Image source: Ambarella.

Ambarella Inc. (AMBA -2.33%) released strong fiscal first-quarter 2017 results Thursday after the market close. With shares up more than 10% in after-hours trading as of this writing, it's apparent the market is more than pleased.

Revenue for the quarter fell 19.5% year over year, to $71 million. Based on generally accepted accounting principles (GAAP), that translated to net income of $1.8 million, or $0.05 per diluted share, down from GAAP net income of $18.9 million, or $0.56 per share in last year's fiscal first quarter.

On an adjusted (non-GAAP) basis, gross margin fell 20 basis points year over year, to 64.6%. And adjusted net income was $11.4 million, or $0.34 per share, down from $23.7 million, or $0.71 per share in the same year-ago period.

However, Ambarella's guidance -- which was the primary culprit behind last quarter's post-earnings drop -- called for significantly lower fiscal Q1 revenue in the range of $55 million to $57 million, or a decline of 24% to 20%, adjusted gross margin of only 60.5% to 62%, and adjusted net income between $8 million and $10 million.

Ambarella CEO Fermi Wang elaborated:

We are pleased with our execution during the first fiscal quarter of 2017, as we introduced our first 14nm IP camera SoC and continued to see strong design win momentum for our new 4K and HEVC SoC families across all market segments. While near-term headwinds continue in the wearable sports camera market, and we expect some adverse impact to our business caused by the disruption in supply of Sony image sensors as a result of the April 2016 Japanese earthquake, we remain confident of renewed revenue growth based on our technology leadership, product roadmap, and the potential of our current and future markets.

The Sony disruption is largely out of Ambarella's control. And it's no surprise Ambarella is seeing continued weakness in the wearable camera space.

As I noted in my earnings preview earlier this week, key Ambarella customer GoPro (GPRO 1.70%) foreshadowed as much despite posting its own better-than-expected quarterly results in April. And Ambarella management warned during last quarter's call that they would be taking a more-cautious approach to forecasting wearable camera chip shipments -- at least until they have "a better picture of end-user demand in this market."

In the meantime, it's encouraging to see Ambarella continuing to make headway with broad design-win activity from its up-and-coming supplementary markets -- from IP Security to flying cameras, automotive, and home-monitoring solutions. These markets will play a crucial role in propping up Ambarella's results and accelerating its return to sustained, profitable growth as it waits for the wearable camera segment to rebound.

What's more, in a further vote of confidence for its future prospects, Ambarella announced its board has approved a new six-month, $75 million share-repurchase program set to commence in the fiscal second quarter.

Ambarella offered a peek at what's to come with selected guidance. Keeping in mind supply shortages related to Sony, as well as continued wearables weakness -- the latter of which Ambarella now believes will recover in the second half of the year -- Ambarella anticipates total revenue for all of fiscal 2017 to be flat to down 5% year over year. Excluding the Sony sensor issue, Ambarella continues to see growth consistent with expectations from its drone, automotive, and IP security businesses.

Finally, for the current (fiscal second) quarter, Ambarella expects revenue between $60 million and $66 million, or a roughly 25% decline at the midpoint, with adjusted gross margin between 60.5% and 63.5%. By comparison -- and though we don't generally pay much attention to Wall Street's near-term demands -- analysts' consensus estimates predicted higher fiscal Q2 revenue of $69 million.

Given the gravity of Ambarella's outperformance to start its new fiscal year, and assuming Ambarella is able to sustain this momentum going forward with shares still down 17% year to date as of this writing, it's no surprise to see the market focusing on the good today.