employee compensation and software license liabilities Accrued and Other Current Liabilities (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :----------------------------- | :------------ | :--------------- | | Accrued employee compensation | $20,732 | $22,941 | | Accrued product development costs | $32,159 | $32,929 | | Software license liabilities, current | $4,759 | $7,021 | | Development deposit liability | $13,500 | $13,500 | | Other accrued liabilities | $5,040 | $4,390 | | Total | $76,190 | $80,781 | - Approximately **$9.8 million** of annual bonus was paid in Q1 FY2026, with **$3.7 million** in cash and **$6.1 million** in fully vested restricted stock units[44](index=44&type=chunk) [7. Leases](index=17&type=section&id=7.%20Leases) Operating lease expense remained stable at approximately **$0.9 million** for Q2 and **$1.8 million** for H1 FY2026, with a weighted-average remaining lease term of 2.16 years Operating Lease Expenses and Cash Flows (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease expense | $900 | $1,000 | $1,800 | $2,000 | | Cash paid for operating leases | $974 | $1,004 | $1,945 | $1,987 | | Operating lease assets obtained | $66 | $3,335 | $66 | $3,335 | - The weighted average remaining lease term is **2.16 years**, and the weighted average discount rate is **3.25 percent** as of July 31, 2025[47](index=47&type=chunk) [8. Deferred Revenue](index=18&type=section&id=8.%20Deferred%20Revenue) Deferred revenue primarily stems from NRE charges and tiered-pricing product shipments, with **$7.7 million** recognized and **$39.2 million** remaining in unsatisfied performance obligations - Deferred revenue is mainly from nonrecurring engineering (NRE) charges and product shipments with material rights under tiered-pricing contracts[48](index=48&type=chunk) - Approximately **$7.7 million** of deferred revenue from the prior fiscal year was recognized as revenue during the six months ended July 31, 2025[48](index=48&type=chunk) - Remaining unsatisfied performance obligations were approximately **$39.2 million** as of July 31, 2025, with about **81%** expected to be recognized within the next 12 months[49](index=49&type=chunk) [9. Other Long-Term Liabilities](index=18&type=section&id=9.%20Other%20Long-Term%20Liabilities) Other long-term liabilities decreased to **$2.30 million** by July 31, 2025, mainly due to a significant reduction in non-current software license liabilities Other Long-Term Liabilities (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Unrecognized tax benefits, including interest | $1,104 | $1,008 | | Deferred tax liabilities | $694 | $695 | | Software license liabilities, non-current | $448 | $2,420 | | Other long-term liabilities | $55 | $3 | | Total | $2,301 | $4,126 | [10. Capital Stock](index=18&type=section&id=10.%20Capital%20Stock) Ambarella increased shares reserved for ESPP by **524,549** in Q1 FY2026 and extended its share repurchase program through June 30, 2026, with **$48.0 million** remaining after **$1.0 million** in repurchases - **524,549** shares were added to ordinary shares reserved for issuance under the Amended and Restated 2012 Employee Stock Purchase Plan (ESPP) in Q1 FY2026[52](index=52&type=chunk) - The share repurchase program was extended through June 30, 2026, with approximately **$48.0 million** available for repurchases as of July 31, 2025[54](index=54&type=chunk) - During the six months ended July 31, 2025, the company repurchased **24,152** shares for approximately **$1.0 million** in cash[54](index=54&type=chunk) [11. Stock-based Compensation](index=19&type=section&id=11.%20Stock-based%20Compensation) Total stock-based compensation expense slightly decreased for Q2 and H1 FY2026, with **$137.5 million** in unrecognized cost for unvested restricted stock units Stock-based Compensation Expense (in thousands) | Category | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenue | $780 | $833 | $1,731 | $1,440 | | Research and development | $16,972 | $18,395 | $34,557 | $36,016 | | Selling, general and administrative | $7,436 | $8,384 | $15,030 | $16,192 | | Total | $25,188 | $27,612 | $51,318 | $53,648 | - Total unrecognized compensation cost related to unvested restricted stock units was approximately **$137.5 million** as of July 31, 2025, with a weighted-average recognition period of **2.23 years**[55](index=55&type=chunk) - The weighted-average exercise price for outstanding stock options at July 31, 2025, was **$51.89**, with an aggregate intrinsic value of **$3.42 million**[57](index=57&type=chunk) [12. Net Loss Per Ordinary Share](index=21&type=section&id=12.%20Net%20Loss%20Per%20Ordinary%20Share) Basic and diluted net loss per ordinary share improved for Q2 and H1 FY2026, with potentially dilutive securities excluded due to their antidilutive effect Net Loss Per Ordinary Share (in thousands, except share and per share data) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(19,995) | $(34,889) | $(44,323) | $(72,821) | | Weighted-average ordinary shares - basic | 42,546,979 | 41,129,754 | 42,383,475 | 40,952,373 | | Basic net loss per share | $(0.47) | $(0.85) | $(1.05) | $(1.78) | | Diluted net loss per share | $(0.47) | $(0.85) | $(1.05) | $(1.78) | - Potentially dilutive securities, including options, restricted stock units, and ESPP awards, were excluded from diluted EPS computation due to their antidilutive effect[60](index=60&type=chunk) [13. Income Taxes](index=22&type=section&id=13.%20Income%20Taxes) Income tax expense decreased for Q2 and H1 FY2026, primarily due to reduced U.S. profits and tax reductions from the One Big Beautiful Bill Act (OBBBA) Income Taxes (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Loss before income taxes | $(19,742) | $(34,142) | $(43,425) | $(71,316) | | Provision for income taxes | $253 | $747 | $898 | $1,505 | | Effective tax rate | (1.3)% | (2.2)% | (2.1)% | (2.1)% | - The decrease in income tax expense was primarily due to a decrease in the proportion of profits generated in the U.S. and reduction in U.S. tax expenses because of the One Big Beautiful Bill Act (OBBBA)[61](index=61&type=chunk) - The company's fiscal years 2022-2025 are generally open for U.S. federal tax examination, and 2021-2025 for state tax authorities[63](index=63&type=chunk) [14. Commitments and Contingencies](index=22&type=section&id=14.%20Commitments%20and%20Contingencies) Total manufacturing purchase commitments increased to **$69.3 million** by July 31, 2025, with no material loss liabilities from adverse commitments or accruals for legal matters - Total manufacturing purchase commitments were approximately **$69.3 million** as of July 31, 2025, up from **$56.4 million** at January 31, 2025[66](index=66&type=chunk) - The company indemnifies certain vendors and customers against third-party claims related to intellectual property and product liability, but no liabilities have been recorded for these obligations[68](index=68&type=chunk) - No accruals for contingent liabilities related to commercial disputes, employment issues, or intellectual property claims were recorded as of July 31, 2025[69](index=69&type=chunk) [15. Segment Reporting](index=23&type=section&id=15.%20Segment%20Reporting) Ambarella operates as a single segment, with revenue geographically concentrated in Taiwan and WT Microelectronics Co., Ltd. as a major customer - The company operates as a single operating and reportable segment, deriving revenue from AI-based processing and video/image processing SoC solutions[70](index=70&type=chunk) Geographic Revenue (in thousands) | Region | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Taiwan | $68,137 | $39,830 | $122,036 | $73,515 | | Asia Pacific other than Taiwan | $17,789 | $13,620 | $34,348 | $26,370 | | Europe | $4,690 | $5,744 | $13,429 | $9,943 | | North America other than United States | $4,197 | $3,507 | $9,342 | $6,277 | | United States | $698 | $1,023 | $2,228 | $2,092 | | Total revenue | $95,511 | $63,724 | $181,383 | $118,197 | - WT Microelectronics Co., Ltd. accounted for approximately **71.3%** and **67.4%** of total revenue for the three and six months ended July 31, 2025, respectively[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Ambarella's significant revenue growth, reduced operating losses, and increased cash flow from operations, driven by AI inference processors and NRE services [Overview](index=25&type=section&id=Overview) Ambarella develops low-power AI-enabled SoCs with CVflow™ technology for edge inference AI, targeting video security, ADAS, and industrial robotics markets - Ambarella is a leading developer of low-power system-on-a-chip (SoC) semiconductors providing powerful artificial intelligence (AI) processing, advanced image signal processing, and high-resolution video compression[77](index=77&type=chunk) - The company's CVflow™ technology supports various AI algorithms, including object detection, classification, tracking, and semantic segmentation, and can process other sensor modalities like lidar and radar[77](index=77&type=chunk) - Future revenue growth is expected to depend significantly on expanding within camera markets with AI technology, particularly in IoT, AI-enabled security cameras, AI-based driving applications, and industrial and robotics markets[79](index=79&type=chunk) [Financial Highlights](index=27&type=section&id=Financial%20Highlights) Ambarella reported significant revenue growth for Q2 and H1 FY2026, with reduced operating losses and substantially increased cash flow from operating activities - Revenue increased by **49.9%** to **$95.5 million** for the three months and **53.5%** to **$181.4 million** for the six months ended July 31, 2025, compared to the prior fiscal year[85](index=85&type=chunk) - Operating losses decreased to **$22.0 million** and **$47.8 million** for the three and six months ended July 31, 2025, respectively, from **$36.3 million** and **$75.7 million** in the prior year[85](index=85&type=chunk) - Cash flows from operating activities increased to **$20.3 million** for the six months ended July 31, 2025, from **$1.8 million** in the prior year[85](index=85&type=chunk) [Factors Affecting Our Performance](index=27&type=section&id=Factors%20Affecting%20Our%20Performance) Ambarella's performance hinges on capitalizing on AI and computer vision trends, developing new solutions, managing costs, and navigating market concentration and supply chain risks - Future success is critical on the ability to develop advanced AI and computer vision technologies and gain customer acceptance in emerging applications like ADAS and industrial robotics[86](index=86&type=chunk) - The company must continuously invest in R&D to introduce new or enhanced solutions that meet market requirements, especially in AI and computer vision technologies[87](index=87&type=chunk) - Revenue remains significantly concentrated in IoT and automotive markets, with a limited number of ODMs and OEMs accounting for a substantial portion of sales[90](index=90&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Ambarella experienced substantial revenue growth for Q2 and H1 FY2026, leading to reduced net losses despite a slight gross margin decrease and increased operating expenses [Revenue](index=30&type=section&id=Revenue) Revenue increased significantly for Q2 and H1 FY2026, driven by higher product unit shipments, increased AI inference processor sales, and NRE project service revenue Revenue (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $95,511 | $63,724 | $181,383 | $118,197 | - Revenue growth was **49.9%** for the three months and **53.5%** for the six months ended July 31, 2025, compared to the same periods in the prior fiscal year[105](index=105&type=chunk) - Increases were primarily due to higher product unit shipments, an increased percentage of sales from higher average selling price AI inference processors, and higher NRE project service revenue[105](index=105&type=chunk) [Cost of Revenue and Gross Margin](index=31&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Margin) Gross margin slightly decreased for Q2 and H1 FY2026 due to higher manufacturing costs for advanced process technologies, partially offset by increased NRE project service revenue Gross Margin Percentage | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :---------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Gross margin | 58.9% | 60.8% | 59.4% | 60.8% | - Gross margin decreased by **1.9 percentage points** for the three months and **1.4 percentage points** for the six months ended July 31, 2025[106](index=106&type=chunk) - The decrease was primarily due to higher manufacturing costs for advanced process technologies and lower sales of previously reserved inventory, partially offset by higher NRE project service revenue[106](index=106&type=chunk) [Research and Development](index=31&type=section&id=Research%20and%20Development) Research and development expense increased for Q2 and H1 FY2026, primarily due to additional engineering-related expenses for chip development and higher personnel costs from increased headcount Research and Development Expense (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development | $59,734 | $56,760 | $118,553 | $110,897 | - R&D expense increased by approximately **$2.1 million** and **$4.4 million** for engineering-related expenses for the three and six months, respectively[107](index=107&type=chunk) - Personnel costs, including stock-based compensation, employee benefits, and incentive bonus, increased by approximately **$1.0 million** and **$3.4 million** for the three and six months, respectively[107](index=107&type=chunk) [Selling, General and Administrative](index=31&type=section&id=Selling,%20General%20and%20Administrative) Selling, general and administrative expense marginally increased for Q2 and H1 FY2026, mainly due to higher outside professional service expenses, partially offset by lower personnel and facility-related costs Selling, General and Administrative Expense (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Selling, general and administrative | $18,486 | $18,268 | $37,061 | $36,736 | - The increase was primarily due to approximately **$0.9 million** and **$0.8 million**, respectively, of higher outside professional service expense[108](index=108&type=chunk) - This was partially offset by approximately **$0.7 million** and **$0.5 million**, respectively, of lower personnel costs and facility-related expenses[108](index=108&type=chunk) [Other Income, Net](index=31&type=section&id=Other%20Income,%20Net) Other income, net, marginally increased for Q2 and H1 FY2026, driven by higher yields from debt security investments, partially offset by lower interest income and higher foreign currency losses Other Income, Net (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Other income, net | $2,247 | $2,145 | $4,422 | $4,416 | - The marginal increase was primarily due to higher yields from debt security investments[109](index=109&type=chunk) - This was partially offset by lower interest income from cash deposits and higher net losses from foreign currency transactions and remeasurements[109](index=109&type=chunk) [Provision (Benefit) for Income Taxes](index=33&type=section&id=Provision%20(Benefit)%20for%20Income%20Taxes) Income tax expense decreased for Q2 and H1 FY2026, primarily due to reduced U.S. profits and tax reductions from the One Big Beautiful Bill Act (OBBBA) Provision for Income Taxes (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Provision for income taxes | $253 | $747 | $898 | $1,505 | | Effective tax rate | (1.3)% | (2.2)% | (2.1)% | (2.1)% | - The decrease in income tax expense was primarily due to a decrease in the proportion of profits generated in the U.S. and reduction in U.S. tax expenses because of the One Big Beautiful Bill Act (OBBBA)[111](index=111&type=chunk) - The company does not expect the OBBBA to have a material impact on its consolidated financial statements[112](index=112&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) Ambarella had **$261.2 million** in cash and marketable securities by July 31, 2025, with increased operating cash flow but higher cash usage in investing and financing activities [Cash Flows](index=35&type=section&id=Cash%20Flows) Net cash from operating activities significantly increased for H1 FY2026, while investing and financing activities used more cash due to investments and stock repurchases Summary of Cash Flows (in thousands) | Metric | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $20,307 | $1,787 | | Net cash provided by (used in) investing activities | $(21,099) | $5,757 | | Net cash provided by (used in) financing activities | $(656) | $1,467 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(1,448) | $9,011 | - Net cash provided by operating activities increased primarily due to a net profit adjusted for certain non-cash items for the six months ended July 31, 2025, compared to a net loss in the prior year[115](index=115&type=chunk) - Net cash used in investing activities increased due to approximately **$21.9 million** of additional net cash outflow for debt security investments and **$5.0 million** higher payments for capital assets and software licenses[116](index=116&type=chunk) [Share Repurchase Program](index=35&type=section&id=Share%20Repurchase%20Program) The share repurchase program was extended through June 30, 2026, with **$48.0 million** remaining after **$1.0 million** in repurchases during H1 FY2026 - The share repurchase program was extended through June 30, 2026[118](index=118&type=chunk) - During the six months ended July 31, 2025, **24,152** ordinary shares were repurchased for approximately **$1.0 million**[118](index=118&type=chunk) - As of July 31, 2025, approximately **$48.0 million** remained available for repurchases under the program[118](index=118&type=chunk) [Operating and Capital Expenditure Requirements](index=35&type=section&id=Operating%20and%20Capital%20Expenditure%20Requirements) Ambarella expects existing cash balances to cover anticipated cash requirements for at least the next 12 months, with potential future needs met by additional financing - Existing cash balances are expected to be sufficient to meet anticipated cash requirements for at least the next 12 months[119](index=119&type=chunk) - Future working capital needs may be met by selling equity or convertible debt securities or borrowing funds commercially[119](index=119&type=chunk) [Contractual Obligations, Commitments and Contingencies](index=35&type=section&id=Contractual%20Obligations,%20Commitments%20and%20Contingencies) Manufacturing purchase obligations increased to **$69.3 million** by July 31, 2025, with no other material changes to contractual obligations reported - Manufacturing purchase obligations with independent contract manufacturers totaled **$69.3 million** as of July 31, 2025[120](index=120&type=chunk) - No other material changes in contractual obligations, commitments, and contingencies were reported since the fiscal year 2025 Annual Report on Form 10-K[121](index=121&type=chunk) [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) As of July 31, 2025, Ambarella did not engage in any off-balance sheet arrangements, including structured finance or special purpose entities - The company did not engage in any off-balance sheet arrangements as of July 31, 2025[122](index=122&type=chunk) [Recent Authoritative Accounting Guidance](index=36&type=section&id=Recent%20Authoritative%20Accounting%20Guidance) Information regarding recently issued accounting pronouncements is detailed in Note 1 of the Notes to Condensed Consolidated Financial Statements - Refer to Note 1 of Notes to Condensed Consolidated Financial Statements for information regarding recently issued accounting pronouncements[123](index=123&type=chunk) [Critical Accounting Policies and Significant Management Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Management%20Estimates) No material changes to Ambarella's critical accounting policies and estimates were reported compared to its Annual Report on Form 10-K for the 2025 fiscal year - No material changes to critical accounting policies and estimates were reported compared to the Annual Report on Form 10-K for the 2025 fiscal year[124](index=124&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures were reported compared to the company's Annual Report on Form 10-K for the 2025 fiscal year - No material changes to market risk disclosures were reported compared to the Annual Report on Form 10-K for the 2025 fiscal year[125](index=125&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of July 31, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of July 31, 2025[127](index=127&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended July 31, 2025[128](index=128&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) Ambarella is not currently engaged in any material legal proceedings, with further details on commitments and contingencies provided in Note 14 of the financial statements - The company is not engaged in any material legal proceedings at this time[130](index=130&type=chunk) - Refer to Note 14, Commitments and Contingencies, for additional information[130](index=130&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks that could materially affect Ambarella's business, financial condition, and results of operations, including customer design wins, market penetration, supply chain, and AI adoption [Summary of Risk Factors](index=38&type=section&id=Summary%20of%20Risk%20Factors) Ambarella faces risks from customer design win dependency, challenges in new market penetration, global supply chain impacts, and uncertainties surrounding AI adoption - Risks include customer design win dependency and the commercial success of customer products[132](index=132&type=chunk) - Failure to penetrate new markets, especially automotive OEM and ADAS, could harm revenue and financial condition[132](index=132&type=chunk) - Impacts of global supply chain challenges could adversely affect business, financial condition, and results of operations[132](index=132&type=chunk) [Risks Related to Our Business and Our Industry](index=41&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Our%20Industry) Ambarella's business depends on design wins, timely innovation, managing supply chain disruptions, addressing AI technology risks, and navigating intense competition and geopolitical exposures - Reliance on OEMs to design solutions into their products means business would suffer without design wins, especially in new markets like OEM automotive and robotics with longer cycles and higher resource demands[134](index=134&type=chunk) - Failure to develop and introduce new or enhanced solutions that meet market requirements on a timely basis could impair customer attraction and retention, and harm competitive position[137](index=137&type=chunk) - Uncertain risks related to the adoption, use, or application of emerging AI technologies by customers could adversely impact financial results and lead to reputational harm and liability[141](index=141&type=chunk) [Risks Related to Our Financial Performance or Results](index=51&type=section&id=Risks%20Related%20to%20Our%20Financial%20Performance%20or%20Results) Ambarella's financial performance is subject to fluctuations from demand, product mix, pricing, and industry cycles, with significant dependence on a limited number of customers and exposure to exchange rate volatility - Fluctuations in operating results on a quarterly and annual basis could cause the market price of ordinary shares to decline due to factors like demand shifts, order cancellations, and competitive dynamics[175](index=175&type=chunk)[177](index=177&type=chunk) - Dependence on a limited number of customers, with WT Microelectronics accounting for approximately **67%** of total revenue for the six months ended July 31, 2025, poses a risk to revenue if these relationships are not retained or expanded[149](index=149&type=chunk) - Fluctuations in exchange rates between the U.S. dollar and currencies in Asia (e.g., New Taiwan Dollar, Chinese Yuan Renminbi) can adversely affect operating results, as a significant portion of sales and expenses are international[180](index=180&type=chunk)[181](index=181&type=chunk) [Risks Related to Our Dependence on Third Parties](index=57&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) Ambarella heavily relies on third parties for manufacturing, including Samsung, without long-term contracts, and on a single distributor, WT Microelectronics, creating vulnerabilities to disruptions and increased costs - Reliance on third parties for substantially all manufacturing operations, including wafer fabrication, assembly, and testing, primarily Samsung, exposes the company to risks if these parties fail to produce and deliver products according to demands[188](index=188&type=chunk) - The absence of long-term supply contracts with most primary third-party manufacturing vendors means they are not obligated to supply products at specific quantities or prices, leading to potential capacity allocation issues and increased costs[191](index=191&type=chunk) - A substantial portion of revenue is processed through a single distributor, WT Microelectronics (**67%** for H1 2025), and the loss of this distributor could cause significant disruptions in shipments and adversely affect operations and financial condition[197](index=197&type=chunk) [Risks Related to Our Legal and Regulatory Environment](index=63&type=section&id=Risks%20Related%20to%20Our%20Legal%20and%20Regulatory%20Environment) Ambarella faces risks from global economic and political conditions, including U.S.-China trade tensions, export controls, and complex data privacy and environmental regulations - Global economic and political conditions, including escalating trade tensions between the U.S. and China, may impact business and financial condition through tariffs, export restrictions, and potential retaliatory actions[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - The company is subject to governmental export and import controls, which could subject it to liability or impair its ability to compete in international markets, including restrictions on selling products to several China customers (e.g., Hikvision, Dahua)[212](index=212&type=chunk)[213](index=213&type=chunk) - Compliance with increasingly complex environmental regulations (e.g., EU's RoHS directive) and data processing, privacy, data protection, and cybersecurity laws (e.g., GDPR, CCPA, China's Data Security Law and PIPL) may delay or interrupt operations and adversely affect business[216](index=216&type=chunk)[217](index=217&type=chunk)[222](index=222&type=chunk) [Risks Related to Our Intellectual Property](index=71&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Ambarella's success depends on protecting its intellectual property, as failure to do so or assertions of infringement by third parties could lead to significant costs and harm its business - Failure to adequately protect intellectual property rights (patents, copyrights, trademarks, trade secrets) could impair the ability to compete effectively or defend against litigation[235](index=235&type=chunk) - Third parties' assertions of infringement of their intellectual property rights could result in significant costs, substantial damages, product redesigns, or the need to obtain licenses, adversely affecting operating results[237](index=237&type=chunk) - The use of open-source software in products, processes, and technology may expose the company to additional risks and could inadvertently require public disclosure of proprietary source code[241](index=241&type=chunk)[242](index=242&type=chunk) [Risks Related to Ownership of Our Ordinary Shares](index=72&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Ordinary%20Shares) The market price of Ambarella's ordinary shares is highly volatile, and provisions in its corporate documents and Cayman Islands law may discourage acquisitions or hinder shareholder protection - The market price of ordinary shares has historically been highly volatile and is subject to wide fluctuations based on financial estimates, operating results, industry conditions, and various other factors[243](index=243&type=chunk) - Provisions in the memorandum and articles of association and Cayman Islands corporate law, such as a classified board and restrictions on shareholder actions, may delay or prevent an acquisition, adversely affecting the value of ordinary shares[245](index=245&type=chunk)[247](index=247&type=chunk) - Holders of ordinary shares may face difficulties in protecting their interests or obtaining/enforcing judgments due to Cayman Islands law offering less developed securities laws and investor protection compared to the United States[249](index=249&type=chunk)[252](index=252&type=chunk) [General Risk Factors](index=76&type=section&id=General%20Risk%20Factors) Ambarella's operations are vulnerable to interruptions from technical breakdowns, natural disasters, and geopolitical conditions, particularly in Taiwan or China, with climate change also posing long-term impacts - Operations are vulnerable to interruptions caused by technical breakdowns, natural disasters, infrastructure failures, pandemics, and geopolitical conditions, especially in seismically active areas like the San Francisco Bay Area and Taiwan[253](index=253&type=chunk) - Climate change and related policies and regulations may have a long-term impact on the business, potentially disrupting supply chains, operations, and reducing customer demand[254](index=254&type=chunk)[255](index=255&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=78&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 FY2026, Ambarella repurchased **24,152** ordinary shares for approximately **$1.0 million** under its extended share repurchase program, with **$48.0 million** remaining available Share Repurchases (in millions, except share data) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Dollar Value of Shares that May Yet Be Purchased | | :------------------------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------- | | February 1, 2025 to February 28, 2025 | — | — | $49.0 | | March 1, 2025 to March 31, 2025 | — | — | $49.0 | | April 1, 2025 to April 30, 2025 | 24,152 | $41.38 | $48.0 | | Total | 24,152 | $41.38 | $48.0 | - The share repurchase program was extended through June 30, 2026, with an initial **$50.0 million** authorization[260](index=260&type=chunk) - As of July 31, 2025, **$48.0 million** was available for repurchases under the program[260](index=260&type=chunk) [Item 5. Other Information](index=78&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended July 31, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ending July 31, 2025[258](index=258&type=chunk) [Item 6. Exhibits](index=78&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or incorporated by reference as part of the Quarterly Report, including the Amended and Restated Memorandum of Association and officer certifications - The exhibit index includes the Amended and Restated Memorandum of Association, certifications of Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents[262](index=262&type=chunk) [Signatures](index=80&type=section&id=Signatures) The report was duly signed on September 3, 2025, by Feng-Ming Wang, President and Chief Executive Officer, and John A. Young, Chief Financial Officer - The report was signed by Feng-Ming Wang, President and Chief Executive Officer, and John A. Young, Chief Financial Officer, on September 3, 2025[267](index=267&type=chunk)

Core Insights - The back-to-school and college shopping season in the U.S. is experiencing a significant increase in early shopping, with 67% of shoppers starting their purchases by early July, up from 55% last year, marking the highest level since 2018 [1][2] Spending Trends - K-12 shoppers have an average budget of $295.81 for electronics, totaling $13.5 billion, $249.36 for clothing and accessories ($11.4 billion), $143.77 for school supplies ($6.6 billion), and $169.13 for shoes ($7.8 billion [3] - College students and parents are expected to spend an average of $309.50 on electronics ($20.7 billion), $191.39 on dorm furnishings ($12.28 billion), $166.07 on clothing and accessories ($11.1 billion), $140.24 on food ($9.4 billion), and $117.95 on shoes ($7.9 billion) [4] Company Insights - Costco Wholesale (COST) operates membership warehouses selling food and general merchandise at discounted prices, holding a Zacks Rank of 3 (Hold) and a VGM Score of B [5] - Lowe's Companies (LOW) is a leading home improvement retailer with a Zacks Rank of 3 and an upbeat VGM Score of A, offering essentials for back-to-campus needs [6] - Ambarella (AMBA) develops semiconductors for video compression and image processing, holding a Zacks Rank of 3 [7] - Amazon.com (AMZN) is a major e-commerce provider with a Zacks Rank of 3 [8] ETF Insights - ProShares Online Retail ETF (ONLN) tracks online retailers and charges 58 bps in fees with a yield of 0.65% annually [9] - VanEck Retail ETF (RTH) tracks the performance of various retail companies and charges 35 bps in fees with a yield of 0.70% annually [10][11] - Invesco Food & Beverage ETF (PBJ) focuses on U.S. food and beverage companies, charging 62 bps in fees with a yield of 1.68% annually [12] - VanEck Semiconductor ETF (SMH) tracks semiconductor companies and charges 35 bps in fees with a yield of 0.37% annually [13]

Group 1: Hong Kong Stocks Performance - BYD Electronics (00285) rose over 7%, reporting a nearly 14% year-on-year increase in net profit for the first half of 2025, with positive progress in AI data center business [1] - Beihai Kangcheng-B (01228) surged over 11%, achieving profitability in the first half of the year and recently forming a strategic partnership with Baiyang Pharmaceutical [1] - MicroPort Medical (00853) increased over 11%, with a reported loss of $46.602 million for the first half of 2025, a 51.9% reduction in loss year-on-year [1] - Bank of China Hong Kong (02388) rose over 6%, reporting a net profit of HKD 22.12 billion for the first half of 2025, with an increase in net trading income year-on-year [1] - UBTECH (09880) increased over 4%, announcing a strategic partnership agreement worth $1 billion with international investment firm Infini Capital [1] - Gold stocks performed well, with China Silver Group (00815) up over 8%, Zhaojin Mining (01818) up over 7%, Shandong Gold (01787) up over 6%, Chifeng Jilong Gold (06693) up over 6%, and Zijin Mining (02899) up over 6%, driven by rising gold prices due to increased interest rate cut expectations [1] Group 2: Chinese Companies' Financial Results - China Communications Construction (01800) fell over 5%, reporting a 16.9% year-on-year decrease in net profit for the first half of 2025 and not declaring an interim dividend [2] - Evergrande Property (06666) declined over 3%, with a 5.6% year-on-year drop in net profit for the first half of the year, with management expressing pessimism about economic benefits from Evergrande Group [2] - Zoomlion Heavy Industry (01157) rose over 2%, reporting a more than 20% year-on-year increase in net profit for the first half of 2025, with institutions optimistic about export growth in the second half [2] - Midea Group (00300) increased over 2%, reporting a 25.04% year-on-year increase in net profit for the first half of 2025 and proposing an interim dividend of HKD 5 per 10 shares [2] Group 3: US Stocks Performance - Autodesk (ADSK.US) rose 9.09%, reporting a 17% year-on-year revenue increase for the second fiscal quarter and raising its full-year revenue and adjusted EPS guidance [3] - Gap (GAP.US) increased 1.52%, with revenue slightly below market expectations for the second fiscal quarter, and management indicated that tariffs may pressure annual gross margins [3] - Marvell Technology (MRVL.US) fell 18.60%, reporting record revenue of $2.01 billion for the second quarter, a 58% year-on-year increase, but provided a Q3 revenue guidance slightly below expectations [3] - Alibaba (BABA.US) surged 12.90%, with a market value increase of $36.7 billion overnight, reporting an 18% year-on-year decline in Non-GAAP net profit, but strong resilience in core business [3] - Ambarella (AMBA.US) rose 16.78%, providing strong guidance for Q3 revenue, expected to be between $100 million and $108 million, reflecting continued growth in edge AI demand [3] - IREN Ltd (IREN.US) increased 14.93%, exceeding expectations in its fourth-quarter earnings report and announcing a priority partnership with NVIDIA [3] Group 4: Other Notable Stocks - Dell Technologies (DELL.US) fell 8.88%, reporting that its infrastructure division's operating profit margin was below expectations [4] - Affirm Holdings (AFRM.US) rose 10.59%, reporting better-than-expected revenue and profit for the fourth fiscal quarter [4] - TryHard Holdings (THH.US) declined 9.80%, issuing 1.5 million shares at $4 each, at the lower end of the pricing range [5] - GrowHub (TGHL.US) increased 1.48%, issuing 3.8 million shares at $4 each, also at the lower end of the pre-set pricing range [5]

Core Insights - Ambarella reported strong quarterly results, with a stock price increase of approximately 17% following the announcement [1] Financial Performance - For Q2 of fiscal 2026, Ambarella generated $95.5 million in revenue, marking a nearly 50% year-over-year increase [2] - The company's non-GAAP net income rose by 16% to $6.4 million, equating to $0.15 per share [2] - Analysts had underestimated the company's growth potential, with average revenue forecasts at $90 million and adjusted profit expectations at $0.05 per share [3] Market Position and Strategy - Ambarella specializes in the edge segment of the semiconductor market, focusing on AI solutions for edge computing, which is currently in high demand [4] - The company has shipped over 36 million edge AI processors to date, highlighting its significant market presence [4] Future Outlook - Ambarella raised its full-year revenue guidance, now expecting a 31% to 35% increase for fiscal 2026 compared to 2025, with a midpoint revenue estimate of around $379 million [5]

Core Viewpoint - Ambarella (AMBA.US) experienced a significant stock increase of over 20%, reaching a new high for the year at $84.93, following the release of its Q2 2026 financial results that exceeded market expectations [1] Financial Performance - The company reported Q2 2026 revenue of $95.5 million, representing a year-over-year growth of 49.9%, surpassing the FactSet estimate of $90 million [1] - Non-GAAP earnings per share were $0.15, exceeding the IBES forecast range of $0.05 to $0.10 [1] Future Guidance - Ambarella raised its revenue growth target for the fiscal year 2026 to a range of 31% to 35% [1] - The company provided strong guidance for Q3 revenue, projecting a range of $100 million to $108 million, reflecting ongoing growth in edge AI demand [1]

Core Viewpoint - Ambarella (AMBA.US) experienced a significant stock increase of over 20%, reaching a new high for the year at $84.93, following the release of its Q2 FY2026 earnings which exceeded market expectations [1] Financial Performance - The company's revenue for Q2 FY2026 was reported at $95.5 million, representing a year-over-year growth of 49.9%, surpassing the FactSet estimate of $90 million [1] - Non-GAAP earnings per share were $0.15, exceeding the IBES forecast range of $0.05 to $0.10 [1] Future Guidance - Ambarella raised its revenue growth target for FY2026 to a range of 31% to 35% [1] - The company provided a strong revenue guidance for Q3, expecting between $100 million and $108 million, driven by the continued growth in edge AI demand [1]

Group 1 - Ambarella's stock increased by 20% following better-than-expected second-quarter results and strong guidance for the third quarter [1] - The company expects third-quarter revenue to be between $100 million and $108 million, surpassing LSEG's estimate of $91 million [1] - Ambarella raised its fiscal year revenue growth outlook to a range of 31-35%, with a midpoint of $379 million, exceeding LSEG's expectation of $350 million [2] Group 2 - The company reported adjusted earnings of 15 cents per share, compared to the expected 5 cents per share [3] - Revenue for the quarter was $96 million, exceeding the expected $90 million [3] - CEO Fermi Wang highlighted the company's extensive product portfolio and investments in edge AI R&D, enabling it to address a wider range of applications [2]

Financial Data and Key Metrics Changes - Revenue for Q2 fiscal year 2026 was $95.5 million, an increase of 11.2% sequentially and 49.9% year-over-year, exceeding prior guidance [23][7] - Non-GAAP gross margin for Q2 was 60.5%, at the low end of the prior guidance range [23] - Non-GAAP net profit for Q2 was $6.4 million, or $0.15 per diluted share [24] Business Line Data and Key Metrics Changes - Automotive revenue increased in the mid-single digits, while IoT revenue grew in the low teens, with IoT representing slightly more than 75% of total revenue [23] - The company reported strong demand for new five-nanometer AI SoCs across various applications, particularly in portable video and robotics [9][10] Market Data and Key Metrics Changes - The company anticipates revenue growth for fiscal year 2026 in the range of 31% to 35%, with a midpoint of approximately $379 million [9] - The edge AI business is expanding, with expectations for unit and average selling price growth [27] Company Strategy and Development Direction - The company is focusing on both autonomous driving and IoT markets, leveraging shared hardware architecture to optimize operational expenses [31] - The company is actively pursuing design wins in the automotive sector while also expanding its presence in the IoT market, particularly in portable video and robotics [12][19] Management's Comments on Operating Environment and Future Outlook - Management noted that while automotive growth is expected to eventually outperform IoT, the current strong performance in IoT is driven by shorter design cycles and more available opportunities [31][36] - The company remains optimistic about the edge AI market, with significant lifetime revenue opportunities in automotive autonomy [80] Other Important Information - The company has shipped over 36 million AI processors, establishing itself as a leader in the edge AI market [19] - The company is preparing for upcoming investor events, including participation in various conferences [5] Q&A Session Summary Question: Thoughts on IoT versus automotive focus - Management acknowledged the strong performance of IoT and indicated a balanced focus on both IoT and automotive markets, with plans to allocate more resources to IoT [31][32] Question: Expectations for automotive growth - Management expects automotive growth to eventually outperform IoT, particularly around 2027-2028, but noted that IoT will continue to contribute significantly in the near term [35][36] Question: Trends in robotic aerial drones - Management confirmed a growing trend in the drone market, with multiple companies focusing on autonomous drone applications [39] Question: Guidance for Q4 - Management indicated that seasonality is expected in Q4, driven by consumer cycles, but noted that growth rates are improving compared to previous years [48] Question: Non-security IoT growth - Management sees significant growth potential in non-security IoT applications, with expectations that this segment will outpace traditional security camera business [50][51] Question: Industry consolidation and strategy - Management refrained from commenting on industry rumors but emphasized the company's leadership in the edge AI market [57] Question: Demand pull-ins related to tariffs - Management stated that they have not observed any significant inventory buildup among customers, indicating confidence in demand stability [70] Question: Customer response to the Cooper development platform - Management reported positive feedback on the Cooper platform, which facilitates easier transitions between different chips for customers [72] Question: Growth drivers in IoT and automotive - Management indicated that growth is roughly split 50/50 between average selling price and unit growth [84] Question: IoT market split between security and non-security applications - Management noted that portable video applications are growing rapidly, with Insta360 being a significant customer [88]

Financial Data and Key Metrics Changes - Revenue for Q2 fiscal year 2026 was $95.5 million, an increase of 11.2% sequentially and 49.9% year-over-year, exceeding prior guidance [22][6][19] - Non-GAAP gross margin for Q2 was 60.5%, at the low end of the prior guidance range [22] - Non-GAAP net profit for Q2 was $6.4 million, or $0.15 per diluted share [23] Business Line Data and Key Metrics Changes - Automotive revenue increased in the mid-single digits, while IoT revenue grew in the low teens, with IoT representing slightly more than 75% of total revenue [22] - The company is seeing strong demand for new five-nanometer AI SoCs across various applications, particularly in portable video and robotics [7][9] Market Data and Key Metrics Changes - The company anticipates a revenue growth range of 31% to 35% for fiscal year 2026, with a midpoint of approximately $379 million [7][25] - The edge AI business is expanding, with significant growth expected in portable video applications and robotics [19][18] Company Strategy and Development Direction - The company is focusing on expanding its edge AI applications, including portable video, robotic aerial drones, and edge infrastructure [7][19] - Management emphasizes the importance of both automotive and IoT markets, with plans to allocate more resources to IoT due to its rapid growth [30][29] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the growth trajectory of both automotive and IoT markets, with expectations for automotive to eventually outperform IoT by 2027-2028 [32][31] - The company is actively working on design wins in the automotive sector while also capitalizing on the rapid growth in IoT applications [76][75] Other Important Information - The company has shipped over 36 million AI processors, establishing itself as a leader in the edge AI market [18][55] - The company is targeting a significant increase in average selling prices due to the demand for higher-end AI SoCs [19][100] Q&A Session Summary Question: Is the company considering a pivot towards IoT given its strong performance? - Management acknowledges the strong performance of IoT and plans to allocate more resources to this area while continuing to focus on automotive [30][29] Question: Will automotive outgrow IoT next year? - Management believes automotive will eventually outperform IoT but expects IoT to continue contributing significantly in the near term [32][31] Question: What is the outlook for the robotic aerial drones market? - Management sees a growing trend in autonomous drones and expects multiple companies to enter this space, indicating a significant market opportunity [36][35] Question: How does the company view the growth of non-security applications in IoT? - Management anticipates that non-security applications, particularly portable video, will continue to grow rapidly and may eventually surpass security applications [46][48] Question: What is the company's strategy regarding industry consolidation? - Management refrains from commenting on rumors but emphasizes the strength and focus on edge AI as a key differentiator in the market [54][55] Question: How does the company monitor potential demand pull-ins related to tariffs? - Management maintains regular communication with customers and distributors to monitor inventory levels and demand trends [66][65] Question: What feedback has the company received on the Cooper development platform? - Management reports positive feedback on the Cooper platform, which facilitates easier transitions between different chips for customers [68][67] Question: What is the split between security and non-security applications in IoT? - Management indicates that portable video is the fastest-growing non-security application, with a significant contribution from various product lines [82][81]

Q2 FY2026 Financial Results Announcement [Q2 FY2026 Performance Highlights & Q3 FY2026 Outlook](index=1&type=section&id=Q2%20FY2026%20Performance%20Highlights%20%26%20Q3%20FY2026%20Outlook) Ambarella reported strong revenue growth and a non-GAAP net profit turnaround for Q2 FY2026, providing Q3 FY2026 guidance for continued revenue growth Q2 FY2026 and H1 FY2026 Key Financial Data | Metric | Q2 FY2026 | Q2 FY2025 | Change (YoY) | H1 FY2026 | H1 FY2025 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :--------- | | **Revenue (Million USD)** | 95.5 | 63.7 | +49.9% | 181.4 | 118.2 | +53.5% | | **GAAP Gross Margin** | 58.9% | 60.8% | -1.9 pp | 59.4% | 60.8% | -1.4 pp | | **GAAP Net Loss (Million USD)** | (20.0) | (34.9) | Improved 42.7% | (44.3) | (72.8) | Improved 39.1% | | **GAAP Diluted Loss Per Share** | (0.47) | (0.85) | Improved 44.7% | (1.05) | (1.78) | Improved 41.0% | | **Non-GAAP Gross Margin** | 60.5% | 63.3% | -2.8 pp | 61.2% | 63.3% | -2.1 pp | | **Non-GAAP Net Income (Loss) (Million USD)** | 6.4 (Income) | (5.5) (Loss) | Turnaround to profit | 9.5 (Income) | (16.0) (Loss) | Turnaround to profit | | **Non-GAAP Diluted Earnings (Loss) Per Share** | 0.15 (Earnings) | (0.13) (Loss) | Turnaround to profit | 0.22 (Earnings) | (0.39) (Loss) | Turnaround to profit | Q3 FY2026 Financial Guidance | Metric | Range (Million USD/Percentage) | | :----------------------- | :--------------------- | | **Revenue** | $100.0 - $108.0 | | **Non-GAAP Gross Margin** | 60.0% - 61.5% | | **Non-GAAP Operating Expenses** | $54.0 - $57.0 | [CEO's Strategic Commentary](index=2&type=section&id=CEO%27s%20Strategic%20Commentary) CEO Fermi Wang highlighted strong cyclical growth in the edge AI market, projecting record revenue growth for FY2026, alongside product development and production advancements - The company is experiencing strong cyclical growth in the edge AI market, with expanding applications driving demand for higher-priced 5nm AI SoCs[6](index=6&type=chunk) - Multiple portable AI video applications have entered production, with the first robotic drone project expected to ship in volume by the end of FY2026, and the first edge infrastructure project projected for production in FY2027[6](index=6&type=chunk) - FY2026 revenue growth forecast is raised to **31% to 35%** (midpoint approximately **$379 million**), with new Q3 and full-year revenue guidance midpoints setting new quarterly and annual total revenue records for Ambarella[6](index=6&type=chunk) - Over **36 million** edge AI processors have been shipped to date, establishing market leadership and focusing on customer needs in the edge AI market, including automotive[6](index=6&type=chunk) [Cash and Marketable Securities Position](index=2&type=section&id=Cash%20and%20Marketable%20Securities%20Position) Ambarella's cash, cash equivalents, and marketable debt securities increased at the end of Q2 FY2026 compared to the prior quarter and year-ago period, indicating robust liquidity Cash, Cash Equivalents, and Marketable Debt Securities (Million USD) | Time Point | Amount (Million USD) | | :------------------- | :-------------- | | End of Q2 FY2026 | 261.2 | | End of Prior Quarter | 259.4 | | End of Prior Year Period | 219.8 | Detailed Financial Statements [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP)](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section presents Ambarella's condensed consolidated statements of operations under GAAP, detailing revenue, costs, expenses, and net loss for the three and six months ended July 31, 2025 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP) (Thousand USD) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $95,511 | $63,724 | $181,383 | $118,197 | | Cost of revenue | 39,280 | 24,983 | 73,616 | 46,296 | | Gross profit | 56,231 | 38,741 | 107,767 | 71,901 | | Operating expenses: | | | | | | Research and development | 59,734 | 56,760 | 118,553 | 110,897 | | Sales, general and administrative | 18,486 | 18,268 | 37,061 | 36,736 | | Total operating expenses | 78,220 | 75,028 | 155,614 | 147,633 | | Operating loss | (21,989) | (36,287) | (47,847) | (75,732) | | Other income, net | 2,247 | 2,145 | 4,422 | 4,416 | | Loss before income taxes | (19,742) | (34,142) | (43,425) | (71,316) | | Provision for income taxes | 253 | 747 | 898 | 1,505 | | Net loss | $(19,995) | $(34,889) | $(44,323) | $(72,821) | | Diluted loss per share | $(0.47) | $(0.85) | $(1.05) | $(1.78) | | Diluted weighted-average shares outstanding | 42,546,979 | 41,129,754 | 42,383,475 | 40,952,373 | [Non-GAAP Financial Measures and Reconciliation](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section explains Ambarella's use of non-GAAP financial measures, their differences from GAAP, and provides detailed tables reconciling GAAP net loss to non-GAAP net income (loss) [Non-GAAP Methodology and Exclusions](index=4&type=section&id=Non-GAAP%20Methodology%20and%20Exclusions) The company provides non-GAAP financial information as a supplement to GAAP statements, benefiting management and investors in assessing operational performance and liquidity, primarily excluding stock-based compensation and acquisition-related costs and their tax impacts - Non-GAAP financial information supplements GAAP statements, used to assess operational performance and liquidity, and provides greater transparency for investors[14](index=14&type=chunk)[15](index=15&type=chunk) - Non-GAAP financial measures exclude stock-based compensation and acquisition-related costs and their related tax impacts[4](index=4&type=chunk)[14](index=14&type=chunk) - GAAP reconciliation for non-GAAP gross margin and operating expense guidance for Q3 FY2026 is not feasible on a forward-looking basis due to the high variability and low visibility of relevant exclusion items[16](index=16&type=chunk) [Stock-based Compensation and Acquisition-Related Costs](index=5&type=section&id=Stock-based%20compensation%20and%20acquisition-related%20costs) This section details stock-based compensation expenses and acquisition-related costs included in various functional line items, explaining their impact on the difference between GAAP and non-GAAP gross margins Stock-based Compensation Expense (Thousand USD) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :---------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Cost of revenue | $780 | $833 | $1,731 | $1,440 | | Research and development | 16,972 | 18,395 | 34,557 | 36,016 | | Sales, general and administrative | 7,436 | 8,384 | 15,030 | 16,192 | | **Total Stock-based Compensation Expense** | **$25,188** | **$27,612** | **$51,318** | **$53,648** | Acquisition-Related Costs (Thousand USD) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :---------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Cost of revenue | $757 | $757 | $1,514 | $1,514 | | Research and development | — | — | — | — | | Sales, general and administrative | 456 | 530 | 912 | 1,050 | | **Total Acquisition-Related Costs** | **$1,213** | **$1,287** | **$2,426** | **$2,564** | - The difference between GAAP and non-GAAP gross margins primarily stems from the amortization of stock-based compensation and acquisition-related costs[19](index=19&type=chunk) [RECONCILIATION OF GAAP TO NON-GAAP DILUTED EARNINGS (LOSSES) PER SHARE](index=5&type=section&id=RECONCILIATION%20OF%20GAAP%20TO%20NON-GAAP%20DILUTED%20EARNINGS%20%28LOSSES%29%20PER%20SHARE) This section provides a detailed reconciliation table, showing the adjustments from GAAP net loss to non-GAAP net income (loss) and corresponding diluted earnings (losses) per share, primarily including stock-based compensation, acquisition-related costs, and income tax effects GAAP to Non-GAAP Diluted Earnings (Losses) Per Share Reconciliation (Thousand USD, except per share data) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | GAAP Net Loss | $(19,995) | $(34,889) | $(44,323) | $(72,821) | | Non-GAAP Adjustments: | | | | | | Stock-based compensation expense | 25,188 | 27,612 | 51,318 | 53,648 | | Acquisition-related costs | 1,213 | 1,287 | 2,426 | 2,564 | | Income tax impact | 22 | 448 | 36 | 600 | | **Non-GAAP Net Income (Loss)** | **$6,428** | **$(5,542)** | **$9,457** | **$(16,009)** | | GAAP Diluted Weighted-Average Shares Outstanding | 42,546,979 | 41,129,754 | 42,383,475 | 40,952,373 | | Non-GAAP Diluted Weighted-Average Shares Outstanding | 42,946,324 | 41,129,754 | 42,698,780 | 40,952,373 | | GAAP Diluted Loss Per Share | $(0.47) | $(0.85) | $(1.05) | $(1.78) | | Non-GAAP Adjustments: | | | | | | Stock-based compensation expense | 0.59 | 0.68 | 1.21 | 1.32 | | Acquisition-related costs | 0.03 | 0.03 | 0.06 | 0.06 | | Income tax impact | 0.00 | 0.01 | 0.00 | 0.01 | | Non-GAAP Diluted Weighted-Average Shares Outstanding Impact | — | — | — | — | | **Non-GAAP Diluted Earnings (Loss) Per Share** | **$0.15** | **$(0.13)** | **$0.22** | **$(0.39)** | [CONDENSED CONSOLIDATED BALANCE SHEETS](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents Ambarella's condensed consolidated balance sheets as of July 31, 2025, and January 31, 2025, detailing the composition of the company's assets, liabilities, and stockholders' equity CONDENSED CONSOLIDATED BALANCE SHEETS (Thousand USD) | Item | July 31, 2025 | January 31, 2025 | | :--------------------------------- | :------------------- | :------------------- | | **Assets** | | | | Current assets: | | | | Cash and cash equivalents | $142,739 | $144,622 | | Marketable debt securities | 118,444 | 105,643 | | Accounts receivable, net | 42,896 | 29,767 | | Inventories | 33,808 | 34,428 | | Restricted cash | 442 | 7 | | Prepaid expenses and other current assets | 5,543 | 6,084 | | **Total current assets** | **343,872** | **320,551** | | Property and equipment, net | 10,092 | 9,084 | | Intangible assets, net | 41,879 | 47,279 | | Operating lease right-of-use assets, net | 3,500 | 5,188 | | Goodwill | 303,625 | 303,625 | | Other non-current assets | 3,463 | 3,241 | | **Total assets** | **$706,431** | **$688,968** | | **Liabilities and Stockholders' Equity** | | | | Current liabilities: | | | | Accounts payable | 26,783 | 21,775 | | Accrued and other current liabilities | 76,190 | 80,781 | | Operating lease liabilities, current | 1,774 | 2,829 | | Income taxes payable | 1,713 | 1,383 | | Deferred revenue, current | 19,482 | 14,226 | | **Total current liabilities** | **125,942** | **120,994** | | Operating lease liabilities, non-current | 1,668 | 2,436 | | Other long-term liabilities | 2,301 | 4,126 | | **Total liabilities** | **129,911** | **127,556** | | Stockholders' equity: | | | | Preferred stock | — | — | | Common stock | 19 | 19 | | Additional paid-in capital | 872,822 | 813,683 | | Accumulated other comprehensive income (loss) | 59 | (233) | | Accumulated deficit | (296,380) | (252,057) | | **Total stockholders' equity** | **576,520** | **561,412** | | **Total liabilities and stockholders' equity** | **$706,431** | **$688,968** | Company Information and Disclosures [About Ambarella](index=2&type=section&id=About%20Ambarella) Ambarella specializes in edge AI semiconductors, with products widely used in edge AI and human vision, offering powerful deep neural network processing and high-resolution video compression technologies - Ambarella's products are widely used in edge AI and human vision applications, including video security, advanced driver assistance systems (ADAS), electronic mirrors, drive recorders, driver/cabin monitoring, autonomous driving, and robotics applications[8](index=8&type=chunk) - The company's low-power system-on-chips (SoCs) provide powerful deep neural network processing for intelligent perception, fusion, and planning, along with high-resolution video compression, advanced image, and radar processing[8](index=8&type=chunk) ["Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995](index=2&type=section&id=%22Safe%20harbor%22%20statement%20under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) This statement advises investors that the press release contains forward-looking statements, and actual results may differ materially due to various risks, uncertainties, and assumptions, thus cautioning against undue reliance on such information - The press release contains forward-looking statements identifiable by words such as "outlook," "project," "intend," "will," "estimate," "expect," "believe," "may," and "should"[9](index=9&type=chunk) - The achievement or success of forward-looking statements involves risks, uncertainties, and assumptions, and actual results may differ materially from those projected or implied[10](index=10&type=chunk) - Risks and uncertainties include global economic and political conditions, changes in government policies, revenue from new customers or design wins, commercial success of customer products, inventory management capabilities, growth strategies, ability to forecast market demand, introduction of new solutions and technologies, customer relationships, market expansion, global health conditions, growth management, retention of key employees, and intellectual property disputes[11](index=11&type=chunk) [Quarterly Conference Call Details](index=2&type=section&id=Quarterly%20Conference%20Call) Ambarella plans to host a conference call to discuss Q2 FY2026 results, with a webcast and archived information available - Ambarella plans to host a conference call at **4:30 p.m. ET / 1:30 p.m. PT** to discuss Q2 FY2026 results[7](index=7&type=chunk) - A live and archived webcast of the conference call will be available on Ambarella's website for up to **30 days**[7](index=7&type=chunk)