Ambarella (AMBA) Stock Forecast & Price Target

Ambarella Inc. has demonstrated a strong upward trajectory in its financial performance, reporting record revenue of $108.5 million, which represents a notable 13.5% quarter-over-quarter increase and a 31.2% year-over-year growth. The company has also observed a year-over-year increase of approximately 20% in its blended average selling prices (ASP) for system-on-chip (SoC) products, primarily due to the growing adoption of its third-generation SoCs. Furthermore, the expansion of Edge AI applications has significantly contributed to revenue growth, particularly within the automotive and IoT sectors, showcasing a promising outlook for the company’s future financial prospects.

The financial outlook for Ambarella Inc indicates significant potential challenges, with anticipated declines in both Automotive and IoT revenue projected to fall by mid- to high-single digits sequentially, following typical seasonal trends. The company's gross margin guidance for F4Q26 is set at 59.8%, which is below prior estimates due to a mix shift towards higher volume customers, suggesting pressure on profitability and production yields. Additionally, with fourth quarter revenue expectations falling to a midpoint of $100 million, representing an approximate 8% decline quarter-over-quarter, the company faces hurdles in maintaining consistent revenue growth.