Ambarella (NASDAQ:AMBA) has endured a rough start to the year after key customer and action-camera maker GoPro (NASDAQ:GPRO) announced its exit from the drone market last month. This was the latest in a series of bad news for the chipmaker, which has been struggling with sharply declining revenue and earnings of late.

Still, investors will be hoping for some good news when Ambarella releases its fiscal fourth-quarter results after the market closes on March 1, though it might disappoint. Here's why.

A woman flying a drone.

Image Source: Ambarella. 

A steep decline is in the cards

Wall Street expects Ambarella to earn $0.37 per share on revenue of $70.3 million, in line with the company's own guidance. By comparison, the chipmaker earned $0.92 per share on $87.5 million in revenue in the year-ago quarter, so the company's top and bottom lines are expected to take big hits.

And it won't be surprising if Ambarella fails to meet estimates. GoPro, which supplied almost 21% of Ambarella's revenue during the third quarter, announced in January that it would be overhauling its business by exiting the drone market and laying off employees. As a result, GoPro's revenue shrunk a huge 38% year over year during the quarter that includes December.

The loss of the GoPro drone business will hurt Ambarella over the coming quarters. This is why investors will be paying close attention to the chipmaker's non-GoPro business, as this is Ambarella's only shot at a turnaround.

Can it make a comeback?

For now, Ambarella's turnaround looks far from certain as its non-GoPro business is growing at a snail's pace. During the third quarter, its non-GoPro revenue increased just 7.2% year over year to $70.6 million, accounting for approximately 79% of the overall top line.

But there are a couple of potential catalysts that could leave a positive impression on the company's upcoming results. Last month, Ambarella released the first computer vision chips based on its CVflow architecture.

The CV1 chip was the first of Ambarella's ultra high-definition computer vision processors that aim to power a variety of applications such as self-driving cars, autonomous drones, and security cameras. The second product from this family is a system on a chip (SoC) that combines image processing, ultra high-definition video encoding, and computer vision processing into a single platform.

Ambarella aims to deliver high performance levels, low power consumption, and reduced cloud storage costs with this SoC. The company claims that the chip is more efficient than central processing units and graphics processing units when it comes to intelligent image and video processing while keeping power consumption in check.

The good news is that Ambarella demonstrated the capabilities of this platform in the drone and automotive space at the Consumer Electronics Show in January. For instance, the company's Embedded Vehicle Autonomy (EVA) package supports a variety of features including obstacle detection, traffic light detection, and lane detection.

Meanwhile, the SuperDrone platform has features such as path planning, obstacle avoidance, and multipoint navigation to support autonomous flight in drones. Ambarella looks like it is targeting the right markets with these new chips, but it remains to be seen if it can find any takers, as the chipmaker is late to the game. Bigger, deep-pocketed rivals are already present.

Investors shouldn't expect much from Ambarella's upcoming quarterly report and outlook because of the problems at GoPro. Additionally, the company's long-term prospects aren't secure at this point, as it is entering highly competitive markets -- such as drones and self-driving cars -- where other tech giants have already made a lot of progress. But any positive pointers in these markets could go a long way in boosting Ambarella's business and giving investors a ray of hope.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.