Ambarella Inc Q4 2025 Earnings Call Transcript

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

Question: Quinn Bolton - Needham & Company - Analyst : Thanks for taking my question. Congratulations on the nice results and outlook and the 16th year of positive cash flow. I guess Fermi, John, I guess I wanted to start, I think you said in the prepared script that CV5, CV7 would account for more than half of the growth in fiscal '26. Wondering what's the other half of revenue growth? Is that the older CV2 family? Or are there other drivers of the business? And I assume, but wanted just to see if you would confirm, that the vision processors or the human camera processors, you would expect that business to continue to decline at a gradual pace in fiscal '26?

Question: Quinn Bolton - Needham & Company - Analyst : Perfect. And then just a follow up. It sounds like in both the January quarter and the April guide, you've got auto down sequentially. Just wondering, is that sort of a reflection just of inventory corrections still taking place in that end market? Is it just lackluster demand given some of the macro events and perhaps tariff uncertainty? Or is it just sort of timing of when some of your new pipeline projects go to production? Just any more color on auto would be helpful.

Question: Quinn Bolton - Needham & Company - Analyst : Got it. Okay. Thank you, Fermi.

Question: Joseph Moore - Morgan Stanley - Analyst : Fermi, I wonder if you could just talk about the general investment in ADAS these days. You're seeing Tesla's FSD has done well. The God's Eye thing at BYD got people's attention. And I know those aren't your opportunities, but has that stimulated kind of incremental investment interest in the ADAS base from other OEMs?

Question: Joseph Moore - Morgan Stanley - Analyst : Great. That's helpful. And then I noticed that the NIO win on electronic review mirrors, I know that's a market you've sort of been talking about for a long time. Are you starting to see more adoption there? And do you expect that to be a more significant growth area going forward?

Question: Joseph Moore - Morgan Stanley - Analyst : Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2025 / 9:30PM, AMBA.OQ - Q4 2025 Ambarella Inc Earnings Call

Question: Ross Seymore - Deutsche Bank - Analyst : Thanks for taking my questions and congrats on the strong results. Getting into the full year guide, again, I can understand the policy conservatism, Fermi, you just answered. Does that hit one side of your business more than the other? Or if you're going to grow that kind of mid- to high-teens, is there a significant delta in your mind between kind of the IoT/AI side and the automotive side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2025 / 9:30PM, AMBA.OQ - Q4 2025 Ambarella Inc Earnings Call

Question: Ross Seymore - Deutsche Bank - Analyst : Got you. So the conservatism that you have on the two -- well, let me just ask the question in a different way. With that given conservatism, do you have a significantly different growth rate expectation for the IoT/AI side versus automotive? Last year, you said one was up over 30%, the other was up mid-single digits. Is that ratio going to continue? Or does the automotive side start to catch up?

Question: Ross Seymore - Deutsche Bank - Analyst : Got you. And then I guess, just if I could sneak in one more. You guys talked about getting good leverage. Can you just parse out a little bit the gross margin trend versus the OpEx side as we try to figure out how you get to the leverage?

Question: Ross Seymore - Deutsche Bank - Analyst : Perfect. Thank you.

Question: Tore Svanberg - Stifel - Analyst : Congratulations on the results. Fermi, can we just take a step back here, especially when we start thinking about open-source reasoning models. I mean DeepSeek probably wasn't positive for everybody, but I think for Ambarella, probably a pretty positive development. So could you just, again, take a step back and elaborate a little bit on how important this is for Ambarella? Because obviously, this will probably accelerate the adoption of smaller models and certainly also AI at the edge. So any more color you could share with us, that would be great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2025 / 9:30PM, AMBA.OQ - Q4 2025 Ambarella Inc Earnings Call

Question: Tore Svanberg - Stifel - Analyst : Yeah. That's great perspective. And as my follow up, could you give us an update on the 2-nanometer development? Any sort of benchmarks or timelines that we should keep an eye on?

Question: Tore Svanberg - Stifel - Analyst : Right. Thank you for that color. And congrats again.

Question: Kevin Cassidy - Rosenblatt Securities - Analyst : Thanks for taking my question. And congratulations on the great results. Maybe just to expand on that with the 2-nanometer development, is that going to be a product similar to the N1-655 or are you going to be focused more on some of the CV devices? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2025 / 9:30PM, AMBA.OQ - Q4 2025 Ambarella Inc Earnings Call

Question: Kevin Cassidy - Rosenblatt Securities - Analyst : Okay. And you mentioned DeepSeek, but there are some countries that are saying that they don't want to use DeepSeek. Is that just as an example? And are there other low-cost LLMs that you're testing with?

Question: Kevin Cassidy - Rosenblatt Securities - Analyst : Okay. Great. Thank you.

Question: Suji Desilva - Roth Capital - Analyst : So just to understand from the geopolitical perspective, can you describe the risk you think there is in your chips having to be replaced in China or are customers making that decision to derisk the geopolitical? Or whether you think that's not a significant risk given the -- what's been happening the last few months?

Question: Suji Desilva - Roth Capital - Analyst : Okay. Thanks, Fermi. That's helpful. And then also on the non-auto side, the -- talk about the enterprise security camera market. Is that going to accelerate in '26? Or are you kind of hitting a point where it's grown very strongly and now it's kind of stabilizing into the kind of full-year growth rate?

Question: Suji Desilva - Roth Capital - Analyst : Okay. All right. Thanks, Fermi.

Question: Gus Richard - Northland Securities - Analyst : Thanks for taking the questions. And congratulations on the strong results and outlook. Fermi, I just was hoping you could talk a little bit about where you see the growth, edge versus data center? And within the edge, you've always been heavy on imaging applications. Are you starting to broaden out beyond that? And what opportunities at the edge do you see to be the most exciting outside of imaging and enterprise?

Question: Gus Richard - Northland Securities - Analyst : Got it. Thanks. That's helpful. And then you've had some long-standing partnerships with Continental, Bosch, and you've got a relationship with [Ruthland], which is now working with [Vdub]. I was just wondering if you could talk a little bit about how those automotive partnerships, if you will, are evolving? And do you see any opportunity over the next year or two? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2025 / 9:30PM, AMBA.OQ - Q4 2025 Ambarella Inc Earnings Call

Question: Gus Richard - Northland Securities - Analyst : Got it. Thank you so much.