What happened

Shares of Ambarella (NASDAQ:AMBA) were up 19% as of 3:15 p.m. EST Friday after the video-processing chip designer announced third-quarter results and early design wins in the computer-vision market.

That's not to say Ambarella's results looked good at first glance. Quarterly revenue declined 35.7% year over year, to $57.3 million, while adjusted earnings slipped 75% to $7 million, or $0.21 per share. But Ambarella's latest guidance provided in August called for roughly the same revenue between $55.5 million and $58.5 million, and most investors would have settled for adjusted earnings of only $0.09 per share.

Camera view of vehicles and pedestrians being identified by a computer-vision chip

IMAGE SOURCE: AMBARELLA.

So what

"The short term revenue outlook continues to be under pressure as our business shifts away from consumer electronic applications and faces geopolitical and macroeconomic challenges, as we have previously discussed," stated Ambarella CEO Fermi Wang. "We are, however, very encouraged with our strategy and position at the forefront of the nascent computer-vision market."

Wang added that Ambarella not only secured its first computer-vision design wins in the automotive market this quarter but expects its first mass-production revenue in the current quarter from its cutting-edge CV series chips in the professional surveillance camera market.

Now what

Ambarella is targeting fiscal fourth-quarter revenue of roughly $51 million, plus or minus 3%. That's well below consensus estimates for revenue closer to $55.6 million and marks another decline of nearly 29% from the same year-ago period.

Nonetheless, with shares already down around 46% year to date going into this report, the market was more than willing to forgive Ambarella in light of its third-quarter earnings beat and the prospect of higher computer-vision sales down the road. 

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ambarella. The Motley Fool has a disclosure policy.