Ambarella (AMBA) Stock Forecast & Price Target

Ambarella Inc. has demonstrated significant growth in revenue, reporting a record $108.5 million for F3Q26, which represents a 31.2% year-over-year increase and surpasses prior guidance. The firm's average selling prices (ASPs) for its system-on-a-chip (SoC) products have risen approximately 20% year-over-year, driven by the increasing demand for advanced applications in Edge AI. Additionally, Ambarella has secured numerous design wins in the automotive and IoT sectors, with strong growth in IoT revenue estimated at over 45% year-over-year, further supporting a favorable outlook for the company's financial performance.

Ambarella Inc. has faced challenges in its financial outlook, particularly with anticipated declines in both Automotive and IoT segments, expected to contract by mid- to high-single digits sequentially, reflecting seasonal trends. Despite achieving a non-GAAP EPS of $0.27, which surpassed expectations, the company is projecting a lower gross margin of 59.8% for Q4, influenced by a mix shift towards higher volume customers that may result in discounts and reduced overall profitability. Revenue guidance for the fourth quarter suggests an approximate 8% decrease sequentially, adding further pressure to the company's financial health, despite a year-over-year increase projections.