Ambarella (AMBA) shares tumbled roughly 20% to $73.33 in afternoon trading Friday, even as the company delivered a modest earnings beat and disclosed a multi-year agreement with South Korea's Hanwha that could generate over $800 million in revenue. The sharp decline, which saw shares open at $82.39 and touch an intraday low of $71.76, underscores the market's growing impatience with AI chip stocks that fail to meet elevated expectations.
The Santa Clara, California-based company reported fiscal first-quarter revenue of $100.4 million, up 16.9% from $85.9 million a year ago. On an adjusted basis, earnings came in at 11 cents per share, edging past the FactSet consensus of 10 cents. Revenue also slightly beat the $100.1 million analyst forecast. However, GAAP net loss widened to $18.1 million, or 41 cents per share, from a loss of $12.8 million, or 30 cents per share, in the prior-year period.
Ambarella's guidance for the fiscal second quarter calls for revenue between $105 million and $111 million, with a midpoint of $108 million, just above the $107.1 million analysts had projected. CFO John Young described the outlook as "seasonally strong," with expected growth in both automotive and IoT segments. The IoT category includes connected cameras and smart devices.
The headline-grabbing news was the long-term partnership with Hanwha, which CEO Fermi Wang called "one of the largest partnerships in Ambarella's history." The deal covers joint development and deployment of Ambarella's edge-AI systems-on-chip (SoCs) in video security, robotics, industrial automation, and life sciences. Hanwha senior executive vice president Kim Dong-seon said the agreement supports the company's investment in "intelligent vision solutions and AI technologies."
Despite the upbeat narrative, investors focused on margin compression. GAAP gross margin slipped to 58.4% from 60.0% a year ago, while non-GAAP gross margin fell to 59.9% from 62.0%. Cash and marketable securities dropped to $277.8 million from $312.6 million in the prior quarter, and inventory days ballooned to 145 from 99 as the company built stockpiles ahead of new product launches.
The broader market reaction was mixed. The Invesco QQQ Trust (QQQ) edged slightly higher, while AI and chip peers like Nvidia (NVDA) gained 1.1%, Qualcomm (QCOM) rose 3.7%, and Mobileye (MBLY) was nearly flat. This suggests the selloff was specific to Ambarella rather than a sector-wide retreat.
Ambarella executives, including CEO Wang, CFO Young, and corporate development chief Louis Gerhardy, are scheduled to present at Bank of America's Global Technology Conference in San Francisco on June 2. With shares down sharply, investors are likely to press for more concrete evidence that Ambarella's edge AI strategy will translate into sustainable cash flow, rather than just headlines and design wins.
