What's happening: Shares of Ambarella (NASDAQ:AMBA) dropped as much as 16.3% Wednesday morning and were down about 12% around noon after the video chip specialist released impressive fiscal second-quarter 2016 results, but followed with guidance that left the market underwhelmed.

Quarterly revenue climbed 79.3% year over year to $84.2 million, which translated to a 150% increase in adjusted net income to $29.7 million, and 138% growth in adjusted net income per diluted share to $0.88. Analysts, on average, were anticipating adjusted net income of only $0.80 per share on lower revenue of $81.7 million.

Why it's happening: "Revenue from our existing wearable, IP security and automotive video recorder camera markets grew significantly in the quarter," explained Ambarella CEO Fermi Wang, "and we saw solid growth from drones or flying cameras.  We also closed on the purchase of VisLab S.r.l., which adds a strong development team as well as advanced intellectual property in computer vision technology."

During the subsequent conference call, however, Ambarella management stated revenue in the current quarter is expected to be between $90 million and $93 million, or a year-over-year increase of between 37% and 42%.  By contrast, Wall Street was expecting fiscal Q3 revenue of $92.3 million, or slightly above the midpoint of Ambarella's expectations. According to Ambarella CFO George Laplante, that performance will be driven by growth in the automotive, IP security, and drone markets, and held back by expected sequential and year-over-year declines from the wearable camera segment. For the latter, Laplante blamed the timing of recent large product launches from customers including GroPro and Xiaomi. 

Meanwhile, current-quarter adjusted net income should be between $29.5 million and $31.5 million. Based on an expected diluted share count of 34.3 million shares, that equates to fiscal Q3 adjusted net income per share between $0.86 and $0.92, or roughly in line with expectations.

To Ambarella's credit, Laplante did note based on combined fiscal Q2 and Q3 unit shipments, Ambarella's outlook is in line with its own growth expectations for this market. But with shares of Ambarella already up a whopping 77% year-to-date going into yesterday's close, it's evident the market wanted even more from this promising tech company.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns and recommends Ambarella and GoPro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.