Ambarella, Inc. (NASDAQ:AMBA) Just Reported Second-Quarter Earnings And Analysts Are Lifting Their Estimates

A week ago, Ambarella, Inc. (NASDAQ:AMBA) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. It looks like a positive result overall, with revenues of US$64m beating forecasts by 2.6%. Statutory losses of US$0.85 per share were 2.6% smaller than the analysts expected, likely helped along by the higher revenues. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Ambarella after the latest results.

See our latest analysis for Ambarella

Taking into account the latest results, the current consensus from Ambarella's 15 analysts is for revenues of US$264.4m in 2025. This would reflect a solid 20% increase on its revenue over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 23% to US$3.30. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$250.6m and losses of US$3.52 per share in 2025. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrades to both revenue and loss per share forecasts for this year.

Despite these upgrades,the analysts have not made any major changes to their price target of US$76.15, implying that their latest estimates don't have a long term impact on what they think the stock is worth. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Ambarella analyst has a price target of US$90.00 per share, while the most pessimistic values it at US$57.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Ambarella's growth to accelerate, with the forecast 44% annualised growth to the end of 2025 ranking favourably alongside historical growth of 3.9% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 18% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Ambarella to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at US$76.15, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Ambarella going out to 2027, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 3 warning signs for Ambarella that you need to be mindful of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.