What happened
Shares of Ambarella (AMBA 0.23%), a maker of specialized semiconductor chips for high-definition video, collapsed in morning trading on the Nasdaq Wednesday, tumbling 16.9% through 11:30 a.m. ET despite beating fiscal Q1 2024 forecasts last night.
Analysts had forecast Ambarella would report a $0.21-per-share (adjusted) loss on sales of $62 million. As it turned out, Ambarella lost only $0.15 per share, and sales beat expectations, coming in at $62.1 million. The stock is down hugely, regardless.
NASDAQ: AMBA
Key Data Points
So what
But if Ambarella beat earnings, then what exactly has investors so upset this morning? A few things, actually.
Ambarella may have beaten expectations for sales in its fiscal Q1 -- but those sales were still abysmal. After all, $62.1 million was 31% less revenue than Ambarella reported a year ago, and so still a huge disappointment, even if not quite as disappointing as analysts had expected.
Gross profit margins on sales also declined by 220 basis points to 60.4%. And it's worth pointing out that Ambarella's loss, when calculated according to generally accepted accounting principles (GAAP), was a lot worse than the "adjusted" figures that analysts tend to focus on. While Ambarella's adjusted loss was only $0.15 per share, and better than expected, its GAAP loss was a staggering $0.91 per share -- and three times worse than last year's Q1 loss.
Now what
Ambarella's guidance was another point of concern. Analysts had been hoping Ambarella could eke out at least $67 million or so in sales in Q2, showing at least some sequential growth. The company's management, however, have disabused them of that notion.
Management's forecast is for Q2 sales of no more than $64 million, and perhaps as little as $60 million -- so $62 million at the midpoint, essentially flat against fiscal Q1.
Now the good news is that gross margins will probably improve in Q2, to somewhere between 62.5% and 64.5%. Even on a non-GAAP basis, those numbers suggest some slight improvement in gross profitability.
The bad news is that after subtracting operating costs, that's going to leave Ambarella still operating at a loss of somewhere between $7 million and $9 million for the quarter -- implying a loss of perhaps $0.20 per share, where Wall Street is expecting a loss of no more than $0.14.
Long story short, after barely beating earnings in Q1, it looks like Ambarella is going to miss pretty badly in Q2. This, in a nutshell, is why investors are dumping the shares today.
