Ambarella Skyrockets on a Surprise Earnings Beat

Ambarella Inc. (NASDAQ: AMBA) released fiscal first-quarter 2020 results on Tuesday after the market closed. In spite of macroeconomic tensions that threatened to derail its near-term growth story, the video-processing chip leader highlighted a surprise adjusted profit and continued progress in the computer vision space.

With shares bouncing more than 15% in after-hours trading as of this writing, let's zoom in for a better view of Ambarella's quarter.

Ambarella results: The raw numbers

What happened with Ambarella this quarter?

  • Revenue was slightly above the midpoint of guidance provided in March for $47 million, plus or minus 3%.
  • On adjusted (non-GAAP) basis, which excludes items like stock-based compensation, Ambarella generated net income of $0.3 million, or $0.01 per share, down from $0.13 per share a year ago but well above analysts' consensus estimates for an adjusted net loss of $0.05 per share.
  • Adjusted gross margin fell 2.2 percentage points year over year to 59.6%, within guidance for between 59% and 60%.
  • Ambarella did not repurchase any shares this quarter. But subsequent to the end of the quarter, its board did approve a new $50 million share repurchase program valid through June 30, 2020.
  • Ambarella ended the quarter with cash, cash equivalents, and marketable securities of $366.2 million, up from $358.9 million last quarter and down from $414.1 million a year ago.

What management had to say

Ambarella CEO Fermi Wang stated:

Looking forward

Ambarella noted that "recent order pull-ins from security camera customers in China, triggered by geopolitical factors, are impacting [...] revenue and gross margin." As such, it expects fiscal second-quarter revenue of $51 million to $53 million -- down from $63.5 million a year earlier but still comfortably ahead of Wall Street's target of closer to $49 million -- with gross margin falling slightly on a sequential basis to between 57% and 59%.

With Ambarella stock down sharply from its 52-week highs largely due to macroeconomic concerns -- and given the promise of its impending CV-industry progress -- it seems investors are more than pleased with this better-than-expected start to the year. Ambarella stock is understandably responding in kind.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ambarella. The Motley Fool has a disclosure policy.