Investors have been less excited about Ambarella's (AMBA 1.87%) prospects lately. The chip specialist, which develops tech in exciting growth niches like computer vision and autonomous driving, has trailed the market so far in 2022 as Wall Street worries about supply chain challenges and a slowing expansion pace ahead.
Investor sentiment might start shifting back toward optimism in a few days when Ambarella reveals its late-2021 performance on key metrics like market share, profitability, and cash flow. CEO Fermi Wang and his team are also set to announce a detailed outlook for 2022 that may -- or may not -- be pressured by inventory shortages.
With that big picture in mind, let's look at a few trends to follow when Ambarella reports fourth-quarter results on Monday, Feb. 28.
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1. Winning new customers
The company's last earnings report featured plenty of good news on the sales front. Revenue gains accelerated to a blistering 64% pace in the third quarter, reaching the top of management's prediction from three months earlier. Ambarella kept winning in established niches like security camera manufacturers.
But executives are more excited about the emerging computer vision space that's useful in artificial intelligence (AI) and autonomous driving. The automotive segment should reach roughly 20% of revenue for the full year 2021, in fact.
Look for gains here to be overshadowed slightly by supply chain challenges. Executives said in November that component shortages "became more acute" in Q3 and into Q4, leading to some delayed shipments. We'll learn on Monday whether those delays worsened enough to knock Ambarella off its growth trajectory.
2. Reaping gains from an acquisition
The company made an aggressive acquisition move by purchasing commercial radar specialist Oculii in late 2021. Management has sounded optimistic about how the purchase should quickly expand its growth potential without pressuring profit margins.
Q4 will be the first quarter that includes significant operating data from Oculii, and so shareholders will have the opportunity to compare actual results with those forecasts.
Heading into the report, most investors are looking for overall sales gains to be about 45% as revenue lands just under $90 million. Non-GAAP gross profit margin should remain strong at about 64% of sales, too.
3. Looking at what the future might hold
There's no shortage of potential risks that management might cite to support a modest initial outlook for 2022. Supply chain issues among semiconductor and tech manufacturers rank near the top, but Ambarella might also be caught up in new Chinese export regulations and/or tariffs. The company will face a higher growth bar this year, given that sales jumped nearly 50% in 2021.
These factors all have investors predicting modest revenue gains of about 20% for the current year, but management might sound a different tone on Monday. Looking further out, we'll see if Ambarella still expects robust demand in areas like security cameras, AI, and radar perception.
Ambarella needs a steady stream of innovation wins in these niches if the company is going to move toward $500 million in annual sales by next year, with long-term hopes of touching $1 billion roughly five years later.
