Ambarella (AMBA) Q3 Earnings and Revenues Surpass Estimates

Ambarella’s AMBA third-quarter fiscal 2020 earnings of 32 cents per share beat the Zacks Consensus Estimate by 52.4% and also the year-ago figure by 22.2%.

The company’s revenues in the fiscal third quarter of $67.9 million surpassed the consensus mark of $65 million and also increased 18.6% year over year. Its transition to a video AI company is a tailwind. Ramping up of production shipments in the automotive and security camera market is a key driver.

Ambarella’s CV portfolio is also attracting customers and helping it expand the client base. During the quarter, the company shipped pre-production parts and development systems to more than 50 customers.

Operating Metrics

On a non-GAAP basis, the company reported gross margin of 58.1%, which was 280-basis points below the year-ago quarter’s figure. Richer mix of automotive business in both OEM and aftermarket business is a positive.

Sequentially, non-GAAP operating expenses came in at $29.3 million compared with $29.7 million in the previous quarter.

Balance Sheet & Cash Flow

Ambarella ended the fiscal third quarter with cash and cash equivalents & marketable securities of $400.8 million, up from $375.8 million in the previous quarter.

The company generated operating cash flow of $21.9 million during the quarter.

Ambarella, Inc. Price, Consensus and EPS Surprise

Ambarella, Inc. Price, Consensus and EPS Surprise

Ambarella, Inc. price-consensus-eps-surprise-chart | Ambarella, Inc. Quote

Outlook

For fourth-quarter fiscal 2020, revenues are expected between $55 million and $59 million. Non-GAAP gross margin is anticipated within 56.5-58.5%. Non-GAAP operating expenses are estimated in the range of $29.5-$31.5 million.

The company envisions automotive and security to be down sequentially while other revenues to be flat to slightly up sequentially. It predicts consumer electronics revenues to be persistently soft, declining as a percentage of revenues over the next two to three years.

However, global tariff issues, export restrictions and unfavorable macroeconomic conditions are bothersome.

Zacks Rank & Stocks to Consider

Ambarella currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Alteryx, Inc. AYX, Fortinet, Inc. FTNT and CommVault Systems, Inc. CVLT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx, Fortinet and CommVault Systems is currently estimated at 39.9%, 14% and 10%, respectively.

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