Ambarella Q2 Earnings: Record AI Sales, Margin Pressure
Ambarella Q2 earnings showed record edge AI sales and a slight EPS beat, but management warned margin pressure that could unsettle positioning.
KEY TAKEAWAYS
- Revenue was $108 million, up 13.2% year over year and driven by record edge AI sales.
- Non-GAAP EPS was $0.18, a slight beat of $0.17 consensus while non-GAAP gross margin fell to 59.3%.
- Management warned of margin pressure and memory-supply uncertainty, leaving buyback timing and margin recovery unclear.
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Ambarella, Inc. (AMBA) reported stronger revenue and record edge-AI sales in its fiscal second quarter ended July 31, 2026, but management warned of margin pressure and memory-supply uncertainty after releasing results and holding an earnings call on Sept. 3, 2026.
Quarter Results and Outlook
Ambarella said revenue for the quarter was $108.1 million, up 13.2% year over year from $95.5 million and 7.7% sequentially. For the six months ended July 31, revenue rose 14.9% to $208.5 million from $181.4 million a year earlier, extending a year-to-date acceleration in sales. The company described the quarter as a new record for edge AI revenue across automotive and Internet of Things (IoT) markets.
The company reported a GAAP net loss of $6.7 million, or $0.15 per diluted share. On a non-GAAP basis, Ambarella posted net income of $8.2 million, or $0.18 per diluted share, modestly above consensus estimates of $0.17. The quarter included $1.8 million of net interest and other income and a non-GAAP tax provision of about $344,000, which helped offset the GAAP loss.
Non-GAAP gross margin declined to 59.3% from 60.5% a year earlier, while GAAP gross margin fell to 57.7% from 58.9%. Non-GAAP operating expenses were $57.4 million, slightly below the midpoint of the company’s prior guidance range of $56 million to $59 million, reflecting some cost discipline despite narrowing margins.
Automotive revenue set a new record and slightly outpaced IoT growth. Within IoT, enterprise-driven businesses outperformed consumer segments. Management credited the strength to 5-nanometer CV75 and CV72 system-on-chips (SoCs). CEO Fermi Wang said, “Our edge AI revenue achieved unprecedented levels in Q2, with consistent sequential growth across both the Auto and IoT markets, driven significantly by 5nm CV75 and CV72 SoCs.” Growth in commercial vehicle and enterprise IoT markets helped lift revenue while shifting the mix toward higher-value applications.
The company ended the quarter with $272.3 million in cash, cash equivalents, and marketable securities, down $5.5 million sequentially due mainly to higher payments for intellectual property licenses but up $11.1 million from about $261.2 million a year earlier. Free cash flow was negative $7.1 million. Ambarella did not repurchase shares during the quarter, though the board authorized a new $50 million share-repurchase program valid through June 30, 2027. The quarter also included a one-time $9.0 million reduction in GAAP research and development expenses related to the release of a deposit liability after terminating a development project.
The results show clear demand momentum for Ambarella’s edge-AI products, supporting revenue growth and a modest adjusted EPS beat. However, margin compression, supply-chain uncertainty, and near-term cash outflow leave the pace of margin recovery and timing of capital returns as key considerations for investors.
