Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Second quarter revenue was near the high end of guidance, increasing 17% sequentially.
- Achieved record edge AI inference revenue, supporting a higher blended average selling price.
- Midpoint of fiscal third quarter revenue guidance implies about 24% sequential growth.
- Initial revenue ramps from IoT and automotive customers, especially for higher-priced new products.
- Positive momentum driven by new products like CV5, CV7, and CV3-AD families.
Negative Points
- Overall economic environment is a headwind, with global auto production forecasted to be down slightly.
- Enterprise and consumer IoT spending is mixed, adding uncertainty to revenue projections.
- Non-GAAP net loss of $5.5 million or a $0.13 loss per diluted share for the second quarter.
- Inventory dollars increased 8% sequentially, indicating potential overstock issues.
- Increased headcount and project-related engineering expenses expected to raise non-GAAP OpEx in the third quarter.
Q & A Highlights
Q: 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?
A: For vision language models, we demoed our first LLaVA model at CES this year with a chip called N1, a derivative of the CV3 family. This has attracted significant customer interest, particularly for applications requiring real-time descriptions from multiple cameras. This feature is unique to Ambarella and is applicable to both enterprise IoT and automotive sectors.
Q: Your guidance for October is strong, but it implies a weaker Q4 than traditional seasonality. Can you explain the moving parts here?
A: The current guidance reflects normal seasonality for Q4, which historically shows a 7% to 10% sequential decline. We believe this is reasonable as the inventory correction is done, and we are ramping new products.
Q: Can you talk about the outlook for the coming quarter? Is it driven by new products or new end markets?
A: The growth is driven by both automotive and IoT sectors introducing new products with higher ASPs. Specifically, the CV5 family is ramping up, and CV22 is returning to normal growth after inventory correction.
Q: Regarding the Leapmotor announcement, is it leading to additional conversations in the China EV market?
A: Yes, the design win with Leapmotor has helped build momentum. We continue to engage with multiple OEMs and Tier 1 suppliers in China for CV3, and we are also targeting European and US customers.
Q: Can you provide a comparison of this product cycle to past cycles?
A: This cycle is characterized by higher AI performance requirements, which is crucial for video quality and AI functions like object detection. Our unique offering of high AI performance with low power consumption makes our products sticky for customers.
Q: Is the decline in consumer IP cam revenue a trend that will continue?
A: Yes, the IoT home market, which includes consumer IP cams, is weak and growing slower than other IoT and automotive sectors. However, new AI functions like vision language models could revive this segment in the future.
Q: How do you view the growth rates of IoT versus automotive for next year?
A: In the short term, both sectors will grow at similar rates. However, IoT is expected to have better growth next year due to the CV72 ramp-up. Automotive growth will be driven by the CV3 family in the longer term.
Q: How does Ambarella plan to manage OpEx relative to revenue growth next year?
A: Our primary focus is to drive towards non-GAAP profitability. We will keep incremental OpEx spend as low as possible while still delivering on our roadmap.
Q: Is there anything specific in the consumer IoT segment that helped with the strong Q3 guidance?
A: No, the IoT home segment did not contribute to the Q3 guidance. However, future requirements for advanced neural networks in consumer IP cams could provide opportunities for our CV75 products.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
