AMBA 10-K: Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Overview of the Company’s Financial Performance

Ambarella, Inc. is a leading developer of low-power system-on-a-chip (SoC) semiconductors that provide powerful artificial intelligence (AI) processing, advanced image signal processing, and high-resolution video compression. The company has primarily served human viewing applications like security cameras, sports cameras, and automotive video recorders. However, Ambarella’s recent focus has been on creating advanced AI technology that enables edge devices to visually perceive the environment and make decisions based on data collected from cameras and other sensors.

In fiscal year 2025, Ambarella recorded revenue of $284.9 million, an increase of 25.8% compared to the prior year. This was driven by higher product shipments, an increased percentage of sales from higher-value AI inference processors, and more non-recurring engineering (NRE) project service revenue. The company recorded a loss from operations of $126.6 million, an improvement from the $154.6 million loss in fiscal year 2024. This was due to the higher revenue and gross profit, partially offset by increased operating expenses for engineering, chip development, and outside services.

Ambarella generated $33.8 million in cash flows from operating activities in fiscal year 2025, up from $19.0 million the prior year. The increase was attributed to lower net loss, higher cash advances from NRE projects, and increased development funding, partially offset by lower accounts receivable collections and higher inventory purchases.

Revenue and Profit Trends

Ambarella’s revenue has fluctuated in recent years. In fiscal year 2024, revenue decreased 32.9% to $226.5 million due to lower product shipments as customers reduced inventory levels. However, revenue rebounded in fiscal year 2025, increasing 25.8% to $284.9 million. This was driven by higher unit shipments for new customer products, a greater proportion of sales from higher-priced AI inference processors, and more NRE project revenue.

The company’s gross margin has remained relatively stable, ranging from 60.4% to 61.9% over the past three fiscal years. In fiscal year 2025, gross margin increased slightly to 60.5% due to the higher sales of AI processors and NRE projects, partially offset by higher manufacturing costs.

Ambarella has incurred operating losses in each of the past three fiscal years as it has invested heavily in research and development (R&D) for its AI and computer vision technologies. R&D expense increased 5.1% to $226.1 million in fiscal year 2025 and 4.9% to $215.1 million in fiscal year 2024 as the company supported the development of its AI inference processors and radar solutions. Selling, general, and administrative (SG&A) expenses decreased in both fiscal years 2025 and 2024 as the company managed personnel and facility costs.

Analysis of Strengths and Weaknesses

A key strength for Ambarella is its technological expertise in AI and computer vision processing. The company’s focus on developing advanced AI capabilities that can be integrated into edge devices has positioned it to address growing demand for these features across various markets. Ambarella’s ability to enable customers to differentiate their products by porting their own or third-party neural networks and algorithms onto the company’s CVflow-based SoCs is a competitive advantage.

However, Ambarella faces the challenge of rapidly evolving technologies and the need to continuously invest in R&D to stay ahead of the competition. The company must anticipate and timely develop new or enhanced solutions to meet the changing needs of its customers and target markets. Failure to do so could result in decreased revenue and losing design wins to competitors.

Another weakness is Ambarella’s concentration of revenue in a small number of end markets, particularly IoT and automotive. While the company is seeking to expand into new markets, a significant portion of its revenue is still dependent on the success or failure of products that incorporate its SoCs, as well as the overall growth or decline of the video capture markets it serves. This lack of diversification makes Ambarella’s financial performance vulnerable to fluctuations in these key markets.

Outlook and Future Prospects

Ambarella believes that AI and computer vision functionality will become increasingly important in many of its current and future markets, including IoT, automotive, industrial, and robotics. As a result, the company’s ability to develop advanced AI and computer vision technologies, enable customer product development in emerging applications, and gain customer acceptance of its technology platform will be critical to its future success.

The company expects its research and development expenditures to increase as it devotes more resources to developing innovative video and image processing solutions with increased AI capabilities and targets new markets. Ambarella anticipates that its future revenue growth will significantly depend on its ability to expand within camera markets with its AI technology, particularly in the IoT, automotive, industrial, and robotics sectors.

However, Ambarella faces risks related to the global supply chain, which has experienced significant challenges in recent years due to the COVID-19 pandemic. While these issues have subsided, future changes in the macroeconomic environment, such as the imposition of tariffs or export restrictions, could lead to new supply chain disruptions that impact the company’s business.

Overall, Ambarella’s focus on developing cutting-edge AI and computer vision technologies positions it well to capitalize on growing demand for these capabilities across a range of industries. However, the company must continue to innovate and diversify its customer base to mitigate the risks of its current market concentration and the rapidly evolving semiconductor landscape.