Ambarella, Inc.

Hello, and welcome to Umbrella's second quarter fiscal year 2026 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the conference over to Louis Gerhardt, Vice President of Corporate Development. You may begin.

Thank you, Tawanda. And good afternoon. Thank you for joining our second quarter fiscal year 2026 financial results conference call. On the call with me today is Dr. Fermi Wong, President and CEO, and John Young, CFO. The primary purpose of today's call is to provide you with information regarding the results for our second quarter fiscal year 2026. The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth, and demand for our solutions among other things. These statements are based on currently available information and subject to risks, uncertainties, and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements, and we're under no obligation to update these statements. These risks, uncertainties, and assumptions, as well as other information on potential risk factors that could affect our financial results, are more fully described in the documents we file with the SEC. Before starting the call, I'd like to summarize our planned investor events for our third fiscal quarter. On September 3rd, we'll participate in Citi's global TMT conference in New York City. September 4th, we'll host KGI Securities bus tour in Santa Clara. On September 16th, we'll host Bernstein's seventh annual West Coast semiconductor bus tour at our office in Santa Clara. And on September 18th and 19th, Craig Hallam will host us on a Midwestern NDR. Access to our second quarter fiscal year 2026 results, press release, transcripts, historical results, SEC filings, and a replay of today's call can be found on the investor relations page of our website. The content of today's call, as well as the materials posted on our website, are Amborella's property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter. John will review the financial results and outlook, and we'll be available for your questions after that. Fermi?

Thank you, Louis, and good afternoon. Thank you for joining our call today. Our strong momentum continued in our second quarter with revenue over $95.5 million, increasing 11% sequentially above the high end of our prior guidance range of $86 to $94 million. The second quarter results represent the fifth consecutive quarter of record HAI revenue. Furthermore, I am proud to say the midpoint of our new third quarter and the full fiscal year 2026 revenue guidance range represents all time record quarterly and the fiscal year total revenue for umbrella. In our May 29th earning call, we increased our fiscal 2026 revenue growth estimate to a range of 19% to 25%, or approximately $348 million at the midpoint. With a strong order book, as well as our expectation for both our total unit ship and our average selling price to increase in fiscal 2026, we are increasing our fiscal 2026 revenue growth estimate to a range of 31% to 35%, or approximately $379 million at the midpoint. Needless to say, it is a very exciting time for Umbrella. Fundamentally, after a multi-year period of significant AGI R&D investment, our broad product portfolio enabled us to address a rising breadth of AGI applications. This increased breadth not only drives our overall unit demand, but we continue to see very strong demand for our new 5-nanometer AI SOCs in both our existing and emerging AGI markets. which is driving our firm-wide average AI spend price higher. I would like to double-click on the rising breadth of H-AI applications I mentioned and focus on three applications we see as rapidly emerging for us, portable video, robotic aerial drones, and the H infrastructure. Our H-AI revenue began in the enterprise security market more than five years ago, And it was followed by an incremental AGI application in a small home, automotive safety, and the telematics market, all of which are continuing their unique growth trajectories. Now this year, the year on top is the rising demand for our AGI SoCs from the portable video market, including action camera, panorama cameras, and the body-worn cameras. In addition to portable video market, we expect to commence high volume shipment into the robotics market by the end of this fiscal year. The unit volume in the robotic market is highly fragmented by application, phone factors, and the customers. But our technology products and roadmap have enabled us to win one of the early high volume robotic application, partially autonomous aerial drones. Portable video and robotic boats represent new emerging HAI applications in Umbrella's traditional market for IoT endpoints. Today, we are also announcing our first win in the HAI infrastructure with our N1655 SoC. This win is yet another example of the expanding breadth of our HAI business, and I am encouraged by the interest in our N1 HAI infrastructure roadmap from both new and existing customers. In the automotive autonomy market, the largest subset of the robotic market, we are actively bidding on OEM projects with our CB380 family of advanced 5 nanometer central domain controller for L2 plus to L4 applications. While offering significant lifetime revenue opportunities, the lower frequency of award decision, OEM program delays, and a longer time to revenue are causing our other AI applications to emerge more rapidly. Nevertheless, we remain highly focused on developing this business, and we will provide updates on our progress as wins occur. I will now describe some representative customer engagement during the quarter, beginning with the two key customer design wins that validate our future vision and strategy. In a rapidly growing robotic drone market, Arashi Vision, also known as Insta360, launched the world's first 8K 360-degree drone on this new anti-gravity brand. Powered by our CV5 AI SoC, this drone features on both the top and the bottom, enabling 8K 360-degree video recording. The AI capacity in CV5 is fully utilized in this partially autonomous drone, and our product portfolio will enable the drone market to evolve rapidly to higher levels of autonomy. The anti-gravity A1 is set to launch globally in January 2026. We are proud to see Arash very successfully differentiate their diverse portable video and now robotic aerial drone portfolio with AI features, such as neural net image signal processing, AI editing, and gesture control, leveraging our AI SoCs. A majority of Arashi's products are based on umbrella SOCs, and approximately 70% of Arashi's shipments are exported. In the emerging AGI infrastructure market, a global networking customer is loading out a compact on-premises network AI appliance with multi-modal intelligence at the event level built on our N1655 AI SOC. This appliance will add Large language model powered, natural language search, and we were selected because of power efficiency, network bandwidth saving, and low bill of material cost. This is a great example of one of the green shoots I mentioned earlier. There are several other use cases being evaluated on our N1655 SoC. Now automotive safety, ADAS, and the telematics business. I would like to share some key customer wins during the quarter. Sensara, a leading provider of a commercial fleet of telematics solutions, has introduced its AI multi-cam platform. Based on Embraer's CV72 AI SoC, Sensara's AI multi-cam delivers live 360-degree visibility and real-time risk detection alerts on an in-cap monitor with up to four times auxiliary HD camera updates. It is a great design win for CV72 that demonstrates more camera inputs and advanced AI features on a single SoC. Audi is utilizing CV22FS for their left-right email functions in the E5 model, initially in the China market. It enables them to provide intelligent context adaptive viewing mode on highways, parking, turning, and lane changes. with dynamic image processing and display enhancement functions. Also in the mirror market, BAIC Steleto ACE9 is utilizing CV22FS for their rear view electronic mirror. They note that AI-aided detection via camera inputs help them cut down blind spots by up to 60%. And a leading Chinese OEM, well utilize our CV22 SOC for their 8 megapixel sensor designed specifically for the level 2 front ADAS functionality. A key capability they are enabling is small target detection at the long range. In the enterprise security segment, Honeywells in India has launched their 50 series enterprise security cameras in 3 megapixel and 5 megapixel resolutions based on our CV25 SOCs. India is a fast-growing market with a drive for made-in-India products, creating new customer opportunity for us. In the small home market, one of our long-term customers in the U.S. has leveraged our H32 SoCs to build multi-sensory, multi-model AI products available in the retail outlets today. They have built a nursery device integrating video monitoring two-way intercom, white noise generator, and an air quality sensor, They have also built a garage device that features carbon monocytes and heat detection, security camera, and the intercom functionality. Also in the small home market, Natamo launched their indoor camera advanced product that is built on H6L SOC in the European market. As you can see from this representative customer engagement, we continue to build design wings momentum in our existing AGI endpoint applications. And we continue to successfully address incremental AI applications, such as robotic aerodromes and AI infrastructure as the AI market breadth expands. Having shipped more than 36 million AI processors to hundreds of customers who have successfully ported hundreds of advanced customer AI models to our SOCs, there should be no doubt that Umbrella is a leader in AGI. AGI is expected to represent about 80% of our total revenue this year. We are focusing exclusively on the unique needs of the AGI market, and we continue a rapid pace of innovation. In conclusion, I would like to summarize the key points covered today. First, we deliver Q2 results above the high end of our prior guidance, and we increased the midpoint of full-year fiscal 2026 revenue guidance by 9%. Second, the breadth of our age AI applications we are successfully addressing is expanding. As seen with our ongoing ramp in a variety of portable video applications and the anticipated production ramp for robotic aerial drones and age infrastructure. Third, the growth of our age AI This is over-occurring with our higher-priced AGI SOCs, supporting the anticipated growth in our ASP. Last, we are exclusively focused on the unique requirements of the AGI market, and we remain an established AGI market leader who continues to innovate at the right pace. Now, John will now discuss the Q2 results and the Q3 outlook in more detail.

Thank you, Fermi. I'll now review the financial highlights for the second quarter, fiscal year 2026, ending July 31, 2025. I will also provide a financial outlook for our third quarter of fiscal year 2026, ending October 31, 2025. I'll be discussing non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation and acquisition-related expenses adjusted for the impact of taxes. For fiscal Q2, revenue was $95.5 million, above the high end of our prior guidance range of $86 to $94 million, up 11.2% from the prior quarter and up 49.9% year-over-year. Sequentially, automotive revenue increased in the mid-single digits, and IoT increased in the low teens, with IoT growth led by the adoption of edge AI in portable video applications. IoT in fiscal Q2 represented slightly more than 75% of our revenue, and it spread across an increasing number of edge AI applications. Non-GAAP gross margin for fiscal Q2 was 60.5% at the low end of our prior guidance range of 60.5% to 66% due to product mix. Non-GAAP operating expense in Q2 was $53.4 million, below the midpoint of our prior guidance range of $52.5 to $55.5 million, primarily due to lower engineering-related costs associated with the timing of product development. Q2 net interest and other income was $2.2 million. Comparing to our prior guidance of $1.8 million, the increase was primarily from higher interest income. Q2 non-GAAP tax provision was approximately $200,000. We reported a non-GAAP net profit of $6.4 million, or 15 cents, per diluted share in Q2. Now I'll turn to our balance sheet and cash flow. Fiscal Q2 cash and marketable securities reached $261.2 million, increasing $1.8 million from the prior quarter and $41.4 million from the same quarter a year ago. Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue, partially offset by increased expenditure on capital investments during the quarter. Receivables day sales outstanding increased from 31 days in the prior quarter to 40 days, while days of inventory decreased from 98 days to 85 days. Operating cash inflow was $5.5 million for the quarter. Capital expenditures for tangible and intangible assets were $4.1 million for the quarter. Free cash flow was $1.4 million. We had one logistics company representing 10% or more of our revenue, WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 71% of revenue for the second quarter. I'll now discuss the outlook for the third quarter of fiscal year 2026. The breadth of our edge AI business is expanding with a strong unit and average selling price outlook. As a result, in Q3, we forecast revenue in the range of $100 to $108 million, or $104 million at the midpoint. Sequentially, we expect mid to high single-digit percent growth in our automotive business with our IoT business up in the mid-teens. For fiscal 2026, we anticipate a revenue growth range of 31 to 35%. We expect fiscal Q3 non-GAAP gross margin to be in the range of 60% to 61.5%. We expect non-GAAP OPEX in the third quarter to be in the range of $54 to $57 million, with the increase compared to Q2 driven by new product development costs. We estimate net interest and other income to be approximately $2 million, our non-GAAP tax expense to be approximately $800,000, and our diluted share count to be approximately 43.7 million shares. Thank you for joining our call today, and with that, I will turn the call over to the operator for questions.

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Christopher Rowland with Susquehanna. Your line is open.

Hey, thanks so much for the question and congrats on a great quarter. So for my first question, I think for years you guys pitched yourself kind of as the future of the company being automotive, automotive first. But IoT at this point has just been an incredible outperformer. I think it outperformed auto by 4X this year. So I guess my question is, are you thinking about IoT differently now? Could there be a pivot in your business where you just double down spending around IoT versus auto? lean in to the development of IoT versus auto, and when might we get to a point where auto outperforms IoT, or is this not the case just given the great interest in IoT? Thank you.

Right. Thank you for the question. I think the first part of the answer is that, like I said in our script, that we are continuing to focus on our level two plus, level four autonomous driving. And we are working hard to continue to win design wins there. But also I pointed out that because other HAI business, because of shorter design cycle and the more available opportunity for us, we are making significant progress there. And we're going to continue to focus on the AGI market, including both autonomous driving as well as IoT. But I want to point out that the fundamental highway architecture between the AGI for the IoT side and the autonomous driving side are identical. Our image processing pipeline, our CPU investment, even on the OS side, there are huge leverage between each two. So from the APEX expense side, the leverage is very strong. Obviously, the go-to-market strategy from the marketing side, some of the sales side are different. But we are going to continue to focus on those two areas because I still believe in the long term, time-driving content can drive our strength. But as you can see our announcement, we made a significant progress on the AGI in the IoT side, where that means we're going to put also more resources on this than before to continue to make progress and try to collect more market share in this particular market.

Thank you for that, Fermi. And yeah, just maybe back to the growth rates. Just a couple of things. First of all, would you expect auto to outgrow IoT next year, or is this really going to be, you've talked about auto and your CB3 wins, I think, ramping in 2027. Would we have to wait for auto to outperform at that point in time? Thank you.

Right. So I think the auto will outperform IoT when we have major design wins with OEMs, like the one that we talk about, the VWK 2.0. Do we want to design? Yes. I think in the 2027, 2028 timeframe, we can see that auto growth will outperform IoT. Right now, I think in the foreseeable future, that before we get any major design win from the automotive side, IoT will continue to have a very strong contribution to our income. In fact, our current growth, you can see that the growth rate that we got from the just IoT side significantly improved over the last few years.

Yep.

Thanks and congrats. Thank you.

Please stand by for our next question. Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is open.

Yes, thanks for taking my question, and congratulations on the great results and outlook. You know, you piqued my interest with the robotic aerial drones. You mentioned Insta360. Is this another trend of will there be multiple companies coming out with these solutions, and are there commercial applications for deliveries?

Yeah, so first of all, I think for Insta360, their target market is commercial and consumer, and the volume is significant compared to what we have seen in the market outside DJI. And then also that we are seeing definitely there's a market trend. A lot of different companies in different countries are focusing on this drone, particular drone application. Now that autonomous driving on the car side become more popular technology widely available, you can imagine that autonomous drones will become popular. And with that, that will enable many different possible applications. in the near future. I think that potential trend is driving this. This is really consistent with the robotic trend that we are seeing in other applications. When the autonomy becomes popular and becomes possible, then the possible applications with those robots or drones become, you know, in the past was impossible, now definitely thinkable. So I think that we continue to engage in multiple drone design wins activities, and we think that you're going to continue to see us to report our success in this market.

Kevin, it's Louis. To kind of add on to that and maybe tie it into Chris's question, you know, this is just a great example of You've got multiple high-bandwidth sensors in a real-time application, you know, collecting data and driving, you know, a higher level of autonomy, higher and higher levels of autonomy, just like, you know, in a vehicle, you know, moving from L1 to L4. You see the same sort of trend beginning in the aerial drone market and, of course, other robotic spaces. And it's all happening with the same underlying AI inference accelerator. That's in common across... all these markets, whether it's auto autonomy, auto safety and telematics, or any of these IoT markets. So we leverage the technology across a lot of different applications.

Right. Thanks. Yeah, I guess your energy efficiency also is very useful. If you're going to be flying something, it has to have a battery, and energy efficiency is really important. Absolutely. You have so many exciting things happening with your new designs. I didn't hear much about your process technology or moving on to the next generation. Is that still on track of moving to an animator?

Absolutely. In fact, our foundry partner continues to announce design wins, not only give us a lot more confidence, but also our potential customers. I think that we will continue to work on two nanometer projects and still remain target to take our customer to production in early 2027. Great.

Thank you. Congratulations again. Thank you.

Our next question comes from the line of Quinn Bolton with Needleman Company. Your line is open.

Hey guys, this is Shadi on for Quentin Bolton. Congrats on the strong results. My first question is on the guidance. Your Q3 guide implies a seasonally downed Q4. And given all the progress you guys have been making and the edge AI tailwind, this feels somewhat conservative. So just want to get your thoughts and maybe the puts and takes as we think about Q4.

Right. So first of all, I think that the seasonality that we're guiding for this Q3 and Q4 is increasing the range compared to our previous year. So I don't think that should be a surprise. But if you look at that a lot of the products, some of the products become driven by consumer cycles. That will definitely explain to you that why we are seeing the seasonality based on our guidance.

Got it. That makes sense.

And then my follow-up is on the non-security camera portion of the IoT business. How does Ambarella view this segment growing over the next few years? And at what point might the non-security segment surpass the security camera segment of the IoT business?

Yeah. First of all, thank you for that question. I think that's important. Internally, we're looking at that also. Because all of the new applications we announced today, none of that is really on the... traditional security camera business. In fact, from the drone robots to the portable video to the aging infrastructure, those are really the new market we have been talking about that we haven't shown much result until this quarter. And I think enterprise security and home security continue to be, the combination continue to be a large portion of compared to others, but I think that we do see that the growth rate on the non-security portion of the business will continue to outpace the other side.

Yeah, just to be clear, Shadi, our security business, we expect to continue to deliver very good growth, but now you have these portable video and some of the robotics markets and other things kicking in that, as you observed, are causing problems. our other IoT business outside of security to contribute very nice growth for us.

Got it. Thanks for the caller and congrats on the progress. Thank you.

Please stand by for our next question. Our next question comes from the line of Liam Farr with Bank of America. Your line is open.

Hi, this is Liam on behalf of Vivek. Thank you very much for taking our question. there's been a lot of media reports recently about M&A and industry consolidation. And I was wondering if you're able to address kind of what role you expect industry consolidation to play and what your strategy looks like if you remain independent.

Right. So obviously we cannot address that rumors. I think we just have no comment on that. But however, I want to point out that with today's earning call, you can see that the HEAI, the importance on the strategy side of HAI becomes so obvious in the market space. And with that, we are probably one of few, maybe only one, shipping 36 million units of HAI SOC so far, put us as a leader in that market. So with the combination, I really think that the rumor base is that our strength and our focus on HAI, and I think that will continue to play very well for us.

Thank you. And then just as a follow-up, in terms of kind of going back to the IoT and auto side, clearly a strong quarter. What does the sustainability look like of these growth drivers through 2026? And where should we kind of expect more of an upside trajectory, more on the IoT or more on the auto side? Thank you.

Right. On the auto side, I think we definitely continue to work hard to get a secure first design wing on the level two plus level three. That is really what pushes our growth trajectory beyond what we have with automotive. And with IoT, we are really growing significantly this year over last year, because thanks to a contribution of a few products ramping up by our customers. So we believe that growth will maintain and we're going to provide the guidance for next year. And we will definitely believe that automotive and both IoT and automotive will continue their growth trend.

Yeah, just to put a little more color on it, it's Louis. It's not like there's just a couple markets that are contributing to the growth. Five, six years ago, it started for us in enterprise security and it was public and smart home. then AI video telematics and commercial fleets, you know, certain in-cabin, you know, e-mirrors or driver monitoring. But now more recently in IoT, you've had portable video, which is not just one thing, but it's, you know, body worn cameras, it's panorama cameras, it's action cameras. And now we're moving into robotics initially with aerial drones expected to become significant. So it's not really like, are you in a couple of markets and are they going to, you know, static and how are they going to do? It's more about edge AI touching more and more different vertical applications. And that's what's been happening to the business.

Thank you.

Thank you. Will you stand by for our next question? Our next question comes from the line of Cal Smith with CIFU. Your line is open.

Hey, guys. This is Kyle Smith on for Tori Sponberg at Steeple. Congratulations on the strong quarter. So I think it's pretty clear that the strong revenue beat and guide is stemming from tangible design wins and product momentum. But that being said, could you provide more commentary on the process that management uses to check for any potential demand pull-ins related to the tariff environment? Are you speaking directly with customers or distributors, monitoring yourself for any irregularities, or is it kind of a mix of multiple factors?

Yeah. I think that's a very important topic internally because, you know, we're all going through this industrial-wide inventory correction for the last three years. And every time we've seen some high growth of area, the first reaction is, let's talk to customers. So in the past few years, we've built a relationship with all the customers and also our distributor to make sure that we review inventory every month. And then based on that, we try to decide whether we've seen any inventory build. So far, I think throughout the process with this internal check, we haven't seen any Inventory built that beyond the normal practice and also we have you know personally every time I have a meeting with you know my my peers in our customer base and One of the topics is always about supply chain and about the supply. And I got no feeling that nobody telling us that they are building excessive inventory, worrying about geopolitical situation. So with that, that's just from the feedback from customer. But more internally, inside, we build some kind of a checkpoint to understand, you know, look at the customers, the odor patterns, and whether that's associated with any product ramping up. So if there's any indication of extra inventory build, internally we have some, well, have some read along. So, so far, you know, based on all of this internal and external discussion, I think that we feel quite confident that we haven't seen any meaningful inventory build up in our customers.

Perfect. Thank you. And you mentioned a lot of really exciting design wins in the prepared remarks. I'm curious what the customer response has been for the Cooper development platform, particularly within these new and emerging markets. And are there any specific components of the platform showing outside positive feedback?

I think, first of all, the feedback from our Cooper development platform is very positive. Not only help our customer to eat to move from one of the chip to another chip easily because Cooper platform cover all of the chips that we develop. And so that for our customer, it's really become a powerful tool for them to develop the product once and they can use the same product to many different chips on the umbrella. So that's one of the most important thing. But because with the investment now, we can easily enable our customer to play with our SDK and also play with all the neural network we put into our model garden, and also enabling them to learn how to use our compiler to compile the neural network to our hardware. All of those features are all integrated into this Cooper platform. Of course, I'm not saying that's perfect, but definitely with the benefit to customers, they all continue to give us great feedback about how we can continue to improve it so that they can enjoy the platform more.

Perfect. And if I could just sneak one more in. You know, contemplating this really outsized revenue growth, do you continue to expect non-GAAP OpEx to grow at around 10% annually, or should we maybe bake in a little bit higher OpEx going forward?

Yeah, thanks, Kyle, for the question. I think it's reasonable if you take this, you know, a little bit higher than 10% is probably reasonable. I think quarter over quarter, I think year to date we're at about 12% growth. I think we'll probably stay in that range for the full year.

Perfect. Congratulations again, guys.

Thank you.

Please stand by for our next question. Our next question comes from the line of David O'Connor with BNP Paribas. Your line is open.

Yeah, good afternoon, guys. Thanks for taking my question. Maybe for me, just going back on the automotive side of things again and ADAS, you know, through this year, you know, the L2 plus adoption rates, you know, have slowed, the software not ready. OEMs optimizing for price. I mean, you guys have talked about this through the year. As we sit here in August and from your recent conversations with customers, can you talk about any changes there on how they're viewing that kind of adoption on their next models, any sign that they may be pulling it in, or just any kind of changes that you're seeing there across the kind of, that would help kind of frame the backdrop for potential CD3 wins?

I think the scenario described continues, and we continue to see OEM coming up, building on a, I would say, more low-end level 2 plus than higher-end than that. Because people, like you said, OEM really focuses on getting proper costs than functional features. In fact, even in China, recently we started seeing a similar trend because Chinese government definitely trying to make sure that the autonomous driving becomes safe and the safety becomes the most important feature. So I really think that the total trend of autonomous driving is focusing on safety and also low end of the function performance. For example, we announced a design wing on an 8 megapixel head test in China. This just gives you an indication that while we continue to build on all kinds of different features, and that we see more opportunity on the low end, level 2 plus, and also ADAS opportunities.

Yeah, David, I mean, we still see very significant lifetime revenue opportunities in the auto autonomy market, for sure. But there's just, you know, as Fermi mentioned earlier, there's a lower frequency of decisions. You know, the market can be subject to delays like you referenced, and There's a longer time to revenue, so what's been happening is all of these other edge AI markets have more than caught up and are growing very rapidly for us now. But we still have these products and very much focused on landing these wins. It's just the frequency of them isn't as high.

That's very helpful. Thanks, guys. Maybe one for John, just on the... the incremental kind of growth year over year, you know, with the new guide, you're kind of up maybe, you know, 95, 100 million, somewhere like that for the year. Is there any way you can kind of split that out in terms of units versus ASP or content, just kind of how you would break that down as kind of a percentage, just half of it unit growth, half ASP, any kind of steer that would help us there at size, the kind of difference between those two drivers. Thanks, guys.

Yeah. Yeah. Thanks, David. I think what we've been seeing throughout this year as it's pulled together, our estimate is that that growth is roughly 50-50 between ASP and unit growth.

Very helpful. Thanks so much, guys. Thank you.

Please stand by for our next question. Our next question comes from the line of Gus Richard with Northland Capital Markets. Your line is open.

Yes, thanks for taking my questions, and my congratulations for the strong results. Just in the IoT market, could you give us a split between the security applications and the non-security applications, and which of the non-security applications are growing the most rapidly?

So in a non-security market, I think that portable video definitely grow the fastest. And in fact, that Insta360 using a CV5 to build their next generation sports camera as well as the Panorama 360 degree camera and the ASP is high and the unit number continue to grow. So that definitely is a faster growing market. I won't be surprised if we see a lot of growth In the future, CSUN grows on the strong side, too, because the ASP and U-number growth can be significant, too.

I guess the auto business in Q2, I think John mentioned, grew in the mid-single digits, and IoT grew in the mid-teens. And that would put auto in the low 20% range as a percent of revenue and IoT the balance. Yes.

Got it. And then just in terms of the IoT business, you know, you've got a wide diversity of applications, and I would imagine that your customers need, you know, support from field application engineers. And I'm just wondering, you know, is that a limitation? You know, is that something that you need to bolster to help accelerate growth? You know, how are you thinking about customer support in that regard?

Right. So, first of all, That unified hardware and software platform we just mentioned is really helpful because that means our field engineering can easily switch you from one customer to another customer, although maybe a different location, different products, but the fundamental hardware and software almost the same. So from that point of view, we definitely can leverage our field engineers in different applications. But you are right that when our revenue grows and when we're looking at a different customer base, we continue to add to our field engineering, which is part of our growth plan that John highlighted just a few minutes ago.

Got it. Thanks so much.

Thank you.

Please stand by for our next question. Our next question comes from the line of Martin Yang with Hopco. Your line is open.

Hi, thank you for taking my question. So on the strength you called out on portable video products, can you tell us if the strength is driven by a single key customer or have you expanded your customer base with new design with new OEMs in the past quarter?

Well, in fact, we continue to have a multiple customer base. in this space, but however, Insta360 definitely is the largest one that we mentioned because they switch from H22-based video processor-only solution last year to this year's CV5-based solution. That ASP growth definitely is one of the main reasons we continue to see the growth from them. But we continue to engage multiple portable video players throughout our careers.

Hey, Martin, I think you're familiar with the company, but, you know, we're selling into like seven different portable video product lines there that would include, you know, action, camera, sports, panorama, but, you know, also body worn, webcam, video conferencing, and now, you know, aerial drones. So it's a lot of different product categories. It's not just a few.

Right.

Got it. Thank you. A follow-up question on Insta360. So in your guidance, do you assume business as usual with them without any potential impact from their ongoing lawsuit in the U.S.?

Well, first of all, yeah, we look at it and, you know, it's not in our position to make a judgment on the outcome of lawsuits. I will leave that to the two parties. Our assumption is based on the POs we receive from our customers. And that's the only thing we're counting on to forecast our business.

Got it. Thank you for me. That's it. Thank you.

Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question. Please stand by for our next question. Our next question comes from the line of Richard Shannon with Craig Hallam. Your line is open.

Oh, great. Thanks, guys. Let me ask you a question. First one is on the broader edge AI opportunity. I talked about your first design window partnership near the end of this fiscal year. Maybe you could describe what the pipeline looks like. Maybe describe it, even quantify it, a number of design opportunities and kind of the any maybe new applications you're seeing here versus what you described in the past.

I think Richard, was your question about just edge IoT overall or just the infrastructure?

I'm sorry. I misspoke. Edge infrastructure. Sorry about that.

Right. Exactly. So, first of all, you know that we have been working on the N1655 product for a while, talking to many customers. And this particular design wing is our first design wing that we can talk about. You can imagine that we are definitely engaging with multiple customers, new and old or existing customers. with potential design wins. And you should expect we'll continue to talk about our progress in this particular market. And I think there are so many different types of potential appliances that people can build. But in general, you can imagine that this kind of appliance is really trying to aggregate multiple edge endpoints and apply most advanced AI models on that and to provide different services. That's just in general terms. to describe opportunity out there. And definitely this kind of appliance need to run not traditional computer vision, but more importantly, all the large language model or vision language model are probably the focus area where our customer wants.

Yeah, Richard, we talked about a SAM for this market of, you know, in this year, this fiscal 26, of being around $125 million and... in five years, you know, approaching $500 million. And, you know, we feel those figures are conservative. We're still learning about the market. As Fermi said, this is our first design win. But, you know, we're pretty excited about the level of interest from customers, both new customers and existing customers for Ambarella.

And the success of this market will continue to drive up our average selling price.

Great. Thanks for that, guys. Second question here is on the portable video opportunity here and following on the questions and responses from the past couple of questions here. To what degree are these opportunities or applications more consumer-oriented versus enterprise in nature?

Well, it depends on the market, but I say overall across all seven that I just described for like Insta360, more weighted to consumer, but they're still being sold into enterprise applications. For example, body-worn cameras is a market that, at least today, is very heavy enterprise and public safety driven, and that's one of the categories. But if you switch over to some of the other portable video markets, it might be more on the consumer side. And overall, I'd say they are weighted more heavily to the consumer side. which is one of the factors that allows them to get to revenue faster.

Okay, great. Thank you, guys. Thank you.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Dr. Fermi Wong, CEO, for closing remarks.

And thank you for joining us today. We are going to see you next time for sure. Thank you.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.