Ambarella Lifts 2026 Outlook on AI Surge

Ambarella (NASDAQ:AMBA) reported Q2 FY2026 non-GAAP revenue of $95.5 million, up 49.9% year over year (non-GAAP) and surpassing the high end of prior guidance. The company raised full-year revenue growth guidance to 31%-35%, or approximately $379 million at the midpoint for FY2026, citing broad-based edge AI (artificial intelligence) application momentum and increasing average selling price (ASP); key developments span IoT, automotive, robotics, and edge infrastructure markets.

Ambarella raises 2026 outlook on sustained high ASP and unit demand

Management delivered its fifth consecutive quarter of record hybrid AI (HAI) revenue, driven in part by rapid IoT adoption and new edge AI applications in portable video, robotics, and infrastructure. Raised full-year revenue growth guidance from 19%-25% (set in May 2025) to 31%-35%, reflecting both volume and pricing drivers.

"With a strong order book as well as our expectation for both our total unit ship and our average selling price to increase in fiscal 2026, we are increasing our fiscal 2026 revenue growth estimate to a range of 31% to 35%, or approximately $379 million at the midpoint."
-- Fermi Wang, President and CEO

The simultaneous growth in ASP and shipments signals Ambarella's expanding value proposition and pricing power, underpinning accelerated topline expansion and margin resilience in fiscal 2026.

IoT outpaces auto revenue as Ambarella leverages shared platform

IoT revenue contributed slightly more than 75% of Q2 FY2026 sales and grew in the low teens quarter-over-quarter, outpacing the automotive segment, which rose in the mid-single digits. Management confirmed the fundamental hardware architecture between automotive and IoT is unified, enabling operational efficiency despite different go-to-market strategies.

"Our CPU architecture, our image processing pipeline, our CPU investment, even the online OS side, they are huge in average between each two. So in terms of OpEx expense side, the leverage is very strong. Obviously, the go-to-market strategy from the marketing side is almost sales side. Are different. But we are going to continue to focus on those two areas because I still believe, you know, long term, the time driving continues to drive our strength."
-- Fermi Wang, President and CEO

This cross-market platform allows Ambarella to efficiently allocate R&D and field engineering resources, fueling rapid IoT expansion while laying groundwork for eventual automotive outperformance as design wins mature post-2027.

Major customer wins expand Ambarella’s presence in drones and edge infrastructure

The company announced its first design win in edge AI infrastructure with the N1655 system-on-chip (SoC), and highlighted Insta360’s anti-gravity A1, the world’s first 8K 360-degree drone powered by Ambarella’s CV5 AI SoC, set to launch globally in January 2026. Management cited robust global demand for these SoCs, especially in emerging robotics and infrastructure applications.

"our future vision and strategy. In the rapidly growing robotic drone market, Arashi Vision, also known as Insta360, launched the world's first 8K 360-degree drone on this new anti-gravity brand. Powered by our CV5 AI SoC, this drone features dual lenses on both the top and the bottom, enabling 8K 360-degree video recording. The AI capacity in CV5 is fully utilized in this partially autonomous drone,"
-- Fermi Wang, President and CEO

These wins validate Ambarella’s expanding reach beyond traditional security and automotive markets, unlocking higher-ASP opportunities across high-growth, next-generation devices and edge AI infrastructure deployments.

Looking Ahead

For Q3 FY2026, management forecasts revenue of $100 million to $108 million, with strong mid-teen QoQ growth in IoT and mid- to high-single-digit QoQ growth in automotive; gross margin is guided at 60%-61.5% for Q3 FY2026. Fiscal 2026 total revenue growth is projected at 31%-35%, anchored by broadening edge AI adoption and increased ASP. Ambarella remains on track with two-nanometer development, targeting early 2027 customer production.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,068%* — a market-crushing outperformance compared to 185% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of August 25, 2025

This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.