Executive Summary
Ambarella delivered a solid QQ2 2025 performance anchored by continued strength in edge AI and the ramp of higher-ASP new product families. Revenue reached $63.7 million, rising 16.98% quarter over quarter and up 2.58% year over year, with IoT contributing the majority of the growth and automotive showing early ramp signals tied to the CV5 family. Management attributed a near-term inventory correction completion and improving visibility into the second half of fiscal 2025, supported by a growing pipeline of design wins across IoT and auto segments. Gross margins remained robust on a non-GAAP basis at 63.3%, while the company posted a non-GAAP net loss of $5.5 million ($0.13 per diluted share) as it continues to fund R&D and product campaigns. Ambarella reinforced its multi-wave new-product strategy (CV5, CV7, CV3-AD, plus N1 and 2nm plans) as the primary engine of revenue growth, with management guiding Q3 revenue of $77–$81 million and a non-GAAP gross margin of 62.5–64%. The company also signaled a path toward profitability as volumes scale and key automotive/IoT programs mature. Net cash remained strong, with cash and marketable securities totaling about $219.8 million mid-quarter and cash at period-end of roughly $153.9 million, producing a net cash position despite ongoing investment in AI-enabled edge capabilities.
Key Performance Indicators
Key Insights
Revenue: $63.7m in Q2 FY2025, up 16.98% QoQ and 2.58% YoY (YoY growth of 2.58%; QoQ growth of 16.98%). YoY and QoQ metrics align with Ambarella’s mix shift toward higher-ASP AI-centric products.
Gross profit: $38.74m, gross margin non-GAAP 63.3% (above the prior midpoint), reflecting higher ASPs from CV5 and early contributions from CV22/IoT products.
Operating expenses: Non-GAAP OpEx of $47.7m, about $0.8m below the prior guidance midpoint, indicating ongoing expense discipline to support...
Financial Highlights
Revenue: $63.7m in Q2 FY2025, up 16.98% QoQ and 2.58% YoY (YoY growth of 2.58%; QoQ growth of 16.98%). YoY and QoQ metrics align with Ambarella’s mix shift toward higher-ASP AI-centric products.
Gross profit: $38.74m, gross margin non-GAAP 63.3% (above the prior midpoint), reflecting higher ASPs from CV5 and early contributions from CV22/IoT products.
Operating expenses: Non-GAAP OpEx of $47.7m, about $0.8m below the prior guidance midpoint, indicating ongoing expense discipline to support profitability as volumes scale.
Net income and earnings: Non-GAAP net loss of $5.5m (EPS -$0.13). GAAP results were not fully disclosed in the data provided, but the non-GAAP view excludes stock-based compensation and acquisition-related costs adjusted for taxes.
Cash flow and liquidity: Positive operating cash flow of $16.7m; free cash flow of $14.17m; net change in cash +$22.1m; cash and marketable securities ~$219.8m; cash at period end ~$153.9m.
Balance sheet: Total assets $650.3m; total liabilities $102.8m; total stockholders’ equity $547.6m. Current ratio 3.06; quick ratio 2.72; net cash position (net debt of about -$147.2m).
Product/market mix and guidance: New product families CV5, CV7, CV3-AD (5nm) driving incremental ASPs; CV5 ramp contributing to IoT and auto growth; CV3 ramp targeted for calendar year 2026 (fiscal 2027). Q3 guidance implies continued sequential growth in both IoT and Auto, with new-product cohorts representing a majority of incremental revenue growth over time.
Notable concentration and risk: Top customers represented by WT Microelectronics (63% of Q2 revenue) and Hakuto (10%). The commentary emphasizes ongoing pricing pressures in China and the need to manage gross margin while expanding high-ASP AI products.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
63.72M |
2.58% |
16.98% |
| Gross Profit |
38.74M |
0.73% |
14.22% |
| Operating Income |
-36.29M |
-2.68% |
4.93% |
| Net Income |
-34.89M |
-11.83% |
8.02% |
| EPS |
-0.85 |
-7.59% |
8.60% |
Key Financial Ratios
operatingProfitMargin
-56.9%
operatingCashFlowPerShare
$0.41
freeCashFlowPerShare
$0.35
priceEarningsRatio
-15.51
Management Commentary
Strategy and product cycle focus:
- Fermi Wang outlined a multi-wave new-product cycle anchored by CV5, CV7, and CV3-AD (all 5nm) with higher ASPs and a growing AI-inference capability at the edge. The first revenue wave is CV5, with expectations to exceed 1 million units shipped this year across IoT and automotive, and >1,000 design wins. Quote: “New products include the CV5, CV7, and the CV3-AD families, which are all 5-nanometer... The first wave of revenue is from the CV5 family, which is ongoing and continue to ramp.”
- The CV7 family is expected to enter production by end of fiscal year 2025, serving auto and IoT with initial CV applications and potential later uplift to CLIP/vision-language networks. Quote: “The second new product wave is expected from the CV7 family, which we expect to enter production at the end of fiscal year '25.”
- CV3-AD targets L2+ autonomy and higher levels of autonomy, with production ramp anticipated in calendar year 2026 (fiscal year 2027). Management framed these as “a majority of our incremental revenue growth” over time.
- Management emphasized edge AI in both Auto and IoT and sees demand for AI networks to run at the edge, with N1 (derived from CV3) enabling a vision-language interface on-device. Quote: “Most importantly, we are seeing initial revenue ramps from certain IoT and automotive customers especially for our higher-priced new products.”
Market conditions and execution:
- Inventory normalization: “Most of our customers have now completed the rebalancing of their inventory of Ambarella SOCs and our revenue in the second half of the fiscal '25 is expected to reflect actual end market demand.”
- Mixed macro headwinds: Auto production forecast down modestly; EV OEM shakeout; enterprise IoT and consumer IoT spending mixed. Yet Ambarella sees offsetting company-specific factors and ongoing demand for AI-infused edge solutions.
- Customer momentum and wins: Leapmotor collaboration cited as a momentum driver in China, with ongoing conversations with multiple OEMs and Tier-1s for CV3. Transport and IoT customers including Rivian and Samsara ramping CV5 in the quarter.
Operational execution and margins:
- Q2 non-GAAP gross margin at 63.3%; OpEx disciplined, with Q2 OpEx $47.7m and gross margin strength supporting a positive near-term profitability pathway as new product ramps scale.
- Balance sheet discipline and cash generation: Positive operating cash flow of $16.7m; free cash flow of $14.2m; cash and equivalents of ~$154m at period end; net cash position despite capex and R&D investments.
Outlook signals:
- Q3 revenue guidance of $77m–$81m; gross margin guidance 62.5%–64%; non-GAAP OpEx $49m–$51m; interest income about $1.8m; tax expense about $0.5m; diluted shares ~41.7m.
- The management tone indicates confidence in the second-half recovery aided by new products and a stabilizing end-market demand; seasonality is expected to be “normal” with Q4 historically weaker sequentially. Quote: “For fiscal Q3, we estimate our total revenue will be in the range of $77 million to $81 million with sequential growth in both IoT and Auto.”
- Long-term growth: The AI-centric product cadence, global OEM activity (including Chinese OEMs) and the edge-inference opportunity position Ambarella to scale ASPs and unit volumes, though execution risk persists with auto demand cycle timing and competitive dynamics.
New products include the CV5, CV7, and the CV3-AD families, which are all 5-nanometer. Most integrate our third-generation AI inference accelerator and all command above-average ASPs. The first wave of revenue is from the CV5 family, which is ongoing and continue to ramp. We expect to easily exceed 1 million units shipped this year across more than 1,000 design wins in IoT as well as automotive.
— Fermi Wang
Inventory correction is done for us. We expect our revenue in the second half of fiscal 2025 to reflect actual end market demand.
— Fermi Wang
Forward Guidance
Near-term outlook emphasizes continued momentum from CV5 and initial CV22 resurgences, with a clear intent to convert multiple OEMs and Tier-1 RFIs into design wins for CV3 and related platforms. Management guidance for Q3 suggests continued sequential growth in both IoT and Automotive, driven by higher-ASP new products and ongoing recovery from inventory corrections. The company maintains an FY2025 revenue growth target in the mid-to-high-teens versus last year, with total revenue around the $250m level previously discussed. Key targets and factors to monitor:
- CV5 ramp: Unit volumes and ASPs remain a primary driver of IoT and auto growth in the near term.
- CV7 and CV3-AD timing: Production ramp windows (end of FY25 for CV7; calendar year 2026 for CV3) will determine the magnitude and timing of incremental revenue inflections, particularly in automotive markets.
- AI edge adoption: The market’s shift toward vision-language models and edge AI inference at the camera (LLaVA on N1) could unlock higher ASPs and new markets (e.g., enterprise IoT, advanced driver monitoring).
- China OEM activity: Leapmotor engagements and other Chinese OEM/Tier-1 RFIs indicate potential new design wins; price competition in China remains a risk, potentially compressing near-term gross margins.
- Margin trajectory: Long-term gross margin target remains in the 59–62% range; continued mix shift toward higher-ASP AI-enabled products and scale of auto as a larger driver should support higher profitability if volume ramps meet plan.
- Inventory and seasonality: The company expects Q4 seasonality to resemble historical patterns (Q4 down 7–10% on average in past cycles), with normalization in demand in the second half of fiscal 2025.
Investors should monitor: (1) CV5/CV7/CV3-AD production milestones and design-win momentum, (2) CV72 stabilization and upside from modernizing the CV22 line, (3) overarching AI-network deployments at the edge (CLIP/VLM-type workloads) and (4) potential margin compression from China pricing pressure and supply chain dynamics.