Shares of Ambarella (AMBA) soared 18% in after-hours trading after the edge AI semiconductor company reported earnings for its third quarter of Fiscal Year 2025 that included a strong outlook. Earnings per share came in at $0.11, which beat analysts’ consensus estimate of $0.04 per share.
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In addition, sales increased by 63.3% year-over-year, with revenue hitting $82.65 million. This beat analysts’ expectations of $79 million. The increase in sales was mainly driven by record revenue for the firm’s edge AI inference products, which are tools and devices that run AI tasks directly on local electronics like cameras or sensors without needing to send data to the cloud.
Guidance for Q4 2025
Looking forward, management has provided the following guidance for Q4 2025:
- Revenue of between $76 million and $80 million versus analysts’ estimates of $69.08 million
- Adjusted Gross margin of 61.5% to 63%
As we can see, the company’s outlook is significantly better than expected, which likely led to the after-hours move in the stock price. The dramatic surge in share price also makes sense when looking at hedge fund trends.
In fact, money managers decreased their holdings by 36,500 shares during the previous quarter. Given that today’s guidance was significantly better than expected, it is likely that hedge funds that previously sold shares are jumping back in.
Is AMBA Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on Ambarella stock based on seven Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 25% rally in its share price over the past year, the average AMBA price target of $73 per share implies 5.8% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
