Q3 2026 Ambarella Inc Earnings Call

Speaker #1: After the speakers' presentation, we'll open up the call for questions. To ask a question during the session, you will need to press *11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded and I will now hand the call over to your speaker, Louis Gerhardy.

Speaker #1: Vice President, Corporate Development. Please go ahead.

Louis Gerhardy: Thank you, Victor. Good afternoon, and thank you for joining our third quarter fiscal year 2026 financial results conference call. On the call with me today is Dr. Feng-Ming Wang, 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 third quarter fiscal year 2026. The discussions 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. You'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.

Speaker #2: Thank you, Victor. Good afternoon, and thank you for joining our third quarter fiscal year 2026 financial call. On the call with me today are Dr. Feng-Ming Wang, President and CEO, and John Young, CFO.

Louis Gerhardy: Feng-Ming Wang, 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 third quarter fiscal year 2026. The discussions 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. You'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.

Speaker #2: The primary purpose of today's call is to provide you with information regarding the results for our third quarter fiscal year 2026. The discussions 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.

Speaker #2: These statements are based on currently available information and are 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.

Speaker #2: 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. We hope to see you at one of the following investor events that we have scheduled during the fourth quarter.

Louis Gerhardy: Before starting the call, we hope to see you at one of the following investor events that we have scheduled during the fourth quarter: 2-3 December, we will be at the UBS Global Technology and AI Conference in Scottsdale, 9-10 December at NASDAQ's London Conference, 6 January 2026, from 4:00-5:30PM at our CES location, we'll be hosting a technology and product briefing, 6-10 January 2026, we'll be hosting more than a dozen sell-side analyst tours of our CES demonstrations, again at our CES location in Las Vegas, and 17 January 2026 at the Needham Conference in New York. Access to our third 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.

Before starting the call, we hope to see you at one of the following investor events that we have scheduled during the fourth quarter: 2-3 December, we will be at the UBS Global Technology and AI Conference in Scottsdale, 9-10 December at NASDAQ's London Conference, 6 January 2026, from 4:00-5:30PM at our CES location, we'll be hosting a technology and product briefing, 6-10 January 2026, we'll be hosting more than a dozen sell-side analyst tours of our CES demonstrations, again at our CES location in Las Vegas, and 17 January 2026 at the Needham Conference in New York. Access to our third 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 Ambarella's property and cannot be reproduced or transcribed without our prior written consent. Feng-Ming will now provide a business update for the quarter. John will review the financial results, and then we will be available for your questions. Feng-Ming?

Speaker #2: December SEC. 2nd and 3rd, we will be at the Before starting the call, AI Conference in Scottsdale. December 9th and 10th at NASDAQ's London UBS Global Technology and January 6th from 4:00 Conference.

Speaker #2: To 5:30 PM at our CES location, we will be hosting a technology and product briefing. January 6th to 10th, we will be hosting more than a dozen sell-side CES demonstrations.

Speaker #2: to 5:30 PM at our CES location will be hosting a technology and product briefing. January 6th to 10th will be hosting more than a dozen sell-side analyst tours of our Again, at our Vegas.

Speaker #2: And in January, New York. Access CES location in Las Vegas to our third quarter fiscal year 2026 at the Needham Conference. The transcripts, historical results, SEC filings, and a replay of today's call can be found on the investor relations page of our website.

Speaker #2: The content of today's call, as well as the materials posted on our website, cannot be reproduced or transcribed without Ambarella's prior written consent. This is the property of Ambarella.

Louis Gerhardy: The content of today's call, as well as the materials posted on our website, are Ambarella's property and cannot be reproduced or transcribed without our prior written consent. Feng-Ming will now provide a business update for the quarter. John will review the financial results, and then we will be available for your questions. Feng-Ming? Thank you, Louis. Good afternoon, and thank you for joining our call today. Before we proceed, I want to let you know that Les Kong, our co-founder and CEO, will be stepping down from the board of directors to become our chief technology advisor. He will continue to oversee our technology direction and development, but without management responsibilities, and with reduced time commitments. Les and I have worked closely since 1994 across four companies.

Speaker #2: Feng-Ming will now provide a business update for the quarter. John will review the financial results, and then we will be available for your questions.

Speaker #2: Feng-Ming?

Speaker #3: Thank you, Louis. Good afternoon and thank you for joining our call. I want to let you know that during our last call, our co-founder and CEO will be stepping down from the board of directors to become our Chief Technology Advisor. Before we proceed, I want to.

Feng-Ming Wang: Thank you, Louis. Good afternoon, and thank you for joining our call today. Before we proceed, I want to let you know that Les Kong, our co-founder and CEO, will be stepping down from the board of directors to become our chief technology advisor. He will continue to oversee our technology direction and development, but without management responsibilities, and with reduced time commitments. Les and I have worked closely since 1994 across four companies.

Speaker #3: He will continue to oversee our technology direction and development, but without management responsibilities and with reduced time commitments. Lars and I have worked closely together across four companies.

Speaker #3: I am grateful that Lars will continue as my close partner for over 31 years, since 1994, and beyond. It's the best I could wish for. I'm happy he will have truly passionate pursuits, but I will definitely miss our daily topics.

Louis Gerhardy: I am grateful that Les will continue as my close partner for over 31 years and beyond, and he's truly the best I could wish for. I'm happy he will have more time to pursue his passions, but I will definitely miss our daily conversations on various topics. Turning to our fiscal third quarter, we are reporting another strong quarter with both revenue and non-GAAP EPS exceeding expectations. We achieved record quarterly revenue of $108.5 million, slightly above the high end of our guidance range. Edge AI revenue, which we define as a product that integrates one of our proprietary deep learning AI accelerators, was about 80% of our total revenue, representing our sixth consecutive quarter of record edge AI revenue. We have increased our fiscal 2026 revenue guidance, which projects an all-time fiscal year total revenue record for Ambarella.

I am grateful that Les will continue as my close partner for over 31 years and beyond, and he's truly the best I could wish for. I'm happy he will have more time to pursue his passions, but I will definitely miss our daily conversations on various topics. Turning to our fiscal third quarter, we are reporting another strong quarter with both revenue and non-GAAP EPS exceeding expectations. We achieved record quarterly revenue of $108.5 million, slightly above the high end of our guidance range. Edge AI revenue, which we define as a product that integrates one of our proprietary deep learning AI accelerators, was about 80% of our total revenue, representing our sixth consecutive quarter of record edge AI revenue. We have increased our fiscal 2026 revenue guidance, which projects an all-time fiscal year total revenue record for Ambarella.

Speaker #3: Turning to our fiscal third quarter, we are more optimistic about pursuing both revenue and non-GAAP EPS exceeding expectations. We achieved record quarterly revenue of $108.5 million.

Speaker #3: Slightly above conversations on various high ends of our guidance range. HAI revenue, which we defined as the product that integrates one of our proprietary deep learning AI accelerators, was about 80% of our total revenue, representing our sixth consecutive quarter of record HAI revenue.

Speaker #3: We have increased our fiscal 26 revenue guidance, which projects an all-time fiscal year total revenue record for Ambarella. The strength in our average selling price and with breadth of demand we are raising our fiscal 2026 revenue growth guidance.

Louis Gerhardy: The strength in our average selling price and the breadth of demand, we are raising our fiscal 2026 revenue growth guidance to a range of 36% to 38%, or approximately $390 million at midpoint. This compares with our prior estimate provided on 28 August for 31% to 35% year-over-year growth, or approximately $379 million at midpoint. These results are very encouraging, but I'm even more excited about the edge AI opportunity ahead of us. There are three key factors behind our enthusiasm, and our strong commitment to edge AI. First, the breadth of applications demanding edge AI technology and our product is expanding. Second, the AI performance requirement for our product roadmap is expected to continue to rise, driving robust new product cycles. Third, our ASP has been increasing, and in the long run, we continue to see an excellent opportunity to capture more value per design.

The strength in our average selling price and the breadth of demand, we are raising our fiscal 2026 revenue growth guidance to a range of 36% to 38%, or approximately $390 million at midpoint. This compares with our prior estimate provided on 28 August for 31% to 35% year-over-year growth, or approximately $379 million at midpoint. These results are very encouraging, but I'm even more excited about the edge AI opportunity ahead of us. There are three key factors behind our enthusiasm, and our strong commitment to edge AI. First, the breadth of applications demanding edge AI technology and our product is expanding. Second, the AI performance requirement for our product roadmap is expected to continue to rise, driving robust new product cycles. Third, our ASP has been increasing, and in the long run, we continue to see an excellent opportunity to capture more value per design.

Speaker #3: to 38%. All approximately a range of $36.39 million at midpoint. This compares with our prior estimate provided on August 28th for 31% to 35% year-over-year growth, or approximately $379 million at midpoint.

Speaker #3: This result is very encouraging, but I'm even more excited about the HAI activity ahead of us. There are three key factors behind our enthusiasm and our strong commitment to HAI.

Speaker #3: First, the breadth of application demanding HAI technology and our product is expanding. Second, the AI performance requirement for our product roadmap is rising, driving robust new product cycles.

Speaker #3: Third, our ASP has been increasing, and in the long run, we expect to continue to see an excellent opportunity to capture more value per design.

Speaker #3: I'll elaborate on those points. First, AI at the edge is becoming more prevalent driving an increasing breadth of applications in both enterprise and consumer-driven markets.

Louis Gerhardy: I'll elaborate on those points. First, AI at the edge is becoming more prevalent, driving an increasing breadth of applications in both enterprise and consumer-driven markets. Our edge AI business started in enterprise security, followed by automotive safety, smart home, telematics, and, more recently, the portable video market, which includes action cameras, panorama cameras, and body-worn cameras. Looking ahead, high-value shipments into the aerial drone market are expected to commence this quarter, representing just the beginning of our realization of the large robotic market opportunity. There is also strong interest from existing and new customers in our edge infrastructure products and the roadmaps, and we are committed to develop this incremental opportunity. In addition, ADAS and vehicle autonomy remain large markets that can leverage our technology to a very high degree.

I'll elaborate on those points. First, AI at the edge is becoming more prevalent, driving an increasing breadth of applications in both enterprise and consumer-driven markets. Our edge AI business started in enterprise security, followed by automotive safety, smart home, telematics, and, more recently, the portable video market, which includes action cameras, panorama cameras, and body-worn cameras. Looking ahead, high-value shipments into the aerial drone market are expected to commence this quarter, representing just the beginning of our realization of the large robotic market opportunity. There is also strong interest from existing and new customers in our edge infrastructure products and the roadmaps, and we are committed to develop this incremental opportunity. In addition, ADAS and vehicle autonomy remain large markets that can leverage our technology to a very high degree.

Speaker #3: Our HAI business started in enterprise security, followed by automotive safety, smart home, telematics, and more recently the portable video market, which includes action cameras, panorama cameras, and body-worn cameras.

Speaker #3: Looking ahead, high-value shipments into the aerial drone market are expected to represent just the beginning of our commerce this quarter. This reflects the realization of the large interest from existing and new customers in the robotic market opportunity.

Speaker #3: our edge infrastructure products. And the roadmaps. And we are committed to develop this incremental opportunity. In addition, There is also strong ADAS and the vehicle economy our technology to a very high degree.

Speaker #3: Second, we see a large opportunity to remain large in markets. Execute at the edge the increasingly complex AI technologies that can leverage network data currently.

Louis Gerhardy: Second, we see a large opportunity to execute at edge the increasingly complex AI technologies currently implemented at the core of the network or in the data center. The challenge and our opportunity is that the solutions used at the core of the network are often not suitable for the edge, where the edge performance requirements are rising. In the edge market, low power consumption, real-time processing, privacy, security, small form factors, thermal, network bandwidth efficiency, and lower price points are critical. At Ambarella, we continue to invest heavily in our proprietary edge AI SoC technology and products to support this unique and increasingly complex edge AI requirements. For example, our 10-nanometer CV2 family supports CNN networks, and our 5-nanometer embedding, our third-generation AI processors, is scaling our customer into more complex CNN and the generative AI applications simultaneously.

Second, we see a large opportunity to execute at edge the increasingly complex AI technologies currently implemented at the core of the network or in the data center. The challenge and our opportunity is that the solutions used at the core of the network are often not suitable for the edge, where the edge performance requirements are rising. In the edge market, low power consumption, real-time processing, privacy, security, small form factors, thermal, network bandwidth efficiency, and lower price points are critical. At Ambarella, we continue to invest heavily in our proprietary edge AI SoC technology and products to support this unique and increasingly complex edge AI requirements. For example, our 10-nanometer CV2 family supports CNN networks, and our 5-nanometer embedding, our third-generation AI processors, is scaling our customer into more complex CNN and the generative AI applications simultaneously.

Speaker #3: The challenge and our opportunity is that the solutions implemented at the core of the network often do not meet edge performance requirements. These requirements are rising in the edge market, including low power consumption, real-time processing, privacy, and security—suitable for the edge.

Speaker #3: Points are critical. At Ambarella, we continue to invest heavily in our proprietary HAI SoC technology and products to support the unique and increasingly complex HAI requirements.

Speaker #3: For example, our 10-nanometer CV2 family supports CNN networks, and our 5-nanometer third-generation AI processors are enabling our customers to scale into more complex CNN and generative AI applications simultaneously.

Speaker #3: Third, we see an excellent opportunity to continue to increase our ASP. The shift from CPU workload to a high level of accelerated computing or AI is well underway.

Louis Gerhardy: Third, we see an excellent opportunity to continue to increase our ASP. The shift from CPU workload to high-level of accelerated computing, or AI, is well underway. The adoption of increasingly complex data center technology for the edge is another driver. Finally, the extension of our roadmap beyond edge endpoints and into the edge infrastructure and autonomy is also expected, in particular, to boost our ASP. For example, our SoC blended ASP in Q3 was up about 20% year-over-year, and as our third-generation AI SoCs and the overall new product become a more material portion of our revenue, we anticipate further increase in the value we earn per design win. I will now describe some of the representative customer engagements that reflect the factors I just described.

Third, we see an excellent opportunity to continue to increase our ASP. The shift from CPU workload to high-level of accelerated computing, or AI, is well underway. The adoption of increasingly complex data center technology for the edge is another driver. Finally, the extension of our roadmap beyond edge endpoints and into the edge infrastructure and autonomy is also expected, in particular, to boost our ASP. For example, our SoC blended ASP in Q3 was up about 20% year-over-year, and as our third-generation AI SoCs and the overall new product become a more material portion of our revenue, we anticipate further increase in the value we earn per design win. I will now describe some of the representative customer engagements that reflect the factors I just described.

Speaker #3: The adoption of increasingly complex data center technology for the edge is another driver. Finally, the extension of our roadmap beyond edge endpoints and into edge autonomy is also expected to particularly boost our ASP.

Speaker #3: For ASP in Q3 was up about 20% year-over-year, and as our third-generation AI SOCs and the overall new product become a more material portion of infrastructure and overall revenue.

Speaker #3: We anticipate a further increase in the value we earn, for example, our SOC blended per design wins. I will now describe some of the representative customer engagements that reflect the factors I just described.

Speaker #3: In the enterprise security market, we are very pleased to share a significant milestone with our customer Sparge, which became India's first to receive STQC certification for its complete range of cameras.

Louis Gerhardy: In the enterprise security market, we are very pleased to share a significant milestone with our customer, Sparsh, who became India's first security camera manufacturer to receive STQC certification for its complete range of cameras. At the heart of the collaboration is our CV28. This gives us a tremendous start to accelerate our adoption in a rapidly growing and mainly in India market. Inability spun out of Bosch announced their Autodon 7100i moving PTZ camera with built-in AI analytics, ultra HD imaging based on CV72. They have also announced their Diamond thermal security camera that is based on CV22, that runs their CNN models to detect and classify objects accurately up to 2,000 feet. Workata announced their upcoming CV75-based AM64 Access Station Pro, which enables secure physical access with AI facial recognition powered face unlock, alongside traditional badge and the mobile access method.

In the enterprise security market, we are very pleased to share a significant milestone with our customer, Sparsh, who became India's first security camera manufacturer to receive STQC certification for its complete range of cameras. At the heart of the collaboration is our CV28. This gives us a tremendous start to accelerate our adoption in a rapidly growing and mainly in India market. Inability spun out of Bosch announced their Autodon 7100i moving PTZ camera with built-in AI analytics, ultra HD imaging based on CV72. They have also announced their Diamond thermal security camera that is based on CV22, that runs their CNN models to detect and classify objects accurately up to 2,000 feet. Workata announced their upcoming CV75-based AM64 Access Station Pro, which enables secure physical access with AI facial recognition powered face unlock, alongside traditional badge and the mobile access method.

Speaker #3: At the heart of the collaboration is our CV28. This gives us a tremendous start to accelerate our adoption in a rapidly growing market, mainly in India.

Speaker #3: Infinity, a security camera manufacturer spun out of Bosch, announced their Autodome 7100i moving PTZ camera with built-in AI analytics. The camera features Ultra HD imaging based on CV72.

Speaker #3: They have also announced their Diamond thermal security camera that is based on CV22 and runs their and classify objects accurately up to 2,000 announced their upcoming CV75-based AS64 access station pro, which enables secure physical access with AI facial feet.

Speaker #3: The company also launched a new CR63E remote security camera that leverages the power efficiency of our CV75, alongside traditional badge and mobile access methods.

Louis Gerhardy: The company also launched a new CR63E remote security camera that leverages the power efficiency of our CV75. They also expand the CV72-based multi-sensor security camera product line, including CH53, CH63, and CY63. Motorola has developed their additional Halo 4 smart sensor on our CV25, which is an all-in-one environmental monitoring and a security device that is designed for areas where cameras are restricted to detect events like smoke, fire, and audio anomalies. In the robotics smart home market, one of our customers, Whisker, announced the Lateral Robot 5 Pro, their first model with facial recognition that supports two night vision equipped AI powered cameras based on our CV28. We are seeing great momentum in our portable video market with Insta360, who released two models this quarter. The X4 Air at just 165g is the new lightest compact 8K360 action camera.

The company also launched a new CR63E remote security camera that leverages the power efficiency of our CV75. They also expand the CV72-based multi-sensor security camera product line, including CH53, CH63, and CY63. Motorola has developed their additional Halo 4 smart sensor on our CV25, which is an all-in-one environmental monitoring and a security device that is designed for areas where cameras are restricted to detect events like smoke, fire, and audio anomalies. In the robotics smart home market, one of our customers, Whisker, announced the Lateral Robot 5 Pro, their first model with facial recognition that supports two night vision equipped AI powered cameras based on our CV28. We are seeing great momentum in our portable video market with Insta360, who released two models this quarter. The X4 Air at just 165g is the new lightest compact 8K360 action camera.

Speaker #3: also expanded CV72-based multi-sensor security camera product line including CH53, CH63, and CY63. Motorola has developed Wakata their additional Halo 4 smart sensor on our CV25, They environmental monitoring and a security device that is designed for which is an all-in-one areas where cameras are restricted to detect events like smoke, fire, and audio anomalies.

Speaker #3: In the robotics smart home market, one of our customers, Whisker, announced the latest Robot 5 Pro, their first model with facial recognition that supports true night vision, equipped with an AI-powered camera based on our CV28.

Speaker #3: We are seeing great momentum in our portable video market with Arashi, who released two models this quarter. The X4 Air, at just $165,000, is the lightest compact AK360 action camera based on CV5 and is the first in the range to support second active HDR.

Louis Gerhardy: It is based on CV5 and is first in the range to support 8K 30 frames per second active HDR. Insta360 also launched the latest version of their body-worn camera, Go Ultra. Based on CV52, it captures 4K 60 frames per second video and a 50-megapixel photo with improved performance even in low-light environments. In our automotive safety, ADAS, and telematics business, I would like to share some key customer wins during the quarter. Zeekr, a unit of Geely, has developed their in-cabin DVR system, CV28, for the 9X full-size luxury model. XPeng expands their global market presence. They have built all their driver management systems for all their export models on CV28. Solera, a global leader of vehicle lifecycle management, announced their new ASR5 AI-powered smart camera in October based on our CV22.

It is based on CV5 and is first in the range to support 8K 30 frames per second active HDR. Insta360 also launched the latest version of their body-worn camera, Go Ultra. Based on CV52, it captures 4K 60 frames per second video and a 50-megapixel photo with improved performance even in low-light environments. In our automotive safety, ADAS, and telematics business, I would like to share some key customer wins during the quarter. Zeekr, a unit of Geely, has developed their in-cabin DVR system, CV28, for the 9X full-size luxury model. XPeng expands their global market presence. They have built all their driver management systems for all their export models on CV28. Solera, a global leader of vehicle lifecycle management, announced their new ASR5 AI-powered smart camera in October based on our CV22.

Speaker #3: Arashi also launched the latest version, Ultra. Based on their body-worn camera, Go CV52, it captures 4Kp60 frames per second video and a 50-megapixel photo with improved performance, even in low-light environments.

Speaker #3: In our automotive safety ADAS and telematics business, I would like to share some key customer wins during the quarter. Zeekr, a unit of GD, has developed their in-cabin DVR system CV28 for the 9X full-size luxury model.

Speaker #3: A Xiaopeng expands their global market presence. They have built all their driver management systems for all their export models on CV28. Solera, a global leader in vehicle lifecycle ASA5 AI-powered smart camera, announced in October that they are based on our CV22.

Speaker #3: In the first for Solera, the ASA5 camera is powered by AI plus AGI human intelligence, a fleet telematics that combines AI-based analysis with a human revolutionary approach in efficiency and operations.

Louis Gerhardy: In the first for Solera, the ASR5 camera is powered by AI plus AI human intelligence, a revolutionary approach in fleet telematics that combines AI-based analysis with human oversight to improve safety, efficiency, and operations. From these representative customer engagements I just described, the strength of our current product portfolio is clearly represented. With seven examples from the 10-nanometer CV2 family, and seven examples from our 5-nanometer generation, these products, all available today, offer customers a wide variety of options ranging from CNN to transformer network processing. One-to-many sensor input supports multiple sensing modalities, all at a wide range of price points. Our new product roadmap will expand this portfolio further. In addition to our comprehensive and expanding AI SoC portfolio, another important distinguishing characteristic of our portfolio is the advanced BSI technology we offer to customers at edge.

In the first for Solera, the ASR5 camera is powered by AI plus AI human intelligence, a revolutionary approach in fleet telematics that combines AI-based analysis with human oversight to improve safety, efficiency, and operations. From these representative customer engagements I just described, the strength of our current product portfolio is clearly represented. With seven examples from the 10-nanometer CV2 family, and seven examples from our 5-nanometer generation, these products, all available today, offer customers a wide variety of options ranging from CNN to transformer network processing. One-to-many sensor input supports multiple sensing modalities, all at a wide range of price points. Our new product roadmap will expand this portfolio further. In addition to our comprehensive and expanding AI SoC portfolio, another important distinguishing characteristic of our portfolio is the advanced BSI technology we offer to customers at edge.

Speaker #3: Engagements, I just described, the strength of our current product portfolio is clearly represented. With seven examples from the 10-nanometer CV2 family and seven examples from our 5-nanometer generation, this representative customer shows that our product's all-available today offers customers a wide variety of options, ranging from CNN to transformer network processing.

Speaker #3: One too many sensor inputs support multiple sensing modalities, all at a wide range of price points. Our new product roadmap will expand this portfolio further.

Speaker #3: Our comprehensive and expanding AI SOC, in addition to our portfolio, includes another important distinguishing characteristic: the advanced PLSI technology we offer to customers at the edge.

Speaker #3: For example, 5-nanometer-based products represent more than 45% of our total Q3 revenue, with products based on more advanced nodes in development. In summary, the first three quarters of fiscal 2026 are steps in the right direction, with strong revenue growth, new product execution, profitability, and our cumulative year-to-date free cash flow of almost $14.8 million.

Louis Gerhardy: For example, 5-nanometer-based products represent more than 45% of our total Q3 revenue, with products based on more advanced nodes in development. In summary, the first three quarters of fiscal 2026 are steps in the right direction, with strong revenue growth, new product execution, profitability, and with our cumulative year-to-date free cash flow of almost 14.8%. We continue to forecast a large edge serviceable available market of $12.9 billion by fiscal year 2031. We recognize the edge AI market is still in the early innings of development, and to successfully address this large set, we remain highly committed to our R&D investment that enables us to build upon our existing leadership position. I hope to see you 6 January 2026 at our CES 2026 product and technology briefing, which will give you a chance to learn about new technologies and products, and meet a broad set of our management team.

For example, 5-nanometer-based products represent more than 45% of our total Q3 revenue, with products based on more advanced nodes in development. In summary, the first three quarters of fiscal 2026 are steps in the right direction, with strong revenue growth, new product execution, profitability, and with our cumulative year-to-date free cash flow of almost 14.8%. We continue to forecast a large edge serviceable available market of $12.9 billion by fiscal year 2031. We recognize the edge AI market is still in the early innings of development, and to successfully address this large set, we remain highly committed to our R&D investment that enables us to build upon our existing leadership position. I hope to see you 6 January 2026 at our CES 2026 product and technology briefing, which will give you a chance to learn about new technologies and products, and meet a broad set of our management team.

Speaker #3: We continue to focus on a large edge serviceable available market of $12.9 billion by fiscal year 2031. We recognize that the edge AI market is still in the early innings of development, and to successfully address this large set, we remain highly committed to our R&D investment that enables us to build upon our existing leadership position.

Speaker #3: I hope to see you January 6th at our CES 2026 product and technology briefing, which will give you a chance to learn about new technologies, end products, and meet a broad set of our management team.

Louis Gerhardy: With that, John, we'll now discuss the Q3 results and the Q4 outlook. Thanks, Fermi. I'll now review the financial highlights for the third quarter of fiscal year 2026 ending 31 October 2025. I will also provide a financial outlook for our fourth quarter of fiscal year 2026 ending 31 January 2026. 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 Q3, revenue was $108.5 million, above the high end of our project range of $100 to 108 million, up 13.5% from the prior quarter, and up 31.2% year-over-year.

With that, John, we'll now discuss the Q3 results and the Q4 outlook.

Speaker #3: Q3 results and the Q4

Speaker #3: Outlook. With that, John, we'll now discuss the thanks.

John Young: Thanks, Fermi. I'll now review the financial highlights for the third quarter of fiscal year 2026 ending 31 October 2025. I will also provide a financial outlook for our fourth quarter of fiscal year 2026 ending 31 January 2026. 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 Q3, revenue was $108.5 million, above the high end of our project range of $100 to 108 million, up 13.5% from the prior quarter, and up 31.2% year-over-year.

Speaker #2: Fermi. I'll now review the financial highlights for the third quarter of fiscal year 2026, ending October 31, 2025. I will also provide a financial outlook for our fourth quarter of fiscal year 2026, ending January 31, 2026.

Speaker #2: 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.

Speaker #2: For fiscal Q3, revenue was $108.5 million, above the high end of our product range of $100 million to $108 million. This is up 13.5% from the prior quarter and up 31.2% year over year.

Speaker #2: Sequentially, automotive revenue increased in the low single digits, and IoT increased in the mid-teens, with IoT growth led by the adoption of edge AI, enterprise security, and portable video applications.

Louis Gerhardy: Sequentially, automotive revenue increased in the low single digits, and IoT increased in the mid-teens, with IoT growth led by the adoption of edge AI, enterprise security, and portable video applications. Non-GAAP gross margin for fiscal Q3 was 60.9%, slightly above the midpoint of our prior guidance range of 60% to 61.5% due to product space. Non-GAAP operating expense in Q3 was $55.3 million, slightly below the midpoint of our prior guidance range of $54 to 57 million. Q3 net interest and other income was $2.1 million. Q3 non-GAAP tax provision was approximately $900,000. We reported a non-GAAP net profit of $11.9 million, or $0.27 per diluted share in Q3. Now I will turn to our balance sheet and cash flow. Fiscal Q3 cash and marketable securities reached $295.3 million, increasing $34.1 million from the prior quarter, and $68.8 million from the same quarter a year ago.

Sequentially, automotive revenue increased in the low single digits, and IoT increased in the mid-teens, with IoT growth led by the adoption of edge AI, enterprise security, and portable video applications. Non-GAAP gross margin for fiscal Q3 was 60.9%, slightly above the midpoint of our prior guidance range of 60% to 61.5% due to product space. Non-GAAP operating expense in Q3 was $55.3 million, slightly below the midpoint of our prior guidance range of $54 to 57 million. Q3 net interest and other income was $2.1 million. Q3 non-GAAP tax provision was approximately $900,000. We reported a non-GAAP net profit of $11.9 million, or $0.27 per diluted share in Q3. Now I will turn to our balance sheet and cash flow. Fiscal Q3 cash and marketable securities reached $295.3 million, increasing $34.1 million from the prior quarter, and $68.8 million from the same quarter a year ago.

Speaker #2: Non-GAAP gross margin for fiscal Q3 was 60.9%, slightly above the midpoint of our prior guidance range of 60% to 61.5% due to product index.

Speaker #2: Non-GAAP operating expense in Q3 was $55.3 million, slightly below the midpoint of our prior guidance range of $54 million to $57 million. Q3 net interest and other income was $2.1 million.

Speaker #2: Q3 non-GAAP tax provision was approximately $900,000. We reported a non-GAAP net profit of $11.9 million, or $0.27 per diluted share, in Q3. Now I will turn to our balance sheet and cash flow.

Speaker #2: Fiscal Q3 cash and marketable securities reached $295.3 million, increasing $34.1 million from the prior quarter and $68.8 million from the same quarter a year ago.

Speaker #2: Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue. Receivables days sales outstanding decreased from 41 days in the prior quarter to 36 days.

Louis Gerhardy: Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue. Receivables, days sales outstanding, decreased from 41 days in the prior quarter to 36 days, and days of inventory decreased from 85 to 76 days. Operating cash inflow was $34.3 million for the quarter. Capital expenditures for tangible and intangible assets were $2.9 million for the quarter. Free cash flow was $31.4 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 70.2% of revenue for the third quarter. I will now discuss the outlook for the fourth quarter of fiscal year 2026. The breadth of our edge AI business is expanding, together with strong unit volume and average selling prices.

Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue. Receivables, days sales outstanding, decreased from 41 days in the prior quarter to 36 days, and days of inventory decreased from 85 to 76 days. Operating cash inflow was $34.3 million for the quarter. Capital expenditures for tangible and intangible assets were $2.9 million for the quarter. Free cash flow was $31.4 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 70.2% of revenue for the third quarter. I will now discuss the outlook for the fourth quarter of fiscal year 2026. The breadth of our edge AI business is expanding, together with strong unit volume and average selling prices.

Speaker #2: And days of inventory decreased from 85 to 76 days. Operating cash inflow was $34.3 million for the quarter. Capital expenditures for tangible and intangible assets were $2.9 million for the quarter.

Speaker #2: Free cash flow was $31.4 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 70.2% of revenue for the third quarter.

Speaker #2: I will now discuss the outlook for the fourth quarter of fiscal year 2026. The breadth of our edge AI business is expanding, together with strong unit volume and average selling prices.

Speaker #2: As a result, in Q4, we forecast revenue in the range of $97 million to $103 million, or $100 million at the midpoint, with a higher percentage of revenue coming from our high-volume customers.

Louis Gerhardy: As a result, in Q4, we forecast revenue in the range of $97 to $103 million, or $100 million at the midpoint, with a higher percentage of revenue coming from our high-volume customers. Sequentially, due to seasonality, we expect a mid to high single-digit decline in both our automotive and IoT businesses. We expect fiscal Q4 non-GAAP gross margin to be in the range of 59% to 60.5%. We expect non-GAAP OPEX in the fourth quarter to be in the range of $55 to $58 million, with the increase compared to Q3 driven primarily by employee-related and CES expenses. We estimate net interest and other income to be approximately $2 million, our non-GAAP tax expense to be approximately $600,000, and our diluted share count to be approximately 44.5 million shares. Thank you for joining our call today. With that, I'll turn the call over to the operator for questions.

As a result, in Q4, we forecast revenue in the range of $97 to $103 million, or $100 million at the midpoint, with a higher percentage of revenue coming from our high-volume customers. Sequentially, due to seasonality, we expect a mid to high single-digit decline in both our automotive and IoT businesses. We expect fiscal Q4 non-GAAP gross margin to be in the range of 59% to 60.5%. We expect non-GAAP OPEX in the fourth quarter to be in the range of $55 to $58 million, with the increase compared to Q3 driven primarily by employee-related and CES expenses. We estimate net interest and other income to be approximately $2 million, our non-GAAP tax expense to be approximately $600,000, and our diluted share count to be approximately 44.5 million shares. Thank you for joining our call today. With that, I'll turn the call over to the operator for questions.

Speaker #2: Sequentially, due to seasonality, we expect a mid to high single digit decline in both our automotive and IoT businesses. We expect fiscal Q4 non-GAAP gross margin to be in the range of 59 to 60 and a half percent.

Speaker #2: We expect non-GAAP OPEX in the fourth quarter to be in the range of $55 million to $58 million, with the increase compared to Q3 driven primarily by employee-related and CES expenses.

Speaker #2: We estimate net interest and other income to be approximately $2 million, our non-GAAP tax expense to be approximately $600,000, and our diluted share count to be approximately 44.5 million shares.

Speaker #2: Thank you for joining our call today. With that, I'll turn the call over to the operator for...

Speaker #2: questions. Thank you.

Louis Gerhardy: Thank you. At this time, we'll conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and one follow-up in the interest of time. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Tore Svanberg from Stifel. Your line is open. Yes. Thank you, and congrats on the record quarter. As my first question, when we think about that, let's call it 36% to 38% growth for fiscal 2026, how much of that is unit versus ASP? Because obviously, CV now is becoming a pretty high percentage, but even within CV, obviously, you have ASP increases.

Operator: Thank you. At this time, we'll conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and one follow-up in the interest of time. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Tore Svanberg from Stifel. Your line is open.

Speaker #3: And at this time, we'll conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone.

Speaker #3: And wait for your name to be announced to withdraw your question. Please press *11 again. Please limit yourself to one question and one follow-up in the interest of time.

Speaker #3: Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Tor Svanberg from Stifel.

Speaker #3: Your line is open.

Tore Svanberg: Yes. Thank you, and congrats on the record quarter. As my first question, when we think about that, let's call it 36% to 38% growth for fiscal 2026, how much of that is unit versus ASP? Because obviously, CV now is becoming a pretty high percentage, but even within CV, obviously, you have ASP increases. Yeah, just trying to understand how much of the growth has been driven by ASP versus units.

Speaker #4: Yes, thank you. And congrats on another record quarter. As my first question, when we think about that, let's call it 36 to 38 percent growth for fiscal 2026, how much of that is unit versus ASP?

Speaker #4: Because, obviously, CV is now becoming a pretty high percentage. But even within CV, obviously, you have ASP increases. So, yeah, I’m just trying to understand how much of the growth has been driven by ASP versus units.

Louis Gerhardy: Yeah, just trying to understand how much of the growth has been driven by ASP versus units. Right. I think both of them contribute to our growth. I will say I don't have an exact number, but if I have to guess, it's probably half and half. I think our unit growth definitely continues to contribute from the CV side, but ASP growth is also significant, like we talked about in the script. I think that both of them contribute to our end results. Yeah. Thank you, Fermi. That's very helpful. As my follow-up, you talked about the portable video market. Could you just add some more color there? I mean, it sounds like you have some new design wins.

Feng-Ming Wang: Right. I think both of them contribute to our growth. I will say I don't have an exact number, but if I have to guess, it's probably half and half. I think our unit growth definitely continues to contribute from the CV side, but ASP growth is also significant, like we talked about in the script. I think that both of them contribute to our end results.

Speaker #5: Right. So, I think both of them contribute to our growth. I would say I don't have an exact number. If I have to guess, it's probably half and half.

Speaker #5: I think our unit growth definitely continues to contribute from the CV side, but ASP growth is also significant. Like we talked about in the script.

Speaker #5: So I think that both of them contribute to our end.

Speaker #5: results.

Tore Svanberg: Yeah. Thank you, Fermi. That's very helpful. As my follow-up, you talked about the portable video market. Could you just add some more color there? I mean, it sounds like you have some new design wins. These are obviously AI-based drones, but I know you've been in that market for a while, and obviously, that market sort of faded, and now it seems to be coming back. How should we just think about that market driving growth for Ambarella going forward? Thank you.

Speaker #4: Yeah. Thank you for that.

Speaker #4: That's very helpful. And as my follow-up, you talked about the portable video market. Can you just add some more color there? I mean, it sounds like you have some new design wins.

Speaker #4: These are obviously AI-based drones, but just so I know, you've been in that market for a while. Obviously, that market sort of faded, and now it seems to be coming back.

Louis Gerhardy: These are obviously AI-based drones, but I know you've been in that market for a while, and obviously, that market sort of faded, and now it seems to be coming back. How should we just think about that market driving growth for Ambarella going forward? Thank you. Right. When we talk about portable, there are multiple different product lines in there. I want to be a little bit more specific on that. In fact, we talked about action sports cameras that you said we have been here for many years. The new category is panorama camera that Insta360 is famous for. Also, we talked about drones that are also part of the portable video. In addition to that, our wearable camera, web camera, video conferencing product, all of them are part of the portable device because that's where our customers are focusing on.

Speaker #4: So, how should we think about that market driving growth for Ambarella going forward? Thank you.

Feng-Ming Wang: Right. When we talk about portable, there are multiple different product lines in there. I want to be a little bit more specific on that. In fact, we talked about action sports cameras that you said we have been here for many years. The new category is panorama camera that Insta360 is famous for. Also, we talked about drones that are also part of the portable video. In addition to that, our wearable camera, web camera, video conferencing product, all of them are part of the portable device because that's where our customers are focusing on.

Speaker #5: Right. So when we talk about portable, there are multiple different product lines in there. I want to be a little bit more specific on that.

Speaker #5: In fact, we talk about action sports cameras, like you said. We have been there for many years. And the new category is panorama cameras that Arash is famous for.

Speaker #5: And also we talk about drones. That is also part of the portable video. But in addition to that, our wearable camera, web camera, and video conferencing product, all of them are part of the portable device because that's where our customer is focusing on.

Speaker #5: So overall, that's an area that is providing a big portion of our growth this year. We believe that this market is going to continue to grow.

Louis Gerhardy: Overall, that's an area that is providing a big portion of our growth this year. We believe that this market is going to continue to grow. In fact, I have to say that I'm a little surprised by the size of the market that grew over the year, but definitely the momentum is there. Our job is trying to not only secure our market share, but hopefully, that we can grow some market share in the future. Hey, Tory, it's Louis. Just technically, we call it portable video and other. There are a lot of things in there, as Fermi said. Yeah. Thank you for that. Congrats again. Thank you. Thank you. One moment for our next question. Our next question will come from the line of Ross Seymour from Deutsche Bank. Your line is open. Hi, guys.

Overall, that's an area that is providing a big portion of our growth this year. We believe that this market is going to continue to grow. In fact, I have to say that I'm a little surprised by the size of the market that grew over the year, but definitely the momentum is there. Our job is trying to not only secure our market share, but hopefully, that we can grow some market share in the future.

Speaker #5: And in fact, I have to say that I'm surprised— a little surprised by the size of the market that grows over the year. But definitely, the momentum is there.

Speaker #5: Our job is trying to not only secure our market share, but hopefully that we can grow some market share in the...

Speaker #5: future. Hey, Tor.

Louis Gerhardy: Hey, Tory, it's Louis. Just technically, we call it portable video and other. There are a lot of things in there, as Fermi said.

Speaker #3: It's Louis. Just technically, we call it portable video and other. So there's a lot of things in there, as Fermi.

Speaker #3: said. Yeah.

Tore Svanberg: Yeah. Thank you for that. Congrats again.

Speaker #4: Thank you for that. Congrats again.

Feng-Ming Wang: Thank you.

Speaker #5: Thank you.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Ross Seymour from Deutsche Bank. Your line is open.

Speaker #3: Moment, for our next thank you. One question. Our next question will come from the line of Ross Seymour from Deutsche Bank. Your line is.

Speaker #6: Hi, guys. Thanks

Ross Seymore: Hi, guys.Thanks for asking a couple of questions, and congrats to Les. I guess first, you talked about the breadth of your business, especially in the edge IoT side of things or edge AI, IoT, whatever you guys are calling it now. Can you just talk a little bit about the consumer versus kind of the enterprise side? I guess where I'm going is the portable side is great, but we've seen volatility around any sort of consumer applications in years past and cycles past. I just wondered how you're managing that in this instance.

Louis Gerhardy: Thanks for asking a couple of questions, and congrats to Les. I guess first, you talked about the breadth of your business, especially in the edge IoT side of things or edge AI, IoT, whatever you guys are calling it now. Can you just talk a little bit about the consumer versus kind of the enterprise side? I guess where I'm going is the portable side is great, but we've seen volatility around any sort of consumer applications in years past and cycles past. I just wondered how you're managing that in this instance. Hey, Ross. It's Louis. The split is roughly 50-50, 50% kind of enterprise CapEx-driven, and 50% consumer. Within that 50% that's consumer, you've got some kind of consumer durable, things like, say, smart home cameras that get replaced every five or six years.

Speaker #6: For asking a couple of questions, and congrats to open. Les, I guess first you talked about the breadth of your business, especially in the edge AI IoT side of things, or edge IoT, whatever you guys are calling it now.

Speaker #6: Can you just talk a little bit about the consumer versus kind of the enterprise side? And I guess where I'm going is the portable side is great, but we've seen volatility around any sort of consumer applications in years past and cycles past.

Speaker #6: that in this instance. Hey, Ross. And I just wondered how you're managing It's Louis. The split is roughly 50/50, 50% kind of enterprise CapEx driven and 50% consumer.

Louis Gerhardy: Hey, Ross. It's Louis. The split is roughly 50-50, 50% kind of enterprise CapEx-driven, and 50% consumer. Within that 50% that's consumer, you've got some kind of consumer durable, things like, say, smart home cameras that get replaced every five or six years. You also have consumer discretionary, which I think is some of the more volatile things you were referring to. It's pretty evenly split at the highest level between the CapEx-driven markets and the consumer, but different types of consumer spending.

Speaker #6: Within that 50% that's consumer, you've got some kind of consumer durable, and then things like, say, smart home cameras that get replaced every five or six years.

Speaker #6: But then you also have consumer discretionary, which I think is some of the more volatile things you were referring to. So it's pretty much the CapEx evenly split at the highest level between x-driven markets and the consumer, but different types of consumer spending.

Louis Gerhardy: You also have consumer discretionary, which I think is some of the more volatile things you were referring to. It's pretty evenly split at the highest level between the CapEx-driven markets and the consumer, but different types of consumer spending. Good. I guess one for John. How are we thinking about gross margin as we look into next year? Just conceptually, what the pluses and minuses would be. I know you have the long-term target of 59% to 62%. You're a little closer to the lower end of that in your fourth quarter guide. Just running through any of the puts and takes would be helpful. Yeah, Ross. Thanks. As you said, our long-term model is 59% to 62%. As we said in our Q4 guide, the composition of gross margin really depends on the contribution of our high-volume customers.

Ross Seymore: Good. I guess one for John. How are we thinking about gross margin as we look into next year? Just conceptually, what the pluses and minuses would be. I know you have the long-term target of 59% to 62%. You're a little closer to the lower end of that in your fourth quarter guide. Just running through any of the puts and takes would be helpful.

Speaker #4: And I guess one for John. How are we thinking about gross margin as we look into next year? Just conceptually, what the pluses and minuses would be?

Speaker #4: have the long-term target of the 59 to 62 percent. You're a little closer to the I know you lower end of that in your fourth quarter guide.

Speaker #4: helpful. Yeah,

Speaker #4: Helpful. Yeah, but just running through any of the puts and takes would be Ross.

John Young: Yeah, Ross. Thanks. As you said, our long-term model is 59% to 62%. As we said in our Q4 guide, the composition of gross margin really depends on the contribution of our high-volume customers. Whatever the gross margin is from quarter to quarter, at least in the near term, that's a primary driver.

Speaker #1: Thanks. So, as you said, our long-term model is 59 to 62. And as we mentioned in our Q4 guide, the composition of gross margin really depends on the contribution of our high-volume customers.

Speaker #1: So whatever the gross margin is from quarter to quarter, that's at least in the near term, that's a primary.

Louis Gerhardy: Whatever the gross margin is from quarter to quarter, at least in the near term, that's a primary driver. Great. Thank you. Yep. Thank you. One moment for our next question. Our next question will come from the line of Joe Moore from Morgan Stanley. Your line is open. Yeah. Great. Thank you. I also wanted to ask about that gross margin target. I guess just as you've kind of refocused the business around a lot of exciting opportunities, is there any chance to really fully participate in some of the consumer markets that you might accept lower gross margin in exchange for growth? I guess you've talked a lot on this call about average selling price. Sort of what's driving that focus, is ASP versus kind of gross profit dollar per device, things like that. Yeah. Thanks.

Speaker #1: driver.

Ross Seymore: Great. Thank you.

Speaker #4: Great. Thank

Speaker #4: you.

John Young: Yep.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Joe Moore from Morgan Stanley. Your line is open.

Speaker #1: Yep.

Speaker #3: Thank you. One moment for our next question. Our next question will come from the line of Joe Moore from Morgan Stanley. Your line is open.

Joe Moore: Yeah. Great. Thank you. I also wanted to ask about that gross margin target. I guess just as you've kind of refocused the business around a lot of exciting opportunities, is there any chance to really fully participate in some of the consumer markets that you might accept lower gross margin in exchange for growth? I guess you've talked a lot on this call about average selling price. Sort of what's driving that focus, is ASP versus kind of gross profit dollar per device, things like that. Yeah. Thanks.

Speaker #4: Yeah. Great. Thank you. I also wanted to ask about that gross margin target. And I guess just as you've kind of refocused the business around a lot of exciting opportunities, is there any chance that to really fully participate in some of the consumer markets that you might accept lower gross margins in exchange for growth?

Speaker #4: And then I guess you've talked a lot on this call about average selling price. Sort of what's driving that focus? Is it ASP versus kind of gross profit dollar per device, things like that?

Speaker #1: Yeah, thanks. So, as far as the ASP goes, that is primarily a function of the technology and features that come with these more advanced technology tape-outs that we’re doing and the products that we’re developing on our roadmap.

Louis Gerhardy: As far as the ASP goes, that is primarily a function of the technology and features that come with these more advanced technology tape-outs that we're doing and products that we're developing on our roadmap. As far as the gross margin goes, like I said, 59% to 62%. I think as far as consumer, on a case-by-case basis, depending on the volume that we see, the opportunities that we see, we're not opposed to gross margins that are maybe not strictly within the 59% to 62% range. The goal at the corporate level is to, over the long term, stay in that range. Great. Thank you for that. I guess there's a lot of enthusiasm for drones, which is a market that you've kind of been in in the past.

Louis Gerhardy: As far as the ASP goes, that is primarily a function of the technology and features that come with these more advanced technology tape-outs that we're doing and products that we're developing on our roadmap. As far as the gross margin goes, like I said, 59% to 62%. I think as far as consumer, on a case-by-case basis, depending on the volume that we see, the opportunities that we see, we're not opposed to gross margins that are maybe not strictly within the 59% to 62% range. The goal at the corporate level is to, over the long term, stay in that range.

Speaker #1: As far as the gross margin goes, like I said, 59% to 62%, I think as far as consumer, on a case-by-case basis, depending on the volume that we see, we're not opposed to opportunities that we see, gross margins that are maybe not strictly within the 59% to 62% range.

Speaker #1: But the goal at the corporate level is to, over the long term, stay in that range.

Joe Moore: Great. Thank you for that. I guess there's a lot of enthusiasm for drones, which is a market that you've kind of been in in the past.

Speaker #4: Great. Thank you for that. And then I guess there's a lot of enthusiasm for drones. It's just a market that you've kind of been in in the past.

Speaker #4: Can you talk about what are the new elements of that market that probably might drive you to a higher content over time? And is it sort of you think about delivery drones and industrial drones and things like that?

Louis Gerhardy: Can you talk about what are the new elements of that market that probably might drive you to a higher content over time? Is it sort of, you think about delivery drones and industrial drones and things like that? Is that a pretty big category for you down the road? Right. First of all, we were big in the past, as you said, but we stopped in that market because of the geopolitical situation, not because of our technology solutions. This time, we came back because we continue to believe a few things. First of all, there was a dominant player, but I think that in the US, the market is wide open at this point for everybody to fight in that capacity. With our video technology, particularly our Paranoma camera that we help our customers to build, it is well suited for this space.

Can you talk about what are the new elements of that market that probably might drive you to a higher content over time? Is it sort of, you think about delivery drones and industrial drones and things like that? Is that a pretty big category for you down the road?

Speaker #4: Is that a pretty big category for you down the road?

John Young: Right. First of all, we were big in the past, as you said, but we stopped in that market because of the geopolitical situation, not because of our technology solutions. This time, we came back because we continue to believe a few things. First of all, there was a dominant player, but I think that in the US, the market is wide open at this point for everybody to fight in that capacity. With our video technology, particularly our Paranoma camera that we help our customers to build, it is well suited for this space.

Speaker #6: Right. So, first of all, we were big in the past, as you said, but we stopped in that market because of the geopolitical situation, not because of our technology solutions.

Speaker #6: And this time we came back because we continue to believe a few things. First of all, there was a dominant player, but I think that in the U.S., the market is wide open at this point for everybody to fight in that capacity.

Speaker #6: So with our video technology, particularly our paranormal camera that we help our customers build, we believe it is well suited for this space. First of all, the driver for us is continuing to provide the best video solution in the drone market.

Louis Gerhardy: First of all, the driver for us is to continue to provide the best video solution in the drone market. More importantly, I think moving forward, is all the drones going to be autonomous in the future? We kind of talking, say, today's drones are level two, and level three, level four drones come in and are probably going to drive faster than an autonomous driving car. We believe that in order to have a level three drone, that it will require a really powerful chip in addition to the video processing. That's really played to our strength also, that our investment in autonomous driving directly applies to here. From the technology point of view, the video processing plus AI is the key driver. As you said, today, the biggest market opportunity for us is consumer for video capture.

First of all, the driver for us is to continue to provide the best video solution in the drone market. More importantly, I think moving forward, is all the drones going to be autonomous in the future? We kind of talking, say, today's drones are level two, and level three, level four drones come in and are probably going to drive faster than an autonomous driving car. We believe that in order to have a level three drone, that it will require a really powerful chip in addition to the video processing. That's really played to our strength also, that our investment in autonomous driving directly applies to here. From the technology point of view, the video processing plus AI is the key driver. As you said, today, the biggest market opportunity for us is consumer for video capture.

Speaker #6: But more importantly, I think moving forward, all the drones are going to be autonomous in the future. We kind of look and say today's drones—level 2, level 3, and level 4 drones—come in and are probably going to drive faster than autonomous driving cars.

Speaker #6: And we believe that to have a level three drone, it will require a really powerful chip in addition to the video processing.

Speaker #6: And that's really played to our strengths also. Our investment in autonomous driving is directly applicable here. From a technology point of view, the key driver is the video processing and AI.

Speaker #6: But as you said, today the biggest market opportunity for us is consumer, for video capture. However, moving forward, we are starting to see opportunities on the commercial side, which is going to continue to drive growth.

Louis Gerhardy: Moving forward, we start seeing opportunities on the commercial side, which is going to continue to drive the growth. We are excited that, first of all, we have really technology that we think is differentiated in this market. More importantly, the market, the service market for us, is growing fast. Those are the two reasons that we feel excited about this market. Great. Thank you. Thank you. One moment for our next question. Our next question will come from the line of Christopher Roland from Susquehanna. Your line is open. Hey, guys. Thanks for the question. Congrats on the results. I guess my first question is around an update, perhaps, for the infrastructure opportunity and the N1 655. Yeah. First of all, we announced our first design wins last quarter.

Moving forward, we start seeing opportunities on the commercial side, which is going to continue to drive the growth. We are excited that, first of all, we have really technology that we think is differentiated in this market. More importantly, the market, the service market for us, is growing fast. Those are the two reasons that we feel excited about this market.

Speaker #6: So we are excited that first of all, we have really technology that we think is differentiated in this market, but more importantly, the market, the service market for us is growing fast.

Speaker #6: So, the two reasons that we feel excited about this.

Speaker #6: market.

Joe Moore: Great. Thank you.

Speaker #4: Great. Thank

Operator: Thank you. One moment for our next question. Our next question will come from the line of Christopher Roland from Susquehanna. Your line is open.

Speaker #3: Thank you. One moment for our next question. Our next question will come from the line of Christopher Roland from Susquehanna. Your line is now open.

Speaker #3: open.

Christopher Rolland: Hey, guys. Thanks for the question. Congrats on the results. I guess my first question is around an update, perhaps, for the infrastructure opportunity and the N1 655.

Speaker #5: Thanks for the question. Congrats on the results. I guess my first question is around an update perhaps for the infrastructure opportunity and the N1 655.

Feng-Ming Wang: Yeah. First of all, we announced our first design wins last quarter. After that, we continue to see very strong design win activity and interest from different types of customers. In fact, in the last few months, we see customers who want using video-sensor products, and also customers who want to use N1 655 for non-video sensor products. We are starting a wide range of opportunities. We are also continuing to see our chance to not only build up, but also win new design in the near future. We are totally committed to this market with N1 655 and the new roadmap that we were going to talk about in the near future.

Speaker #6: Yeah. So, first of all, we announced our first design wins last quarter. After that, we continued to see very strong design win activity and interest from different types of customers.

Louis Gerhardy: After that, we continue to see very strong design win activity and interest from different types of customers. In fact, in the last few months, we see customers who want using video-sensor products, and also customers who want to use N1 655 for non-video sensor products. We are starting a wide range of opportunities. We are also continuing to see our chance to not only build up, but also win new design in the near future. We are totally committed to this market with N1 655 and the new roadmap that we were going to talk about in the near future. Thank you, Fermi. Perhaps if there are any updates on two other opportunities, I guess the first would be the home security market with AI feature integration, and then the second would be any kind of design activity.

Speaker #6: In fact, we do see that, in the last few months, we have seen customers who want to use video-centric products, and also customers who want to use N1 655 for non-video-centric products.

Speaker #6: So we are seeing a wide range of opportunities. And we are also continuing to see our chance to not only building out, but also

Speaker #6: win new. In the next, in the near

Speaker #5: future. So we are totally committed to this market with N1 655 and the new roadmap that we were going to talk about in the near future.

Christopher Rolland: Thank you, Fermi. Perhaps if there are any updates on two other opportunities, I guess the first would be the home security market with AI feature integration, and then the second would be any kind of design activity. I know it's further out, but around humanoid robots. I think that would be interesting as well.

Speaker #5: Thank you for me. And perhaps if there are any updates on two other opportunities, I guess the first would be the home security market with AI feature integration.

Speaker #5: And then the second would be any kind of design activity I know it's further out, but around humanoid robots. I think that would be interesting as

Louis Gerhardy: I know it's further out, but around humanoid robots. I think that would be interesting as well. Right. First of all, for the home security, I think we do have design wins with our CV75 that we haven't announced yet, but definitely is in design. However, I think this is a market that's price-sensitive. I think the progress or the movement towards this Gen AI type of the home security camera based on the camera solution, not the cloud solution. We've really focused on just edge AI for this market. With that, I think that market is not developing as fast as we expect, but we do have design wins. We hope we can talk about sometime next year. From the humanoid, I think this is a long-term market that we definitely want to participate.

Speaker #5: well.

Feng-Ming Wang: Right. First of all, for the home security, I think we do have design wins with our CV75 that we haven't announced yet, but definitely is in design. However, I think this is a market that's price-sensitive. I think the progress or the movement towards this Gen AI type of the home security camera based on the camera solution, not the cloud solution. We've really focused on just edge AI for this market. With that, I think that market is not developing as fast as we expect, but we do have design wins. We hope we can talk about sometime next year. From the humanoid, I think this is a long-term market that we definitely want to participate.

Speaker #6: Right. So first of all, for the home security, I think we do have a design win with our CB75 that we haven't announced yet, but it is definitely in design.

Speaker #6: However, I think this is a market that's price sensitive. So I think the progress or the movement towards this Gen AI type of based on the camera home security camera for solution, not the cloud solution.

Speaker #6: We have really focused on just edge AI for this market. So with that, I think that market is not developing as fast as we expected, but we do have design wins we hope we can talk about sometime next year.

Speaker #6: From the humanoid, I think this is a long-term market that we definitely want to participate. However, I think it will take time to get to a humanoid.

Louis Gerhardy: However, I think it will take time to get to a humanoid. I think there's multiple steps for robotics from today's situation to the humanoid. I think, like I said, even drone, if you treat drone as a robotic application, there's a level two to level five. I think humanoid is like level five of drones for your different application. There's intermediate step we go through. We definitely have design wins and also design activities in those steps that will lead us into the humanoid. I just want to be more specific. We're offering two types of solutions to the robotics today. One is for people only interested with the video technology, so they want to have a really powerful eye that not only can see the object, but also can do a quick object detection based on CN network.

However, I think it will take time to get to a humanoid. I think there's multiple steps for robotics from today's situation to the humanoid. I think, like I said, even drone, if you treat drone as a robotic application, there's a level two to level five. I think humanoid is like level five of drones for your different application. There's intermediate step we go through. We definitely have design wins and also design activities in those steps that will lead us into the humanoid. I just want to be more specific. We're offering two types of solutions to the robotics today. One is for people only interested with the video technology, so they want to have a really powerful eye that not only can see the object, but also can do a quick object detection based on CN network.

Speaker #6: I think there are multiple steps. For robotics, from today's situation to humanoid robots, and I think, like I said, even drones, if you treat drones as a robotic application, there's a level two to level five.

Speaker #6: I think humanoid is like level five of drones for your different applications. But there's an intermediate step when you go through, and we definitely have design wins and also design activities in low staff that will lead us into the humanoid.

Speaker #6: I just want to be more specific. We're offering two types of solutions to the robotics today. One is for people only interested with the video technology.

Speaker #6: So they want to have a really powerful eye that not only can see the object, but also can do a quick object detection based on CNN network.

Speaker #6: We have that kind of solution based on our CV2 family or CV72, CV73 solution. So that's one part of the line we're providing. The other part of the line we're providing to the robots is really a brand, right?

Louis Gerhardy: We have that kind of solution based on our CV2 family or CV72, CV75 solution. That's one product line we're providing. The other product line we're providing to the robots is really a brand, right? Our N1 655 type of solution can be a central processor for any type of a robotic outlayer. I think we're offering these two solutions. For a humanoid solution, it will take time to develop a really central domain controller like an autonomous driving car. That kind of solution will be required to do a humanoid solution in the future. Excellent. Thanks so much. Thank you. One moment for our next question. Our next question will come from the line of Suji Desilva from Roth Capital. Your line is open. John and Les, best of luck with the next step of your transition here.

We have that kind of solution based on our CV2 family or CV72, CV75 solution. That's one product line we're providing. The other product line we're providing to the robots is really a brand, right? Our N1 655 type of solution can be a central processor for any type of a robotic outlayer. I think we're offering these two solutions. For a humanoid solution, it will take time to develop a really central domain controller like an autonomous driving car. That kind of solution will be required to do a humanoid solution in the future.

Speaker #6: So our N1 655 type of solution can be a central processor for any type of robot out there. So I think we're offering these two solutions.

Speaker #6: It will take time to develop a really central domain control, like an autonomous driving car. That kind of solution will be required to do a humanoid solution in the future.

Speaker #5: Excellent. Thanks so much.

Christopher Rolland: Excellent. Thanks so much.

Speaker #3: Thank you. One moment for our next question. Our next question will come from the line of Suji DeSilva from Roth Capital. Your line is open.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Suji Desilva from Roth Capital. Your line is open.

Suji Desilva: John and Les, best of luck with the next step of your transition here. Maybe in the edge AI market, looking ahead to calendar 2026, perhaps, which of the two or three segments would you describe as the highest kind of growth opportunity for you as a drones or other areas? Any color there would be helpful.

Speaker #5: John, unless best of luck with the next step of your transition here. So maybe in the edge AI market, looking ahead, the calendar 26 perhaps, which of the two or three segments would you describe as the highest kind of growth opportunity for you as a drones or other areas?

Louis Gerhardy: Maybe in the edge AI market, looking ahead to calendar 2026, perhaps, which of the two or three segments would you describe as the highest kind of growth opportunity for you as a drones or other areas? Any color there would be helpful. Thanks. I think drones definitely, when we call out that, it's going to be a growth area for us. I also believe that even for the edge endpoint, we continue to see multiple opportunities coming up with different types of products. For example, wearable camera, we talk about this for many years. Right now, we are excited because wearable camera is not only for policemen anymore. We start seeing that goes to totally different commercial utilization. That's just another example that the technology becomes ready. Low power and also AI on the camera. All of that enables a new application for wearable camera.

Speaker #5: Any color there would be helpful.

Speaker #5: Thanks. I think drones have been.

Feng-Ming Wang: Thanks. I think drones definitely, when we call out that, it's going to be a growth area for us. I also believe that even for the edge endpoint, we continue to see multiple opportunities coming up with different types of products. For example, wearable camera, we talk about this for many years. Right now, we are excited because wearable camera is not only for policemen anymore. We start seeing that goes to totally different commercial utilization. That's just another example that the technology becomes ready. Low power and also AI on the camera. All of that enables a new application for wearable camera.

Speaker #6: very cool out there. It's going to be a growth area for us. And I also believe that even for the edge endpoint, we continue to see multiple opportunities coming up with different types of products.

Speaker #6: For example, wearable cameras have been a topic of discussion for many years. But right now, we are excited because wearable cameras are not only for policemen anymore.

Speaker #6: We start seeing that it goes to totally different commercial utilization. So that's just another example that the technology becomes ready. Low power and also AI on the camera—all of that enables a new application for wearable cameras.

Speaker #6: That's another really high-growth area that we're seeing. And it's not only that we're seeing it; if you follow our customers, you'll see that our customers are saying similar things.

Louis Gerhardy: That's another really high growth area that we're seeing. It's not only we're saying that, if you follow our customers, you'll see that our customers are saying similar things. Those edge endpoints definitely are a growth area for us. I also want to bring attention to the edge infrastructure we talked about last quarter. I think although not immediately you're going to see high revenue growth, long-term that will be a very important market for us. We'll definitely cover our thoughts on edge infrastructure at CES and give you more insight into our plan. Okay. Great. Fermi, one specific question on drones. Do you have any visibility in your pipeline beyond consumer, commercial, perhaps into any government programs, or is that going to be a separate part of the market handling that versus you guys?

That's another really high growth area that we're seeing. It's not only we're saying that, if you follow our customers, you'll see that our customers are saying similar things. Those edge endpoints definitely are a growth area for us. I also want to bring attention to the edge infrastructure we talked about last quarter. I think although not immediately you're going to see high revenue growth, long-term that will be a very important market for us. We'll definitely cover our thoughts on edge infrastructure at CES and give you more insight into our plan.

Speaker #6: So those edge endpoints definitely growth area for us. But also want to bring your attention to the edge infrastructure. We'll talk about less quarter.

Speaker #6: immediately they're going to I think although that not see high revenue growth, but I think long-term that will be a very important market for us.

Speaker #6: And we'll definitely cover our thoughts on edge infrastructure as CES and give you more insight into our plan.

Suji Desilva: Okay. Great. Fermi, one specific question on drones. Do you have any visibility in your pipeline beyond consumer, commercial, perhaps into any government programs, or is that going to be a separate part of the market handling that versus you guys?

Speaker #5: Okay. Great. Then for me, one specific question on drones. Do you have any visibility in your pipeline beyond consumer commercial, perhaps into any government programs?

Speaker #5: Or is that going to be a separate part of the market handling that versus you?

Speaker #5: guys? You've

Louis Gerhardy: In fact, all the customers, in fact, it's not really us. It's all customers. All customers. Right, right. I think all the customers have the desire to serve multiple different segments. Most of the customers are focusing on consumer, commercial. I don't think that government usage is a real focus for most of our customers yet. Okay. Great. Thanks, Fermi. Thank you. One moment for our next question. Our next question will come from the line of Martin Yang from Opco. Your line is open. Hi. Thank you for taking my question. First question on IoT, especially with growing customers like Insta360. Could you maybe comment on this customer's growth and its relative contribution to your overall ASP and margins? Right. First of all, Insta360 is, I think, the largest customer in our top 10 list. Their revenue roughly doubled from last year to this year.

Feng-Ming Wang: In fact, all the customers, in fact, it's not really us. It's all customers. All customers. Right, right. I think all the customers have the desire to serve multiple different segments. Most of the customers are focusing on consumer, commercial. I don't think that government usage is a real focus for most of our customers yet.

Speaker #6: Got all the customers; in fact, it's not really us. It's our customer. Our customer.

Speaker #5: Right,

Speaker #5: right. I think all the

Speaker #6: The customer has a desire to serve multiple different segments. However, most of the customers are focusing on consumer and commercial markets, and I don't think that government usage is a real focus for most of our customers.

Suji Desilva: Okay. Great. Thanks, Fermi.

Speaker #5: me.

Speaker #6: Thank you.

Feng-Ming Wang: Thank you.

Operator: One moment for our next question. Our next question will come from the line of Martin Yang from Opco. Your line is open.

Speaker #3: One moment for our next

Speaker #3: question. Our next question will come from the line of Martin Yang from OPCO. Your line is open.

Martin Yang: Hi. Thank you for taking my question. First question on IoT, especially with growing customers like Insta360. Could you maybe comment on this customer's growth and its relative contribution to your overall ASP and margins?

Speaker #7: for taking my question. First Hi. Thank you question, IoT, especially with growing customers like Rush, could you maybe comment on those customers' growth and its relative contribution to your overall ASP and margins?

Feng-Ming Wang: Right. First of all, Insta360 is, I think, the largest customer in our top 10 list. Their revenue roughly doubled from last year to this year. They are using multiple chips and selling to multiple ODNs. It's hard for us to track exactly their revenue contribution. We have no doubt they are the largest customer right now.

Speaker #6: All, Rush is, I think, our largest customer in our top 10 list. Their revenue roughly doubled from last year to this year. However, they are using multiple chips and selling to multiple ODNs.

Louis Gerhardy: They are using multiple chips and selling to multiple ODNs. It's hard for us to track exactly their revenue contribution. We have no doubt they are the largest customer right now. Thank you. Another question on drones. When you're referring to next year's product, are those drones using your image processing capabilities, or do you expect them to deploy AI functions that relate to autonomous flying capabilities? Both. Like I said, there are two types of solutions we're offering. Some of them are using just video plus AI to apply CN type network for simpler AI functions. There will definitely be customers using our AI for flying to avoid objects, to determine the flying path. Both of them. Got it. Thank you, Fermi. That's it for me. Thank you. One moment for our next question.

Speaker #6: It's hard for us to track exactly their revenue contribution, but we have no doubt they are the largest customer, right?

Speaker #6: now.

Martin Yang: Thank you. Another question on drones. When you're referring to next year's product, are those drones using your image processing capabilities, or do you expect them to deploy AI functions that relate to autonomous flying capabilities?

Speaker #7: Thank

Speaker #7: you. Another question on drones. So when you're referring to next year's product, are those drones using your image processing capabilities or do you expect them to deploy AI functions that relate to autonomous flying capabilities?

Feng-Ming Wang: Both. Like I said, there are two types of solutions we're offering. Some of them are using just video plus AI to apply CN type network for simpler AI functions. There will definitely be customers using our AI for flying to avoid objects, to determine the flying path. Both of them.

Speaker #6: Both. I think that, like I said, there are two types of solutions we're offering. Some of them using just a video plus AI for to apply CN type network for simple AI functions.

Speaker #6: But there will be definitely customers using our AI for flying to avoid objects, to avoid determining the flying path. So both of...

Martin Yang: Got it. Thank you, Fermi. That's it for me.

Speaker #7: Got it. Thank you for me. That's.

Speaker #7: it for

Speaker #7: me. them. Thank

Operator: Thank you. One moment for our next question. Our next question will come from the line of Quinn Bolton from Needham & Company. Your line is open.

Speaker #3: You. And our next moment for our next question. Our next question will come from the line of Quinn Bolton from Needham & Company.

Louis Gerhardy: Our next question will come from the line of Quinn Bolton from Needham & Company. Your line is open. Hey, guys. I know the focus of the business has sort of shifted to edge AI and the future edge infrastructure. In the past, you gave us sort of an automotive funnel. You haven't provided that. Just wondering, how should we be thinking about how are you guys approaching the automotive market? Do you still see opportunities in level two plus, or are you kind of de-emphasizing some of the automotive applications? Thank you for that question because we did not de-commute from that market. In fact, we continue to focus on the market. We are engaging multiple OEM Tier 1s at this point for autonomous driving level two, level two plus, some even level three.

Speaker #3: Your line is open.

Quinn Bolton: Hey, guys. I know the focus of the business has sort of shifted to edge AI and the future edge infrastructure. In the past, you gave us sort of an automotive funnel. You haven't provided that. Just wondering, how should we be thinking about how are you guys approaching the automotive market? Do you still see opportunities in level two plus, or are you kind of de-emphasizing some of the automotive applications?

Speaker #8: Hey, guys. I know the folks at the business have sort of shifted to edge AI in the future edge infrastructure. But in the past, you gave us sort of an automotive funnel; you haven't provided that.

Speaker #8: So just wondering, how should we be thinking about how are you guys approaching the automotive market? Do you still see opportunities and level two plus?

Speaker #8: de-emphasizing some of the automotive Or are you kind of applications?

Feng-Ming Wang: Thank you for that question because we did not de-commute from that market. In fact, we continue to focus on the market. We are engaging multiple OEM Tier 1s at this point for autonomous driving level two, level two plus, some even level three.

Speaker #6: Right. Thank you for that question because we did not decommit from that market. In fact, we continue to focus on the market. We are engaging multiple OEM Tier 1s.

Speaker #6: At this point, for autonomous driving level two, level two plus, it's not even level three. So, from that engineering activity and business development activity point of view, we are all in on this market.

Louis Gerhardy: From that engineering activity and business development activity point of view, we are oriented on this market. Definitely, from the funnel discussion point of view, like I said last quarter, we will provide a funnel discussion in the next quarter release. The one modification that we'll do, we will stop using a probability-weighted matrix. We are trying to give you just direct opportunity we're looking at. That will be the one change we're going to offer. We will definitely provide more guidance on how we look at this market. Got it. Thanks for that, Fermi. I guess for John, you mentioned that it sounds like the mix towards high-volume customers is pushing the gross margin down to the lower half of your long-term range. Can you give us just beyond the January quarter?

From that engineering activity and business development activity point of view, we are oriented on this market. Definitely, from the funnel discussion point of view, like I said last quarter, we will provide a funnel discussion in the next quarter release. The one modification that we'll do, we will stop using a probability-weighted matrix. We are trying to give you just direct opportunity we're looking at. That will be the one change we're going to offer. We will definitely provide more guidance on how we look at this market.

Speaker #6: As before, definitely from the funnel discussion point of view. Like I said last quarter, we will provide a funnel discussion in the next quarter release.

Speaker #6: But one modification that we'll do is we will stop using the probability-weighted matrix. We are trying to give you just the direct opportunity we are looking at.

Speaker #6: So that will be the one change we're going to offer. But we will definitely provide more guidance on how we look at this.

Speaker #6: market. Got

Quinn Bolton: Got it. Thanks for that, Fermi. I guess for John, you mentioned that it sounds like the mix towards high-volume customers is pushing the gross margin down to the lower half of your long-term range. Can you give us just beyond the January quarter? Do you think that mix continues to be pretty heavy with higher volume customers, or do you see this as sort of a temporary shift just for the January quarter and it normalizes beyond that?

Speaker #8: just you mentioned that Got it. Thanks for that for me. And then I guess for John, sounds like the mix towards high-volume customers pushing the gross margin down to the lower half of your long-term range.

Speaker #8: Can you give us just beyond the January quarter? Do you think that mix continues to be pretty heavy with higher volume customers? Or do you see this as sort of a temporary shift just for the January quarter and it normalizes beyond?

Louis Gerhardy: Do you think that mix continues to be pretty heavy with higher volume customers, or do you see this as sort of a temporary shift just for the January quarter and it normalizes beyond that? Thanks, Quinn. Yeah. At this point, we don't want to give a guide with regard beyond Q4. I think that commentary with regard to Q4 will continue to be relevant going forward, the ratio of high-volume customers to the total revenue for the quarter. Sorry, John, you cut out there a little bit. Did you say that the mix would stay pretty similar beyond January? No. What I tried to say was that we don't want to make any guide beyond Q4, but that the commentary about Q4 with the ratio of high-volume customers to the total revenue, that dynamic will continue to be a factor going forward.

Speaker #8: that? Thanks, Quinn.

John Young: Thanks, Quinn. Yeah. At this point, we don't want to give a guide with regard beyond Q4. I think that commentary with regard to Q4 will continue to be relevant going forward, the ratio of high-volume customers to the total revenue for the quarter.

Speaker #5: Yeah. At this point, we don't want to give a guide with regard to Q4. But I think that commentary with regard to Q4 will continue to be relevant going forward.

Speaker #5: The ratio of high-volume customers to the total revenue for the quarter.

Quinn Bolton: Sorry, John, you cut out there a little bit. Did you say that the mix would stay pretty similar beyond January?

Speaker #8: would stay pretty similar beyond January?

Speaker #8: would stay pretty similar beyond January? Sorry, John, you cut out there a little bit. Did you say that the mix

John Young: No. What I tried to say was that we don't want to make any guide beyond Q4, but that the commentary about Q4 with the ratio of high-volume customers to the total revenue, that dynamic will continue to be a factor going forward. To the extent that the high-volume folks are a higher percentage of the revenue, that will have its impact.

Speaker #5: No, we don't want to make any guidance beyond Q4. However, the commentary about Q4 regarding the ratio of high-volume customers to the total revenue indicates that this dynamic will continue to be a factor going forward.

Speaker #5: So, to the extent that the high-volume folks are a higher percentage of the revenue, that will have its impact.

Louis Gerhardy: To the extent that the high-volume folks are a higher percentage of the revenue, that will have its impact. Got it. Okay. Thank you. Thank you. Once again, that's star 11 for any questions. Star 11. One moment for next follow-up. We have a follow-up question for Tore Svanberg from Stifel. Your line is open. Yes. Thank you. John, just a follow-up for you. This year, you guys demonstrated some pretty good operating leverage. I'm just thinking as we look at fiscal 2027 and OpEx growth, obviously, you're not giving a growth target per se, but we should assume that OpEx would grow at a slower pace than revenue growth for fiscal 2027? Thanks, Tore. Yeah. We're not giving a guide at this point.

Quinn Bolton: Got it. Okay. Thank you.

Speaker #8: Got it. Okay. Thank you.

Operator: Thank you. Once again, that's star 11 for any questions. Star 11. One moment for next follow-up. We have a follow-up question for Tore Svanberg from Stifel. Your line is open.

Speaker #3: Thank you. And once again, that’s Star 11 for any questions, Star 11. One moment for our next follow-up. We have a follow-up question for Tor Sunberg from Stifel.

Speaker #3: Your line is

Speaker #3: Your line is open. Yes.

Tore Svanberg: Yes. Thank you. John, just a follow-up for you. This year, you guys demonstrated some pretty good operating leverage. I'm just thinking as we look at fiscal 2027 and OpEx growth, obviously, you're not giving a growth target per se, but we should assume that OpEx would grow at a slower pace than revenue growth for fiscal 2027?

Speaker #6: Thank you. John, just a follow-up for you. So this year, you guys demonstrated some pretty good operating leverage. I'm just thinking as we look at fiscal 27 and OPEX growth, obviously, you're not giving a growth target per se.

Speaker #6: But we should assume that OPEX would grow at a slower pace than revenue growth for fiscal 27?

John Young: Thanks, Tore. Yeah. We're not giving a guide at this point. I think what we have said in the past, kind of as you articulated, is that long-term, we expect to create operating leverage by having revenue and obviously gross profit outpace the increase in OpEx on a non-GAAP basis.

Speaker #5: Thanks, Tory. Yeah, we're not giving a guide at this point. But I think what we have said in the past, as you articulated, is that long-term, we expect to create operating leverage by having revenue and, obviously, gross profit outpace the increase in OPEX.

Louis Gerhardy: I think what we have said in the past, kind of as you articulated, is that long-term, we expect to create operating leverage by having revenue and obviously gross profit outpace the increase in OpEx on a non-GAAP basis. Great. Thank you. Thank you. One moment for our next question. Our next question will come from Kevin Cassidy from Rosenblatt. Your line is open. Yes. Thanks for taking my question. Congratulations to Les for a legendary career. Again, I'm interested in that, but I want to know how much of your software and development that you've been able to work on with the automobiles for L2 to L4 can you apply? Is it a relatively easy market for you to transition into, or are there other software or other issues that would happen in robotics that isn't in automotive?

Speaker #5: On and on gap

Speaker #5: basis. Great.

Quinn Bolton: Great. Thank you.

Speaker #6: Thank you.

Operator: Thank you. One moment for our next question. Our next question will come from Kevin Cassidy from Rosenblatt. Your line is open. Yes.

Speaker #3: Thank you. One moment for our next question. Our next question comes from Kevin Cassidy from Rosenblatt. Your line is open.

Speaker #9: Yes. Thanks for taking my question. And congratulations to Les for a legendary career. Again, I'm interested in that. But I want to know how much of your software and development that you've been able to work on with the automobiles for L2 to L4, can you apply?

Kevin Cassidy: Thanks for taking my question. Congratulations to Les for a legendary career. Again, I'm interested in that, but I want to know how much of your software and development that you've been able to work on with the automobiles for L2 to L4 can you apply? Is it a relatively easy market for you to transition into, or are there other software or other issues that would happen in robotics that isn't in automotive?

Speaker #9: Does it have a relatively easy market for you to transition into? Or are there other software issues or challenges in robotics that aren't present in automotive?

Speaker #5: I think having you point out that it's really a great direction because, like I continue to say, autonomous driving is just a special kind of robot.

Louis Gerhardy: I think, Kevin, you point out that it's really a great direction because, like I continue to say, autonomous driving is just a special kind of robots. So is a drone. In fact, if you look at the details of functions inside an autonomous driving car, level three drone, and also robots, at the end, it's really a bunch of sensor fusion. You make a decision on your environment, and you decide path planning, then you control either a car or drone or some mobile robots moving around performing some actions. From that point of view, a lot of hardware have a commonality. In fact, a lot of software development, particularly on the sensor fusion side with the perception, there's a huge reuse on all the robotic applications.

John Young: I think, Kevin, you point out that it's really a great direction because, like I continue to say, autonomous driving is just a special kind of robots. So is a drone. In fact, if you look at the details of functions inside an autonomous driving car, level three drone, and also robots, at the end, it's really a bunch of sensor fusion. You make a decision on your environment, and you decide path planning, then you control either a car or drone or some mobile robots moving around performing some actions. From that point of view, a lot of hardware have a commonality. In fact, a lot of software development, particularly on the sensor fusion side with the perception, there's a huge reuse on all the robotic applications.

Speaker #5: And so is a drone. In fact, if you look at the details of functions inside autonomous driving cars, level three drones, and also robots, at the end, it’s really a bunch of sensor fusion, and you make a decision on your environment and you decide path planning.

Speaker #5: Then you control either a car, a drone, or some mobile robots moving around to perform some actions. From that point of view, a lot of hardware has commonality.

Speaker #5: And in fact, a lot of software development, particularly on the sensor fusion side with the perception, there's a huge reuse among all the robotic applications.

Speaker #5: So, in fact, we definitely believe that a lot of our investment, both on the hardware and software side for autonomous driving, will directly apply to all the future drone and other robotic applications that we're talking about.

Louis Gerhardy: In fact, we definitely believe that a lot of our investment, both on hardware and software side for autonomous driving, will directly apply to all the future drone and other robotic applications that we're talking about. Okay. Great. Thanks. Thank you. One moment for our next question. Our next question will come from the line of Ross Seymore from Deutsche Bank. Your line is open. Hi, guys. Thanks for asking a couple of follow-ups. On the consumer percentage being about half of your IoT business, what was that mix last fiscal year and a year ago? I don't have that figure for you, but I would say the dominant part of our mix was enterprise, CapEx-driven markets. Got it. Thanks, Louis. I guess the follow-up to that, if the consumer business does sound like it has increased, does that change seasonality of your company?

In fact, we definitely believe that a lot of our investment, both on hardware and software side for autonomous driving, will directly apply to all the future drone and other robotic applications that we're talking about.

Speaker #5: about. Okay.

Kevin Cassidy: Okay. Great. Thanks.

Speaker #9: Great.

Speaker #9: Thanks. Thank

Operator: Thank you. One moment for our next question. Our next question will come from the line of Ross Seymore from Deutsche Bank. Your line is open.

Speaker #3: You. One moment for our next question. Our next question comes from Ross Seymour from Deutsche Bank. Your line is open.

Ross Seymore: Hi, guys. Thanks for asking a couple of follow-ups. On the consumer percentage being about half of your IoT business, what was that mix last fiscal year and a year ago?

Speaker #8: Hi guys. Thanks for asking a couple of follow-ups. On the consumer percentage being about half of your IoT business, what was that mix last fiscal year?

Speaker #8: A year

Speaker #8: ago? I don't have

Louis Gerhardy: I don't have that figure for you, but I would say the dominant part of our mix was enterprise, CapEx-driven markets.

Speaker #5: That figure for you. But I would say the dominant part of our mix was enterprise: CapEx-driven markets.

Ross Seymore: Got it. Thanks, Louis. I guess the follow-up to that, if the consumer business does sound like it has increased, does that change seasonality of your company? I know kind of the first and fourth quarters tend to be, relatively speaking, the weakest sequentials, and then the mid two quarters are the largest. Does that change at all, either directionally or kind of magnitude, just because consumer is a bigger portion than it used to be?

Speaker #8: Thanks. Got it. Thanks, Louis. And I guess the follow-up to that, if the consumer business does sound like it is increased, does that change seasonality of your company?

Speaker #8: I know kind of the first and the fourth quarters tend to be relatively speaking the weakest sequentials. And then the mid two quarters are the largest.

Louis Gerhardy: I know kind of the first and fourth quarters tend to be, relatively speaking, the weakest sequentials, and then the mid two quarters are the largest. Does that change at all, either directionally or kind of magnitude, just because consumer is a bigger portion than it used to be? Yeah. Yes. That's a very good point. The answer is yes. I would look at the next question as what's normal. Really, the last three, four, or five years hasn't been very normal. I would look at the last 10 years because those first five years in the 10 years did have more consumer like you're asking about. I would look at the averages over that 10-year period rather than just the last two or three years, which really weren't normal. Maybe one last follow-up.

Speaker #8: Does that change at all, either directionally or in terms of magnitude, just because the consumer is a bigger portion than it used to be?

Speaker #5: Yeah.

Louis Gerhardy: Yeah. Yes. That's a very good point. The answer is yes. I would look at the next question as what's normal. Really, the last three, four, or five years hasn't been very normal. I would look at the last 10 years because those first five years in the 10 years did have more consumer like you're asking about. I would look at the averages over that 10-year period rather than just the last two or three years, which really weren't normal.

Speaker #8: Yes. That's a very good point. And I think the answer is yes. And I would look at the next question is what's normal. And really, the last three, four, or five years hasn't been very normal.

Speaker #8: So I’d look at the last 10 years because those first five years and the 10 years did have more consumer, like you’re asking about.

Speaker #8: So I'd look at the averages over that 10-year period rather than just the last two or three years, which really weren't normal. And then maybe one last follow-up.

Ross Seymore: Maybe one last follow-up. How do we think about taxes, either dollars or percentages, next year and the year after? I know it kind of goes between the dollars and percentages, and the former might be more applicable. Just an idea of how we should think about that.

Speaker #8: How do we think about taxes either dollars or percentages next year and the year after? I know it kind of goes between the dollars and percentages in the form it might be more applicable.

Louis Gerhardy: How do we think about taxes, either dollars or percentages, next year and the year after? I know it kind of goes between the dollars and percentages, and the former might be more applicable. Just an idea of how we should think about that. Yeah. Thanks, Ross. We tend to think about it from a dollars perspective as opposed to a rate based on the way the company is structured and where the profits are located in various jurisdictions internationally. I would expect the dollars will increase, but they'll increase with revenue, and it won't be a significant change to the story. I think on a full-year basis, if you look at the rate on a non-GAAP basis, that'll give you some indication to be able to model going forward, I would say. Thank you. Thank you.

Speaker #8: But just an idea of how we should think about

Speaker #8: that. Yeah.

Louis Gerhardy: Yeah. Thanks, Ross. We tend to think about it from a dollars perspective as opposed to a rate based on the way the company is structured and where the profits are located in various jurisdictions internationally. I would expect the dollars will increase, but they'll increase with revenue, and it won't be a significant change to the story. I think on a full-year basis, if you look at the rate on a non-GAAP basis, that'll give you some indication to be able to model going forward, I would say.

Speaker #5: Thanks, Ross. So we tend to think about it from a dollars perspective as opposed to a rate based on the way the company is structured.

Speaker #5: And where the profits are located in various jurisdictions internationally. So I would expect, well, the dollars will increase. But it won't be they'll increase with revenue.

Speaker #5: But it won't be a significant change to the story I think on a full-year basis, if you look at the rate on a non-gap basis, that'll give you some indication to be able to model going forward, I would say.

Speaker #8: Thank you.

Ross Seymore: Thank you.

Operator: Thank you. That's all the time we have for a question-and-answer session. I want to turn it back over to Dr. Fermi Wang for any closing remarks.

Speaker #3: Thank you. That's all the time we have for the question and answer session. I would like to turn it back over to Dr. Fermi Wong for any closing remarks.

Louis Gerhardy: That's all the time we have for a question-and-answer session. I want to turn it back over to Dr. Fermi Wang for any closing remarks. Thank you. Thank you all for joining our call today. I hope to see some of you join our January event at CES. Thank you. Thank you for your participation in today's conference. This does include the program. You may now disconnect. Everyone, have a great day.

Speaker #3: remarks. Thank you.

Feng-Ming Wang: Thank you. Thank you all for joining our call today. I hope to see some of you join our January event at CES. Thank you.

Speaker #5: And thank you all for joining our call today. I hope to see some of you join our January event at CES. Thank you.

Speaker #5: you. Thank you for

Operator: Thank you for your participation in today's conference. This does include the program. You may now disconnect. Everyone, have a great day.