Ambarella’s Strong AI Prospects Offset by Competitive and Operational Challenges: Hold Rating Maintained

Analyst Vivek Arya from Bank of America Securities reiterated a Hold rating on Ambarella (AMBA – Research Report) and increased the price target to $63.00 from $50.00.

Vivek Arya has given his Hold rating due to a combination of factors influencing Ambarella’s current market position. The company has shown strength in its edge AI pipeline, with its recent quarterly results surpassing expectations and its revenue guidance for FY26 being raised. However, despite these positive developments, there are concerns about potential inventory build-up by customers in response to tariffs, which could impact future demand.
Additionally, while Ambarella is well-positioned in the growing AI market, its relatively smaller scale compared to larger competitors like Qualcomm and Nvidia poses challenges in securing automotive program bids. Furthermore, although the company is expected to turn positive in earnings per share by FY26, high operating expenses suggest that significant earnings growth may not materialize until later years, contributing to a high forward price-to-earnings ratio. These mixed factors have led to a cautious stance, resulting in a Hold rating.

Based on the recent corporate insider activity of 84 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of AMBA in relation to earlier this year.