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DATE

Thursday, May 28, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Feng-Ming Wang
• Chief Financial Officer — John Young
• Vice President, Corporate Development — Louis Gerhardy

TAKEAWAYS

• Revenue -- $100 million, down 0.5% sequentially and up 16.9% year over year, landing slightly above the midpoint of guidance.
• Automotive revenue -- Achieved a new all-time quarterly record, with a strong above-seasonal double-digit percentage increase on a sequential basis.
• IoT revenue -- Accounted for about three-fourths of total revenue and was seasonally down; enterprise security camera market showed a high single-digit sequential increase, offset by a double-digit sequential decline in consumer IoT.
• Non-GAAP gross margin -- 59.9%, slightly above the midpoint of the 59%-60.5% guidance range.
• Non-GAAP operating expense -- $56.4 million, below the guidance midpoint of $55 million to $58 million.
• Non-GAAP net profit -- $5 million, or $0.11 per diluted share.
• Cash and marketable securities -- $278 million, down $34.8 million sequentially, but up $18.4 million from the prior year, mainly due to intentional inventory build for new product cycles.
• Inventory -- Inventory days increased from 99 to 145 quarter over quarter as management aimed to support upcoming ramps and offset anticipated supply chain constraints.
• Operating and free cash outflow -- Operating cash outflow was $25.6 million, and free cash outflow was $29.6 million.
• Share repurchase activity -- 47,800 shares repurchased for $2.4 million at an average price of $51.04 per share; new $50 million repurchase program authorized through June 30, 2027.
• Customer concentration -- WT Microelectronics (TPE:3036) accounted for 60.7% of revenue as a logistics partner serving multiple Asian customers.
• Long-term agreements (LTAs) -- Announced an LTA with Hanwha for sourcing and co-development, representing "potential revenue in excess of $800 million over a period exceeding 10 years" and involving multiple generations of silicon.
• Robotics design wins -- 15+ design wins in robotics, including aerial drones and AMRs, having lifetime revenue potential exceeding $100 million and spanning over 30 customers in the pipeline.
• Product development -- Cumulative shipments have reached over 46 million Edge AI SoCs; 12 Edge AI SoCs are in production, with most robotics wins using 5-nanometer products and expansion toward 2-nanometer (CV8 and future CV3-AD) platforms.
• Second quarter outlook -- Revenue guidance is $105 million to $111 million, with both automotive and IoT expected to increase sequentially; projected non-GAAP gross margin is 59%-60.5%, and operating expenses are forecast at $56 million to $59 million.

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RISKS

• Management directly cited elevated DRAM and flash prices creating indirect impacts, stating "our customer facing much higher DRAM price and the flash price as well as potential shortage in the second half."
• Inventory days increased sharply to 145 days. Management emphasized the build is "just in case we run into a different supply issue," but this also led to higher free cash outflows.

SUMMARY

Ambarella (AMBA 21.41%) reported quarterly revenue slightly above the midpoint of its guidance, with automotive reaching a new all-time high and revenue growing 16.9% year over year. The company disclosed a significant long-term agreement with Hanwha (KRX:000880), noted as "potential revenue in excess of $800 million over a period exceeding 10 years," emphasizing multigenerational silicon co-development and deeper customer partnerships. Management highlighted continued progress in robotics, with over 15 design wins representing more than $100 million in lifetime revenue potential, and revealed consistent pipeline expansion in AI-enabled markets. Edge AI SoC shipments surpassed 46 million cumulatively, while ongoing transitions to more advanced 5-nanometer and 2-nanometer nodes signal higher ASPs for upcoming cycles. Management maintained its long-term gross margin model at 59%-62%, despite supply chain headwinds and increased inventory levels in anticipation of future product ramps.

• Management confirmed that the portfolio now supports more than 200 distinct AI model architectures in production, signifying high platform flexibility.
• The second quarter guidance expects increased sequential growth in both automotive and IoT revenues, with projected revenue midpoint of $108 million.
• On the indirect sales channel, six independent software vendors have been onboarded, with a goal to double that figure within the fiscal year to penetrate fragmented verticals beyond traditional security.
• Samsung (KRX:005930) was named as Ambarella's manufacturing partner for advanced 4-nanometer and 2-nanometer nodes; management asserted confidence in ongoing wafer supply sufficiency for announced agreements.
• The Board authorized a new $50 million share repurchase program valid through June 2027, replacing the expiring authorizations.

INDUSTRY GLOSSARY

• Edge AI SoC: System-on-chip solutions integrating AI processing directly at the device or network edge for low-latency, low-power applications.
• LTA (Long-Term Agreement): A binding contract for multi-year collaboration and product supply, often including pricing and volume commitments, and sometimes co-development elements.
• CVflow: Ambarella's proprietary AI accelerator architecture tailored for computer vision, supporting high efficiency and multiple AI model types.
• AMR (Autonomous Mobile Robot): A robot capable of navigating and operating in unstructured environments using onboard AI and sensor fusion without human intervention.
• ISV (Independent Software Vendor): Third-party software developers who create applications that run on Ambarella’s Edge AI platform, enhancing functionality for specific verticals.
• VLA (Vision Language Action) Model: AI frameworks that integrate visual processing, natural language understanding, and task execution for robotic autonomy.

Full Conference Call Transcript

Louis Gerhardy: Thank you, Carmen, and good afternoon. Thank you for joining our first quarter fiscal year 27 financial results conference call. On the call with me today is Dr. Fermi Wang, president and CEO, and John Young, CFO. The primary purpose of today's call is to provide you with information regarding the results for our first quarter fiscal year 27 the discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results financial prospects, market growth and demand for our solutions, among other things.

These statements are based on currently available information and subject to risks, uncertainties and assumptions Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. We are under no obligation to update these statements. And these risks, uncertainties, and assumptions as well as other information on potential risk factors that could affect our financial results are more fully described in the documents we file with the SEC. Access to our first quarter fiscal year 27 results press release, transcripts, historical results, SEC filings, and a replay of today's call can be found on the Investor Relations page of our website.

The content of today's call, as well as the materials posted on our website are Ambarella's property and cannot be reproduced. Or transcribed without our prior written consent. Before starting the call, we hope to see you at some of the following investor events scheduled during our second fiscal quarter. June 2nd, will be at the Bank of America's TMT Conference in San Francisco. June 23rd at Northland's virtual equity capital markets growth conference. June 23rd and 24th we will be hosting investor meetings in Baltimore and Boston. And August 18th at Rosenblatt's Age of AI event.

For your calendar planning in our third fiscal quarter, please note we are a sponsor at the AI Infrastructure Summit in Santa Clara, on November 15th to 17th, and we hope to see you there where we will lead the physical AI track with a number of Edge AI product demos in our exhibit area. Fermi will now provide a business update for the quarter, John will review the financial results and outlook. And then we will be available for your questions. Fermi?

Feng-Ming Wang: Thank you, Louis, and good afternoon. Thank you for joining our call today. During our first fiscal quarter, we delivered on our key financial guidance. Revenue, gross margins, and operating expenses. Most importantly, we continue to extend our Edge AI platform leadership with technology and the product innovation addressing existing and emerging use cases. As a recognized Edge AI leader, we are entering a new and significant phase for our market development. With the execution of long-term customer agreements which can drive a more predictable revenue stream while also offering lifetime revenue potential far in excess of what we have realized in the past. Let me provide a few comments about the current market environment.

In Q1, delivered revenue at the high end of the normal seasonal range and slightly above the midpoint of our guidance. Demand signals and the long term secular growth outlook for Edge AI remain very strong. And I am very optimistic about our ability to serve it. In particular, as AI workloads become more complex. IoT applications were about 3-fourths of our total revenue and were seasonally down. With our enterprise security camera market growing in a high single digit sequentially offset by a double digit sequential decline in our consumer IoT business. Our automotive revenue established a new all time revenue record.

With very strong double digit growth led by the rapid emergency of AI within the large and growing commercial vehicle telematics market. As well as automotive safety applications. After a multi-year build-out, of AI training capacity in data centers, the AI market is increasingly focused on AI inferencing. And we think the inferencing market, the processing is becoming more distributed. In other words, processing is moving to the edge and the physical AI layers of the network hierarchy. As the edge market evolves to GenAI, and Agent AI in particular, our positioning become even stronger and I would like to explain more about this.

First, before talking about Ambarella's unique positioning, let me remind you of the advantage of Edge AI efforts relative to the data center. Edge AI processing reduces latency, lower power consumption, minimize communication expense, and improves privacy and security. So why is Ambarella's edge AI platform so well positioned? First, Ambarella's Edge AI platform is comprehensive and well established. Yet expanding and under constant evolution to adapt to new AI trends. We believe a broad and highly programmable edge AI platform is required to address a wide number of use cases, Enabling customers to be more efficient by reusing software and scaling their business.

Our software platform is now open and easy to use and supports a wide variety of AI models with more than 200 AI model architectures. Reaching production. We have cumulatively shipped more than 46 million Edge AI SoCs and we have 12 Edge AI SoCs already available with up to hundreds of tops like performance. Another reason Ambarella is so well positioned for GenAI and Agent AI at the edge is that our software tools and AI SOCs integrates all the accelerated computing system functions into a single platform. In the data centers, the functions such as data aggregation, AI acceleration, CPUs, and other system functions are usually a collection of discrete SoCs from different vendors.

However, at the edge, to be successful, our AI SoC integrates all the functions: Fusion perception AI acceleration, CPUs, encoding, and all the system functions into 1 single chip. And our differentiation is not just in proprietary processing elements and advanced VLSI integration, But also in the proprietary algorithms, full edge AI stack software, and the edge AI agentic frameworks that tie the entire system together. As workloads become more complex, such as with GenAI, multimodal reasoning, and autonomous agent based workflows, Our deep expertise across the full accelerated computing stack optimized physically for each deployment becomes increasingly rare and of strategic value in the industry.

In other words, as our customers need the most performance in their Edge AI applications, there are an extremely limited number of companies that can do this and even fewer that are proven and established. We are now becoming recognized as 1 of the very few companies that can tie this all together as Edge AI workloads get more complex. We are entering a new phase of Edge AI in the physical AI market development. Where we are engaged in multiple discussion with customers who want to enter deeper relationships including multigenerational commitments. This can take the form of long-term agreements or LTA that involves our standard products and or our semi custom AI SoC optimized for customer's particular workload.

Relative to our current customer relationship, LTAs will enable long term partnerships that may include a structured contract involving volume and pricing. Typically over 5 years or more. Over the long run, we expect that the LTAs should be an important driver of revenue growth. Improved visibility, resulting in less volatility, and improved the predictability of our revenue. Our first LTA example involves our first 2-nanometer chip and the semi custom Edge AI SoC, which we tape out in January. And this product is named CV 8. This AI SoC will serve both consumer and enterprise applications in the IoT endpoint market.

For this long term agreement, we agreed to develop a semi-custom ASIC for a customer who want to support a certain complex AI workload. We will sell this AI SoC as a standard product to a variety of other customers in other markets. And this afternoon, we announced another material LTA, This time with Hanwha in South Korea, for the enterprise CapEx side of IoT market. With Hanwha, this LTA is for the sourcing and co-development of Ambarella's H AI technology across Hanwha's product lines and industry, including physical security, operational automation, life sciences, robotics, and other industrial markets. The agreement has potential revenue in excess of $800 million over a period exceeding 10 years.

And it represents 1 of the largest agreements in Ambarella's history and 1 of the first agreements of its kind in the Edge AI semiconductor market. The multi generation nature of this relationship is expected to enable both companies to plan jointly across technology roadmaps, accelerate product development cycles, and bring new category of AI-enabled products to market at scale. This relationship will involve standard AI SoCs we will sell in a variety of market to our customers. Beyond these first 2 LTAs, we are engaged in discussion with other companies. Today, I will also provide an update on robotic edge infrastructure and automotive markets. Which represents a material market opportunity for us.

I am very pleased to share that we now have 15+ robotic design wins including aerodrones. With lifetime revenue exceeding $100 million with more than 30 customers in our robotic pipeline. Our AI SoC combined high performance AI inference of this computer vision and ultra efficient power consumption into a single edge optimized architecture and represents the foundation platform for robotic system to run vision language action (VLA) models in drones. CV5 enabling platforms such as the anti-gravity A1, enabling capabilities including 8K imaging, real time perception, autonomous navigation, obstacle avoidance, SLAM, and on device AI inferencing without relying on constant cloud connectivity for these functions.

As drones evolved from flying camera into autonomous aerial robots, Ambarella's CVflow AI accelerator architecture allows manufacturers to deliver lower latency in decision-making, Improve latency, longer flight time, and more advanced autonomy at the edge. The robotic market is fragmented. And we are realizing design wins across a variety of other robotic applications including industrial automation, autonomous mobile robots or AMRs, delivery robots, Our AI SoCs evolve from providing perception sensor fusion, and Edge AI processing to also offer decision making and the full autonomy needed for real time robotic awareness and action.

This convergence of high quality imaging and AI acceleration in edge autonomy running VLA models efficiently, positioning us as a key enabler of the broader physical AI and embodied AI ecosystems. As I mentioned earlier, our automotive business established an all time quarterly revenue record in Q1. And is on pace to establish a new fiscal year record. Third party research firms indicate global automotive production is expected to decline 1% to 2% this year. But with semiconductor content per vehicle rising, market research firms also anticipate the automotive semiconductor market to grow by 10% to 15% this year.

We expect our automotive revenue growth to outpace these figures due to our success in commercial fleet telematics and the safety applications. The commercial fleet telematics market offers continued and exciting growth prospects as there is an installed telematic base in excess of 100 million vehicles growing at around a 10% CAGR but only about 10% of this installed base is so far AI enabled. We are aligned with industry AI telematic leaders who are also increasingly demanding AI SOCs that can now take on not only more sensors, but more complex AI workloads. And our platform of 12 Edge AI SoCs is very well suited to help them scale in this market.

I will also provide an update on the build out of our indirect sales channel that we announced to augment our existing direct to customer business. The development of our indirect sales channel is important to not only help us address the fragmented robotics market, but also to provide support for our emerging Edge infrastructure business. We have already onboard a half dozen ISVs in vertical industries like retail, Industrial automation, transportation, health care, and smart cities since our launch of our developer zone at the CES in January. With more ISV expected to be onboard by the end of this fiscal year.

In March, for the first time ever, we have boost at Embedded World in Newberg Germany, where we did live demonstration highlighting how Ambarella's AI software stack and developer tools deliver a competitive advantage across a wide range of AI applications. From AI agentic automation and orchestration to physical AI system deployed in real-world environments. 1 of our existing design partner to demonstrate a real industrial quality inspection solution on CV72 and N5. Multiple new ISVs partners will present in our booth, including 1 who demonstrated a real retail AI solution for in store and the drive through optimization. Another ISV demonstrated continuous training for high-speed rail network and the third demonstrating warehouse robot solutions.

In March, we also posted an invitation only exhibition at ISC West. Showcasing how Edge AI is powering the next generation of intelligent security and physical AI systems. At the center of our exhibit was our newly launched CV 7 Edge AI Vision SoC, delivering advanced imaging and on device AI processing alongside the N5 Edge AI SoC enabling edge infrastructure for low power, high performance enterprise security applications. While our ISV partners demonstrate a smart city security solution based on a CV75 and N5 solution. I will now briefly summarize our representative customer engagements in Q1, and it is notable for the first time All of the examples are based on our Edge AI SoC.

3 from our CV2 family and 8 from our new CV7x family. In enterprise security, while physical security remain the principal driver of this market, We are seeing our customer develop AI application software that enable their product to provide operational efficiency to a business. Examples including predictive maintenance, supply chain optimization, and auto automated customer support we expect operational efficiency in the long run, become an important new growth offshoot of what we refer to as enterprise security today. In particular, as GenAI and Agentic AI is deployed at the edge.

We achieved an important milestone in March when April formerly i-PRO (formerly Panasonic) announced the first edge endpoint camera to run GenAI locally, based on the capabilities in our CV72 AI SoC. We also have the number of other CV75 and the CV 72 wins in the quarter including IDES, in South Korea, access in Sweden, i-PRO (part of Panasonic), Canada, IQinVision (formerly Bosch) in Germany, And with major communication equipment company in The Americas, Notably, we had an additional CV72 win with C-PRO in South Korea that also utilize our AI imaging signal processing software. We also want a CV22 platform win with C-PRO that included another CV5 win with the major communication equipment company in The Americas.

In the industrial market, we earned another AI based barcode reader project based on CV 28, this time with Hanwha Vision, which is expanding its reach beyond the traditional physical security market. In the automotive market, our safety and telematics customer engagement activity remains strong. For example, we are pleased to announce Lytics, an industry leader in the commercial and the public sector telematics market has designed in CV 75 and CV72 into multiple platforms. For in cabin pre installed safety market, we have a CV72 win with South Korean based Tier 1 URA and a CV22FS win for a Western OEM in China.

Our new product momentum remains a very strong both in terms of fiscal 27 revenue generation as well as new products that have not started to generate revenues. While our 10 nanometer CV2 family of Edge AI processors for CNN applications continue to land design wins and grow. Our new 5 nanometer CV75 and CV72 capable of both advanced CNN and the transformer based GenAI, As well as Agentic AI-- Sorry. As well as Agentic AI, are in a steep production ramp and are expected to drive material incremental revenue this year. Then, on top of this, we continue to expand our new CV7 AI processor to enter production by the end of the year.

And in the first half of fiscal 28 or less than a year from now. We expect our 2 nanometer CV3-AD AI SoC to commence production. All of these new products I have described as well as all the new unannounced AI SoCs in development target more-sophisticated AI workload and command average ASPs well above our current $15 SoC ASP in Q1. As you can tell, we have a lot of technology product, and customer development activity going on. I would like to summarize this quarter's call with 3 observations. First, the Edge AI market is just getting started, and the momentum is building in multiple areas.

Second, Ambarella is clearly an Edge AI technology platform and the product leader and we are already well-established. I think our positioning is getting even stronger as Edge AI workloads get more complex. And there become fewer and fewer companies capable of integrating all the edge accelerated computing functions into a single chip. Third, customers are recognizing the first 2 points and now want to engage with us more broadly and more deeply. For example, LTA agreements can build stronger relationships and get us design into new markets like robotic, while the indirect channel sales ecosystem bring us more scale. In conclusion, as all this comes together, we intend to drive shareholder value with strong revenue growth.

And a more diversified and predictable financial model that offers mature operating leverage potential for our shareholders. With that, John will now discuss our Q1 results and Q2 outlook in more detail. John?

John Young: Thank you, Fermi. I will now review the financial highlights for the first quarter fiscal year 27 ending April 30, 2026, I will also provide a financial outlook for our second quarter of fiscal year 27 ending July 31, 2026. I will be discussing non GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non GAAP results. For non GAAP reporting, we have eliminated stock based compensation and acquisition related expenses, adjusted for the impact of taxes. For fiscal Q1, revenue was $100 million slightly above the midpoint of our prior guidance range, of $97 million to $103 million down 0.5% from the prior quarter and up 16.9% year-over-year.

On a sequential basis, automotive revenue driven by commercial vehicles experienced a strong above seasonal double digit percent increase while IoT revenue was seasonally down. Non GAAP gross margin for fiscal Q1 was 59.9%, slightly above the midpoint of our prior guidance range of 59% to 60.5%. Non GAAP operating expense in Q1 was $56.4 million slightly below the midpoint of our prior guidance range of 55 to $58 million Q1 net interest and other income was $2.1 million Q1 non GAAP tax provision was approximately $740 thousand. We reported a non GAAP net profit of $5 million or 11 cents per diluted share in Q1. Now I will turn to our balance sheet and cash flow.

Fiscal Q1 cash and marketable securities were $278 million decreasing $34.8 million from the prior quarter but increasing $18.4 million from the same quarter a year ago. The sequential decrease in cash and marketable securities was primarily due to an increase in our inventory levels to better service our customers in the face of a number of new product cycles. Receivables days sales outstanding of 35 in Q1 was flat with the prior quarter, while days of inventory increased from 99 to 145 days. Operating cash outflow was $25.6 million for the quarter. Capital expenditures for tangible and intangible assets were $4 million for the quarter. Free cash outflow was $29.6 million for the quarter.

During the first second quarter of fiscal year 27, we repurchased 47.8 thousand shares of our stock for total consideration of $2.4 million or an average price of $51.04 per share. During the second fiscal quarter, Ambarella's Board of Directors authorized a new $50 million repurchase program valid through June 30, 2027. Replacing the program that expires on June 30, 2026. The repurchase program does not obligate the company to acquire any particular amount of ordinary shares and it may be suspended at any time at the company's discretion. We had 1 logistics company representing 10% or more of our revenue.

WT Microelectronics, our fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 60.7% of revenue for the first quarter. I will now discuss the outlook for the second quarter of fiscal year 27. We forecast a seasonally strong fiscal second quarter with revenue in the range of $105 million to $111 million or $108 million at the midpoint. Sequentially, both auto and IoT revenue are expected to increase, with growth in both consumer and CapEx-driven markets. We expect fiscal Q2 non GAAP gross margin to be in the range of 59% to 60.5%.

We expect non GAAP OpEx in the second quarter to be in the range of $56 million to $59 million We estimate net interest and other income to be $1.9 million our non GAAP tax expense to be approximately $800 thousand and our diluted share count to be approximately 44.3 million shares. Thank you for joining our call today. And with that, I will turn the call over to the operator for questions.

Operator: Thank you so much. As a reminder, if you do have a question, please press 11 on your telephone and wait for your name to be announced. To remove yourself, press 1-1 again. Our first question is from Ross Seymore with Deutsche Bank. Please proceed.

Ross Seymore: You mentioned earlier about the auto side growing faster than the end market itself. I think you said that the end market will be 10% to 15%. In the past, you have given full year fiscal year revenue guidance. I think you said 10% to 15% on your last call. How are you thinking about that for this year now?

Feng-Ming Wang: Yeah. I think for the whole year, we are still thinking it is probably 10% to 15%. We are not changing that. And the automotive is stronger and goes faster than the other market. Okay. And then on the LTA side of things and maybe the 1 that you announced tonight in the 8-K with the 800 million over time, but more conceptually, how are you thinking about those? Are they going to be guaranteed revenues? I think you said the word potential revenue. How do we build that into the estimates as we think forward for the company? Right.

First of all, we already have a run rate with Hanwha for the last 15 years, and we know we only take a percentage of their current market share. So we expect with this LTA we are going to gain market share on their annual run rate. As well as this is a multigenerational commitment on both sides. So that this is-- we are talking about you know, at least 2 generations of silicon that will be you know, codeveloped between these 2 companies. So I think from that point of view, we believe that it is a long period kind of commitment as well as getting market shares from them.

At the On the same time, if you look at our current ASP, although our corporate ASP, is $15, but our CV ASP is a lot higher than that. So if you calculate, put all the things together, that is how we calculate this potential $800 million. Yeah.

Louis Gerhardy: Ross, just a little background on it is a major multinational conglomerate with more than $60 billion in annual revenue. it is involved in aerospace, defense, robotics, physical security, life sciences, industrial, ocean solutions, chemicals, all, you know, a lot of different things, retail services. And so an important part of this relationship in the intermediate to long term is moving beyond what has just been, you know, the physical security relationship that Fermi described as our current run rate.

So we can gain share on that business, but at the same time, the press release talks about in addition to physical security, but also things like operational automation, life sciences, robotics, other industrial markets, that is another very important angle of this relationship.

Ross Seymore: Great. Thank you.

Operator: Thank you. 1 moment for our next question. It comes from Tore Svanberg with Stifel. Please proceed.

Tore Svanberg: Yes. Thank you. Maybe a question to follow-up on the LTA and not the Hanwha 1 specifically, but how should we think about these sort of folding in here over the next few years? Obviously, these could be quite large. I am sure you can say yes to all of them. Is there also going to be potentially some OpEx sharing with some of these customers that you signed LTAs with? Any more color you could offer us as far as how we should think about the magnitude and how it is going to be funded over the next few years?

Feng-Ming Wang: So first of all, I think I want to go a little higher level and saying that most of the LTAs discussed are based on 2 things. 1 is that you look at all the fast AI trend, and our customer continue to look at the new AI model. They have implemented higher performance requirement, lower power efficiency. So to meet this kind of AI demand, while for most Edge AI application, power efficiency is probably the probably the most important thing. So it is getting harder and harder to build a platform of silicon that can address all of these new applications.

So I think that trend really help our customers think about how to partner with somebody that can build a platform over silicon that can help them not only on the you know, security enterprise security, but also other associated markets they are trying to address. I think that is probably how the LTA started. And in this kind of LTA, most of the discussion will involve NRE, and but also will develop a product mutually beneficial. Right?

So I think those are 2 things that we definitely want to make sure that we develop a software platform that can go across our silicon platforms that offer our complete roadmap to our customer and in exchange they were willing to help us to fund those platforms with NRE, not only on the silicon side, but also on the software side.

Tore Svanberg: that is very helpful. And that is my follow-up. Maybe related to that platform approach, Fermi. So just thinking about the competitive landscape. Obviously, there is big processor companies. there is obviously analog companies and so on and so forth. But how flexible can your software platform really be? Because, obviously, the use cases at the edge are going to be quite different from use case to use case. Thank you.

Feng-Ming Wang: Yeah. So I think our unique architecture you remember that we have been talking about algorithm first. So our, let's call it, our we actuate, like, our image processing and our CVflow AI accelerator, has been really passed many battles and have been proved to our customer that it is not only power efficient, but also programmable enough to adapt to many different applications, different AI models. For example, we just talk about our CVflow architecture can do 200 AI model architecture, not 200 models. We are talking about 200 model architectures, and we took all of them into production. Just show you how flexible our accelerator is.

But more importantly, with the latest Agent AI approach, you need to integrate everything together. So in that including not only the ISP and the CVflow or MPEG encode H.264 encoder. On top of that, you need to integrate with a complete SoC for CPU and also IO and DRAM connectivity to provide a very not only power efficient, but also cost efficient solution to our customers. So that is where we are basically having a reputation to deliver those kind of products consistently in the last 20 years.

And when we look at the competitive landscape, we see NVIDIA, Qualcomm obviously, But I really do not see any other people keep coming out with a complete silicon platform. that we have 12 Edge AI SoCs can go from very low performance to a few hundred top performance with power efficiency. On top of that, all the silicon was covered by 1 unified software development SDK that our customer, if they develop 1 product on 1 SoC, can easily go to a different SoC providing a different price of performance point on their product platform. And this kind of flexibility and the width of our product format, I do not think there are many people can match.

Tore Svanberg: that is great color. Thank you.

Operator: Thank you. 1 moment for our next question, please. It comes from the line of Quinn Bolton with Needham and Company. Please proceed.

Quinn Bolton: I wanted to follow up, Fermi, on the Hanwha LTA. The press release, it talked about an internal SOC that Hanwha continues to design. And so I wonder if you know, it sounds like you are co-designing multiple generations of chips. Is there an opportunity to get a bigger percentage of share away from that? Internal SOC? Or you think that internal SOC continues to hold a portion of Hanwha's requirements? and then I have got a follow-up.

Feng-Ming Wang: I think it is a mutual intention that they are going to use more of this co developed platform into more product lines. So we totally expect we are getting more market share from Hanwha with this new development.

Quinn Bolton: Excellent. And then Fermi, you guys have talked about the fleet telematics market for a number of years, and it feels like it may finally be starting to inflect on the script. You mentioned an installed base of over a 100 million units with less than 10% of that being AI. But what do you think is driving the inflection? Is there anything you can point to in particular that is driving the pretty strong growth here in the first and second quarter?

Louis Gerhardy: Quinn, it is Louis. Just in terms of the market opportunity, telematics there is about a 100 million subscribers. And third party research firms, you know, like ABI or Gartner, see it growing maybe a 10% CAGR. Within that 100 million subscriber base, maybe only 15% to 20% of the market is using AI and AI video. With as an additional ARPU generating feature in their platforms. So what you have is the overall telematics market growing You have got AI video growing into that. And at the same time, there is demand for more sophisticated AI workloads and multiple sensors, which is causing, our ASP. The demand for more sophisticated edge AI chips to go up.

So those are the dynamics that we are facing. We are doing a very good job with share, for example, this quarter. We announced Lytics, as Fermi mentioned, you know, multiple platforms with CV 72, CV 75. Which is they are 1 of the leaders of this market. So any follow ups on that?

Quinn Bolton: No. that is that is that is great. Thank you, Louis. Thank you, for me.

Operator: Thank you. Our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed.

Joe Moore: Yes. Thank you. If you could talk about, are you guys impacted at all by shortages of DRAM or storage in any of the surveillance markets or consumer markets? Just seeing any impact from any of that?

Feng-Ming Wang: Yeah. So first of all, obviously, just like everybody else, we are impacted, but not directly. We are impacted indirectly. You know, we in the last quarter, we did when we talk about this, we definitely talk about our customer facing much higher DRAM price and the flash price as well as potential shortage in the second half. So that situation did not change.

The biggest direct impact to us is most of our customer are handling this issue by doing, first of all, they are trying to source different DRAM suppliers Or to cut down the DRAM utilization per product or basically how to optimize the DRAM utilization in a chip so that they can use a smaller DRAM size. And all those activity require us putting our FAE support to help our customer. We are happy to do that because that is definitely something we need to do to help our customer. But at the same time, I think that is probably the biggest direct impact to us on the engineering resource requirement.

Joe Moore: Okay. Thank you. And then as a follow-up, the inventory, you sort of described it supporting product ramps. Was a pretty big increase. I just can you give us any more color to make us feel comfortable with that amount of inventory build? Thank you.

John Young: Hi, Joe. Yeah. I mean, if you look back in the last couple of quarters, we were running kind of lean. And over the last few quarters, we have looked at the opportunities that are coming to us with the strong growth that we had last year We wanted to position ourselves in the in the right product categories to be able to continue to serve our customers And so going from a fairly low number of days of inventory at points in last year we wanted to build up a bit of inventory heading into this year. To be able to do that.

Feng-Ming Wang: And, Joe, this is Fermi. I just want to add another color on this. You know, Samsung has officially informed us that their supply chain supply is getting tighter. Obviously, we ask we have secured our supply, but we feel it is prudent for us to build up a little inventory just in case we run into a different supply issue. So from that point of view, I think I think you also heard that supply chain become a problem for everybody. We just try to be prudent to build up some inventory just in case.

Joe Moore: Makes sense. Thank you so much.

Operator: Thank you. Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Please proceed.

Analyst (Kevin): Hi. Thanks for taking my question, and congratulations on all the great progress. And along those lines, you are building out the indirect sales channel. I think you mentioned 6 groups hired. Do these the if you could describe these little better geographically, and then also, do they have application engineers? I will just stop with that. Those questions.

Feng-Ming Wang: Right. So first of all, there are mainly in the United States right now, obviously, but we are definitely trying to go to Japan, and Europe to expand the ISV. But today, all 6 of them are US based. In terms of size of those ISVs, it is really from large to small, but more importantly, is really about what their current engagement with the end customer. We are looking at ISVs that can add value, that can easily pull their software onto our platform and so they can go to their existing customer with our solution. So those are the ISVs we are engaging.

And more importantly, they are really enabling applications that we have not touched in the past. So overall, from that point of view, we are happy with the progress that we made in a short period of time since we announced this at CES. But I think 6 of them is just a beginning. I think our goal is to double that this year and hopefully, we can continue build our momentum based on that.

Louis Gerhardy: Yeah. Kevin, it is Louis. In addition, for this indirect effort, in addition to the ISVs we just talked about, there is significant effort building out channel partners and even system integrators as part of this effort. This is really important to help us serve markets like edge infrastructure that need a lot of technical support or very fragmented markets like robotics. So a lot of efforts going into the ISV channel partners and even system integrators.

Analyst (Kevin): Okay. Great. Yeah. That was going to be part of my, follow-up question of how much of a I hate to use the term, but the cookie cutter approach can it be that someone can go in with a lot of the solution already and help out a customer. Is that the idea?

Louis Gerhardy: Yeah. Yeah. You might have multiple ISVs working on 1 project. So, if I understood the question right, it is not just always something right off the shelf, you know, cookie cutter as you said. But you might have ISVs. You might have channel partners, and you might have system integrators all involved on 1 project. So think it is pretty far from being cookie-cutter. cutter. it is very sophisticated software as these workloads get more complex. You need that whole indirect ecosystem to play a role in many of these designs we are pursuing.

John Young: And Kevin, just to add, part of the decision making engaging with some of these ISVs is seeing the expertise that they have in different verticals. And some of them-- of them are they have expertise across multiple verticals. And so it is it is really trying to take a holistic approach to that engagement and cover as many verticals as we can with folks who specialize.

Analyst (Kevin): Great. Thank you.

Operator: Thank you. Our next question comes from the line of Christopher Rolland with Susquehanna. Please proceed.

Christopher Rolland: Thanks so much for the question, guys. My question is I think a few quarters ago, you guys talked about doing some infrastructure, putting your chips basically into servers. I think it was for security camera applications, but potentially others. Have you had any other further engagements there on the infrastructure side?

Feng-Ming Wang: Yes. We do. Edge infrastructure continue to be a focus. And we have n 5. We have a, you know, not only engaging with customers, we also have design wins that we are working on. The first product will probably come out, I would say, second half of this year. And at the same time, we are building definitely building a road map to continue to address this opportunity. So we have not talked about our next generation chip and also the potential updates on that. But I think next time we should give you more updates on edge infrastructure. that is meant to be a very important direction for us. Yeah.

Louis Gerhardy: Just to put it in perspective, based on the products we have now, you know, it is a couple of hundred million dollar SAM For things like AI Vision Box. But as we come out with more products and build out this indirect ecosystem that, as we mentioned, will help the edge infrastructure business. You will see us update the SAM appropriately when we have more products here. So definitely a high focus area, part of that indirect channel we were just talking about.

Christopher Rolland: Great. Thank you, Louis. Thanks, thank you, Fermi. And then for my second question, just the robotics opportunity, I think last quarter, you mentioned warehouse robotics. Any other engagements there? And then if you could talk about humanoid and engagements there, that would be interesting too.

Feng-Ming Wang: Right. So we talk about different applications. This time, in fact, last time we talked about this the warehouse design win, and now we are definitely in a extensive engineering development cycle with them. And but more importantly, on top of that, we have a multiple design wins in this quarter in the span of many different application. I talk about the in my script. But I think the most important thing is now we know we focus on that for any robots, there are multiple different solutions today. 1 is just purely video. The other 1 is perception.

The third 1 is using fusion to put a different sensor together, and the fourth 1 is really to become the controller or decision maker for this whole robot system. Our design wins is in all these areas, but more focused on the perception side because our expertise in the on the video and also fusion side I think it is across different applications and also focus on perception and also the decision making part of the robotic solution. There are some of the humanoid type of applications in that design wins, but we are not in the place to talk about just yet.

Christopher Rolland: Excellent. Thank you, Fermi.

Operator: Thank you. 1 moment for our next question. That comes from Martin Yang with Oppenheimer.

Martin Yang: Hi. Thank you for taking my question. First, a couple of questions on LTA. Are you able to say or quantify how many other potential partners you have in your LTA discussions?

Feng-Ming Wang: We only announced 2. We are talking about potential, but there is no other concrete information we can disclose at this point.

Martin Yang: Got it. And then also on LTAs, so for example, the 1 with Hanwha, spending over multiple years, do you need to also secure wafer supply from your foundry partner regarding those LTA agreement?

Feng-Ming Wang: First of all, I believe that our relationship with Samsung, although we only try to secure wafer commitment every year, But in the last 18 years, we never have any problem with to secure the wafer we want for our customers. So I expect that our wafer supply for 5-, 4-, 2-nanometer from Samsung will not be an issue for us Although that there is a lot of discussion that Samsung is also gaining momentum on those process node. Obviously, we do not have any long term contract with any suppliers, and that might be a question you are asking. But I do not think that is a contract we are going to sign with any supplier anytime soon.

Martin Yang: Got it. And last question, also have to-- Do you view your relationship with Samsung your design capabilities as a key value prop when you try to secure long term agreements with other customers.

Feng-Ming Wang: Absolutely. Because, 1 long discussion with any customer on LTA is how you secure your wafer, particularly on the 4-nanometer, 2-nanometer process node. In fact, some of the time, we have to really bring our supplier partners into a conversation to make sure that our customer feel comfortable with it. By the way, I can say that, you know, today, Samsung announced at their-- Samsung has their official company wide event talking about their 2-nanometer process. And they made announcement that NVIDIA and Ambarella are the 2-nanometer customers that commit to their process node. as an official press release from Samsung.

Martin Yang: Okay. Thank you, Fermi.

Operator: Thank you. And as a reminder, to ask a question, simply press 1-1 to get in the queue. That is 1-1 to get in the queue. Our next question is from Suji Desilva with ROTH Capital. Please proceed.

Suji Desilva: Hi, Fermi. Hi, John, and Louis. So quick question on robotics as well. I am curious. Are those you have a breadth of wins there. Are those across the board on your product portfolio, or does that category lean towards the leading edge products, the leading edge nodes, I just want to understand you know, where robotics is intercepting your product portfolio.

Feng-Ming Wang: All the products that we have design wins with is our CV product line. it is really -- most of them are our 5-nanometer products. There are some 10-nanometer, but majority is 5 nanometer products. In fact, there are also 4-nanometer products in there too. So this is really covering our CVflow architecture. that is the main reason people using us. But more focus on the 5 nanometer for the performance and power efficiency.

Suji Desilva: Got it. Okay. And then a question perhaps for John. Should we expect typical seasonality this fiscal year, this calendar year? Or are there factors that might be swinging it differently than prior years?

John Young: Suji, I think the expectation is to continue to see the seasonality that we have seen in the past at this point.

Suji Desilva: Okay. Great. Great. Thanks, John. Thanks, everybody.

Operator: Thank you. Our next question is from Ross Seymore with Deutsche Bank.

Ross Seymore: Hi, guys. Just 1 follow-up for you. Given the change in the business more automotive this year relative to the IoT side and then longer term some of the robotics and IoT and Edge AI, physical AI, everything you talked about on the call, how do you see that impacting either benefiting or being a little bit of a headwind to your gross margin in both the near term and long term from those dynamics, please?

Feng-Ming Wang: Right. So, Ross, in fact, since 3 quarters ago, we started really watching our gross margin carefully. I think that today, what I can say is based on all the things that we just discussed, we believe that we are going to stay with our current long term gross margin model that between 59% and 62%.

Ross Seymore: Got it. Thank you.

Operator: Thank you. And this concludes our Q&A session, and I will pass it back to Dr. Fermi Wang for closing comments.

Feng-Ming Wang: And thank you for joining our call today. And I really hope I can see you at some of our events this quarter. Thank you. See you next time.

Operator: This concludes our conference. Thank you for participating, And you may now disconnect. Good day, and thank you for standing by. Welcome to Ambarella's First Quarter Fiscal Year 27 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear a message advising your hand is raised. To withdraw your question, please press 1-1 again. Please be advised that today's conference is being recorded. Now it is my pleasure to hand the conference over to the Vice President of Corporate Development, Louis Gerhardy. Please proceed. Thank you, Carmen, and good afternoon. Thank you for joining our first quarter fiscal year 27 financial results conference call.

On the call with me today is Dr. Fermi Wang, President and CEO, and John Young, CFO. The primary purpose of today's call is to provide you with information regarding the results for our first quarter fiscal year 27 the discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results financial prospects, market growth and demand for our solutions, among other things. These statements are based on currently available information and subject to risks, uncertainties and assumptions Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. We are under no obligation to update these statements.

And these risks, uncertainties, and assumptions as well as other information on potential risk factors that could affect our financial results are more fully described in the documents we file with the SEC. Access to our first quarter fiscal year 27 results press release, transcripts, historical results, SEC filings, and a replay of today's call can be found on the Investor Relations page of our website. The content of today's call well as the materials posted on our website are Ambarella's property and cannot be reproduced. Or transcribed without our prior written consent. Before starting the call, we hope to see you at some of the following investor events scheduled during our second fiscal quarter.

June 2nd, will be at the Bank of America's TMT Conference in San Francisco June 23rd at Northland's virtual equity capital markets growth conference. June 23rd and 24th we will be hosting investor meetings in Baltimore and Boston August 18th at Rosenblatt Age of AI event. For your calendar planning in our third fiscal quarter, please note we are a sponsor at the AI infrastructure Summit in Santa Clara. On November 15th to 17th, and we hope to see you there where we will lead the physical AI track with a number of Edge AI product demos in our exhibit area. Fermi will now provide a business update for the quarter, John will review the financial results and outlook.

And then we will be available for your questions. Fermi? Thank you, Louis, and good afternoon. Thank you for joining our call today. During our first fiscal quarter we delivered on our key financial guidance. Revenue, gross margins, and operating expenses. Most importantly, we continue to extend our platform leadership with technology and the product innovation addressing existing and emerging use cases. As a recognized Edge AI leader, we are entering a new and significant phase for our market development. With the execution of long-term customer agreements which can drive a more predictable revenue stream while also offering lifetime revenue potential far in excess of what we have realized in the past.

Let me provide a few comments about the current market environment. In Q1, delivered revenue at a high end of the normal seasonal range and slightly above the midpoint of our Demand signals and the long term secular growth outlook for AGAI remain very strong. And I am very optimistic about our ability to serve it. In particular, as AI workloads become more complex. IoT applications were about 3-fourths of our total revenue and were seasonally down. With our enterprise security camera market growing in a high single digit sequentially offset by a double digit sequential decline in our consumer IoT business. Our automotive revenue establish a new all time revenue record.

With very strong double digit growth led by the rapid emergency of AI within the large and growing commercial vehicle telematics market. As well as automotive safety applications. After a multiple year build out of AI training capacity in data centers, the AI market is increasingly focused on AI inferencing. And we think the inferencing market, the processing is becoming more distributed In other words, processing is moving to the edge and the physical AI layers of the network hierarchy. As the edge market evolves to GenAI, and Agent AI in particular, our positioning become even stronger and I would like to explain more about this.

First, before talking about Ambarella's unique positioning, let me remind you of the advantage of Edge AI efforts relative to the data center. Edge AI processing reduces latency, lower power consumption, minimize communication expense, and improves privacy and security. So why is Ambarella's Edge AI platform so well positioned? First, Ambarella's Edge AI platform is comprehensive and well established, yet expanding and under constant evolution to adapt to new AI trends. We believe a broad and highly programmable edge AI platform is required to address a wide number of use cases, Enabling customers to be more efficient by reusing software and scaling their business.

Our software platform is now open and easy to use and supports a wide variety of AI models with more than 200 AI model architectures. Reaching production. We have cumulatively shipped more than 46 million Edge AI SoCs, and we have 12 HAI SOCs already available with up to hundreds of tops like performance. Another reason Ambarella is so well positioned for GenAI and Agent AI at the edge is that our software tools and AI SOCs integrates all the accelerated computing system functions into a single platform. In the data centers, the functions such as data aggregation, acceleration, CPUs, and other system functions are usually a collection of discrete SoCs from different vendors.

However, at the edge, to be successful, our AI SoC integrates all the functions:. Fusion perception AI acceleration, CPUs, encoding, analysis and into 1 single chip. And our differentiation is not just in proprietary processing elements and advanced VRSI integration. But also in the proprietary algorithms, full edge AI stack software, and the HAI agentic frameworks that tie the entire system together. As workloads become more complex, such as with GenAI, multimodal reasoning, and autonomous agent based flow workflows our deep expertise across the full accelerated computing stack optimized physically for each deployment become increasing rare and of strategic value in the industry.

In other words, as our customers need most performance in their HEI applications, they are an extremely limited number of companies that can do this even fewer that are proven and established. We are now becoming recognized as 1 of the very few companies that can tie this all together as HCI workload get more complex. We are entering a new phase of AGAI in the physical AI market development. Where we are engaged in multiple discussion with customers who want to enter deeper relationships including multigenerational commitments. This can take the form of long-term agreements or LTA that involves our standard products and or our semi custom AI SoC optimized for customer's particular workload.

Relative to our current customer relationships, LTAs will enable long term partnerships that may include a structured contract involving volume and pricing. Typically over 5 years or more. Over the long run, we expect that the LTAs should be an important driver of revenue growth. Improved visibility, resulting in less volatility, and improved the predictability of our revenue. Our first LTA example involves our first 2-nanometer chip and the semi custom Edge AI SoC, which we tape out in January. And this product is named CV 8. This AI SoC will serve both consumer and enterprise of patients in the IoT endpoint market.

For this long term agreement, we agreed to develop semi custom 8 ASIC for customers who want to support a certain complex AI workload. We will sell this AI SoC as a standard product to a variety of other customers in other markets. And this afternoon, we announced another material MTA, This time with Hanwha in South Korea, for the enterprise CapEx side of IoT market. With Hanwha, this LTA is for the sourcing and co-development of Ambarella's H AI technology across Hanwha's product lines and industry, including physical security, operational automation, life sciences, robotics, and other industrial markets. The agreement has potential has a potential revenue in excess of $800 million over a period exceeding 10 years.

And it represents 1 of the largest agreementss in Ambarella's history and 1 of the first agreements of its kind in the Edge AI semiconductor market. The multi generation nature of this relationship is expected to enable both companies to plan jointly cross road maps, accelerate product development cycles, and bring new category of AI-enabled products to market at scale. This relationship will involve standard AI SoCs we will sell in a variety of market to our customers. Beyond these first 2 LTAs, we are engaged in discussion with other companies. Today, I will also provide an update on robotic edge infrastructure and automotive markets. Which represents a material market opportunity for us.

I am very pleased to share that we now have 15+ robotic design wins including aerodrones. With lifetime revenue exceeding $100 million with more than 30 customers in our robotic pipeline. Our AI SoC combined high performance AI inference of this computer vision and ultra efficient power consumption into a single edge optimized architecture and represents the foundation platform for robotic system to run vision language action (VLA) models, in drones. CV5 enabling platforms such as the anti-gravity A1, enabling capabilities including 8K imaging, real time perception, autonomous navigation, obstacle avoidance, SLAM, and on device AI inferencing, without relying on constant cloud connectivity for these functions.

As drones evolved from flying camera into autonomous aerial robots, Ambarella's CVflow AI accelerator architecture allows manufacturers to deliver lower latency in decision-making, Improve latency, longer flight time, and more advanced autonomy at the edge. The robotic market is fragmented. And we are realizing design wins across a variety of other robotic applications including industrial automation, autonomous mobile robots or AMRs, delivery robots, Our AI associate involves from providing perception sensor fusion, and Edge AI processing to also offer decision making and the full autonomy needed for real time robotic awareness and action.

This convergence of high quality imaging and AI exploration and age autonomy running VLA models efficiently, positioning us as a key enabler of the broader physical AI and embodied AI ecosystems. As I mentioned earlier, our automotive business established an all time quarterly revenue record in Q1. And is on pace to establish a new fiscal year record. Third party research firms indicate global automotive production is expected to decline 1% to 2% this year. But with semiconductor content per vehicle rising, market research firms also anticipate the automotive semiconductor market growth 10 to 15% this year. We expect our automotive revenue growth to outpace these figures due to our success in commercial fleet met telematics and the safety applications.

The commercial fleet telematics market offers continued and exciting growth prospects as there is an installed telematic base in excess of 100 million vehicles growing at around a 10% CAGR but only about 10% of this installed base is so far AI We are aligned with industry AI telematic leaders who are also increasingly demanding AI SOCs that can take. Now take on not only more sensors, but more complex AI workloads. And our platform of 12 Edge AI SoCs is very well suited to help them scale in this market. I will also provide an update on the build out of our indirect sales channel that we announced to augment our existing direct to customer business.

The development of our indirect cell channel is important to not only help us address the fragmented robotics market, but also to provide support our emerging edge infrastructure business. We have already onboard a half dozen ISVs in vertical industries like retail, Industrial automation, transportation, health care, and smart cities since our launch of our developer zone at the CES in January. With more ISV expected to be onboard by the end of this fiscal year. In March, for the first time ever, we have boost at Embedded World in Newberg Germany, where we did live demonstration highlighting how Embraer AI SoC software stack and develop tools to be a competitive advantage across a wide range of AI applications.

From AI agentic automation and orchestration to physical AI system deployed in real-world environments. 1 of our existing design to demonstrate a real time industrial quality inspection solution on CV72 and N5. Multiple new ISVs, partners, will present in our booth, including 1 who demonstrated a real retail AI solution for in store and the drive through optimization. Another ISV demonstrated continuous training for high speed rail network and the third demonstrating warehouse robot solutions. In March, we also posted an invitation only exhibition at ISC West. Showcasing how Edge AI is powering the next generation of intelligent security and physical AI systems.

At the center of our exhibit was our newly launched CV 7 HAI Vision SoC delivering advanced imaging and on device AI processing alongside the n y 5 HAI SoC enabling infrastructure for low power, high performance enterprise security applications. While our ISV partners demonstrate a smart city security solution based on CV 75 and n 5 solution. I will now briefly summarize our representative customer engagements in Q1, and it is notable for the first time All of the examples are based on our Edge AI SoC. 3 from our CV2 family and 8 from our new CV7x family.

In enterprise security, while physical security remain the principal driver of this market, we are seeing our customer develop AI application software that enable their product to provide operational efficiency to a business. Examples including predictive maintenance, supply chain optimization, and auto automated customer support we expect operational efficiency in the long run, become an important new growth offshoot of what we refer to as enterprise security today. In particular, as Gen AI and the Agentsia AI is deployed at the edge, We achieved important milestone in March when April formally Panasonic announced the first edge endpoint camera to run AI locally. Based on the transformer capability in our CV72 AI SoC.

We also have the number of other CV75 and the CV 72 wins in the quarter including IDES, in South Korea, access in Sweden, i-PRO (part of Panasonic), Canada, IQ site formerly Bosch in German, and with major communication equipment company in The Americas, Notably, we had an additional CV72 win with C-PRO in South Korea that also utilize our AI imaging signal processing software. We also want a CV22 platform win with C-PRO that included another CV5 win with the major communication equipment company in The Americas. In the industrial market, we earned another AI based barcode reader project based on CV 28, this time with Hanwha Vision, which is expanding its reach beyond the traditional physical security market.

In the automotive market, our safety and telematics customer engagement activity remains strong. For example, we are pleased to announce Lytics, an industry leader in the commercial and the public sector telematics market has designed in CV 75 and the CV 72. Into multiple platforms. For in cabin pre installed safety market, we have a CV72 win with South Korean based tier 1 EURA and the CV 22 FS wing for a Western OEM in China. Our new product momentum remains a very strong both in terms of fiscal 27 revenue generation as well as new products that have not started to generate revenues.

While our 10 nanometer CV2 family of Edge AI processors for CNN applications continue to land design wins and grow. Our new 5 nanometer CV75 and CV72 capable of both advanced CNN and the transformer based GenAI, As well as Agentic AI-- Sorry. As well as Agentic AI, are in a steep production ramp and are expected to drive material incremental revenue this year. Then, on top of this, we continue to expand our new CV7 AI processor to enter production by the end of the year. And in the first half of fiscal 28 or less than a year from now. We expect our 2 nanometer CV3-AD AI SoC to commence production.

All of these new products I have described as well as all the new unannounced AI SoCs in development. Target more sophisticated AI workload and command average ASPs well above our current $15 SoC ASP in Q1. As you can tell, we have a lot of technology product market and the customer development activity going on. I would like to summarize this quarter's call with 3 observations. First, the AGI market is just getting started, and the momentum is building in multiple areas. Second, Ambarella is clearly an Edge AI technology platform and the product leader. And we are already well and we are already well established.

I think our positioning is gate even stronger as Edge AI workloads get more complex. And there become fewer and fewer companies capable of integrating all of accelerated computing functions into a single chip. Third, customers are recognizing the first 2 points and now want to engage with us more broadly and more deeply. For example, LTA agreements can build stronger relationships and get us design into new markets like robotic, while the indirect channel sales ecosystem bring us more scale. In conclusion, as all this comes together, we intend to drive shareholder value with strong revenue growth. And a more diversified and predictable financial model that offers mature operating leverage potential for our shareholders.

With that, John will now discuss our Q1 results and Q2 outlook in more detail. John? Thank you, I will now review the financial highlights for the first quarter fiscal year 27 ending April 30, 2026, I will also provide a financial outlook for our second quarter of fiscal year 27, ending July 31, 2026. I will be discussing non GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non GAAP results. For non GAAP reporting, we have eliminated stock based compensation and acquisition related expenses, adjusted for the impact of taxes. For fiscal Q1, revenue was $100 million slightly above the midpoint of our prior guidance range.

Of 97 million to $103 million down 0.5% from the prior quarter and up 16.9% year-over-year. On a sequential basis, automotive revenue driven by commercial vehicles experienced a strong above seasonal double digit percent increase while IoT revenue was seasonally down. Non GAAP gross margin for fiscal Q1 was 59.9%, slightly above the midpoint of our prior guidance range of 59% to 60.5%. Non GAAP operating expense in Q1 was $56.4 million slightly below the midpoint of our prior guidance range. Of 55 million to $58 million Q1 net interest and other income was $2.1 million Q1 non GAAP tax provision was approximately $740 thousand.

We reported a non GAAP net profit of $5 million or 11 cents per diluted share in Q1. Now I will turn to our balance sheet and cash flow. Fiscal Q1 cash and marketable securities were $27.8 million decreasing $34.8 million from the prior quarter but increasing $18.4 million from the same quarter a year ago. The sequential decrease in cash and marketable securities was primarily due an increase in our inventory levels, to better service our customers in the face of a number of new product cycles. Receivables days sales outstanding of 35 in Q1 was flat with the prior quarter, while days of inventory increased from 99 to 145 days.

Operating cash outflow was $25.6 million for the quarter. Capital expenditures for tangible and intangible assets were $4 million for the quarter. Free cash outflow was $29.6 million for the quarter. During the first second quarter of fiscal year 27, we repurchased 47.8 thousand shares of our stock for total consideration of $2.4 million or an average price of $51.04 per share. During the second fiscal quarter, Ambarella's Board of Directors authorized a new $50 million repurchase program valid through June 30, 2027. Replacing the program that expires on June 30, 2026. The repurchase program does not obligate the company to acquire any particular amount of ordinary shares, and it may be suspended at any time at the company's discretion.

We had 1 logistics company representing 10% or more of our revenue. WTM Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 60.7% of revenue for the first quarter. I will now discuss the outlook for the second quarter of fiscal year 27. We forecast a seasonally strong fiscal second quarter with revenue in the range of $105 million to $111 million or $108 million at the midpoint. Sequentially, both auto and IoT revenue are expected to increase. With growth in both consumer and CapEx driven market. We expect fiscal Q2 non GAAP gross margin to be in the range of 59% to 60%.

We expect non GAAP OpEx in the second quarter to be in the range of $56 million to $59 million We estimate net interest and other income to be $1.9 million our non GAAP tax expense to be approximately $800 thousand and our diluted share count to be approximately 44.3 million shares. Thank you for joining our call today. And with that, I will turn the call over to the operator for questions. Thank you so much. As a reminder, if you do have a question, please press 11 on your and wait for your name to be announced. To remove yourself, press 1-1 again. Our first question is from Ross Seymore with Deutsche Bank. Please proceed.

You mentioned earlier about the auto side growing fast faster than the end market itself. I think you said that end market will be 10 to 15%. In the past, you have given full year fiscal year revenue guidance. I think you said 10 to 15% on your last call. How are you thinking about that for this year now? Totally. Yeah. We I think for the whole year, we are still thinking it is probably 10% to 15%. We are not changing that. And the automotive is stronger grows faster than the other market. Okay.

And then on the LTA side of things, and then maybe the 1 that you announced tonight in the 8-Ks with the $800 million over time. But more conceptually, how are you thinking about those? Are they gonna be revenues? I think you said the word potential revenue. How do we build that into the estimates as we think forward for the company? Right. First of all, we already have a run rate with Hanwha for the last 15 years, and we know we only take a percentage of their current market share.

So we expect with this LTA we are going to gain market share on their annual run rate as well as this is a multigenerational commitment on both sides. So that this is-- we are talking about you know, at least 2 generations of silicon that will be you know, codeveloped between these 2 companies. So I think from that point of view, we believe that it is a long period kind of commitment as well as getting market shares from them. At the On the same time, if you look at our current ASP, although our corporate ASP, is $15, but our CV ASP is a lot higher than that.

So if you calculate put all the thing together, you that is how we calculate this potential. $800 million. Yeah. Ross, just a little background on Hanwha. Know, it is a major multinational conglomerate with more than billion in annual revenue. it is involved in aerospace, defense, robotics, physical security, life sciences, industrial, ocean solutions, chemicals, all, you know, a lot of different things, retail services. And so an important part of this relationship in the intermediate to long term is moving beyond what has just been, you know, the physical security relationship that Fermi described as our current run rate.

So we can gain share on that business, but at the same time, the press release talks about in addition to physical security, things like operational automation, life sciences, robotics, other industrial markets, another very important angle of this relationship. Great. Thank you. Thank you. 1 moment for our next question. It comes from Tore Svanberg with Stifel. Please proceed. Yes. Thank you. Maybe a question to follow-up on the LTA and not the Hanwha 1 specifically, but how should we think about these sort of folding in here over the next few years? Obviously, these could be quite large. I am sure you can say yes to all of them.

Is there also going to be potentially some OpEx sharing with some of these customers that you signed LTAs with? Any more color you could offer us as far as how we should think about you know, the magnitude and, you know, how it is gonna be funded over the next few Thank you. So first of all, I think I want to go a little higher level and saying a lot the most of the LTA discussion is based on 2 things. 1 is that you look at all the fast AI trend, and our customer continue to look at the new AI model. They have implemented higher performance requirement, lower power efficiency.

So to meet this kind of AI demand, while for most Edge AI application, how efficient is what the probably the most important thing. So it is getting harder and harder to build a platform of silicon that can address all in this new application. So I think that trend really help our customers think about how to partner with somebody that can build a platform of a of a silicon that help them not only on the you know, security enterprise security, but also other associate they are trying to address. I think that is probably how the LTA started.

And in this kind of LTA, most of the discussion will involve NRE, and but also will develop a product mutually beneficial. Right? So I think those are 2 things that we definitely want to make sure that we develop a software platform that can go cross our current silicon platform that offer our or complete roadmap to our customer. And in exchange, they were willing to help us to fund those platform with an IE, particularly not only on the silicon side, also on the software side. that is very helpful. And that is my follow-up. Maybe related to that platform approach, Fermi.

So just thinking about the competitive landscape, obviously, there is big processor companies. there is obviously analog companies and so on and so forth. But how flexible can your software platform really be? Because, obviously, the use cases at the edge are going to be quite different from use case to use case. Thank you. Yeah. So I think our unique architecture you remember that we have been talking about algorithm first. So our let's say, called how we actuate, like, our image processing and our CVflow AI x-ray there.

Has been really passed many battles and have been proved to our customer is not only power efficient, but also programmable enough to adapt to many different application, different AI models. For example, we just talk about our CVflow architecture can do 200 AI, sorry, model architecture, not 200 models. We are talking about 200 model architectures. And we took all of them into production. Just show you how flexible our accelerator is. But more importantly, with the latest Agent AI approach, you need to integrate everything together. So in that including not only the ISV and the CVflow or impact encode H.264 encoder.

On top of that, you need to integrate complete SoC for CPU and also IO and DRAM connectivity to provide a very not only power efficient, but also cost efficient solution to our customers. So that is where we are basically having a reputation to deliver those kind of products landscape, consistently in the last 20 years. And when we look at the competitive we see NVDLC, Qualcomm obviously, But I really do not see any other people keep coming out with a complete silicon platform. that we have 12 Edge AI SoCs can go from very low performance to a few hundred top performance with power efficiency.

On top of that, all the silicon was covered by 1 unified software development SDK that our customer, if they develop 1 product on 1 SoC, can easily go to a different SoC providing a deep a different price or performance point on their product platform. And this kind of flexibility and the width of our product format, I do not think there are many people can match. that is great color. Thank you. Thank you. 1 moment for our next question, please. It comes from the line of Quinn Bolton with Needham and Company. Please proceed. I wanted to follow up, Fermi, on the Hanwha LTA.

The press release, it talked about an internal SOC that Hanwha continues to design. And so I wonder if you know, it sounds like you are co designing multiple generations of shifts. Is there an opportunity to get a bigger percentage of share away from that? Internal SOC? Or you think that internal SOC continues to hold a portion of Hanwha's requirements? And then I have got a follow-up. I think it is a mutual intention that they are going to use more of this co developed platform into more product lines. So we totally expect we are getting more market share from Hanwha with this new development. Excellent.

And then Fermi, you guys have talked about the fleet telematics market for a number of years, and it feels like it may finally be starting to inflect on the script. You mentioned an installed base of over a 100 million units with less than 10% of that being AI. But what do you think is driving the inflection? Is there anything you can point to in particular that is driving the pretty strong growth here in the first and second quarter? Quinn, it is Louis. Just in terms of the market opportunity, telematics you know, there is about a 100 million subscribers.

And third party research firms, you know, like ABI or Gartner, see it growing maybe a 10% CAGR Within that 100 million subscriber base, maybe only 15% to 20% of the market is using AI and AI video. With as an additional ARPU generating feature in their platforms. So what you have is the overall telematics market growing You have got AI video growing into that. And at the same time, there is demand for more sophisticated AI workloads and multiple sensors, which is causing, our ASP, the demand for more sophisticated edge AI chips to go up. So those are the dynamics that we are facing. We are doing a very good job with share, for example, this quarter.

We announced Lytics, as Fermi mentioned, you know, multiple platforms with CV 72, CV 75. Which is they are 1 of the leaders of this market. So, any follow ups on that? No. that is that is that is great. Thank you, Louis. Thank you, for me. Thank you. Our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed. Yes. Thank you. If you could talk about are you guys impacted at all by shortages of DRAM or storage in any of the surveillance markets or consumer markets? Just seeing any impact from any of that? Yeah. So first of all, obviously, just like everybody else, we are impacted, but not directly.

We are impacting directly. You know, we in the last quarter, we did when we talk about this, we definitely talk about our customer facing much higher DRAM price and the flash price as well as potential shortage in the second half. So that situation did not change. The biggest direct impact to us is most of our customer are handling this deal and show to you by doing, first of all, they are trying to source different DRAM suppliers Or to cut down the DRAM utilization per product or basically how to utilization in a chip so that they can use a smaller DRAM size.

And all those activity require we our FAE support to help our customer We are happy to do that because that is definitely something we need to do to help our customer. But at the same time, I think that is probably the biggest direct impact to us on the engineering resource requirement. Okay. Thank you. And then as a follow-up, the inventory, you sort of described it supporting product ramps. Was a pretty big increase. I just can you give us any more color to make us feel comfortable with that amount of inventory build? Thank you. Hi, Joe. Yeah. I mean, if you look back in the last couple of quarters, we were running kind of lean.

And over the last few quarters, we have looked at the opportunities that are coming to us with the strong growth that we had last year We wanted to position ourselves in the in the right product categories to be able to continue to serve our customers And so going from a fairly low number of days of inventory at points in last year we wanted to build bit of inventory heading into this year. To be able to do that. And, Joe, this is Fermi. I just want to add another color on this. You know, Samsung has officially informed us that their supply chain supply is getting tighter.

Obviously, we ask we have secured our supply, but we feel that is prudent for us build up a little inventory just in case we run into a different supply issue. So from that point of view, I think I think you also heard that supply chain become a problem for everybody. We just try to be prudent to build up some inventory just in case. Makes sense. Thank you so much. Thank you. Our next question comes from the line of Kevin Cassidy. With Rosenblatt Securities. Hi. Thanks for taking my question, and congratulations on all the great progress. And along those lines, you are building out the indirect sales channel. I think you mentioned 6 groups hired.

You know, do these the if you could describe these little better geographically, and then also, do they have application engineers? I will just stop with that. Those questions. Right. So first of all, there are mainly in the United States right now, obviously, but we are definitely trying to go to Japan, and Europe to expand the ISV. But today, all 6 of them are US based. In terms of size of those ISVs, it is really from large to small, but more importantly, is really about what their current engagement with the end customer.

We are looking at ISVs that can add value, that can easily pull their software onto our platform and so they can go to their existing customer with our solution. So those are the ISV who are engaging. And more importantly, they are really enabling applications that we have not touched in the past. So overall, from that point of view, we are happy with the progress that we made in a short period of time since we announced this at CES. But I think 6 of them is just a beginning. I think our goal is to double that this year, and hopefully, we can continue to build our momentum based on that. Yeah, Kevin. it is Louis.

In addition, for this indirect effort, in addition to the ISVs we just talked about, there is significant effort you know, building out channel partners and even system integrators as part of this effort. This is really important to help us serve markets like edge infrastructure that need a lot of technical support or very fragmented markets like robotics. So a lot of efforts going into the ISV channel partners and even system integrators. Okay. Great. Yeah.

That was going to be part of my follow-up question of how much of a I hate to use the term, but the cookie cutter approach can it be that someone can go in with a lot of the solution already and help out a customer. Is that the idea? Yeah. Yeah. You might have multiple ISVs working on 1 project. So, if I understood the question right, it is not just always something right off the shelf, you know, cookie cutter as you said. But you might have ISVs. You might have channel partners, and you might have system integrators all involved on 1 project. So think it is pretty far from being cookie-cutter. cutter. it is very sophisticated.

Software as these workloads get more complex. You need that whole indirect ecosystem to play a role in many of these designs we are pursuing. And Kevin, just to add, part of the decision making engaging with some of these ISVs is seeing the expertise that they have in different verticals. And some of them-- of them are they have expertise across multiple verticals. And so it is it is really trying to take a holistic approach to that engagement and cover as many verticals as we can with folks who specialize. Great. Thank you. Thank you. Our next question comes from the line of Christopher Rolland with Susquehanna. Please proceed. Thanks so much for the question, guys.

My question is, I think a few quarters ago, talked about doing some infrastructure, putting your chips basically into servers. I think it was for security camera applications, but potentially others. Have you had any other further engagements there on the side? Yes. We do. Edge infrastructure continue to be a focus. And we have n 5 We have a, you know, not only engage with customer, we also have design wins that we are that we are working on. The first product will probably come out, I would say, second half of this year. And at the same time, we are building definitely building a road map to continue to address this opportunity.

So we have not talked about our next generation chip and also the potential updates on that. But I think next time, we should give you more updates on the age infrastructure. that is meant to be a very important direction for us. Yeah. Just to put it in perspective, based on the products we have now, you know, it is a couple of hundred million dollar SAM For things like AI VisionVox, but as we come out with more products and build out this indirect ecosystem that, as we mentioned, will help the edge infrastructure business, You will see us update the SAM appropriately when we have more products here.

So definitely a high focus area, and it is part of that indirect channel we were just talking about. Great. Thank you, Louis. Thanks, thank you, Fermi. And then for my second question, just the robotics opportunity, I think last quarter, you mentioned warehouse robotics. Any other engagements there? And then if you could talk about humanoids and engagements there, that would be interesting too. Right. So we talk about different applications. This time. In fact, last time we talked about this the warehouse design win and now we are definitely in a extensive engineering development cycle with them.

And but more importantly, on top of that, we have a multiple design wins in this quarter in the span of many different application. I talk about I talk about in our my script. But I think the most important thing is now we know we focus on that for any robots, there are multiple different solutions today. 1 is just purely video. The other 1 is perception. The third 1 is using fusion to put a different sensor together. And fourth 1 is really become a controller or decision maker for this whole robot system.

I would do our design win is in the all these areas, but more focused on the perception side because our expertise in the on the video and also fusion side I think it is across different applications and also focus on perception and also the decision making part of the robotic solution. There are some of the humanoid type of applications in that design wins, but we are not in the place to talk about just yet. Excellent. Thank you, Fermi. Thank you. 1 moment for our next question. That comes from Martin Yang with Oppenheimer. Please proceed. Chan you for taking my question. First, a couple of questions on LTA.

Are you able to say or quantify how many other potential partners you have in your LTA discussions? We only announced 2. We are talking about potential, but there is no other concrete information we can disclose at this point. Got it. And then also on LTAs, for example, the 1 with Hemlo, spending over multiple years, do you need to also secure wafer supply from your foundry partner regarding those LTA agreement? First of all, I believe that our relationship with Samsung, although we only try to secure wafer commitment every year, But in the last 18 years, we never have any problem with to secure the wafer we want for our customers.

So I expect that our wafer supply for 5-, 4-, 2-nanometer from Samsung will not be an issue for us Although that there is a lot of discussion that Samsung is also gaining momentum on those process node. And, we do not have any long term contract with any suppliers. That might be a question you are asking. But I do not think that is a contract we are going to sign with any supplier anytime soon. Got it. And last question, also have to-- Do you view your relationship with Samsung your design capabilities? As a key value prop when you try to secure long term agreements with other customers. Absolutely.

Because, 1 long discussion with any customer on LTA is how you secure your wafer, particularly on the 4-nanometer, 2-nanometer process node. In fact, some of the time, we have to really bring our supplier partners into a conversation to make sure that our customer feel comfortable with it. By the way, I can say that, you know, today, Samsung announced at their-- Samsung has their official company wide event talking about their 2-nanometer process. And they made announcement that NVIDIA and Ambarella are the 2-nanometer customers that commit to their process node. As official press release from Samsung. Okay. Thank you, Fermi. Thank you.

And as a reminder, to ask a question, simply press 1-1 to get in the queue. That is 1-1 to get in the queue. Our next question is from Suji Desilva with ROTH Capital. Please proceed. Hi, Fermi. Hi, John and Louis. So quick question on robotics as well. I am curious. Are those you have a breadth of wins there. Are those across the board on your product portfolio? Or are does that category lean towards the leading edge products, the leading edge nodes, wanna understand, you know, where robotics is intercepting your product portfolio.

All the products that we have design wins with is our CV product line. it is really -- most of them are our 5-nanometer products. There are some 10-nanometer, but majority is 5 nanometer products. In fact, there are also 4-nanometer products in there too. So this is really covering our CVflow architecture. that is the main reason people using us. But more focus on the 5 nanometer for the performance and power efficiency. Got it. Okay. And then a question perhaps for John. Should we expect typical seasonality this fiscal year, this calendar year? Or are there factors that might, be swinging it differently than prior years?

Suji, I think the expectation is to continue to see the seasonality that we have seen in the past at this point. Okay. Great. Great. Thanks, John. Thanks, everybody. Thank you. Our next question is from Ross Seymore with Deutsche Bank. Hi, guys. Just 1 follow-up for you. Given the change in the business more automotive this year relative to the IoT side and then longer term some of the robotics and IoT and Edge AI, physical AI, everything you talked about on the call, how do you see that impacting either benefiting or being a little bit of a headwind to your gross margin in both the near term and long term from those dynamics, please? Right.

So, Ross, in fact, since 3 quarters ago, we started really watching our gross margin carefully. I think that today, what I can say is based on all the things that we just discussed, we believe that we are going to stay with our current long term gross margin model that between 59% and 62%. Got it. Thank you. Thank you. And this concludes our Q&A session, and I will pass it back Doctor. Fermi Wang for closing comments. And thank you for joining our call today. And I really hope I can see you at some of our events this quarter. Thank you. See you next time. This concludes our conference.

Thank you for participating, And you may now disconnect.