Ambarella Inc. (NASDAQ:AMBA) released fiscal third-quarter 2018 results on Wednesday after the market closed, comfortably beating expectations on the bottom line and delivering as promised on revenue. But perhaps most important, the company continues to make progress on its long-term strategy for becoming a leader in the computer-vision space.

Let's take a closer look at how the video-processing chip specialist kicked off the second half of its fiscal year, and what to expect in quarters ahead.

Ambarella chip attached to a camera lens

Image source: Ambarella.

Ambarella results: The raw numbers


Fiscal Q2 2018

Fiscal Q2 2017

Year-Over-Year Growth


$89.1 million

$100.5 million


GAAP net income

$11.7 million

$29.0 million


GAAP earnings per share




Data source: Ambarella, Inc. 

What happened with Ambarella this quarter?

  • The top line was within Ambarella's guidance provided last quarter, which called for revenue between $87.5 million and $90.5 million.
    • Revenue declines were primarily caused by sales to GoPro (NASDAQ:GPRO), which fell almost 47% year over year to $18.4 million.
    • Non-GoPro revenue grew 7.2% to $70.6 million, driven by growth in IP security and in line sales in the auto and non-GoPro wearables markets. Drone sales declined modestly, as DJI's low-end Spark drone impacted higher-end drone sales. Ambarella also continued to see weakness from Tier 2 consumer drone customers.
  • Adjusted (non-GAAP) net income was $25.7 million, or $0.75 per share, above consensus estimates for $0.67 per share.
  • Adjusted gross margin was 64%, above guidance for between 62% and 63.5%.
  • Ambarella repurchased 269,540 shares during the quarter for $12.8 million, leaving $35 million remaining under its repurchase program.
  • Ambarella demonstrated and sampled its new CV1 computer vision chip to key IP security and automotive customers, ahead of its previous goal to start sampling the cutting-edge chip by the start of the fiscal fourth quarter.

What management had to say

Ambarella CEO Fermi Wang said:

During the quarter, we continued our solid execution in support of the development and delivery of our next generation of computer vision solutions. We met our aggressive goal of demonstrating our CV1 performance to customers and commenced sampling in the security and automotive markets. We continue to invest in leading edge technology to expand our market opportunities, both in current markets, and in a broad range of new automotive applications.

Looking forward 

For the current fiscal fourth quarter, Ambarella expects revenue to be between $68 million and $72 million, representing a year-over-year decline of between 22.3% and 17.7%. This assumes a roughly 57% decline in GoPro revenue, to $13 million, and strong growth from both IP security and automotive OEM customers. Adjusted gross margin is expected to arrive at between 62% and 63.5%.

Looking further ahead, Ambarella CFO George Laplante noted that little has changed with regard to Ambarella's expectations for fiscal year 2019. That means non-GoPro revenue is still expected to climb in the range of 10% next fiscal year. The company is opting not to provide guidance for GoPro revenue given a lack of visibility as the action camera specialist favors its own custom chips in newer devices.

With the exception of the bottom-line beat, there were no big surprises this quarter from Ambarella -- and that's a good thing with last quarter's guidance-related plunge still fresh on investors' minds. As Ambarella continues to reduce its reliance on GoPro and make swift progress as a leader in the computer vision market, I think long-term investors should be more than happy with where it stands.