Ambarella(AMBA) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Ambarella's unaudited condensed consolidated financial statements for Q2 and H1 FY2026, including core financial statements and detailed accounting notes Unaudited Condensed Consolidated Balance Sheets Total assets increased to $706.43 million by July 31, 2025, with corresponding changes in liabilities and shareholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Total current assets | $343,872 | $320,551 | | Total assets | $706,431 | $688,968 | | Total current liabilities | $125,942 | $120,994 | | Total liabilities | $129,911 | $127,556 | | Total shareholders' equity | $576,520 | $561,412 | - Cash and cash equivalents decreased slightly from $144.62 million to $142.74 million[9] - Accounts receivable, net, increased from $29.77 million to $42.90 million, indicating higher sales or slower collections[9] Unaudited Condensed Consolidated Statements of Operations Revenue significantly increased for Q2 and H1 FY2026, leading to substantial reductions in operating and net losses despite higher operating expenses Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $95,511 | $63,724 | $181,383 | $118,197 | | Gross profit | $56,231 | $38,741 | $107,767 | $71,901 | | Total operating expenses | $78,220 | $75,028 | $155,614 | $147,633 | | Loss from operations | $(21,989) | $(36,287) | $(47,847) | $(75,732) | | Net loss | $(19,995) | $(34,889) | $(44,323) | $(72,821) | | Basic net loss per share | $(0.47) | $(0.85) | $(1.05) | $(1.78) | - Revenue increased by 49.9% for the three months and 53.5% for the six months ended July 31, 2025, compared to the same periods in the prior fiscal year[11] - Net loss per share improved from $(0.85) to $(0.47) for the three-month period and from $(1.78) to $(1.05) for the six-month period[11] Unaudited Condensed Consolidated Statements of Comprehensive Loss Comprehensive loss decreased for Q2 and H1 FY2026, reflecting reduced net loss partially offset by changes in unrealized gains/losses on investments Condensed Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(19,995) | $(34,889) | $(44,323) | $(72,821) | | Other comprehensive income (loss), net of tax | $(267) | $407 | $292 | $18 | | Comprehensive loss | $(20,262) | $(34,482) | $(44,031) | $(72,803) | Unaudited Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $576.52 million by July 31, 2025, primarily from equity plans and stock compensation, partially offset by net loss and repurchases Changes in Shareholders' Equity (in thousands) | Item | 6 Months Ended July 31, 2025 | | :------------------------------------------ | :--------------------------- | | Balance—January 31, 2025 | $561,412 | | Issuance of shares through employee equity plans | $6,713 | | Issuance of shares through employee stock purchase plan | $4,479 | | Stock repurchase | $(1,000) | | Stock-based compensation expense | $24,881 | | Other comprehensive income (loss) - net of tax | $559 | | Net loss | $(24,328) | | Balance—April 30, 2025 | $572,716 | | Issuance of shares through employee equity plans | $170 | | Stock-based compensation expense | $23,896 | | Other comprehensive income (loss) - net of tax | $(267) | | Net loss | $(19,995) | | Balance—July 31, 2025 | $576,520 | - Ordinary shares outstanding increased from 41,963,959 at January 31, 2025, to 42,674,711 at July 31, 2025[15] Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased for H1 FY2026, while investing and financing activities used more cash due to investments and repurchases Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $20,307 | $1,787 | | Net cash provided by (used in) investing activities | $(21,099) | $5,757 | | Net cash provided by (used in) financing activities | $(656) | $1,467 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(1,448) | $9,011 | | Cash, cash equivalents and restricted cash at end of period | $143,181 | $153,932 | - The increase in operating cash flow was primarily due to a net profit adjusted for non-cash items in 2025, compared to a net loss in 2024[18] - Investing activities shifted from providing $5.76 million in 2024 to using $21.10 million in 2025, mainly due to increased investment purchases[18] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures on Ambarella's accounting policies, financial instruments, inventory, and other crucial financial components 1. Organization and Summary of Significant Accounting Policies Ambarella develops low-power semiconductor solutions with AI processing, advanced image signal processing, and HD/Ultra HD compression for various markets - Ambarella is a leading developer of low-power system-on-a-chip (SoC) semiconductors offering AI processing, advanced image signal processing, and high-definition (HD) and Ultra HD compression[20] - The company's system-on-a-chip (SoC) products integrate high-definition video processing, image processing, AI algorithms, audio processing, and system functions onto a single chip, targeting applications like video security, ADAS, and autonomous driving[20] - New accounting guidance (ASU 2023-09, ASU 2024-03, ASU 2025-05) is being evaluated, with ASU 2023-09 expected to impact financial disclosures for fiscal year ending January 31, 2026[30][31][32] 2. Financial Instruments and Fair Value The marketable debt securities portfolio increased to $126.31 million, primarily in corporate bonds and U.S. government securities, with most maturing within 1-5 years Marketable Debt Securities Portfolio (in thousands) | Category | July 31, 2025 Fair Value | January 31, 2025 Fair Value | | :------------------------ | :----------------------- | :-------------------------- | | Money market funds | $861 | $849 | | Fixed deposits | $7,001 | $3,000 | | Corporate bonds | $61,728 | $55,126 | | Asset-backed securities | $20,362 | $20,365 | | U.S. government securities | $36,354 | $30,152 | | Total | $126,306 | $109,492 | Contractual Maturities of Investments (in thousands) | Maturity Period | July 31, 2025 | January 31, 2025 | | :---------------- | :------------ | :--------------- | | Due within one year | $31,781 | $35,405 | | Due in 1 - 5 years | $94,068 | $74,087 | | Due in 5 - 15 years | $457 | — | | Total | $126,306 | $109,492 | - The fair value of money market funds and fixed deposits are classified within Level 1, while other debt securities are classified within Level 2[37] 3. Inventories Total inventories slightly decreased to $33.81 million by July 31, 2025, with a shift from finished goods to work-in-progress Inventories (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :-------------- | :------------ | :--------------- | | Work-in-progress | $22,234 | $20,546 | | Finished goods | $11,574 | $13,882 | | Total | $33,808 | $34,428 | 4. Property and Equipment, Net Net property and equipment increased to $10.09 million by July 31, 2025, primarily due to additions in computer hardware and construction in progress Property and Equipment, Net (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :--------------------------- | :------------ | :--------------- | | Computer hardware and software | $27,488 | $25,730 | | Tools and equipment | $9,226 | $8,625 | | Construction in progress | $861 | $307 | | Total property and equipment, net | $10,092 | $9,084 | - Depreciation expense was approximately $1.2 million for both three-month periods and $2.3 million and $2.4 million for the six-month periods ended July 31, 2025 and 2024, respectively[39] 5. Goodwill and Intangible Assets, Net Goodwill remained constant at $303.63 million, while net intangible assets decreased to $41.88 million due to amortization, with $7.0 million in unamortized software licenses Intangible Assets, Net (in thousands) | Category | July 31, 2025 Net Carrying Amount | January 31, 2025 Net Carrying Amount | | :-------------------- | :-------------------------------- | :----------------------------------- | | Software licenses | $23,322 | $26,296 | | Developed technology | $9,696 | $11,211 | | Customer relationships | $7,700 | $8,433 | | Trade name | $1,161 | $1,339 | | Total | $41,879 | $47,279 | - Goodwill remained unchanged at $303.63 million[9] - Approximately $7.0 million of software licenses with alternative uses are not yet amortized, pending product release[43] 6. Accrued and Other Current Liabilities Accrued and other current liabilities decreased to $76.19 million by July 31, 2025, mainly due to lower employee compensation and software license liabilities Accrued and Other Current Liabilities (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :----------------------------- | :------------ | :--------------- | | Accrued employee compensation | $20,732 | $22,941 | | Accrued product development costs | $32,159 | $32,929 | | Software license liabilities, current | $4,759 | $7,021 | | Development deposit liability | $13,500 | $13,500 | | Other accrued liabilities | $5,040 | $4,390 | | Total | $76,190 | $80,781 | - Approximately $9.8 million of annual bonus was paid in Q1 FY2026, with $3.7 million in cash and $6.1 million in fully vested restricted stock units[44] 7. Leases Operating lease expense remained stable at approximately $0.9 million for Q2 and $1.8 million for H1 FY2026, with a weighted-average remaining lease term of 2.16 years Operating Lease Expenses and Cash Flows (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease expense | $900 | $1,000 | $1,800 | $2,000 | | Cash paid for operating leases | $974 | $1,004 | $1,945 | $1,987 | | Operating lease assets obtained | $66 | $3,335 | $66 | $3,335 | - The weighted average remaining lease term is 2.16 years, and the weighted average discount rate is 3.25 percent as of July 31, 2025[47] 8. Deferred Revenue Deferred revenue primarily stems from NRE charges and tiered-pricing product shipments, with $7.7 million recognized and $39.2 million remaining in unsatisfied performance obligations - Deferred revenue is mainly from nonrecurring engineering (NRE) charges and product shipments with material rights under tiered-pricing contracts[48] - Approximately $7.7 million of deferred revenue from the prior fiscal year was recognized as revenue during the six months ended July 31, 2025[48] - Remaining unsatisfied performance obligations were approximately $39.2 million as of July 31, 2025, with about 81% expected to be recognized within the next 12 months[49] 9. Other Long-Term Liabilities Other long-term liabilities decreased to $2.30 million by July 31, 2025, mainly due to a significant reduction in non-current software license liabilities Other Long-Term Liabilities (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Unrecognized tax benefits, including interest | $1,104 | $1,008 | | Deferred tax liabilities | $694 | $695 | | Software license liabilities, non-current | $448 | $2,420 | | Other long-term liabilities | $55 | $3 | | Total | $2,301 | $4,126 | 10. Capital Stock Ambarella increased shares reserved for ESPP by 524,549 in Q1 FY2026 and extended its share repurchase program through June 30, 2026, with $48.0 million remaining after $1.0 million in repurchases - 524,549 shares were added to ordinary shares reserved for issuance under the Amended and Restated 2012 Employee Stock Purchase Plan (ESPP) in Q1 FY2026[52] - The share repurchase program was extended through June 30, 2026, with approximately $48.0 million available for repurchases as of July 31, 2025[54] - During the six months ended July 31, 2025, the company repurchased 24,152 shares for approximately $1.0 million in cash[54] 11. Stock-based Compensation Total stock-based compensation expense slightly decreased for Q2 and H1 FY2026, with $137.5 million in unrecognized cost for unvested restricted stock units Stock-based Compensation Expense (in thousands) | Category | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenue | $780 | $833 | $1,731 | $1,440 | | Research and development | $16,972 | $18,395 | $34,557 | $36,016 | | Selling, general and administrative | $7,436 | $8,384 | $15,030 | $16,192 | | Total | $25,188 | $27,612 | $51,318 | $53,648 | - Total unrecognized compensation cost related to unvested restricted stock units was approximately $137.5 million as of July 31, 2025, with a weighted-average recognition period of 2.23 years[55] - The weighted-average exercise price for outstanding stock options at July 31, 2025, was $51.89, with an aggregate intrinsic value of $3.42 million[57] 12. Net Loss Per Ordinary Share Basic and diluted net loss per ordinary share improved for Q2 and H1 FY2026, with potentially dilutive securities excluded due to their antidilutive effect Net Loss Per Ordinary Share (in thousands, except share and per share data) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(19,995) | $(34,889) | $(44,323) | $(72,821) | | Weighted-average ordinary shares - basic | 42,546,979 | 41,129,754 | 42,383,475 | 40,952,373 | | Basic net loss per share | $(0.47) | $(0.85) | $(1.05) | $(1.78) | | Diluted net loss per share | $(0.47) | $(0.85) | $(1.05) | $(1.78) | - Potentially dilutive securities, including options, restricted stock units, and ESPP awards, were excluded from diluted EPS computation due to their antidilutive effect[60] 13. Income Taxes Income tax expense decreased for Q2 and H1 FY2026, primarily due to reduced U.S. profits and tax reductions from the One Big Beautiful Bill Act (OBBBA) Income Taxes (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Loss before income taxes | $(19,742) | $(34,142) | $(43,425) | $(71,316) | | Provision for income taxes | $253 | $747 | $898 | $1,505 | | Effective tax rate | (1.3)% | (2.2)% | (2.1)% | (2.1)% | - The decrease in income tax expense was primarily due to a decrease in the proportion of profits generated in the U.S. and reduction in U.S. tax expenses because of the One Big Beautiful Bill Act (OBBBA)[61] - The company's fiscal years 2022-2025 are generally open for U.S. federal tax examination, and 2021-2025 for state tax authorities[63] 14. Commitments and Contingencies Total manufacturing purchase commitments increased to $69.3 million by July 31, 2025, with no material loss liabilities from adverse commitments or accruals for legal matters - Total manufacturing purchase commitments were approximately $69.3 million as of July 31, 2025, up from $56.4 million at January 31, 2025[66] - The company indemnifies certain vendors and customers against third-party claims related to intellectual property and product liability, but no liabilities have been recorded for these obligations[68] - No accruals for contingent liabilities related to commercial disputes, employment issues, or intellectual property claims were recorded as of July 31, 2025[69] 15. Segment Reporting Ambarella operates as a single segment, with revenue geographically concentrated in Taiwan and WT Microelectronics Co., Ltd. as a major customer - The company operates as a single operating and reportable segment, deriving revenue from AI-based processing and video/image processing SoC solutions[70] Geographic Revenue (in thousands) | Region | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Taiwan | $68,137 | $39,830 | $122,036 | $73,515 | | Asia Pacific other than Taiwan | $17,789 | $13,620 | $34,348 | $26,370 | | Europe | $4,690 | $5,744 | $13,429 | $9,943 | | North America other than United States | $4,197 | $3,507 | $9,342 | $6,277 | | United States | $698 | $1,023 | $2,228 | $2,092 | | Total revenue | $95,511 | $63,724 | $181,383 | $118,197 | - WT Microelectronics Co., Ltd. accounted for approximately 71.3% and 67.4% of total revenue for the three and six months ended July 31, 2025, respectively[74] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Ambarella's significant revenue growth, reduced operating losses, and increased cash flow from operations, driven by AI inference processors and NRE services Overview Ambarella develops low-power AI-enabled SoCs with CVflow™ technology for edge inference AI, targeting video security, ADAS, and industrial robotics markets - Ambarella is a leading developer of low-power system-on-a-chip (SoC) semiconductors providing powerful artificial intelligence (AI) processing, advanced image signal processing, and high-resolution video compression[77] - The company's CVflow™ technology supports various AI algorithms, including object detection, classification, tracking, and semantic segmentation, and can process other sensor modalities like lidar and radar[77] - Future revenue growth is expected to depend significantly on expanding within camera markets with AI technology, particularly in IoT, AI-enabled security cameras, AI-based driving applications, and industrial and robotics markets[79] Financial Highlights Ambarella reported significant revenue growth for Q2 and H1 FY2026, with reduced operating losses and substantially increased cash flow from operating activities - Revenue increased by 49.9% to $95.5 million for the three months and 53.5% to $181.4 million for the six months ended July 31, 2025, compared to the prior fiscal year[85] - Operating losses decreased to $22.0 million and $47.8 million for the three and six months ended July 31, 2025, respectively, from $36.3 million and $75.7 million in the prior year[85] - Cash flows from operating activities increased to $20.3 million for the six months ended July 31, 2025, from $1.8 million in the prior year[85] Factors Affecting Our Performance Ambarella's performance hinges on capitalizing on AI and computer vision trends, developing new solutions, managing costs, and navigating market concentration and supply chain risks - Future success is critical on the ability to develop advanced AI and computer vision technologies and gain customer acceptance in emerging applications like ADAS and industrial robotics[86] - The company must continuously invest in R&D to introduce new or enhanced solutions that meet market requirements, especially in AI and computer vision technologies[87] - Revenue remains significantly concentrated in IoT and automotive markets, with a limited number of ODMs and OEMs accounting for a substantial portion of sales[90] Results of Operations Ambarella experienced substantial revenue growth for Q2 and H1 FY2026, leading to reduced net losses despite a slight gross margin decrease and increased operating expenses Revenue Revenue increased significantly for Q2 and H1 FY2026, driven by higher product unit shipments, increased AI inference processor sales, and NRE project service revenue Revenue (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $95,511 | $63,724 | $181,383 | $118,197 | - Revenue growth was 49.9% for the three months and 53.5% for the six months ended July 31, 2025, compared to the same periods in the prior fiscal year[105] - Increases were primarily due to higher product unit shipments, an increased percentage of sales from higher average selling price AI inference processors, and higher NRE project service revenue[105] Cost of Revenue and Gross Margin Gross margin slightly decreased for Q2 and H1 FY2026 due to higher manufacturing costs for advanced process technologies, partially offset by increased NRE project service revenue Gross Margin Percentage | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :---------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Gross margin | 58.9% | 60.8% | 59.4% | 60.8% | - Gross margin decreased by 1.9 percentage points for the three months and 1.4 percentage points for the six months ended July 31, 2025[106] - The decrease was primarily due to higher manufacturing costs for advanced process technologies and lower sales of previously reserved inventory, partially offset by higher NRE project service revenue[106] Research and Development Research and development expense increased for Q2 and H1 FY2026, primarily due to additional engineering-related expenses for chip development and higher personnel costs from increased headcount Research and Development Expense (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development | $59,734 | $56,760 | $118,553 | $110,897 | - R&D expense increased by approximately $2.1 million and $4.4 million for engineering-related expenses for the three and six months, respectively[107] - Personnel costs, including stock-based compensation, employee benefits, and incentive bonus, increased by approximately $1.0 million and $3.4 million for the three and six months, respectively[107] Selling, General and Administrative Selling, general and administrative expense marginally increased for Q2 and H1 FY2026, mainly due to higher outside professional service expenses, partially offset by lower personnel and facility-related costs Selling, General and Administrative Expense (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Selling, general and administrative | $18,486 | $18,268 | $37,061 | $36,736 | - The increase was primarily due to approximately $0.9 million and $0.8 million, respectively, of higher outside professional service expense[108] - This was partially offset by approximately $0.7 million and $0.5 million, respectively, of lower personnel costs and facility-related expenses[108] Other Income, Net Other income, net, marginally increased for Q2 and H1 FY2026, driven by higher yields from debt security investments, partially offset by lower interest income and higher foreign currency losses Other Income, Net (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Other income, net | $2,247 | $2,145 | $4,422 | $4,416 | - The marginal increase was primarily due to higher yields from debt security investments[109] - This was partially offset by lower interest income from cash deposits and higher net losses from foreign currency transactions and remeasurements[109] Provision (Benefit) for Income Taxes Income tax expense decreased for Q2 and H1 FY2026, primarily due to reduced U.S. profits and tax reductions from the One Big Beautiful Bill Act (OBBBA) Provision for Income Taxes (in thousands) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Provision for income taxes | $253 | $747 | $898 | $1,505 | | Effective tax rate | (1.3)% | (2.2)% | (2.1)% | (2.1)% | - The decrease in income tax expense was primarily due to a decrease in the proportion of profits generated in the U.S. and reduction in U.S. tax expenses because of the One Big Beautiful Bill Act (OBBBA)[111] - The company does not expect the OBBBA to have a material impact on its consolidated financial statements[112] Liquidity and Capital Resources Ambarella had $261.2 million in cash and marketable securities by July 31, 2025, with increased operating cash flow but higher cash usage in investing and financing activities Cash Flows Net cash from operating activities significantly increased for H1 FY2026, while investing and financing activities used more cash due to investments and stock repurchases Summary of Cash Flows (in thousands) | Metric | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $20,307 | $1,787 | | Net cash provided by (used in) investing activities | $(21,099) | $5,757 | | Net cash provided by (used in) financing activities | $(656) | $1,467 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(1,448) | $9,011 | - Net cash provided by operating activities increased primarily due to a net profit adjusted for certain non-cash items for the six months ended July 31, 2025, compared to a net loss in the prior year[115] - Net cash used in investing activities increased due to approximately $21.9 million of additional net cash outflow for debt security investments and $5.0 million higher payments for capital assets and software licenses[116] Share Repurchase Program The share repurchase program was extended through June 30, 2026, with $48.0 million remaining after $1.0 million in repurchases during H1 FY2026 - The share repurchase program was extended through June 30, 2026[118] - During the six months ended July 31, 2025, 24,152 ordinary shares were repurchased for approximately $1.0 million[118] - As of July 31, 2025, approximately $48.0 million remained available for repurchases under the program[118] Operating and Capital Expenditure Requirements Ambarella expects existing cash balances to cover anticipated cash requirements for at least the next 12 months, with potential future needs met by additional financing - Existing cash balances are expected to be sufficient to meet anticipated cash requirements for at least the next 12 months[119] - Future working capital needs may be met by selling equity or convertible debt securities or borrowing funds commercially[119] Contractual Obligations, Commitments and Contingencies Manufacturing purchase obligations increased to $69.3 million by July 31, 2025, with no other material changes to contractual obligations reported - Manufacturing purchase obligations with independent contract manufacturers totaled $69.3 million as of July 31, 2025[120] - No other material changes in contractual obligations, commitments, and contingencies were reported since the fiscal year 2025 Annual Report on Form 10-K[121] Off-Balance Sheet Arrangements As of July 31, 2025, Ambarella did not engage in any off-balance sheet arrangements, including structured finance or special purpose entities - The company did not engage in any off-balance sheet arrangements as of July 31, 2025[122] Recent Authoritative Accounting Guidance Information regarding recently issued accounting pronouncements is detailed in Note 1 of the Notes to Condensed Consolidated Financial Statements - Refer to Note 1 of Notes to Condensed Consolidated Financial Statements for information regarding recently issued accounting pronouncements[123] Critical Accounting Policies and Significant Management Estimates No material changes to Ambarella's critical accounting policies and estimates were reported compared to its Annual Report on Form 10-K for the 2025 fiscal year - No material changes to critical accounting policies and estimates were reported compared to the Annual Report on Form 10-K for the 2025 fiscal year[124] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures were reported compared to the company's Annual Report on Form 10-K for the 2025 fiscal year - No material changes to market risk disclosures were reported compared to the Annual Report on Form 10-K for the 2025 fiscal year[125] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of July 31, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of July 31, 2025[127] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended July 31, 2025[128] PART II. OTHER INFORMATION Item 1. Legal Proceedings Ambarella is not currently engaged in any material legal proceedings, with further details on commitments and contingencies provided in Note 14 of the financial statements - The company is not engaged in any material legal proceedings at this time[130] - Refer to Note 14, Commitments and Contingencies, for additional information[130] Item 1A. Risk Factors This section outlines various risks that could materially affect Ambarella's business, financial condition, and results of operations, including customer design wins, market penetration, supply chain, and AI adoption Summary of Risk Factors Ambarella faces risks from customer design win dependency, challenges in new market penetration, global supply chain impacts, and uncertainties surrounding AI adoption - Risks include customer design win dependency and the commercial success of customer products[132] - Failure to penetrate new markets, especially automotive OEM and ADAS, could harm revenue and financial condition[132] - Impacts of global supply chain challenges could adversely affect business, financial condition, and results of operations[132] Risks Related to Our Business and Our Industry Ambarella's business depends on design wins, timely innovation, managing supply chain disruptions, addressing AI technology risks, and navigating intense competition and geopolitical exposures - Reliance on OEMs to design solutions into their products means business would suffer without design wins, especially in new markets like OEM automotive and robotics with longer cycles and higher resource demands[134] - Failure to develop and introduce new or enhanced solutions that meet market requirements on a timely basis could impair customer attraction and retention, and harm competitive position[137] - Uncertain risks related to the adoption, use, or application of emerging AI technologies by customers could adversely impact financial results and lead to reputational harm and liability[141] Risks Related to Our Financial Performance or Results Ambarella's financial performance is subject to fluctuations from demand, product mix, pricing, and industry cycles, with significant dependence on a limited number of customers and exposure to exchange rate volatility - Fluctuations in operating results on a quarterly and annual basis could cause the market price of ordinary shares to decline due to factors like demand shifts, order cancellations, and competitive dynamics[175][177] - Dependence on a limited number of customers, with WT Microelectronics accounting for approximately 67% of total revenue for the six months ended July 31, 2025, poses a risk to revenue if these relationships are not retained or expanded[149] - Fluctuations in exchange rates between the U.S. dollar and currencies in Asia (e.g., New Taiwan Dollar, Chinese Yuan Renminbi) can adversely affect operating results, as a significant portion of sales and expenses are international[180][181] Risks Related to Our Dependence on Third Parties Ambarella heavily relies on third parties for manufacturing, including Samsung, without long-term contracts, and on a single distributor, WT Microelectronics, creating vulnerabilities to disruptions and increased costs - Reliance on third parties for substantially all manufacturing operations, including wafer fabrication, assembly, and testing, primarily Samsung, exposes the company to risks if these parties fail to produce and deliver products according to demands[188] - The absence of long-term supply contracts with most primary third-party manufacturing vendors means they are not obligated to supply products at specific quantities or prices, leading to potential capacity allocation issues and increased costs[191] - A substantial portion of revenue is processed through a single distributor, WT Microelectronics (67% for H1 2025), and the loss of this distributor could cause significant disruptions in shipments and adversely affect operations and financial condition[197] Risks Related to Our Legal and Regulatory Environment Ambarella faces risks from global economic and political conditions, including U.S.-China trade tensions, export controls, and complex data privacy and environmental regulations - Global economic and political conditions, including escalating trade tensions between the U.S. and China, may impact business and financial condition through tariffs, export restrictions, and potential retaliatory actions[205][206][207] - The company is subject to governmental export and import controls, which could subject it to liability or impair its ability to compete in international markets, including restrictions on selling products to several China customers (e.g., Hikvision, Dahua)[212][213] - Compliance with increasingly complex environmental regulations (e.g., EU's RoHS directive) and data processing, privacy, data protection, and cybersecurity laws (e.g., GDPR, CCPA, China's Data Security Law and PIPL) may delay or interrupt operations and adversely affect business[216][217][222] Risks Related to Our Intellectual Property Ambarella's success depends on protecting its intellectual property, as failure to do so or assertions of infringement by third parties could lead to significant costs and harm its business - Failure to adequately protect intellectual property rights (patents, copyrights, trademarks, trade secrets) could impair the ability to compete effectively or defend against litigation[235] - Third parties' assertions of infringement of their intellectual property rights could result in significant costs, substantial damages, product redesigns, or the need to obtain licenses, adversely affecting operating results[237] - The use of open-source software in products, processes, and technology may expose the company to additional risks and could inadvertently require public disclosure of proprietary source code[241][242] Risks Related to Ownership of Our Ordinary Shares The market price of Ambarella's ordinary shares is highly volatile, and provisions in its corporate documents and Cayman Islands law may discourage acquisitions or hinder shareholder protection - The market price of ordinary shares has historically been highly volatile and is subject to wide fluctuations based on financial estimates, operating results, industry conditions, and various other factors[243] - Provisions in the memorandum and articles of association and Cayman Islands corporate law, such as a classified board and restrictions on shareholder actions, may delay or prevent an acquisition, adversely affecting the value of ordinary shares[245][247] - Holders of ordinary shares may face difficulties in protecting their interests or obtaining/enforcing judgments due to Cayman Islands law offering less developed securities laws and investor protection compared to the United States[249][252] General Risk Factors Ambarella's operations are vulnerable to interruptions from technical breakdowns, natural disasters, and geopolitical conditions, particularly in Taiwan or China, with climate change also posing long-term impacts - Operations are vulnerable to interruptions caused by technical breakdowns, natural disasters, infrastructure failures, pandemics, and geopolitical conditions, especially in seismically active areas like the San Francisco Bay Area and Taiwan[253] - Climate change and related policies and regulations may have a long-term impact on the business, potentially disrupting supply chains, operations, and reducing customer demand[254][255] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 FY2026, Ambarella repurchased 24,152 ordinary shares for approximately $1.0 million under its extended share repurchase program, with $48.0 million remaining available Share Repurchases (in millions, except share data) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Dollar Value of Shares that May Yet Be Purchased | | :------------------------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------- | | February 1, 2025 to February 28, 2025 | — | — | $49.0 | | March 1, 2025 to March 31, 2025 | — | — | $49.0 | | April 1, 2025 to April 30, 2025 | 24,152 | $41.38 | $48.0 | | Total | 24,152 | $41.38 | $48.0 | - The share repurchase program was extended through June 30, 2026, with an initial $50.0 million authorization[260] - As of July 31, 2025, $48.0 million was available for repurchases under the program[260] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended July 31, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ending July 31, 2025[258] Item 6. Exhibits This section lists all exhibits filed or incorporated by reference as part of the Quarterly Report, including the Amended and Restated Memorandum of Association and officer certifications - The exhibit index includes the Amended and Restated Memorandum of Association, certifications of Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents[262] Signatures The report was duly signed on September 3, 2025, by Feng-Ming Wang, President and Chief Executive Officer, and John A. Young, Chief Financial Officer - The report was signed by Feng-Ming Wang, President and Chief Executive Officer, and John A. Young, Chief Financial Officer, on September 3, 2025[267]