It has been about a month since the last earnings report for Ambarella (AMBA Quick QuoteAMBA - Free Report) . Shares have lost about 18.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ambarella due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Ambarella Earnings & Revenues Beat Estimates in Q1

Ambarella reported first-quarter fiscal 2023 non-GAAP earnings of 44 cents per share, outpacing the Zacks Consensus Estimate of a loss of 20 cents per share. The reported figure soared 91.3% from the prior-year quarter’s earnings of 23 cents per share.

Revenues surged 29% year over year to $90.3 million and narrowly surpassed the consensus mark of $90 million. The robust year-over-year top-line growth was primarily driven by an improvement in the automotive and security camera businesses.

Customer & Market Details

Ambarella had three customers that contributed more than 10% in the reported quarter. WT Microelectronics, a fulfillment partner in Taiwan that serves multiple customers in Asia, accounted for 57% of the company’s revenues. Hakuto, a Japanese distributor for automotive customers, contributed 10%, while Chicony, a Taiwan-based electronics manufacturer serving multiple IOT customers, represented 11% of the company’s revenues.

The momentum in AMBA’s CV flow system-on-a-chip in professional IP cameras across all geographies continued in the reported quarter.

Operating Details

The non-GAAP gross margin was 63.8%, up 90 basis points year over year in the fiscal first quarter.

A healthy customer and product mix, supported by stable price movements, aided the gross-margin expansion in the quarter reported.

On a non-GAAP basis, operating expenses were $39.8 million, down 1.2% sequentially. Non-GAAP operating expenses were slightly lower than the midpoint of the company’s prior guidance, mainly driven by the timing of new product development activities.

Net inventory was $41.5 million as of Apr 30, 2022, down 8.2% sequentially.

Balance Sheet & Cash Flow

As of Apr 30, 2022, Ambarella had cash and cash equivalents & marketable securities of $200.6 million compared with $171 million as of Jan 31, 2022.

In the fiscal first quarter, the company generated operating cash flow of $34 million.

Guidance

For the second quarter of fiscal 2023, revenues are expected between $78 million and $82 million. The non-GAAP gross margin is anticipated at 63-64%.

Non-GAAP operating expenses are projected in the range of $42-$45 million.

Management noted that supply-chain constraints would continue to remain a concern in the second quarter of fiscal 2023.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -119.67% due to these changes.

VGM Scores

At this time, Ambarella has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Ambarella has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.