Shares of Ambarella Inc. (NASDAQ:AMBA) are up 13.5% as of 12:30 p.m. EST Friday after the video-processing chip company announced better-than-expected fiscal fourth-quarter results.
Ambarella's quarterly revenue declined 19.3% year over year to $70.6 million. That translated to adjusted net income of $15.8 million, or $0.45 per share, down from $0.92 per share in the same year-ago period. Of course, this might not sound encouraging, but the midpoint of Ambarella's latest guidance -- provided in late November -- called for revenue to fall 20%, and most investors were modeling significantly lower adjusted earnings of $0.37 per share.
As expected, the primary culprit of Ambarella's declines was GoPro, sales to which fell around 56% year over year to $13.3 million. During the subsequent conference call, Ambarella management said their non-GoPro revenue enjoyed "strong" growth in the security, automotive, and other wearable camera markets, partially offset by an expected decline from the drone market.
"At the CES show this year, we continued our history of successfully demonstrating leading edge technology with a focus on a wide range of computer vision applications," added Ambarella CEO Fermi Wang. "We look forward to delivering a deeper insight into our CV capabilities, particularly in the automotive market, at our upcoming Analyst Day on March 28th."
Looking ahead to the first quarter of fiscal 2019, Ambarella expects revenue to be between $54.5 million and $57.5 million, or a decline of between 15% and 10.3% year over year. This assumes a slight impact from new revenue recognition rules (less than 2%), and a 12% drop in non-GoPro revenue as continued declines in the drone market are partially offset by growth in IP security and automotive. Adjusting for the revenue recognition item, the range is roughly in line with consensus expectations.
All things considered, this quarter certainly didn't look pretty at first glance. But given Ambarella's outperformance relative to expectations, it's no surprise to see the stock soaring today in response.