Ambarella’s Q1 Earnings: Riding AI Momentum or Stumbling on Insider Doubts?

Ambarella (NASDAQ: AMBA) is set to host its first fiscal 2026 earnings call on May 29, 2025—a critical moment for investors weighing the company’s position in the booming AI semiconductor sector against lingering concerns about insider selling and macroeconomic pressures. The event will shed light on whether Ambarella can sustain its momentum in edge AI chip markets, where its Computer Vision products like the CV5 and CV7 SoCs are carving out a niche. But with executives dumping shares and the stock trading at a discount, the path forward is far from clear.

The Numbers: A Modest Beat or a Miss in the Making?

Analysts expect Ambarella to report Q1 revenue of $84.0 million, matching management’s midpoint guidance. This would mark a 1.6% sequential rise from Q4’s $82.7 million, a result that beat estimates in the prior quarter. Non-GAAP EPS is projected to be $0.04, a marginal improvement from the $0.03 expected in Q2. While these figures suggest stability, the real focus will be on long-term growth drivers and management’s outlook for FY2026, which analysts project to reach $333 million in revenue, a 16.9% annual jump.

But here’s the catch: Ambarella’s stock has been volatile. Over the past year, shares have swung from a 52-week low of $39.65 to a recent rebound to $49.81, reflecting investor uncertainty.

The Case for Optimism: AI Chips and Institutional Buying

Ambarella’s edge AI chips are at the heart of its growth story. Its CVflow® architecture powers advanced driver-assistance systems (ADAS), robotics, and surveillance, with next-gen SoCs like the CV3-AD635/655 enabling vision-language models with industry-leading power efficiency. Needham analysts see this as a $1.2 billion addressable market, justifying their $110 price target—a 120% premium to current levels.

Institutional investors are taking notice. Fuller & Thaler and Balyasny Asset Management boosted holdings by over 400%, signaling confidence in Ambarella’s long-term prospects. Even as Marshall Wace and State Street reduced stakes, the net result is a $15.3 million increase in institutional ownership since late 2024.

The Red Flags: Insider Selling and a Fragile Balance Sheet

The downside risks are equally stark. Over the past six months, 38 insider sales occurred, including $726,000 in shares sold by CEO Feng-Ming Wang. Such moves often unsettle investors, especially when paired with Ambarella’s negative P/E ratio (-18.0x) due to recent losses. While the company boasts a strong current ratio of 2.65, profitability remains elusive—analysts don’t expect a positive net income until 2028.

Moreover, macroeconomic headwinds loom. Stifel analysts warn of tariff-related pressures and supply chain bottlenecks that could crimp margins. With Ambarella’s stock trading at a P/S ratio of 7.4x, below its historical average, the market is pricing in skepticism about its ability to scale profitability.

The Bottom Line: A High-Risk, High-Reward Bifurcation

Investors face a stark choice: bet on Ambarella’s AI-driven innovation or avoid a stock plagued by insider pessimism and valuation uncertainty. The Q1 earnings call will likely hinge on two factors:
1. Fiscal 2026 guidance: If management reaffirms the $333 million revenue target, it could validate bullish forecasts.
2. Product pipeline updates: Details on automotive and robotics partnerships could solidify its edge AI leadership.

Consider this: Needham’s $110 price target implies a 120% upside, but risks like $1.4 billion in accumulated deficit and $1.7 billion in long-term liabilities temper optimism. Meanwhile, competitors like NVIDIA (NVDA) and AMD (AMD) dominate broader AI chip markets, making Ambarella’s niche focus a double-edged sword.

Conclusion: A Roll of the Dice on AI’s Next Frontier

Ambarella’s earnings call is a pivotal moment. On one hand, its AI SoCs are powering high-growth markets, with institutional investors doubling down. On the other, insider selling and a lack of profitability underscore execution risks. At 26.1% below its fair value (per analysts), the stock offers tempting upside—if management can deliver on its vision. Investors should watch for revenue visibility beyond 2026 and margin improvements as key metrics. For now, it’s a gamble on whether Ambarella’s AI chips can outpace its skeptics.

The stakes are high: with a market cap of just $2.4 billion, Ambarella could be either a stealth winner in edge AI or a cautionary tale of overpromising in a crowded space. The May 29 call will begin to answer that question.