Ambarella says sales could hit highest total in five years, stock jumps

Chip maker says demand is high for its semiconductors embedded in security cameras and cars

Ambarella Inc. shares soared 9% higher in after-hours trading Tuesday, after the chip maker predicted that revenue could hit a five-year high this quarter.

Ambarella $(AMBA)$ reported a second-quarter loss of $7.2 million, or 20 cents a share, on sales of $79.3 million, up more than 50% from $50.1 million a year ago. After adjusting for stock-based compensation and income-tax effects, the company reported earnings of 35 cents a share.

Those results easily topped analysts' average expectations, which called for adjusted earnings of 25 cents a share on sales of $75.7 million. The bigger beat, though, was in Ambarella's forecast for the third quarter, which called for revenue of $88 million to $92 million.

The midpoint of that guidance, $90 million, reflects a quarterly sales total Ambarella has not accomplished since the same quarter in 2016, exactly five years ago. In that quarter, Ambarella produced sales of $100.5 million, one of only two times in the company's history that it has topped $90 million in a quarter.

Chief Executive Fermi Wang credited the strong showing to its chips for security cameras and cars, which he said accounted for 90% of total revenue in the second quarter.

"While the significant industry wide supply-chain challenges persist, we expect F2022 to represent a major inflection in our business, and we are excited about our future," Wang said, referring to a continuing semiconductor shortage.

Stifel analysts predicted earlier this week that Ambarella would beat expectations with its results and forecast on the strength of its security and automotive businesses, as its chips find a home in advanced driver-assistance systems. The analysts expected "growth across both Ambarella's Security and Auto business segments, with the former having bottomed last Q and the latter benefiting [from] ongoing new design-win momentum."

"We believe Ambarella is well-positioned to capture an unfair share of the AI/computer vision opportunity, not only in its core strength in Security applications, but also in even larger and faster-growing end markets/applications such as advanced Automotive ADAS/monitoring as well as high-end "AI-IoT" use cases such as smart traffic, smart retail and smart enterprise," the analysts wrote, while maintaining a buy rating and $140 price target.

Ambarella stock closed with a 1.8% decline at $103.57 Tuesday, then jumped 9% in the extended session after the results were released. The stock has gained 12.8% so far this year, as the S&P 500 index has increased 20.6%.