Shares of Ambarella (AMBA) soared in after-hours trading after the edge AI semiconductor company reported earnings for its second quarter of Fiscal Year 2025 that included a strong outlook. Earnings per share came in at -$0.13, which beat analysts’ consensus estimate of -$0.19 per share.
In addition, sales increased by 2.6% year-over-year, with revenue hitting $63.73. This beat analysts’ expectations of $62.1 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.
Looking forward, management now expects revenue and adjusted gross margins for Q3 2025 to be in the ranges of $77 million to $81 million and 62.5% to 64%, respectively. For reference, analysts were expecting $69 million in revenue.
The surge in share price makes sense when looking at hedge fund trends. In fact, money managers decreased their holdings by 192,300 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 27% decline in its share price over the past year, the average AMBA price target of $70.70 per share implies 34.95% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
