Ambarella Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Christopher Rolland - Susquehanna International Group, LLLP - Analyst : Hey, guys. Thanks so much for the question here. I guess my first one is you referenced vision language models. Is this a new opportunity or an opportunity that you've been addressing for some time here? And how your architecture might be different from GPU or an ASIC here. And is this a CV3 opportunity? I think you've maybe talked about a $1,000 ASP, something like that. Is that the kind of opportunity we're talking about here?

Question: Christopher Rolland - Susquehanna International Group, LLLP - Analyst : Great. Thank you for that, Fermi. And then secondly, as I kind of look at your guidance for October, which was very strong, and then reconcile it with the full-year guidance that you gave, it implies maybe a significantly weaker Q4 than traditional seasonality, at least the way we track it would suggest. I guess maybe you could just talk about maybe the moving parts here into January what -- how you view traditional seasonality for the fourth quarter and the expectation for January -- the implied expectation. Thank you.

Question: Christopher Rolland - Susquehanna International Group, LLLP - Analyst : Thank you, Fermi.

Question: Joe Moore - Morgan Stanley & Co. LLP - Analyst : Great. Thank you. I wonder if you could talk about the outlook. For the quarter, you talked about being driven by new products. Is that kind of content increases because you're migrating people to CV5? Are there new end markets or applications? Just kind of want to understand what's driving the strength in the coming quarter.

Question: Joe Moore - Morgan Stanley & Co. LLP - Analyst : Great. That's very helpful. Thank you. And then separately, the announcement you had of Leapmotor's a quarter ago, can you just talk to is that leading to additional conversations in the China EV market? And just I know you're not ready to make any announcements there, but just how are you seeing the potential to increase traction with other OEMs in China?

Question: Tore Svanberg - Stifel - Analyst : Yes. Thank you and congratulations on the strong results here. So Fermi, I just wanted to paint a little bit of a picture and maybe if you can help me out here. So I mean, obviously, CV2, CV22 has been doing well. The holy grail is CV3 and CV1. CV5, obviously now really ramping. What about CV75 and CV72? Are those going to ramp quite meaningfully into production next year or are those also more 2026?

Question: Tore Svanberg - Stifel - Analyst : Yes, thank you, and congrats on the strong results, guys. So Fermi, I was hoping you could just help me out a little bit with some of the product cycles here, right, because obviously, CV2, CV22 have been doing well. You're now ramping CV5. Everyone's waiting for CV3 and CV1. But in the meantime, we got CV75 and CV72. So are we going to see pretty strong ramps from CV75 and CV72 next year or are those also going to be more 2026?

Question: Tore Svanberg - Stifel - Analyst : Right. And so just to put that into perspective -- from a pricing perspective, right, because obviously you said that a lot of the growth right now is being driven by new products for higher ASPs. So when we especially look at CV72, that would still be a higher ASP product than CV5, right?

Question: Tore Svanberg - Stifel - Analyst : That's great. Great color. Thank you so much.

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Hi, guys. Can you hear me, okay?

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Great. So first, congratulations on the strong report and guide. I know you talked about how this is new product-driven and I understand that methodology, but you also said that the inventory burn is done. So are we getting to the point where you're not burning inventory? And so a big part of the step-up sequentially is that into the third quarter, and then from there, new products and normal seasonality applies. I'm just trying to figure out the new product side versus your comments that there's no longer an inventory burn either.

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Thanks, Fermi. I guess as my follow-up, hopefully, you gave the full-year commentary. I was just thinking some of the stuff you answered with Tore with the new products and the timing of when they're coming in, et cetera, if we just put that to an end market perspective, to simplify it a little bit, how would you think the puts and takes on the growth rate of IoT versus automotive would be for next year? Do you expect one to grow significantly faster than the other? Is IoT going to be largely seasonal from here with some new product kickers and automotive is the one that has very large stair steps as new customer ramps begin? Just how should we think about the relative growth rates and kind of linearity of them?

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Thank you.

Question: Kevin Cassidy - Rosenblatt Securities Inc. - Analyst : Yes, thanks for taking my question. And clearly, you're in a very strong product cycle. You've had quite a few in the past. Can maybe Fermi give us a comparison? What's this product cycle like were different than past product cycles? Is there the customers -- maybe stickiness, the longer-term product cycle, software defending your product, just anything you can compare it to past cycles?

Question: Kevin Cassidy - Rosenblatt Securities Inc. - Analyst : Okay. Great. And just another, in your 10% customers, Chicony wasn't mentioned. Should we imply that that means consumer is getting to be less percentage of your overall revenue? And is that going to be the trend going forward?

Question: Kevin Cassidy - Rosenblatt Securities Inc. - Analyst : Okay. Congratulations again on the great results.

Question: Sean O'Loughlin - TD Cowen - Analyst : Hey, guys. It's actually Sean O'Loughlin on here for Matt. And I'll echo the congratulations of others on the really positive guidance here. I wanted to dig in actually on the more traditional video processor side of the business. And I know that we saw a pretty significant decline in fiscal year 2024. I think at the time, it was categorized as something like $80 million or so of that decline from the traditional legacy video processing. Should we sort of think about that as a potential -- another potential lever going forward or is the industry sort of moved on from that product segment into much more of the CV22 and beyond family that you've spent a lot of the call talking about?

Question: Sean O'Loughlin - TD Cowen - Analyst : Yeah, that's crystal clear. And then on those new products, we talked a little bit about higher ASPs. But I was wondering -- maybe John could speak to the margin profile of those new products considering that there are more advanced geometries and potential wafer pricing increases at the foundry and stuff like that. Thanks and congrats again.

Question: Sean O'Loughlin - TD Cowen - Analyst : Great. Thanks a lot and congrats again.

Question: Suji Desilva - ROTH Capital Partners LLC - Analyst : Hi, Fermi. Hi, John. Congrats on the progress here. I just wanted to clarify the growth you had in the fiscal second quarter. I think it was mostly IoT. Please correct that if it's wrong. And if it is, which applications kind of came back or did inventory burn and ordering resume in the IoT segment to help with the fiscal second quarter?

Question: Suji Desilva - ROTH Capital Partners LLC - Analyst : Got it. And then flipping over to the auto side, you talked about in the CV3 helping ramp, maybe in the '25 or maybe potentially calendar '26 timeframe. Do you have visibility into program ramps there and the timing of when those start to inflect, to give a sense, roughly kind of where in the '25 time, calendar '25 timeframe? Autos would kind of have a growth inflection upward or program ramp starts?

Question: Suji Desilva - ROTH Capital Partners LLC - Analyst : Okay. That's very helpful for me. All right, thanks.

Question: Shadi Mitwalli - Needham & Company - Analyst : Hey, this is Shadi Mitwalli on for Quinn Bolton. My first question is on Ambarella's passenger OEM win last quarter. Has that provided a halo effect for current passenger OEM engagements? Or more so, has there been a shift in sentiment with current OEMs that Ambarella is engaged with?

Question: Shadi Mitwalli - Needham & Company - Analyst : Thanks for that. And my follow-up question is on the China auto market. There has been some recent news of aggressive pricing between Chinese OEMs. And I was wondering if Ambarella is seeing any negative impacts from this.

Question: Shadi Mitwalli - Needham & Company - Analyst : Awesome. Thanks for that. Congrats on the solid quarter and guide.

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Hi, guys. Thanks for letting me speak two quick ones in here. Louis -- or I think it might be Fermi that gave what typical seasonality is in the fourth quarter. To the extent seasonality is a framework that's going to matter more as we look into next fiscal year, however you want to define it, can you just give us an idea of how you view seasonality?

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Got it. Thank you, Louis. And then I guess one for John. As I think about next year looking like it's going to be a much more significant revenue growth year, how do I -- how does the company think about OpEx relative to revenue growth? I know you've put a ton of that work in already and you've been spending ahead of the growth. But to the extent, leverage is going to be an important metric in profitability, as Fermi mentioned, I just want to see how you guys think about that relationship. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 27, 2024 / 8:30PM, AMBA.OQ - Q2 2025 Ambarella Inc Earnings Call

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Great. Thank you.

Question: Martin Yang - Oppenheimer & Co. Inc. - Analyst : Thank you. I have a quick question on guidance. Is there anything happening regarding the non-industrial IoT in your guidance that has helped with the strength?

Question: Martin Yang - Oppenheimer & Co. Inc. - Analyst : So is there anything regarding consumer IoT segment that helped with the guidance and the strength of the guidance in 3Q?

Question: Martin Yang - Oppenheimer & Co. Inc. - Analyst : Got it. Thank you, Fermi.