Ambarella (AMBA) Stock Forecast & Price Target

Ambarella Inc reported robust financial growth for FY25, achieving revenue of $284.9 million, which reflects a year-over-year increase of 25.8%, driven primarily by a 30%+ surge in IoT revenue and mid-single-digit growth in automotive revenue. The company has successfully secured 10 OEM engagements across IoT and automotive sectors, indicating strong demand for its semiconductor solutions, particularly from the CV5 and CV7 product families that are anticipated to contribute significantly to revenue in FY26. Furthermore, Ambarella exceeded revenue expectations in the recent quarter, with reported figures of $84 million marking a remarkable 62.8% increase year-over-year, showcasing not only the strength of its current offerings but also its potential for future growth in the rapidly expanding IoT market.

Ambarella Inc's financial outlook is negatively influenced by a declining Non-GAAP gross margin, which decreased from 63.3% in FY24 to 62.7% in FY25, primarily due to shifts in product mix, and ongoing declines in their Video Processing business projected at 10-15% year-over-year. The anticipated sequential decline in the Automotive sector raises concerns about the company’s revenue stability, despite an increase in the IoT segment, suggesting that the growth may not be sufficient to offset losses in core areas. Additionally, the issues surrounding low production yields compound risks to revenue and profitability, further strengthening the negative outlook.