Chipmaker’s Shift To AI-Based Computer Vision Taking Hold

Chipmaker Ambarella (AMBA) says its investments in artificial intelligence-based computer vision are bearing fruit. AMBA stock rocketed Wednesday after the company delivered a beat-and-raise quarterly report.


The Santa Clara, Calif.-based firm late Tuesday said it earned an adjusted 35 cents a share on sales of $79.3 million in its fiscal second quarter ended July 31. Analysts had expected earnings of 25 cents a share on sales of $75.7 million. On a year-over-year basis, Ambarella earnings soared 483% while sales jumped 58%.

Ambarella’s second-quarter results marked the company’s third straight quarter of accelerating sales and earnings growth on a year-over-year basis.

For its current fiscal third quarter ending Oct. 31, Ambarella expects to generate sales of $90 million, based on the midpoint of its outlook. It did not give a target for earnings per share. Wall Street had predicted Ambarella earnings of 26 cents a share on sales of $78.6 million. In the year-earlier period, Ambarella earned 9 cents a share on sales of $56.1 million.

AMBA Stock Leaps

In afternoon trading on the stock market today, AMBA stock surged 25.7%, near 130.15. AMBA spiked to an all-time high of 137.21 on March 3 after its fiscal fourth-quarter report.

“Our rapidly expanding AIoT (Artificial Intelligence of Things) foundation has positioned us to achieve record revenue in fiscal 2022, driven by new product cycles in existing markets and the expansion into new markets,” Chief Executive Fermi Wang said in a news release. “The quality of our business is at its highest levels, with IoT (Internet of Things) cameras, primarily security, and automotive, representing about 90% of total Q2 revenue.”

He added, “While the significant industrywide supply-chain challenges persist, we expect fiscal 2022 to represent a major inflection in our business, and we are excited about our future.”

Diversifying Business

Ambarella started as a company making video-processing chips for action cameras including those from GoPro (GPRO). But as that business waned, it diversified. Ambarella now describes itself as “an AI vision silicon company.”

Ambarella’s products are used in a wide variety of human and computer vision applications, including video security, advanced driver assistance systems, electronic mirror, drive recorder, driver/cabin monitoring, autonomous driving, and robotic applications.

AMBA Stock Gets Price-Target Hikes

At least six Wall Street analysts raised their price targets on AMBA stock after the earnings report. Of those, four have buy ratings on AMBA stock while two rate it hold.

Ambarella’s CVflow chip architecture has reached critical mass, Rosenblatt Securities analyst Kevin Cassidy said in a note to clients. Ambarella has 240 customers in various stages of product development using the company’s computer vision chips.

“The CVflow products are driving revenue growth, expanding operating margins and increasing earnings,” Cassidy said. He reiterated his buy rating on AMBA stock and upped his price target to 160 from 145.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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