Ambarella (AMBA) Stock Forecast & Price Target

Ambarella Inc. has demonstrated robust revenue growth, reporting record revenues of $108.5 million, which reflects a 13.5% increase quarter-over-quarter and a substantial 31.2% increase year-over-year, surpassing expectations. This growth is bolstered by a notable rise in average selling prices (ASPs), which increased by approximately 20% year-over-year, alongside the expanding adoption of their third-generation system-on-a-chip (SoC) designs within automotive and IoT applications. With significant design wins in key sectors, particularly Edge AI, the company's ability to leverage increasing demand across its target markets presents a favorable outlook for future financial performance.

Ambarella Inc is facing a negative outlook due to several fundamental financial metrics indicating potential challenges. Despite a strong past quarter revenue of $261.2 million and a non-GAAP EPS of $0.27 that exceeded estimates, management forecasts a decline in IoT and Automotive revenues in the mid- to high-single digits on a sequential basis, which reflects typical seasonality. Additionally, the anticipated gross margin for F4Q26 is expected to drop to 59.8%, below previous estimates, driven by a mix shift towards higher volume customers that may burden profitability through potential volume discounts and low production yields.