The next chapter in the wild life of Ambarella (NASDAQ:AMBA) will be scripted tomorrow. The provider of video compression and image processing semiconductors reports quarterly results after Tuesday's market close, and there's a lot riding on the numbers.

A couple of years ago Ambarella was setting itself up as the thinking investor's play on GoPro's (NASDAQ:GPRO) success. As the sole provider of the video chips going into GoPro's wearable cameras, it was a shrewd coattail play. However, now that GoPro's hit a wall -- it rattled off four straight quarters of double-digit declines of at least 30% before bouncing back with 24% growth for the holiday quarter -- there's pressure on Ambarellla to prove that there's life beyond wearable cameras. It relied on GoPro for 30% of its revenue during Ambarella's fiscal third quarter.

Ambarella's already a big player in dashboard cameras, drones, surveillance gear, and virtual-reality equipment. The diversification has already paid off. Ambarella's revenue declined in just two of the four quarters of GoPro's brutal slide, and revenue rose 8% in Ambarella's most recent fiscal third quarter. GoPro's third quarter -- overlapping most of Ambarella's fiscal quarter ending in October -- saw a nearly 40% year-over-year plunge in revenue. 

An a7L chip from Ambarella.

Image source: Ambarella.  

Chipping in for a turnaround

Analysts are holding out for a robust report. They see Ambarella posting revenue of $86.1 million, 27% ahead of the prior year's showing. Ambarella's own guidance three months ago was forecasting between $84 million and $87 million on the top line. Wall Street pros are also modeling a profit of $0.74 a share, 16% over last year's bottom-line results.

Investors shouldn't be surprised if Ambarella's net income comes in stronger than expected, as that's exactly what we've seen materialize over the past year. Even during the first two quarters of the fiscal year it wrapped up at the end of January when it staged a top-line retreat, Ambarella still landed well ahead of where analysts were perched. It wasn't even close, with double-digit percentage beats every single time out.

QuarterEPS EstimateEPS ActualSurprise
Q4 2016 $0.48 $0.64 33%
Q1 2017 $0.28 $0.34 21%
Q2 2017 $0.38 $0.54 42%
Q3 2017 $0.94 $1.11 18%

Data source: Yahoo! Finance.

Ambarella's historical outperformance and GoPro's bounce over holidays aren't the only reasons to be hopeful. Kevin Cassidy at Stifel issued an upbeat analyst note last week. His channel checks show that Ambarella's CMOS sensor production constraints and drone production hiccups have eased. Cassidy expects Ambarella to post another better-than-expected quarterly report and to raise its outlook. 

We won't have to wait long to see if Cassidy is right. Ambarella reports shortly after Tuesday's market close. Shares took a hit the week it posted disappointing guidance following its third-quarter results. Ambarella stock is trading 8% higher since that week's slide, and we'll soon find out if those gains are sustainable.