Image source: Ambarella.

What: Shares of Ambarella (NASDAQ:AMBA) dropped as much as 10.1% Friday after the company reported solid fiscal fourth-quarter 2016 results, but followed with light guidance for the current quarter.

So what: Quarterly revenue rose 5% year over year to $68 million, and translated to a 71.2% decline in GAAP net income to $5.1 million, or $0.15 per share. On an adjusted (non-GAAP basis), which excludes items like stock-based compensation, Ambarella's net income fell 4.4% year over year to $21.6 million, or $0.64 per share. Both figures were well above Ambarella's guidance, which called for revenue between $65 million and $67.5 million, and adjusted net income between $15 million and $17 million. 

"During the fourth quarter we saw strong sales from professional IP security, automotive aftermarket, home monitoring and flying camera markets," explained Ambarella CEO Fermi Wang. "This was largely offset, however, by a continued decline in the wearable sports camera market."

Now what: For the current quarter, however, Ambarella expects revenue of between $55 million and $57 million, or a decline of 24% to 20% from the same year-ago period. To be fair, Ambarella management did warn investors during last quarter's call of an impending "moderate" decline in fiscal first-quarter revenue resulting from high inventories in the wearable camera space. However -- and with the caveat that we don't typically lend much credence to Wall Street's short-term expectations -- analysts' consensus estimates predicted fiscal Q1 revenue would decline just 12.1% year over year.

During this quarter's call, Ambarella CFO George Laplante noted his company would be taking a more cautious approach to guidance given the ongoing weakness in the wearable sports camera space, at least "until we have a better picture of end-user demand in this market." In the meantime, however, Ambarella shareholders can take solace knowing their company continues to diversify its business through promising other market verticals, and I remain convinced its long-term story still holds.

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