EPS came in at $0.01 vs. the ($0.06) consensus while revenue decreased 17% yr/yr to $47.2 mln, in line with the consensus. Looking ahead, the company is forecasting Q2 revenue of $51-$53 mln compared to the $48.8 mln expectation.
We have to go all the way back to its 4Q14 report to find the last time AMBA provided quarterly revenue guidance that was above expectations.
Click here to access AMBA's Q1 earnings press release.
The results indicate that it is finally putting the troubles related to consumer-related products -- namely, GoPro (GPRO) sports cameras -- behind it, while its investments in computer vision technology begin to pay off.
However, AMBA is now facing another major risk that has the potential to significantly disrupt its business.
Similar to its approach with Huawei, the U.S. government is considering black-listing AMBA's largest video surveillance customer, Hikvision, a 16-19% revenue customer of AMBA’s
Additionally, some of its customers will be facing higher tariffs which could cause market share among its customers to shift, creating further disruptions.
Due to the unpredictable geopolitical situation, some of AMBA's customers have pulled in orders to get ahead of any possible restrictions and increased tariffs. Consequently, both its Q1 results and its Q2 guidance are inflated from extraordinary circumstances, rather than from strengthening demand.
A significant portion of the expedited orders are for lower-margin security cameras in China too, resulting in AMBA guiding for Q2 non-GAAP gross margin of 57-59% compared to 59.6% this quarter.
On the positive side, the company continues to gain momentum for its computer vision (CV) products. In Q1 it continued its early ramp of CV22 chips targeted for the security camera market, which it expects to become a major revenue contributor in 2020.
The second CV wave is expected to come from the consumer security market in 2H20, followed by the automotive market in 2022-2023.
Key Takeaways: On the surface, AMBA's upside Q1 results and Q2 revenue guidance look quite encouraging. The demise of wearable sports cameras has been devastating to AMBA and the company has been trying to rebuild its business over the past few years.
Strong interest in its computer vision products are providing some much-needed hope that it is finally turning the corner.
But, its exposure to Chinese surveillance cameras and China customers in general is a significant near-to-intermediate term risk. Fearing future restrictions and higher tariffs, these customers ramped up their order activity in Q1 and Q2, which is a primary driver behind AMBA's upside report.