Analyst Summary
- Ambarella’s revenue increased by 25.8% in fiscal year 2025, reaching $284.9 million, driven by higher product unit shipments, increased sales of AI inference processors, and higher NRE project service revenue.
- The company’s loss from operations decreased from $154.6 million in fiscal year 2024 to $126.6 million in fiscal year 2025, primarily due to higher revenue and gross profit, partially offset by increased operating expenses related to engineering and chip development.
- Cash flows from operating activities increased to $33.8 million in fiscal year 2025, compared to $19.0 million in fiscal year 2024, driven by lower net loss adjusted for non-cash items and increased liabilities from NRE projects and development funding.
- WT Microelectronics Co., Ltd. accounted for approximately 63% of total revenue in fiscal year 2025.
- The company is focusing on expanding its AI computer vision solutions in the IoT, automotive, robotics, and industrial markets.
- Research and development expenses increased to $226.1 million in fiscal year 2025, reflecting the company’s commitment to developing new AI-based solutions.
- The company expects to increase research and development expenditures in future periods to develop innovative computer vision, video and image processing solutions with increased functionality.
Potential Implications
Company Performance
- Continued investment in research and development may lead to new and enhanced solutions, potentially driving future revenue growth.
- The company’s success depends on its ability to penetrate new markets, such as the automotive OEM and robotics markets, and to develop solutions that meet market requirements on a timely basis.
- The company’s financial results could be affected by fluctuations in demand, sales cycles, product mix, and prices for its products.
- The company’s operating results could be affected by general socioeconomic and political conditions in the countries where it operates or where its products are sold or used.
Stock Price
- Fluctuations in the company’s operating results on a quarterly and annual basis could cause the market price of its ordinary shares to decline.
- The market price of the company’s ordinary shares could be subject to wide fluctuations in response to various factors, including changes in financial estimates, announcements by the company or its competitors, and general economic conditions.
Ambarella Inc. (AMBA) – Form 10-K Analysis for Fiscal Year Ended January 31, 2025
Executive Summary
This report analyzes Ambarella Inc.’s Form 10-K filing for the fiscal year ended January 31, 2025. The company, a leading developer of low-power system-on-a-chip (SoC) semiconductors and software for edge artificial intelligence (AI) applications, reported increased revenue driven by AI product adoption and new product ramps. However, operating losses persist despite improved gross margins. Key risks include customer concentration, competition, supply chain vulnerabilities, and the evolving landscape of AI technology. Overall, a cautious outlook is warranted, balancing growth potential with inherent industry risks.
Company Overview
Ambarella, Inc. (AMBA) is a fabless semiconductor company specializing in low-power, high-resolution video compression and AI processing solutions. The company targets the automotive, IoT, and robotics markets. Recent strategic shifts include a focus on AI-enabled SoCs and radar technology through the acquisition of Oculii.
Detailed Analysis
Financial Statement Analysis
Revenue
Revenue increased by 25.8% from $226.5 million in FY2024 to $284.9 million in FY2025. This growth was attributed to higher product unit shipments, increased adoption of AI inference processors, and higher non-recurring engineering (NRE) project service revenue.
Gross Profit and Margin
Gross profit increased from $136.8 million in FY2024 to $172.3 million in FY2025. Gross margin saw a slight increase from 60.4% to 60.5%. The increase was driven by a higher percentage of sales from higher average selling price AI inference processors and increased higher margin NRE project service revenue, partially offset by higher manufacturing costs associated with advanced process technologies.
Operating Expenses
Operating expenses increased from $291.4 million in FY2024 to $298.9 million in FY2025. Research and development (R&D) expenses increased due to higher engineering-related expenses and personnel costs. Selling, general, and administrative (SG&A) expenses decreased due to lower net personnel costs and facility-related expenses.
Profitability
Ambarella reported a net loss of $117.1 million in FY2025, an improvement from the $169.4 million net loss in FY2024. The reduction in net loss was primarily attributable to higher revenue and gross profit, partially offset by an increase in operating expenses.
Liquidity and Capital Resources
Cash, cash equivalents, and marketable securities increased from $219.9 million in FY2024 to $250.3 million in FY2025. Cash flow from operations increased due to lower net loss adjusted for certain non-cash items and increased liabilities driven by higher cash advances from NRE projects and development funding. The company believes its existing cash balances will be sufficient to meet anticipated cash requirements for at least the next 12 months.
Key Ratios
- Gross Margin: 60.5% (FY2025) vs. 60.4% (FY2024)
- R&D as % of Revenue: 79% (FY2025) vs. 95% (FY2024)
- SG&A as % of Revenue: 25% (FY2025) vs. 34% (FY2024)
Management’s Discussion and Analysis (MD&A) Insights
- Management emphasizes the importance of AI and computer vision trends and the company’s ability to capitalize on them.
- The company is focused on expanding within existing IoT camera markets and penetrating new markets, such as the OEM automotive, robotics, and industrial markets.
- Management acknowledges the impact of global supply chain conditions on the business and the need to manage inventory levels effectively.
Red Flags and Uncommon Metrics
- Customer Concentration: A significant portion of revenue is derived from a limited number of customers, with WT Microelectronics accounting for approximately 63% of total revenue in FY2025.
- Reliance on Third Parties: The company relies on third-party foundries and assembly and test contractors for manufacturing operations, which exposes it to supply chain risks.
- Geographic Concentration: A large percentage of sales are made to customers in Asia, which subjects the company to geopolitical and economic risks.
Risk and Opportunity Assessment
Risks
- Customer Concentration: Dependence on a limited number of customers for a significant portion of revenue.
- Competition: Increasing competition in the semiconductor market, particularly in the AI and computer vision segments.
- Supply Chain Vulnerabilities: Reliance on third-party manufacturers and potential disruptions in the global supply chain.
- Market Risks: Uncertainty in the growth and development of target markets, such as the automotive OEM and ADAS market.
- Technology Obsolescence: Rapidly changing technologies and the need to develop new or enhanced solutions to meet market requirements.
- Geopolitical Risks: Operations and customers located outside of the United States are subject to increased complexity and costs of managing international operations and geopolitical instability.
Opportunities
- AI and Computer Vision Trends: Growing demand for AI and computer vision functionality in various markets.
- Market Expansion: Potential to expand within existing IoT camera markets and penetrate new markets, such as the automotive OEM and robotics markets.
- Technology Innovation: Ability to develop advanced AI and computer vision technologies and gain customer acceptance of the company’s technology platform.
Conclusion and Actionable Insights
Ambarella’s FY2025 results show revenue growth driven by AI product adoption, but operating losses persist. The company faces significant risks related to customer concentration, competition, and supply chain vulnerabilities. While the company has opportunities to expand into new markets and capitalize on AI and computer vision trends, it must manage its risks effectively to achieve sustainable profitability. A cautious outlook is warranted, balancing growth potential with inherent industry risks.
Recommendations:
- Diversify Customer Base: Reduce reliance on a limited number of customers by expanding relationships with new customers and markets.
- Strengthen Supply Chain: Mitigate supply chain risks by diversifying suppliers and establishing long-term supply agreements.
- Invest in R&D: Continue to invest in research and development to maintain a competitive edge in the rapidly evolving semiconductor market.
- Monitor Market Trends: Closely monitor market trends and adapt product offerings to meet changing customer needs.
Financial Analysis of Ambarella, Inc. (AMBA) – 10-K Filing for FY2025
1. Commentary
Ambarella’s FY2025 shows a mixed financial performance. Revenue increased by 25.8% compared to FY2024, indicating growth in sales. However, the company continues to experience a net loss, although it decreased from $(169.42) million in FY2024 to $(117.13) million in FY2025. Operating expenses remain high, particularly in research and development, contributing to the overall loss from operations. The company’s cash flow from operations has improved, suggesting better management of working capital.
2. Financial Ratio and Metric Analysis
Profitability
Gross Profit Margin
- Metric: 60.5% (2025), 60.4% (2024), 61.9% (2023)
- Trend: Increased slightly by 0.1% from 2024 to 2025. Decreased by 1.5% from 2023 to 2024.
- Industry: The semiconductor industry typically has gross margins ranging from 40% to 65%. Ambarella’s gross margin is within this range.
Operating Profit Margin
- Metric: -44% (2025), -69% (2024), -22% (2023)
- Trend: Improved from -69% in 2024 to -44% in 2025.
- Industry: Negative operating margins are not uncommon for growth-focused semiconductor companies investing heavily in R&D.
Net Profit Margin
- Metric: -41% (2025), -75% (2024), -19% (2023)
- Trend: Improved significantly from -75% in 2024 to -41% in 2025.
- Industry: Similar to operating margins, negative net profit margins reflect ongoing losses.
Return on Assets (ROA)
- Metric: ROA = Net Loss / Total Assets = -117,126 / 688,968 = -17.00%
- Trend: To determine the trend, we would need the ROA from the previous comparable period, which is not provided in the filing.
- Industry: A negative ROA indicates the company is not generating profit from its assets.
Return on Equity (ROE)
- Metric: ROE = Net Loss / Total Shareholders’ Equity = -117,126 / 561,412 = -20.86%
- Trend: To determine the trend, we would need the ROE from the previous comparable period, which is not provided in the filing.
- Industry: A negative ROE indicates the company is not generating profit from shareholder investments.
Earnings Per Share (EPS) – Basic and Diluted
- Metric: Basic EPS = Diluted EPS = $(2.84)
- Trend: Increased from $(4.25) in 2024 to $(2.84) in 2025.
- Industry: Negative EPS values are consistent with the net losses reported.
Liquidity
To calculate liquidity ratios, we need current assets and current liabilities from the balance sheet.
- Current Assets (2025): $320,551 (in thousands)
- Current Liabilities (2025): $120,994 (in thousands)
- Current Assets (2024): $280,157 (in thousands)
- Current Liabilities (2024): $82,979 (in thousands)
Current Ratio
- Metric: 2025: 320,551 / 120,994 = 2.65; 2024: 280,157 / 82,979 = 3.38
- Trend: Decreased from 3.38 in 2024 to 2.65 in 2025.
- Industry: A current ratio above 1 indicates the company has more current assets than current liabilities. A ratio of 2.65 is generally considered healthy.
Quick Ratio (Acid-Test Ratio)
To calculate the quick ratio, we need to subtract inventory from current assets.
- Inventories (2025): $34,428 (in thousands)
- Inventories (2024): $29,043 (in thousands)
- Metric: 2025: (320,551 – 34,428) / 120,994 = 2.36; 2024: (280,157 – 29,043) / 82,979 = 3.03
- Trend: Decreased from 3.03 in 2024 to 2.36 in 2025.
- Industry: A quick ratio above 1 is generally considered good.
Cash Ratio
To calculate the cash ratio, we need cash and cash equivalents, and marketable securities.
- Cash and cash equivalents (2025): $144,622 (in thousands)
- Marketable debt securities (2025): $105,643 (in thousands)
- Cash and cash equivalents (2024): $144,914 (in thousands)
- Marketable debt securities (2024): $75,013 (in thousands)
- Metric: 2025: (144,622 + 105,643) / 120,994 = 2.07; 2024: (144,914 + 75,013) / 82,979 = 2.65
- Trend: Decreased from 2.65 in 2024 to 2.07 in 2025.
- Industry: A cash ratio of 1 or higher is typically considered strong.
Solvency/Leverage
To calculate solvency ratios, we need total debt, total equity, and earnings before interest and taxes (EBIT).
- Total Liabilities (2025): $127,556 (in thousands)
- Total Shareholders’ Equity (2025): $561,412 (in thousands)
- Total Liabilities (2024): $97,784 (in thousands)
- Total Shareholders’ Equity (2024): $559,871 (in thousands)
Debt-to-Equity Ratio
- Metric: 2025: 127,556 / 561,412 = 0.23; 2024: 97,784 / 559,871 = 0.17
- Trend: Increased from 0.17 in 2024 to 0.23 in 2025.
- Industry: A debt-to-equity ratio below 1 is generally considered good, indicating less reliance on debt financing.
Debt-to-Assets Ratio
- Metric: 2025: 127,556 / 688,968 = 0.18; 2024: 97,784 / 657,655 = 0.15
- Trend: Increased from 0.15 in 2024 to 0.18 in 2025.
- Industry: A lower debt-to-assets ratio is generally preferred, indicating a smaller proportion of assets are financed by debt.
Interest Coverage Ratio (Times Interest Earned)
To calculate the interest coverage ratio, we need EBIT and interest expense. Interest expense is not explicitly provided, but we can calculate EBIT.
- Loss from operations (2025): $(126,595) (in thousands)
- Other income, net (2025): $8,867 (in thousands)
- Loss before income taxes (2025): $(117,728) (in thousands)
- Loss from operations (2024): $(154,560) (in thousands)
- Other income, net (2024): $6,030 (in thousands)
- Loss before income taxes (2024): $(148,530) (in thousands)
EBIT = Loss before income taxes + Interest Expense. Since “Other income, net” likely includes interest income, we can approximate EBIT as Loss from operations + Other income, net.
- EBIT (2025): -126,595 + 8,867 = $(117,728) (in thousands)
- EBIT (2024): -154,560 + 6,030 = $(148,530) (in thousands)
Since the company has a loss, the interest coverage ratio is not meaningful.
- Metric: Not meaningful due to negative EBIT.
- Trend: Not applicable.
- Industry: A ratio above 1.5 is generally considered safe.
Activity/Efficiency
To calculate activity ratios, we need cost of revenue, revenue, inventory, accounts receivable, and accounts payable.
- Revenue (2025): $284,865 (in thousands)
- Cost of Revenue (2025): $112,535 (in thousands)
- Inventory (2025): $34,428 (in thousands)
- Accounts Receivable (2025): $29,767 (in thousands)
- Accounts Payable (2025): $21,775 (in thousands)
- Revenue (2024): $226,474 (in thousands)
- Cost of Revenue (2024): $89,657 (in thousands)
- Inventory (2024): $29,043 (in thousands)
- Accounts Receivable (2024): $24,950 (in thousands)
- Accounts Payable (2024): $28,503 (in thousands)
Inventory Turnover
- Metric: 2025: 112,535 / 34,428 = 3.27; 2024: 89,657 / 29,043 = 3.09
- Trend: Increased from 3.09 in 2024 to 3.27 in 2025.
- Industry: A higher inventory turnover ratio indicates the company is efficiently managing its inventory.
Days Sales Outstanding (DSO)
- Metric: 2025: (29,767 / 284,865) * 365 = 38.05 days; 2024: (24,950 / 226,474) * 365 = 40.17 days
- Trend: Decreased from 40.17 days in 2024 to 38.05 days in 2025.
- Industry: A lower DSO indicates the company is collecting its receivables more quickly.
Days Payable Outstanding (DPO)
- Metric: 2025: (21,775 / 112,535) * 365 = 70.65 days; 2024: (28,503 / 89,657) * 365 = 115.94 days
- Trend: Decreased from 115.94 days in 2024 to 70.65 days in 2025.
- Industry: A higher DPO indicates the company is taking longer to pay its suppliers.
Asset Turnover
- Metric: 2025: 284,865 / 688,968 = 0.41; 2024: 226,474 / 657,655 = 0.34
- Trend: Increased from 0.34 in 2024 to 0.41 in 2025.
- Industry: A higher asset turnover ratio indicates the company is efficiently using its assets to generate revenue.
Valuation
To calculate valuation ratios, we need the current market capitalization, book value, sales, and EBITDA. Market cap is not provided, so we will assume a market cap of $2 billion for demonstration purposes.
- Market Cap (Assumed): $2,000,000 (in thousands)
- Net Loss (2025): $(117,126) (in thousands)
- Shareholders’ Equity (2025): $561,412 (in thousands)
- Revenue (2025): $284,865 (in thousands)
- Loss from operations (2025): $(126,595) (in thousands)
- Depreciation and amortization (2025): $26,060 (in thousands)
EBITDA = Loss from operations + Depreciation and amortization
- EBITDA (2025): -126,595 + 26,060 = $(100,535) (in thousands)
Price-to-Earnings Ratio (P/E)
- Metric: P/E = Market Cap / Net Loss = 2,000,000 / -117,126 = -17.08
- Trend: Not applicable as the company has a net loss.
- Industry: Not meaningful for companies with negative earnings.
Price-to-Book Ratio (P/B)
- Metric: P/B = Market Cap / Shareholders’ Equity = 2,000,000 / 561,412 = 3.56
- Trend: To determine the trend, we would need the P/B from the previous comparable period, which is not provided in the filing.
- Industry: A P/B ratio between 1 and 3 is considered a good value.
Price-to-Sales Ratio (P/S)
- Metric: P/S = Market Cap / Revenue = 2,000,000 / 284,865 = 7.02
- Trend: To determine the trend, we would need the P/S from the previous comparable period, which is not provided in the filing.
- Industry: The average P/S ratio for the semiconductor industry is between 3 and 5.
Enterprise Value to EBITDA (EV/EBITDA)
Enterprise Value (EV) = Market Cap + Total Debt – Cash and Cash Equivalents
- Total Liabilities (2025): $127,556 (in thousands)
- Cash and cash equivalents (2025): $144,622 (in thousands)
- EV = 2,000,000 + 127,556 – 144,622 = $1,982,934 (in thousands)
- Metric: EV/EBITDA = 1,982,934 / -100,535 = -19.73
- Trend: Not applicable as EBITDA is negative.
- Industry: Not meaningful for companies with negative EBITDA.
Growth Rates
- Revenue (2025): $284,865 (in thousands)
- Revenue (2024): $226,474 (in thousands)
- Net Loss (2025): $(117,126) (in thousands)
- Net Loss (2024): $(169,417) (in thousands)
- Basic EPS (2025): $(2.84)
- Basic EPS (2024): $(4.25)
Revenue Growth
- Metric: (284,865 – 226,474) / 226,474 = 25.8%
- Trend: Increased by 25.8% from 2024 to 2025.
- Industry: The semiconductor industry is expected to grow at a rate of 5-10% annually.
Net Income Growth
- Metric: (-117,126 – (-169,417)) / -169,417 = 30.87%
- Trend: Increased by 30.87% from 2024 to 2025.
- Industry: N/A
EPS Growth
- Metric: (-2.84 – (-4.25)) / -4.25 = 33.18%
- Trend: Increased by 33.18% from 2024 to 2025.
- Industry: N/A
Other Relevant Metrics
The filing does not contain specific KPIs or non-GAAP metrics that can be analyzed beyond the standard financial statements.
⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️