Edge AI in Security and Robotics Powers Record Revenue for Ambarella

In its third-quarter earnings call, Ambarella Inc. (AMBA) reported record quarterly revenue of $108.5 million, driven by expanding adoption of edge artificial intelligence across security, automotive safety, and emerging robotics applications. The AI chip designer raised its full-year revenue growth guidance to 36-38%, citing strong average selling prices and broadening demand for on-device AI processing capabilities.

President and CEO Fermi Wang emphasized the company's strategic position: "Edge AI revenue, we define as a product that integrates one of our proprietary deep learning AI accelerators, was about 80% of our total revenue, representing our sixth consecutive quarter of record Edge AI revenue."

Security Market Demonstrates Breadth of Applications

Ambarella's security customer base expanded significantly during the quarter with notable design wins spanning traditional enterprise surveillance, environmental monitoring, and access control applications. Motorola Solutions developed its Avigilon Halo 4 smart sensor on Ambarella's CV25 processor—described as "an all-in-one environmental monitoring and security device that is designed for areas where cameras are restricted to detect events like smoke, fire and audio anomalies."

Verkada announced its upcoming Ambarella CV75-based AF64 Access Station Pro, which "enables secure physical access with AI facial recognition-powered Face Unlock alongside traditional badge and mobile access methods." The company also launched a CR63-E remote security camera leveraging CV75's power efficiencies and expanded its CV72-based multisensor security camera product line.

Keenfinity, spun out of Bosch, announced its Autodome 7100I moving PTZ camera with built-in AI analytics based on Ambarella CV72, alongside a Dinon thermal security camera based on Ambarella CV22 that "runs their CNN models to detect and classify objects accurately up to 2,000ft."

Portfolio Shift Drives Average Selling Price Increases

The company's strategic shift toward more advanced AI processing capabilities is materializing in higher selling prices. Wang detailed the progression: "Our SoC blended ASP in Q3 was up about 20% year-over-year, and as our third-generation AI SoCs and other new products become a more material portion of our revenue, we anticipate a further increase in the value we earn per design wins."

Products based on advanced 5-nanometer manufacturing processes represented over 45% of Q3 revenue, reflecting customer adoption of more sophisticated AI capabilities. The company's portfolio now spans from its 10-nanometer CV2 family supporting CNN networks to 5-nanometer products featuring third-generation AI processors that enable both complex CNN and generative AI applications simultaneously.

VP of Corporate Development Louis Gerhardy noted the revenue mix has evolved significantly: "The split is roughly 50-50, 50% kind of enterprise CapEx driven and 50% consumer," representing an increase in consumer applications compared to prior years when enterprise CapEx-driven markets dominated.

Robotics and Drone Market Entry Accelerates

Ambarella is entering the aerial drone market with high-volume shipments expected to commence in the current quarter. Wang characterized this as "just the beginning of our realization of the large robotic market opportunity," drawing parallels to automotive autonomy development.

"We're kind of looking at today's drones is Level 2 and Level 3, Level 4 drones coming and probably going to drive faster than autonomous driving car," Wang explained. "We believe that in order to have a Level 3 drone that it will require a really powerful chip in addition to the video processing. And that's really played to our strength also that our investment in autonomous driving directly apply to here."

The company is offering two distinct solutions for robotics applications: video-centric products based on the CV2, CV72, and CV75 families for customers focused on computer vision and object detection, and more comprehensive "central domain controller" solutions for customers developing autonomous navigation capabilities.

Wang noted the technology transfer opportunity: "A lot of our investment, both on hardware and software side for autonomous driving will directly apply to all the future [drone] and other robotic applications that we're talking about."

*This article was created with the help of generative AI tools and edited by our content team for clarity and accuracy. Earnings call transcripts are available at https://seekingalpha.com.