Q1 2027 Ambarella Inc Earnings Call

May 28, 2026

Operator: Good day, and thank you for standing by. Welcome to Ambarella's Q1 fiscal year 2027 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference over to the Vice President of Corporate Development, Louis Gerhardy. Please proceed.

Operator: Good day, and thank you for standing by. Welcome to Ambarella's Q1 Fiscal Year 2027 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded.

Speaker #2: Good day, and thank you for standing by. Welcome to Ambarella's first quarter fiscal year 2027 earnings call. At this time, all participants are in a listen-only mode.

Speaker #2: After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised.

Speaker #2: To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. Now, it’s my pleasure to hand the conference over to the Vice President of Corporate Development, Louis Gerhardy.

Operator: Now, it's my pleasure to hand the conference over to the Vice President of Corporate Development, Louis Gerhardy. Please proceed.

Speaker #2: Please proceed.

Speaker #3: Thank you, Carmen, and good afternoon. Thank you for joining our first quarter fiscal year 2027 financial results conference call. On the call with me today are Dr. Feng-Ming Wang, President and CEO, and John Young, CFO.

Louis Gerhardy: Thank you, Carmen, and good afternoon. Thank you for joining our Q1 fiscal year 2027 financial results conference call. On the call with me today is Dr. Fermi 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 Q1 fiscal year 2027. The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth, and demand for our solutions, among other things. These statements are based on currently available information and subject to risks, uncertainties, and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements.

Speaker #3: The primary purpose of today's call is to provide you with information regarding the results for our first quarter, fiscal year 2027. The discussion today, and the responses to your questions, will contain forward-looking statements regarding our projected financial results, financial prospects, market growth, and demand for our solutions, among other things.

Louis Gerhardy: The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth, and demand for our solutions, among other things. These statements are based on currently available information and subject to risks, uncertainties, and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements.

Speaker #3: 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 #3: 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.

Louis Gerhardy: 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. Access to our Q1 fiscal year 2027 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. Before starting the call, we hope to see you at some of the following investor events scheduled during our Q2 fiscal quarter. 2 June, we'll be at the Bank of America's TMT Conference in San Francisco. 23 June at Northland's Virtual Equity Capital Markets Growth Conference.

Speaker #3: Access to our first quarter fiscal year 2027 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.

Speaker #3: 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.

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. Before starting the call, we hope to see you at some of the following investor events scheduled during our Q2 fiscal quarter. 2 June, we'll be at the Bank of America's TMT Conference in San Francisco. 23 June at Northland's Virtual Equity Capital Markets Growth Conference. 23 June and 24 June, we'll be hosting investor meetings in Baltimore and Boston.

Speaker #3: Before starting the call, we hope to see you at some of the following investor events scheduled during our second fiscal quarter. On June 2, we will be at the Bank of America's TMT Conference in San Francisco.

Speaker #3: June 23rd at Northland's virtual equity capital markets growth conference. June 23rd and 24th will be hosting investor meetings in Baltimore and Boston. August 18th at Rosenblatt's Age of AI event.

Louis Gerhardy: June and 24 June, we'll be hosting investor meetings in Baltimore and Boston. 18 August at Rosenblatt's Age of AI event. For your calendar planning in our Q3 fiscal quarter, please note we are a sponsor at the AI Infra Summit in Santa Clara on 15 November to 17 November, and we hope to see you there, where we will lead the Physical AI track with a number of Edge AI product demos in our exhibit area. Fermi will now provide a business update for the quarter. John will review the financial results and outlook, then we'll be available for your questions. Fermi?

Louis Gerhardy: 18 August at Rosenblatt's Age of AI event. For your calendar planning in our Q3 fiscal qarter, please note we are a sponsor at the AI Infra Summit in Santa Clara on 15 November to 17 November, and we hope to see you there, where we will lead the Physical AI track with a number of Edge AI product demos in our exhibit area. Fermi will now provide a business update for the quarter. John will review the financial results and outlook, then we'll be available for your questions. Fermi?

Speaker #3: For your calendar planning and for our third fiscal quarter, please note we are a sponsor at the AI Infrastructure Summit in Santa Clara. From November 15th to 17th, we hope to see you there, where we will lead the fiscal AI track with a number of edge AI product demos in our exhibit area.

Speaker #3: Fermi will now provide a business update for the quarter. John will review the financial results and outlook. Then we'll be available for your questions.

Speaker #3: Fermi?

Speaker #4: Thank you, Louis. And good afternoon. Thank you for joining our call today. During our first fiscal quarter, we delivered on our key financial guidance: revenue, gross margins, and operating expenses.

Fermi Wang: Thank you, Louis. Good afternoon. Thank you for joining our call today. During our Q1, we delivered on our key financial guidance, revenue, gross margins, and OpEx. Most importantly, we continue to extend our Edge AI platform leadership with technology and product innovation, addressing existing and emerging use cases. As a recognized Edge AI leader, we are entering a new and significant phase for our market development with the execution of long-term customer agreements, which can drive a more predictable revenue stream while also offering lifetime revenue potential far in excess of what we have realized in the past. Let me provide a few comments about the current market environment. In Q1, we delivered revenue at the high end of the normal season range and slightly above the midpoint of our guidance.

Speaker #4: Most importantly, we continue to extend our edge AI platform leadership with technology and product innovation, addressing existing and emerging use cases. As a recognized edge AI leader, we are entering a new and significant phase for our market development with the execution of long-term customer agreements, which can drive a more predictable revenue stream while also offering lifetime revenue potential far in excess of what we have realized in the past.

Fermi Wang: As a recognized Edge AI leader, we are entering a new and significant phase for our market development with the execution of long-term customer agreements, which can drive a more predictable revenue stream while also offering lifetime revenue potential far in excess of what we have realized in the past. Let me provide a few comments about the current market environment. In Q1, we delivered revenue at the high end of the normal season range and slightly above the midpoint of our guidance.

Speaker #4: Let me provide a few comments about the current market environment. In Q1, we delivered revenue at the high end of the normal seasonal range and slightly above the midpoint of our guidance.

Fermi Wang: Demand signals and the long-term secular growth outlook for Edge AI remain very strong, and I'm very optimistic about our ability to serve it, in particular, as AI workloads become more complex. IoT applications were about three quarters of our total revenue and were seasonally down with our enterprise security camera market growing in the high single digits, sequentially offset by a double-digit sequential decline in our consumer IoT business. Our automotive revenue established a new all-time revenue record with very strong double-digit growth led by the rapid emergence of AI within the large and growing commercial vehicle telematic market, as well as automotive safety applications. After a multiple year build-out of AI training capacity in data centers, the AI market is increasingly focused on AI inferencing. Within the inferencing market, the processing is becoming more distributed.

Speaker #4: Demand signals and the long-term secular growth outlook for edge AI remain very strong, and I'm very optimistic about our ability to serve it, particularly as AI workloads become more complex.

Speaker #4: IoT applications were about three-quarters of our total revenue and were seasonally down, with our enterprise security camera market growing in the high single digits sequentially, offset by a double-digit sequential decline in our consumer IoT business.

Speaker #4: Our automotive revenue established a new all-time revenue record, with very strong double-digit growth led by the rapid emergence of AI within the large and growing commercial vehicle telematics market, as well as automotive safety applications.

Fermi Wang: Our automotive revenue established a new all-time revenue record with very strong double-digit growth led by the rapid emergence of AI within the large and growing commercial vehicle telematic market, as well as automotive safety applications. After a multiple year build-out of AI training capacity in data centers, the AI market is increasingly focused on AI inferencing. Within the inferencing market, the processing is becoming more distributed.

Speaker #4: After a multi-year build-out of AI training capacity in data centers, the AI market is increasingly focused on AI inferencing. And within the inferencing market, processing is becoming more distributed—in other words, processing is moving to the edge and the physical AI layers of the network hierarchy.

Fermi Wang: In other words, processing is moving to the edge and the Physical AI layers of the network hierarchy. As the edge market evolves to gen AI and agentic AI in particular, our positioning becomes even stronger, and I would like to explain more about this. First, before talking about Ambarella's unique positioning, let me remind you of the advantage Edge AI efforts relative to the data center. Edge AI processing reduces latency, lower power consumption, minimize communication expense, and improves privacy and security. Why is Ambarella's Edge AI platform so well-positioned? First, Ambarella's Edge AI platform is comprehensive and well-established, yet expanding and under constant evolution to adapt to new AI trends. We believe a broad and highly programmable Edge AI platform is required to address wide number of use cases, enabling customers to be more efficient by reusing software and scaling their business.

Speaker #4: As the edge market evolves to Gen AI, and agentic AI in particular, our positioning becomes even stronger, and I would like to explain more about this.

Speaker #4: First, before talking about Ambarella's unique positioning, let me remind you of the advantages of edge AI efforts relative to the data center. Edge AI processing reduces latency, lowers power consumption, minimizes communication expense, and improves privacy and security.

Speaker #4: So why is Ambarella's edge AI platform so well positioned? First, Ambarella's edge AI platform is comprehensive and well established, yet expanding and under constant evolution to adapt to new AI trends.

Fermi Wang: Why is Ambarella's Edge AI platform so well-positioned? First, Ambarella's Edge AI platform is comprehensive and well-established, yet expanding and under constant evolution to adapt to new AI trends. We believe a broad and highly programmable Edge AI platform is required to address wide number of use cases, enabling customers to be more efficient by reusing software and scaling their business.

Speaker #4: We believe a broad and highly programmable edge AI platform is required to address a wide number of use cases, enabling customers to be more efficient by reusing software and scaling their business.

Fermi Wang: Our software platform is now open and easy to use and supports a wide variety of AI models with more than 200 different AI model architectures reaching production. We have cumulatively shipped more than 46 million Edge AI SoCs, and we have 12 Edge AI SoC already available with up to hundreds of TOPS-like performance. Another reason Ambarella is so well positioned for gen AI and agentic AI at Edge is that our software tools and AI SoCs integrates all the accelerated computing system functions into a single platform. In the data centers, the functions such as data aggregation, AI acceleration, CPUs, and other system functions are usually a collection of discrete SoCs from different vendors. However, at Edge, to be successful, our AI SoC integrate all the functions, fusion, perception, AI acceleration, CPUs, encoding, and other system function into one single chip.

Speaker #4: Our software platform is now open and easy to use, and supports a wide variety of AI models with more than 200 different AI model architectures.

Speaker #4: Reaching production, we have cumulatively shipped more than 46 million edge AI SoCs, and we have 12 edge AI SoCs already available with up to hundreds of TOPS-like performance.

Speaker #4: Another reason Ambarella is so well positioned for Gen AI and the agentic AI at the edge is that our software tools and AI SoCs integrate all the accelerated computing system functions into a single platform.

Speaker #4: In the data centers, functions such as data aggregation, AI acceleration, CPUs, and other system functions are usually a collection of discrete SoCs from different vendors.

Fermi Wang: In the data centers, the functions such as data aggregation, AI acceleration, CPUs, and other system functions are usually a collection of discrete SoCs from different vendors. However, at Edge, to be successful, our AI SoC integrate all the functions, fusion, perception, AI acceleration, CPUs, encoding, and other system function into one single chip.

Speaker #4: However, at the edge, to be successful, our AI SoC integrates all the functions—fusion, perception, AI acceleration, CPUs, encoding, and other system functions—into one single chip.

Speaker #4: And our differentiation is not just in proprietary processing elements and advanced VLSI integration, but also in the proprietary algorithms for edge AI stack software and the edge AI agentic frameworks, tying the entire system together.

Fermi Wang: Our differentiation is not just in proprietary processing elements and advanced VLSI integration, but also in the proprietary algorithms, full Edge AI stack software, and Edge AI agentic frameworks that tie the entire system together. As workloads become more complex, such as with gen AI, multimodal reasoning, and autonomous agent-based workflows, our deep expertise across the full accelerated computing stack optimized physically for Edge deployment become increasingly rare and a strategic value in the industry. In other words, as our customers need more performance in their Edge AI applications, there are an extremely limited number of companies that can do this, and even fewer are proven and established. We are now becoming recognized as one of the very few companies that can tie this all together as Edge AI workloads get more complex.

Speaker #4: As workloads become more complex, such as with Gen AI, multimodal reasoning, and autonomous agent-based workflows, our deep expertise across the full accelerated computing stack optimized physically for edge deployment becomes increasingly rare and of strategic value in the industry.

Speaker #4: In other words, as our customers need more performance in their edge AI applications, there are an extremely limited number of companies that can do this—and even fewer that are proven and established.

Fermi Wang: In other words, as our customers need more performance in their Edge AI applications, there are an extremely limited number of companies that can do this, and even fewer are proven and established. We are now becoming recognized as one of the very few companies that can tie this all together as Edge AI workloads get more complex.

Speaker #4: We are now becoming recognized as one of the very few companies that can tie this all together as edge AI workloads get more complex.

Speaker #4: We are entering a new phase of edge AI in the physical AI market development, where we are engaged in multiple discussions with customers who want to enter deeper relationships, including multi-generational commitments.

Fermi Wang: We are entering a new phase of Edge AI and the Physical AI market development, where we are engaged in multiple discussions with customers who want to enter deeper relationships, including multi-generational commitments. This can take the form of long-term agreements, or LTA, that involves our standard products and/or our semi-custom AI SoC optimized for customers' particular workload. Relative to our current customer relationships, LTAs will enable long-term partnerships that may include a structured contract involving volume and pricing, typically over 5 years or more. Over the long run, we expect that LTAs to be an important driver of revenue growth, improve visibility, resulting in less volatility, and improve the predictability of our revenue. Our first LTA example involves our first 2-nanometer chip and the semi-custom Edge AI SoC, which we tape out in January, and this product is named CV8.

Speaker #4: This can take the form of long-term agreements, or LTAs, that involve our standard products and/or our semi-custom AI SoC optimized for customers' particular workloads.

Fermi Wang: Relative to our current customer relationships, LTAs will enable long-term partnerships that may include a structured contract involving volume and pricing, typically over 5 years or more. Over the long run, we expect that LTAs to be an important driver of revenue growth, improve visibility, resulting in less volatility, and improve the predictability of our revenue. Our first LTA example involves our first 2-nanometer chip and the semi-custom Edge AI SoC, which we tape out in January, and this product is named CV8.

Speaker #4: Relative to our current customer relationships, LTAs will enable long-term partnerships that may include a structured contract involving volume and pricing, typically over five years or more.

Speaker #4: Over the long run, we expect LTAs to be an important driver of revenue growth, improve visibility resulting in less volatility, and improve the predictability of our revenue.

Speaker #4: Our first LTA example evolves our first 2-nanometer chip and the semi-custom edge AI SoC, which we tape out in January. This product is named CV8.

Speaker #4: This AI SoC will serve both consumer and enterprise applications in the IoT endpoint market. For this long-term agreement, we agree to develop a semi-custom ASIC for customers who want to support a certain complex AI workload.

Fermi Wang: This AI SoC will serve both consumer and enterprise applications in the IoT endpoint market. For this long-term agreement, we agreed to develop semi-custom ASIC for a customer who want to support a certain complex AI workload. We will sell this AI SoC as a standard product to a variety of other customer in other markets. This afternoon we announced another material LTA, this time with Hanwha in South Korea for the enterprise CapEx side of IoT market.

Speaker #4: We will sell this AI SoC as a standard product to a variety of other customers in other markets. And this afternoon, we announced another material LTA.

Speaker #4: This time with Hanwha in South Korea, for the enterprise CAPEX side of the IoT market. With Hanwha, this LTA is for the sourcing and co-development of Ambarella's edge AI technology across Hanwha's product lines and the industry, including physical security, operational automation, life sciences, robotics, and other industrial markets.

Fermi Wang: With Hanwha, this LTA is for the sourcing and co-development of Ambarella’s Edge AI technology across Hanwha’s product lines and the industry, including physical security, operational automation, life sciences, robotics, and other industry market. The agreement has a potential revenue in excess of $800 million over a period exceeding 10 years, and it represents one of the largest agreements in Ambarella history and one of the first agreements of its kind in the Edge AI semiconductor market. The multi-generation nature of this relationship is expected to enable both companies to plan jointly across technology roadmaps, accelerate product development cycles, and bring new category AI-enabled product to market at scale. This relationship will involve standard AI SoCs we will sell in a variety of markets to our customers. Beyond these first two LTAs, we are engaged in discussions with other companies.

Speaker #4: The agreement has potential revenue in excess of $800 million over a period exceeding 10 years, and it represents one of the largest agreements in Ambarella history and one of the first agreements of its kind in the edge AI semiconductor market.

Speaker #4: The multi-generation nature of this relationship is expected to enable both companies to plan jointly across technology roadmaps, accelerate product development cycles, and bring new category AI-enabled products to market at scale.

Fermi Wang: The multi-generation nature of this relationship is expected to enable both companies to plan jointly across technology roadmaps, accelerate product development cycles, and bring new category AI-enabled product to market at scale. This relationship will involve standard AI SoCs we will sell in a variety of markets to our customers. Beyond these first two LTAs, we are engaged in discussions with other companies.

Speaker #4: This relationship will involve standard AI SoCs we will sell in a variety of markets to our customers. Beyond these first two LTAs, we are engaged in discussions with other companies.

Speaker #4: Today, I will also provide an update on robotic edge infrastructure and automotive markets, which represents a material market opportunity for us. I'm very pleased to share that we now have 15-plus robotic design wins, including aero drones, with lifetime revenue exceeding $100 million, with more than 30 customers in our robotic pipeline.

Fermi Wang: Today, I will also provide an update on robotic edge infrastructure and automotive markets, which represents material market opportunity for us. I'm very pleased to share that we now have 15 plus robotic design wins, including aerial drones, with lifetime revenue exceeding $100 million, with more than 30 customers in our robotic pipeline. Our AI SoC combine high-performance AI inference, advanced computer vision, and ultra-efficient power consumption into a single edge-optimized architecture, and it represents the foundation platform for robotic systems to run vision, language, action VLA models in drones. CV5-enabling platforms such as the Antigravity A1, enabling capability including 8K imaging, real-time perception, autonomous navigation, obstacle avoidance, SLAM, and on-device AI inferencing without relying on constant cloud connectivity for these functions.

Speaker #4: Our AI SoC combines high-performance AI inference, advanced computer vision, and ultra-efficient power consumption into a single, edge-optimized architecture. It represents the foundational platform for robotic systems to run vision language action—VRA—models in drones.

Fermi Wang: Our AI SoC combine high-performance AI inference, advanced computer vision, and ultra-efficient power consumption into a single edge-optimized architecture, and it represents the foundation platform for robotic systems to run vision, language, action VLA models in drones. CV5-enabling platforms such as the Antigravity A1, enabling capability including 8K imaging, real-time perception, autonomous navigation, obstacle avoidance, SLAM, and on-device AI inferencing without relying on constant cloud connectivity for these functions.

Speaker #4: CV5 enabling platforms, such as the Anti-Gravity A1 enabling capability, including 8K imaging, real-time perception, autonomous navigation, obstacle avoidance, SLAM, and on-device AI inferencing, will not rely on constant cloud connectivity for this function.

Fermi Wang: As drones evolve from flying camera into autonomous aerial robots, Ambarella's CVflow AI accelerator architecture allow manufacturers to deliver lower latency decision-making, improve latency, longer flight time, and more advanced autonomy at the edge. The robotic market is fragmented. We are realizing design wins across a variety of other robotic applications, including industrial automation, autonomous mobile robots or AMRs, delivery robots. Our AI SoC evolves from providing perception, sensor fusion, and Edge AI processing to also offer decision-making and the full autonomy needed for real-time robotic awareness and action. This convergence of high-quality imaging and AI acceleration and edge autonomy running VLA models efficiently positions us as a key enabler of the broader physical AI and embodied AI ecosystems. As I mentioned earlier, our automotive business established an all-time quarterly revenue record in Q1 and is on pace to establish a new fiscal year record.

Speaker #4: As drones evolve from flying cameras into autonomous aerial robots, Ambarella's CV4 AI accelerator architecture allows manufacturers to deliver lower latency decision-making, improved latency, longer flight time, and more advanced autonomy at the edge.

Speaker #4: The robotics market is fragmented. We are realizing design wins across a variety of other robotic applications, including industrial automation, autonomous mobile robots—or AMRs—and delivery robots. Our AI SoC evolves from providing perception, sensor fusion, and edge AI processing to also offering decision-making and the full autonomy needed for real-time robotic awareness and action.

Fermi Wang: Our AI SoC evolves from providing perception, sensor fusion, and Edge AI processing to also offer decision-making and the full autonomy needed for real-time robotic awareness and action. This convergence of high-quality imaging and AI acceleration and edge autonomy running VLA models efficiently positions us as a key enabler of the broader physical AI and embodied AI ecosystems. As I mentioned earlier, our automotive business established an all-time quarterly revenue record in Q1 and is on pace to establish a new fiscal year record.

Speaker #4: This convergence of high-quality imaging, AI acceleration, and edge autonomy—running VRA models efficiently—positions us as a key enabler of the broader physical AI and embodied AI ecosystem.

Speaker #4: As I mentioned earlier, our automotive business established an all-time quarterly revenue record in Q1 and is on pace to establish a new fiscal year record.

Fermi Wang: Third-party research firms indicate global automotive product is expected to decline 1% to 2% this year. With semiconductor content per vehicle rising, market research firms also anticipate the automotive semiconductor market to grow 10% to 15% this year. We expect our automotive revenue growth to outpace these figures due to our success in commercial fleet telematics and safety applications. The commercial fleet telematics market offers continued and exciting growth prospects as there is an installed telematics base in excess of 100 million vehicles, growing around 10% CAGR, but only about 10% of this installed base is so far AI-enabled. We are aligned with industry AI telematics leaders who are also increasingly demanding AI SoCs that can take on not only more sensors, but more complex AI workloads. Our platform of 12-edge AI SoCs is very well-suited to help them scale in this market.

Speaker #4: Third-party research firms indicate global automotive products are expected to decline 1% to 2% this year. But with semiconductor content per vehicle rising, market research firms also anticipate the automotive semiconductor market to grow 10% to 15% this year.

Speaker #4: We expect our automotive revenue growth to outpace these figures due to our success in commercial fleet telematics and the safety of applications. The commercial fleet telematics market offers continued and exciting growth prospects, as there is an installed telematics base in excess of 100 million vehicles, growing around a 10% CAGR, but only about 10% of this installed base is so far AI-enabled.

Fermi Wang: The commercial fleet telematics market offers continued and exciting growth prospects as there is an installed telematics base in excess of 100 million vehicles, growing around 10% CAGR, but only about 10% of this installed base is so far AI-enabled. We are aligned with industry AI telematics leaders who are also increasingly demanding AI SoCs that can take on not only more sensors, but more complex AI workloads. Our platform of 12-edge AI SoCs is very well-suited to help them scale in this market.

Speaker #4: We are aligned with industry AI telematic leaders who are also increasingly demanding AI SoCs that can take on not only more sensors, but more complex AI workloads.

Speaker #4: And our platform of 12 edge AI SoCs is very well suited to help them scale in this market. I will also provide an update on the build-out of our indirect sales channel that we announced, to augment our existing direct-to-customer business.

Fermi Wang: I will also provide an update on the build-out of our indirect sales channel that we announced to augment our existing direct-to-customer business. The development of our indirect sales channel is important to not only help us address fragmented robotic market, but also to provide support for our emerging edge infrastructure business. We have already onboarded half a dozen ISVs in vertical industry like retail, industrial automation, transportation, healthcare, and smart cities since our launch of our developer zone at the CES in January, with more ISVs expected to be onboard by the end of this fiscal year.

Speaker #4: The development of our indirect sales channel is important not only to help us address the fragmented robotic market, but also to provide support for our emerging edge infrastructure business.

Speaker #4: We have already onboarded half a dozen ISVs in vertical industries like retail, industrial automation, transportation, healthcare, and smart cities since our launch of our Developer Zone at CES in January.

Fermi Wang: We have already onboarded half a dozen ISVs in vertical industry like retail, industrial automation, transportation, healthcare, and smart cities since our launch of our developer zone at the CES in January, with more ISVs expected to be onboard by the end of this fiscal year.

Speaker #4: With more ISVs expected to be onboarded by the end of this fiscal year. In March, for the first time ever, we had booths at Embedded World in Nuremberg, Germany, where we did live demonstrations highlighting how Ambarella AI SoC software stack and developer tools deliver a competitive advantage across a wide range of AI applications.

Fermi Wang: In March, for the first time ever, we have booth at Embedded World in Nuremberg, Germany, where we did live demonstrations highlighting how Ambarella AI SoC, software stack, and developer tools deliver a competitive advantage across a wide range of AI applications, from AI agentic automation and orchestration to Physical AI systems deployed in real-world environments. One of our existing design partners will demonstrate a real-time industrial quality inspection solution on CV72 and N1-655. Multiple new ISVs partners will present in our booth, including one who demonstrated retail AI solution for in-store and drive-thru optimization. Another ISV demonstrated continuous training for high-speed rail network, and the third demonstrating warehouse robot solutions. In March, we also hosted an invitation-only exhibition at ISC West showcasing how Edge AI is powering the next generation of intelligent security and Physical AI systems.

Speaker #4: From AI-agentic automation and orchestration to physical AI systems deployed in real-world environments. One of our existing design partners demonstrated a real-time industrial quality inspection solution on the CV72 and the N1655.

Fermi Wang: Multiple new ISVs partners will present in our booth, including one who demonstrated retail AI solution for in-store and drive-thru optimization. Another ISV demonstrated continuous training for high-speed rail network, and the third demonstrating warehouse robot solutions. In March, we also hosted an invitation-only exhibition at ISC West showcasing how Edge AI is powering the next generation of intelligent security and Physical AI systems.

Speaker #4: Multiple new ISV partners will present in our booth, including one who demonstrated a real retail AI solution for in-store and drive-through optimization. Another ISV demonstrated continuous training for high-speed rail networks, and the third demonstrated warehouse robot solutions.

Speaker #4: In March, we also hosted an invitation-only exhibition at ISC West, showcasing how edge AI is powering the next generation of intelligent security and physical AI systems.

Speaker #4: At the center of our exhibit was our newly launched CV7 edge AI vision SoC, delivering advanced imaging and on-device AI processing alongside the N1655 edge AI SoC, enabling edge infrastructure for low-power, high-performance enterprise security applications.

Fermi Wang: At the center of our exhibit was our newly launched CV7 AI vision SoC, delivering advanced imaging and on-device AI processing alongside the N1-655 AI SoC, enabling edge infrastructure for low-power, high-performance enterprise security applications. One of our ISP partners demonstrate a smart city security solution based on CV75 and N1-655 solution. I will now briefly summarize our representative customer engagement in Q1. It is notable for the first time, all of the example are based on our Edge AI SoC. Three from our CV2 family and eight from our new CV7x family. In the enterprise security, while physical security remains the principal driver of this market, we are seeing our customer develop AI application software that enable their product to provide operational efficiency to a business. Examples including predictive maintenance, supply chain optimization, and automated customer support.

Speaker #4: One of our ISP partners demonstrated a smart city security solution based on the CV75 and N1655 solution. I will now briefly summarize our represented customer engagement in Q1, and it is notable that, for the first time, all of the examples are based on our edge AI SoC.

Fermi Wang: It is notable for the first time, all of the example are based on our Edge AI SoC. Three from our CV2 family and eight from our new CV7x family. In the enterprise security, while physical security remains the principal driver of this market, we are seeing our customer develop AI application software that enable their product to provide operational efficiency to a business. Examples including predictive maintenance, supply chain optimization, and automated customer support.

Speaker #4: Three from our CV2 family and eight from our new CV7X family. In enterprise security, while physical security remains the principal driver of this market, we are seeing our customers develop AI application software that enables their products to provide operational efficiency to businesses.

Speaker #4: Examples include predictive maintenance, supply chain optimization, and automated customer support. We expect operational efficiency in the long run to become an important new growth offshoot of what we refer to as enterprise security today.

Fermi Wang: We expect operational efficiency in the long run become an important new growth offshoot of what we refer to as enterprise security today. In particular, as agentic AI is deployed at the edge. We achieved important milestone in March when i-PRO, formerly Panasonic, announced the first edge endpoint camera to run gen AI locally based on the transformer capability in our CV72 AI SoC. We also have the number of other CV75 and the CV72 wins in the quarter, including IDIS in South Korea, Axis in Sweden, now part of Canon, IQSIGHT, formerly Bosch, in Germany. With major communication equipment company in the Americas, notably, we had an additional CV72 win with Sepro in South Korea that also utilize our AI imaging signal processing software. We also won a CV22 platform with Sepro that had another CV5 win with the major communication equipment company in the Americas.

Speaker #4: In particular, as Gen AI and agentic AI are deployed at the edge, we achieved important milestones in March when April Foley formally, Panasonic announced the first edge endpoint camera to run Gen AI locally.

Speaker #4: Based on the transformer capability in our CV72 AI SoC, we also had a number of other CV75 and CV72 wins in the quarter, including IDAS in South Korea, AXIS in Sweden (now part of Canon), IQSight, formerly Bosch, in Germany, and with major communication equipment companies in the Americas. Notably, we had an additional CV72 win with Cipro in South Korea that also utilized our AI imaging signal processing software.

Fermi Wang: We also have the number of other CV75 and the CV72 wins in the quarter, including IDIS in South Korea, Axis in Sweden, now part of Canon, IQSIGHT, formerly Bosch, in Germany. With major communication equipment company in the Americas, notably, we had an additional CV72 win with Sepro in South Korea that also utilize our AI imaging signal processing software. We also won a CV22 platform with Sepro that had another CV5 win with the major communication equipment company in the Americas.

Speaker #4: We also won a CV22 platform with Cipro that had another CV5 win with a major communication equipment company in the Americas. In the industrial market, we earned another AI-based barcode reader project based on CV28.

Fermi Wang: In the industrial market, we earned another AI-based barcode reader project based on CV28, this time with Hanwha Vision with expanding his reach beyond the traditional physical security market. In the automotive market, our safety and the telematics customers engagement activity remains strong. For example, we are pleased to announce Lytx, an industry leader in the commercial and public sector telematics market, is designing CV75 and the CV72 into multiple platforms. For in-cabin pre-installed safety market, we have CV72 win with South Korean-based Tier 1, Yura, and a CV22FS win for Western OEM in China. Our new product momentum remains very strong, both in terms of fiscal 2027 revenue generation as well as new product that have not start to generate revenues. While our 10-nanometer CV2 family of Edge AI processor for CNN application continue to land design wins and grow.

Speaker #4: This time, with Hanwha Vision, we're expanding its reach beyond the traditional physical security market. In the automotive market, our safety and telematics customer engagement activity remains strong.

Speaker #4: For example, we are pleased to announce Lytx, an industry leader in the commercial and public sector telematics market, has designed in the CV75 and the CV72 into multiple platforms.

Speaker #4: For the in-cabin pre-installed safety market, we have a CV72 win with South Korean-based tier-one URA, and a CV22FS win for a Western OEM in China.

Fermi Wang: For in-cabin pre-installed safety market, we have CV72 win with South Korean-based Tier 1, Yura, and a CV22FS win for Western OEM in China. Our new product momentum remains very strong, both in terms of fiscal 2027 revenue generation as well as new product that have not start to generate revenues. While our 10-nanometer CV2 family of Edge AI processor for CNN application continue to land design wins and grow.

Speaker #4: Our new product momentum remains very strong, both in terms of physical products, revenue generation, as well as new products that have not started to generate revenues.

Speaker #4: While our 10-nanometer CV2 family of edge AI processors for CN applications continue to land design wins and grow, our new 5-nanometer CV75 and CV72 capable of both advanced CNN and the transformer-based Gen AI, as well as genetic AI, sorry, as well as agentic AI, are in a steep production ramp and are expected to drive material incremental revenue this year.

Fermi Wang: Our new 5-nanometer CV75 and CV72 capable both advanced CNN and the transformer-based gen AI, as well as genetic AI, Sorry, as well as agentic AI, are in a steep production ramp and are expected to drive material incremental revenue this year. Later on top of this, we continue to expect our new CV7 AI processor to enter production by the end of the year. In the H1 of fiscal 2028, or less than a year from now, we expect our two-nanometer CV8 AI SoC to commence production. All these new products I have described, as well as all the new unannounced AI SoCs we have in development, target more sophisticated AI workload and come in average ASP well above our currently $15 SoC ASP in Q1. As you can tell, we have a lot of technology product marketed and the customer development activity going.

Speaker #4: They are on top of this; we continue to expand our new CV7 AI processor to enter production by the end of the year. In the first half of fiscal 2028, or less than a year from now, we expect our 2-nanometer CV8 AI SoC to commence production.

Speaker #4: All of these new products that I have described, as well as all the new unannounced AI SoCs we have in development, are targeting more sophisticated AI workloads and come in at an average ASP well above our current $15 SoC ASP in Q1.

Fermi Wang: All these new products I have described, as well as all the new unannounced AI SoCs we have in development, target more sophisticated AI workload and come in average ASP well above our currently $15 SoC ASP in Q1. As you can tell, we have a lot of technology product marketed and the customer development activity going. I would like to summarize this quarter's call with three observations. First, the Edge AI market is just getting started, and the momentum is building in multiple areas.

Speaker #4: As you can tell, we have a lot of technology products marketed and the customer development activity going. I would like to summarize this quarter's call with three observations.

Fermi Wang: I would like to summarize this quarter's call with three observations. First, the Edge AI market is just getting started, and the momentum is building in multiple areas. Second, Ambarella is clearly an Edge AI technology platform and a product leader, and we are already well established. I think our positioning is getting even stronger as Edge AI workloads get more complex. There become fewer and fewer companies capable of integrating all the edge accelerated computing functions into a single chip. Third, customers are recognizing the first two points and now want to engage with us more broadly and more deeply. For example, LTA agreements can build stronger relationships and get us designed into new markets like robotics, while the indirect channel sales ecosystem brings us more scale.

Speaker #4: First, the edge AI market is just getting started and the momentum is building in multiple areas. Second, Ambarella is clearly an edge AI technology platform and the product leader and we are already well and we are already well established.

Fermi Wang: Second, Ambarella is clearly an Edge AI technology platform and a product leader, and we are already well established. I think our positioning is getting even stronger as Edge AI workloads get more complex. There become fewer and fewer companies capable of integrating all the edge accelerated computing functions into a single chip. Third, customers are recognizing the first two points and now want to engage with us more broadly and more deeply.

Speaker #4: I think our positioning is getting even stronger as edge AI workloads get more complex, and there become fewer and fewer companies capable of integrating all the edge-accelerated computing functions into a single chip.

Speaker #4: Third, customers are recognizing the first two points and now want to engage with us more broadly and more deeply. For example, LTA agreements can build stronger relationships and get us designed into new markets like robotics, while the indirect channel sales ecosystem brings us more scale.

Fermi Wang: For example, LTA agreements can build stronger relationships and get us designed into new markets like robotics, while the indirect channel sales ecosystem brings us more scale. In conclusion, as all this comes together, we intend to drive shareholder value with strong revenue growth and a more diversified and predictable financial models that offer material operating leverage potential for our shareholders. With that, John will now discuss our Q1 results and Q2 outlook in more detail. John?

Speaker #4: In conclusion, as all this comes together, we intend to drive shareholder value with strong revenue growth and more diversified and predictable financial models that offer material operating leverage potential for our shareholders.

Fermi Wang: In conclusion, as all this comes together, we intend to drive shareholder value with strong revenue growth and a more diversified and predictable financial models that offer material operating leverage potential for our shareholders. With that, John will now discuss our Q1 results and Q2 outlook in more detail. John?

Speaker #4: With that, John will now discuss our Q1 results and Q2 outlook in more detail. John?

Speaker #2: Thank you, Ferming. I'll now review the financial highlights for the first quarter of fiscal year 2027, ending April 30, 2026. I will also provide a financial outlook for our second quarter of fiscal year 2027, ending July 31, 2026.

John Young: Thank you, Fermi. I'll now review the financial highlights for the Q1 fiscal year 2027 ending 30 April 2026. I will also provide a financial outlook for our Q2 of fiscal year 2027 ending 31 July 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 Q1, revenue was $100.4 million, slightly above the midpoint of our prior guidance range of $97 to $103 million, down 0.5% from the prior quarter and up 16.9% year over year. On a sequential basis, automotive revenue driven by commercial vehicles experienced a strong above seasonal double-digit percent increase while IoT revenue was seasonally down.

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 Q1, revenue was $100.4 million, slightly above the midpoint of our prior guidance range of $97 to $103 million. This is down 0.5% from the prior quarter and up 16.9% year over year.

John Young: For fiscal Q1, revenue was $100.4 million, slightly above the midpoint of our prior guidance range of $97 to $103 million, down 0.5% from the prior quarter and up 16.9% year over year. On a sequential basis, automotive revenue driven by commercial vehicles experienced a strong above seasonal double-digit percent increase while IoT revenue was seasonally down. Non-GAAP gross margin for fiscal Q1 was 59.9%, slightly above the midpoint of our prior guidance range of 59% to 60.5%.

Speaker #2: On a sequential basis, automotive revenue driven by commercial vehicles experienced a strong, above-seasonal, double-digit percent increase, while IoT revenue was seasonally down. Non-GAAP gross margin for fiscal Q1 was 59.9%, slightly above the midpoint of our prior guidance range of 59% to 60.5%.

John Young: Non-GAAP gross margin for fiscal Q1 was 59.9%, slightly above the midpoint of our prior guidance range of 59% to 60.5%. Non-GAAP operating expense in Q1 was $56.4 million, slightly below the midpoint of our prior guidance range of $55 to $58 million. Q1 net interest and other income was $2.1 million. Q1 non-GAAP tax provision was approximately $740,000. We reported a non-GAAP net profit of $5 million, or $0.11 per diluted share in Q1. Now I'll turn to our balance sheet and cash flow. Fiscal Q1 cash and marketable securities were $277.8 million, decreasing $34.8 million from the prior quarter, but increasing $18.4 million from the same quarter a year ago. The sequential decrease in cash and marketable securities was primarily due to an increase in our inventory levels to better service our customers in the face of a number of new product cycles.

John Young: Non-GAAP operating expense in Q1 was $56.4 million, slightly below the midpoint of our prior guidance range of $55 to $58 million. Q1 net interest and other income was $2.1 million. Q1 non-GAAP tax provision was approximately $740,000. We reported a non-GAAP net profit of $5 million, or $0.11 per diluted share in Q1. Now I'll turn to our balance sheet and cash flow. Fiscal Q1 cash and marketable securities were $277.8 million, decreasing $34.8 million from the prior quarter, but increasing $18.4 million from the same quarter a year ago.

Speaker #2: Non-GAAP operating expense in Q1 was $56.4 million, slightly below the midpoint of our prior guidance range of $55 million to $58 million. Q1 net interest and other income was $2.1 million.

Speaker #2: Q1 non-GAAP tax provision was approximately $740,000. We reported a non-GAAP net profit of $5 million, or $0.11 per diluted share, in Q1.

Speaker #2: Now I'll turn to our balance sheet and cash flow. Fiscal Q1 cash and marketable securities were $277.8 million, decreasing $34.8 million from the prior quarter, but increasing $18.4 million from the same quarter a year ago.

Speaker #2: The sequential decrease in cash and marketable securities was primarily due to an increase in our inventory levels to better service our customers in the face of a number of new product cycles.

John Young: The sequential decrease in cash and marketable securities was primarily due to an increase in our inventory levels to better service our customers in the face of a number of new product cycles. Receivables days sales outstanding of 35 in Q1 was flat with the prior quarter, while days of inventory increased from 99 to 145 days. Operating cash outflow was $25.6 million for the quarter. Capital expenditures for tangible and intangible assets were $4 million for the quarter. Free cash outflow was $29.6 million for the quarter.

Speaker #2: Receivables days sales outstanding of 35 in Q1 was flat with the prior quarter, while days of inventory increased from 99 to 145 days. Operating cash outflow was $25.6 million for the quarter.

John Young: Receivables days sales outstanding of 35 in Q1 was flat with the prior quarter, while days of inventory increased from 99 to 145 days. Operating cash outflow was $25.6 million for the quarter. Capital expenditures for tangible and intangible assets were $4 million for the quarter. Free cash outflow was $29.6 million for the quarter. During the Q1 fiscal year 2027, we repurchased 47,798 shares of our stock for total consideration of $2.4 million, or an average price of $51.04 per share. During the Q2 fiscal quarter, Ambarella's Board of Directors authorized a new $50 million repurchase program valid through 30 June 2027, replacing the program that expires on 30 June 2026. The repurchase program does not obligate the company to acquire any particular amount of ordinary shares, and it may be suspended at any time at the company's discretion.

Speaker #2: Capital expenditures for tangible and intangible assets were 4 million dollars for the quarter. Free cash outflow was 29.6 million dollars for the quarter. During the first quarter of fiscal year 2027, we repurchased 47,798 shares of our stock for total consideration of 2.4 million dollars, or an average price of 51 dollars and 4 cents per share.

John Young: During the Q1 fiscal year 2027, we repurchased 47,798 shares of our stock for total consideration of $2.4 million, or an average price of $51.04 per share. During the Q2 fiscal quarter, Ambarella's Board of Directors authorized a new $50 million repurchase program valid through 30 June 2027, replacing the program that expires on 30 June 2026. The repurchase program does not obligate the company to acquire any particular amount of ordinary shares, and it may be suspended at any time at the company's discretion.

Speaker #2: During the second fiscal quarter, Ambarella's board of directors authorized a new $50 million repurchase program, valid through June 30, 2027, replacing the program that expires on June 30, 2026.

Speaker #2: The repurchase program does not obligate the company to acquire any particular amount of ordinary shares, and it may be suspended at any time at the company's discretion.

Speaker #2: 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 60.7% of revenue for the first quarter.

John Young: 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 60.7% of revenue for Q1. I'll now discuss the outlook for Q2 of fiscal year 2027. We forecast a seasonally strong fiscal Q2, with revenue in the range of $105 to 111 million, or $108 million at the midpoint. Sequentially, both auto and IoT revenue are expected to increase, with growth in both consumer and CapEx-driven markets. We expect fiscal Q2 non-GAAP gross margin to be in the range of 59% to 60.5%. We expect non-GAAP OpEx in Q2 to be in the range of $56 to 59 million.

Speaker #2: I'll now discuss the outlook for the second quarter of fiscal year 2027. We forecast a seasonally strong fiscal second quarter with revenue in the range of $105 to $111 million, or $108 million at the midpoint.

Speaker #2: Sequentially, both auto and IoT revenue are expected to increase with growth in both consumer and CapEx-driven markets. We expect fiscal Q2 non-GAAP gross margin to be in the range of 59 to 60.5 percent.

John Young: We expect fiscal Q2 non-GAAP gross margin to be in the range of 59% to 60.5%. We expect non-GAAP OpEx in Q2 to be in the range of $56 to 59 million. We estimate net interest and other income to be approximately $1.9 million, our non-GAAP tax expense to be approximately $800,000, and our diluted share count to be approximately 44.3 million shares. Thank you for joining our call today. With that, I will turn the call over to the operator for questions.

Speaker #2: We expect non-GAAP OpEx in the second quarter to be in the range of $56 million to $59 million. We estimate net interest and other income to be approximately $1.9 million, our non-GAAP tax expense to be approximately $800,000, and our diluted share count to be approximately 44.3 million shares.

John Young: We estimate net interest and other income to be approximately $1.9 million, our non-GAAP tax expense to be approximately $800,000, and our diluted share count to be approximately 44.3 million shares. Thank you for joining our call today. With that, I will turn the call over to the operator for questions.

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

Speaker #3: Thank you so much. As a reminder, if you do have a question, please press *11 on your telephone and wait for your name to be announced.

Operator: Thank you so much. As a reminder, if you do have a question, please press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. Our first question is from Ross Seymore with Deutsche Bank. Please proceed.

Speaker #3: To remove yourself, press star 11 again. Our first question is from Ross Seymour with Deutsche Bank. Please proceed.

Speaker #4: Hi, guys. Thanks for letting me ask a question. You mentioned earlier about the auto side growing faster than the end market itself. I think you said that end market would be 10% to 15%.

Ross Seymore: Hi, guys. Thanks for letting me ask a question. You mentioned earlier about the auto side growing faster than the end market itself. I think you said that end market would be 10% to 15%. In the past, you've given full year fiscal year revenue guidance. I think you said 10% to 15% on your last call. How are you thinking about that for this year now?

Speaker #4: In the past, you've given full-year fiscal revenue guidance. I think you said 10% to 15% on your last call. How are you thinking about that for this year now?

Fermi Wang: Oh, yeah. I think for the whole year, we're still thinking it's probably 10% to 15%. We're not changing that. The automotive is stronger, grows faster than the other market.

Speaker #5: Oh, yeah. I think for the whole year, we're still thinking it's probably 10% to 15%. We're not changing that. And the automotive is stronger, grows faster than the other market.

Speaker #4: Okay. And then on the DLTA side of things—and maybe the one that you announced tonight in the 8-K, with the $800 million over time—but more conceptually, how are you thinking about those?

Ross Seymore: Okay. On the LTA side of things and maybe the one that you announced tonight in the 8-K with the $800 million over time, more conceptually, how are you thinking about those? Are they going to be guaranteed revenues? I think you said the word potential revenue. How do we build that into the estimates as we think forward for the company?

Speaker #4: Are they going to be guaranteed revenues? I think you said the word "potential revenue." How do we build that into the estimates as we think forward for the company?

Speaker #5: Right. First of all, we already have a runway with Hanwha for the last 15 years, and we know we only take a percentage of their current market share.

Fermi Wang: Right. First of all, we already have a run rate with Hanwha for the last 15 years, we know we only take a percentage of their current market share. We expect with this LTA, we're going to gain market share on their annual run rate as well as this is a multi-generational commitment on both sides so we're going to talk about at least two generations of silicon that will be co-developed between these two companies. I think from that point of view, we believe that it's a long period of time of commitment as well as getting market shares from Hanwha. At the same time, if you look at our current ASP, although our corporate ASP is $15, but our CV ASP is a lot higher than that. If you put all the things together, that's how we calculate this potential $800 million.

Speaker #5: So we expect with this LTA, we're going to gain market share on their annual run rate, as well as, this is a multi-generational commitment on both sides.

Speaker #5: So, this is—so we're going to talk about at least two generations of silicon that will be co-developed between these two companies. So, I think from that point of view, we believe that it's a long period of time of commitment, as well as getting market shares from Hanwha.

Speaker #5: But at the same time, if you look at our current ASP, although our corporate ASP is $15 per hour, CV ASP is a lot higher than that.

Fermi Wang: At the same time, if you look at our current ASP, although our corporate ASP is $15, but our CV ASP is a lot higher than that. If you put all the things together, that's how we calculate this potential $800 million.

Speaker #5: So if you calculate, put all the things together, that's how we calculate this potential $800 million.

Speaker #4: Yeah, Ross, just a little background on Hanwha. It's a major multinational conglomerate with more than 60 billion in annual revenue. It's involved in aerospace, defense, robotics, physical security, life sciences, industrial, ocean solutions, chemicals, a lot of different things.

Louis Gerhardy: Yeah, Ross, just a little background on Hanwha. It's a major multinational conglomerate with more than $60 billion in annual revenue. It's involved in aerospace, defense, robotics, physical security, life sciences, industrial, ocean solutions, chemicals, a lot of different things, retail services. An important part of this relationship in the intermediate to long term is moving beyond what has just been the physical security relationship that Fermi described as our current run rate. We can gain share on that business, but at the same time, the press release talks about, in addition to physical security, things like operational automation, life sciences, robotics, other industrial markets. That's another very important angle of this relationship.

Speaker #4: Retail services, and so an important part of this relationship and the intermediate to long term is moving beyond what has just been the physical security relationship that Fermi described as our current run rate.

Speaker #4: So we can gain share on that business, but at the same time, the press release talks about in addition to physical security, things like operational automation, life sciences, robotics, other industrial markets, that's another very important angle of this relationship.

Louis Gerhardy: We can gain share on that business, but at the same time, the press release talks about, in addition to physical security, things like operational automation, life sciences, robotics, other industrial markets. That's another very important angle of this relationship.

Ross Seymore: Great. Thank you.

Speaker #4: Great. Thank you.

Speaker #3: Thank you. One moment for our next question. It comes from Toris Bamberg with Stifel. Please proceed.

Operator: Thank you. One moment for our next question. It comes from Tore Svanberg with Stifel. Please proceed.

Tore Svanberg: Yes. Thank you. Maybe a question to follow up on the LTA and not the Hanwha one specifically, but how should we think about these sort of folding in here over the next few years? Obviously, these could be quite large. I'm sure you can't say yes to all of them. Is there also going to be potentially some OpEx sharing with some of these customers that you sign LTAs with? Any more color you could offer us as far as how we should think about the magnitude and how it's going to be funded over the next few years? Thank you.

Speaker #5: Yes. Thank you. Maybe a question to follow up on the LTA and not the Hanwha one specifically, but how should we think about these sort of folding in here over the next few years?

Speaker #5: Obviously, these could be quite large. I'm sure you can't say yes to all of them. Is there also going to be potentially some OpEx sharing with some of these customers that you sign LTAs with?

Speaker #5: Any more color you could offer us as far as how we should think about the magnitude and how it's going to be funded over the next few years?

Speaker #5: Thank you. So first of all, I think I want to go a little higher level on saying a lot of the most of LTA discussion is based on two things.

Fermi Wang: First of all, I think I want to go a little higher level in saying most of LTA discussion is based on two things. One is really when you look at all the fast AI trend and our customer continue to look at the new AI model they've implement, higher performance require lower power efficiency. To meet this kind of AI demand, while for the most Edge AI application, power efficiency is probably the most important thing. It's getting harder and harder to build a platform of silicon that can address all of these new applications. I think that trend really help our customers think about how to partner with somebody that can build a platform of a silicon that can help them not only on the enterprise security, but also other associated market they are trying to address.

Speaker #5: One is really, when you look at all the fast AI trends and our customers continue to look at the new AI models they've implemented—higher performance requirements, lower power efficiency.

Speaker #5: So to meet this kind of AI demand while for the most AGI application, power efficiency is probably the most important thing. So it's getting harder and harder to build a platform of silicon that can address all of these new applications.

Speaker #5: So I think that trend really helps our customers think about how to partner with somebody that can build a platform of silicon that can help them not only on enterprise security but also other associated markets they are trying to address.

Fermi Wang: I think that trend really help our customers think about how to partner with somebody that can build a platform of a silicon that can help them not only on the enterprise security, but also other associated market they are trying to address. I think that's probably how the LTA started. In this kind of LTA, most of the discussion will involve NRE, but also will develop a product mutually beneficial, right?

Speaker #5: I think that's probably how the LTA started. And in this kind of LTA, most of the discussion will involve NIE, but also will develop a product that's mutually beneficial, right?

Fermi Wang: I think that's probably how the LTA started. In this kind of LTA, most of the discussion will involve NRE, but also will develop a product mutually beneficial, right? I think those are two things that we definitely want to make sure that we develop a software platform that can go across our current silicon platform that offer a complete roadmap to our customer. In exchange, they were willing to help us to fund those platform with NRE, particularly not only on the silicon side, but also on the software side.

Speaker #5: So I think those are two things that we definitely want to make sure—that we develop a software platform that can go across our current silicon platform that offers a complete roadmap to our customer.

Fermi Wang: I think those are two things that we definitely want to make sure that we develop a software platform that can go across our current silicon platform that offer a complete roadmap to our customer. In exchange, they were willing to help us to fund those platform with NRE, particularly not only on the silicon side, but also on the software side.

Speaker #5: And in exchange, they are willing to help us to fund those platforms with NIE, particularly not only on the silicon side, but also on the software side.

Tore Svanberg: That's very helpful. That was my follow-up, and maybe related to that platform approach, Fermi. Just thinking about the competitive landscape. Obviously, there's big processor companies, there's obviously analog companies and so on and so forth, but how flexible can your software platform really be? Because obviously the use cases at the edge are going to be quite different from use case to use case. Thank you.

Speaker #4: That's very helpful, and that was my follow-up. Maybe related to that platform approach, Fermi, just thinking about the competitive landscape—obviously, there are big processor companies, there are analog companies, and so on and so forth.

Speaker #4: But how flexible can your software platform really be? Because obviously, the use cases at the edge are going to be quite different from use case to use case.

Speaker #4: Thank you.

Speaker #5: Yeah. So I think our unique architecture you remember that we have been talking about algorithm first. So our let's say code how we accelerate our image processing and our CV flow AI accelerator has been really passed many battles and been proved to our customer.

Fermi Wang: Yeah. I think our unique architecture, you remember that we have been talking about algorithm first. Let's say, call it how we accelerator our image processing and our CVflow AI accelerator has been really passed many battles and have been proved to our customer is not only power efficient, but also programmable enough to adapt to many different applications, different AI models. For example, we just talk about our CVflow architecture can do 200 different model architecture, not 200 models. We're talking about 200 model architectures, we took all of them into production. Just show you how flexible our accelerator is. More importantly, with the latest agentic AI approach, you need to integrate everything together, including not only the ISV and the CVflow or MPAC encode, H.264 encoder.

Speaker #5: It's not only power efficient, but also programmable enough to adapt to many different applications, different AI models. For example, we just talked about our CVflow architecture; it can do 200 different AI—sorry, model architectures, not 200 models.

Fermi Wang: We're talking about 200 model architectures, we took all of them into production. Just show you how flexible our accelerator is. More importantly, with the latest agentic AI approach, you need to integrate everything together, including not only the ISV and the CVflow or MPAC encode, H.264 encoder. On top of that, you need to integrate a complete SoC for CPU and also IO and DRAM activity to provide very not only power efficient, but also cost-efficient solution to our customer.

Speaker #5: We're talking about 200 model architectures, and we took all of them into production—just to show you how flexible our accelerator is. But more importantly, with the latest agentic AI approach, you need to integrate everything together.

Speaker #5: So that includes not only the ISV and the CV flow or impact in code, H2C for encoder. On top of that, you need to integrate the complete SoC for CPU, and also I/O and DRAM activity to provide not only a power-efficient, but also a cost-efficient solution to our customers.

Fermi Wang: On top of that, you need to integrate a complete SoC for CPU and also IO and DRAM activity to provide very not only power efficient, but also cost-efficient solution to our customer. That's where we are basically having a reputation to deliver those kind of products consistently in the last 20 years. When we look at the competitive landscape, we see NVIDIA, we see Qualcomm, obviously. I really don't see any other people coming out with, one, a complete silicon platform that we have 12 Edge AI SoC can go from very low performance to few hundred TOPS performance with power efficiency. On top of that, all the silicon was covered by one unified software development SDK that our customer, if they develop one product on one SoC, can easily go to different SoC, providing a different price or performance point on their product platform.

Speaker #5: So that's where we are, basically having a reputation for delivering those kinds of products consistently over the last 20 years. And when we look at the competitive landscape, we see NVIDIA, we see Qualcomm, obviously.

Fermi Wang: That's where we are basically having a reputation to deliver those kind of products consistently in the last 20 years. When we look at the competitive landscape, we see NVIDIA, we see Qualcomm, obviously. I really don't see any other people coming out with, one, a complete silicon platform that we have 12 Edge AI SoC can go from very low performance to few hundred TOPS performance with power efficiency.

Speaker #5: But I really don't see any other people coming out with one, a complete silicon platform that we have 12 AGI SOC can go from very low performance to a few hundred top performance with power efficiency.

Fermi Wang: On top of that, all the silicon was covered by one unified software development SDK that our customer, if they develop one product on one SoC, can easily go to different SoC, providing a different price or performance point on their product platform. This kind of flexibility and the width of our product format, I don't think there are many people can match.

Speaker #5: On top of that, all the silicon was covered by one unified software development SDK so that our customer, if they develop one product on one SoC, can easily go to a different SoC, providing a different price or performance point on their product platform.

Fermi Wang: This kind of flexibility and the width of our product format, I don't think there are many people can match.

Speaker #5: And this kind of flexibility and the width of our product format, I don't think there are many people can match.

Tore Svanberg: That's great, Carl. Thank you.

Speaker #4: That's great, Carla. Thank you.

Speaker #3: Thank you. One moment for our next question, please. It comes from the line of Quinn Bolton with Needham and Company. Please proceed.

Operator: Thank you. One moment for our next question, please. It comes from the line of Quinn Bolton with Needham & Company. Please proceed.

Speaker #4: Hey, guys. Thanks for taking my question. I guess I wanted to follow up further on the Hanwha LCA in the press release. It talked about an internal SOC that Hanwha continues to design.

Quinn Bolton: Hey, guys. Thanks for taking my question. I guess I wanted to follow up, Fermi, on the Hanwha LCA. In the press release, it talked about the internal SoC that Hanwha continues to design. I wonder, it sounds like you're co-designing multiple generations of chips. Is there an opportunity to get a bigger percentage of share away from that internal SoC, or you think that internal SoC continues to hold a portion of Hanwha's requirements? I've got a follow-up.

Speaker #4: And so I wonder it sounds like your co-designing multiple generations of chips is there an opportunity to get a bigger percentage of share away from that internal SOC, or do you think that internal SOC continues to hold a portion of Hanwha's requirements?

Speaker #4: And then I've got a follow-up.

Fermi Wang: I think it's a mutual intention that they're going to use more of this co-developed platform into more product lines. We fully expect we're getting more market share from Hanwha with this new development.

Speaker #5: I think it's a mutual intention that they're going to use more of this co-developed platform in more product lines, so we fully expect we're getting more market share from Hanwha with this new development.

Speaker #4: Excellent. And then, Fermi, you guys have talked about the fleet telematics market for a number of years, and it feels like it may finally be starting to inflect. On the script, you mentioned an installed base of over 100 million units, with less than 10% of that being AI.

Quinn Bolton: Excellent. Fermi, you guys have talked about the fleet telematics market for a number of years, and it feels like it may finally be starting to inflect. On the script, you mentioned an installed base of over 100 million units, with less than 10 of that being AI. What do you think is driving the inflection? Is there anything you can point to in particular that's driving the pretty strong growth here in the Q1 and Q2?

Speaker #4: But what do you think is driving the inflection? Is there anything you can point to in particular that's driving the pretty strong growth here in the first and second quarter?

Speaker #5: Yeah. Hey, Quinn. It's Louis. Just in terms of the market opportunity for telematics, there are about 100 million subscribers. And third-party research firms like ABI or Gartner see it growing maybe 10% CAGR.

Louis Gerhardy: Yeah. Hey, Quinn, it's Louis. Just in terms of the market opportunity, telematics, there's about 100 million subscribers. Third-party research firms like ABI or Gartner see it growing maybe 10% CAGR. Within that 100 million subscriber base, maybe only 15% to 20% of the market is using AI and AI video as an additional ARPU-generating feature in their platforms. What you have is the overall telematics market growing. You've got AI video growing into that, and at the same time, there's demand for more sophisticated AI workloads and multiple sensors, which is causing our ASP, the demand for more sophisticated Edge AI chips to go up. Those are the dynamics that we're facing, and we're doing a very good job with share. For example, this quarter, we announced Lytx, as Fermi mentioned, multiple platforms with CV72, CV75, which is one of the leaders of this market.

Speaker #5: Within that 100 million subscriber base, maybe only 15, 20 percent of the market is using AI and AI video. As an additional ARPU-generating feature, in their platforms, and so what you have is the overall telematics market growing you've got AI video growing into that.

Louis Gerhardy: You've got AI video growing into that, and at the same time, there's demand for more sophisticated AI workloads and multiple sensors, which is causing our ASP, the demand for more sophisticated Edge AI chips to go up. Those are the dynamics that we're facing, and we're doing a very good job with share. For example, this quarter, we announced Lytx, as Fermi mentioned, multiple platforms with CV72, CV75, which is one of the leaders of this market. Any follow-ups on that?

Speaker #5: And at the same time, there's demand for more sophisticated AI workloads and multiple sensors, which is causing our ASP—the demand for more sophisticated edge AI chips—to go up.

Speaker #5: So those are the dynamics that we're facing. And we're doing very good job with share, for example, this quarter. We announced Lytics as Fermi mentioned, multiple platforms with CV72, CV75, which is one of the leaders of this market.

Speaker #5: So any follow-ups on that?

Louis Gerhardy: Any follow-ups on that?

Quinn Bolton: No, that's great. Thank you, Louis. Thank you, Fermi.

Speaker #4: No, that's great. Thank you, Louis. Thank you, Fermi.

Fermi Wang: Sure.

Louis Gerhardy: Sure.

Speaker #5: Sure.

Speaker #3: Thank you. Our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed.

Operator: Thank you. Our next question comes from the line of Joseph Moore with Morgan Stanley. Please proceed.

Speaker #6: Yes. Thank you. I wonder if you could talk about are you guys impacted at all by shortages of DRAM or storage in any of the surveillance markets or consumer markets?

Joseph Moore: Yes. Thank you. I wonder if you could talk about, are you guys impacted at all by shortages of DRAM or storage in any of the surveillance markets or consumer markets? Just you seeing any impact from any of that?

Joe Moore: Yes. Thank you. I wonder if you could talk about, are you guys impacted at all by shortages of DRAM or storage in any of the surveillance markets or consumer markets? Just you seeing any impact from any of that?

Speaker #6: Just you seeing any impact from any of that?

Speaker #5: Yeah. So first of all, obviously, just like everybody else, we are impacted—but not directly. We are impacted indirectly. In the last quarter, when we talk about this, we definitely talk about our customer facing much higher DRAM price and flash price, as well as potential shortage in the second half.

Fermi Wang: First of all, obviously, just like everybody else, we are impacted, but not directly. We are impacted indirectly. In the last quarter, when we talk about this, we definitely talk about our customer facing much higher DRAM price and the flash price, as well as potential shortage in the second half. That situation didn't change. The biggest direct impact to us is most of our customer are handling this DRAM shortage by doing, first of all, they are trying to source different DRAM supplier or to cut down the DRAM utilization per product, or basically how to optimize the DRAM utilization in a chip so that they can use a smaller DRAM size. All those activity require we put in our FAE support to help our customer. We're happy to do that because that's definitely something we need to do to help our customer.

Speaker #5: So, that situation didn't change. The biggest direct impact to us is that most of our customers are handling this DRAM shortage by, first of all, trying to source different DRAM suppliers or to cut down the DRAM utilization per product—basically, trying to optimize the DRAM utilization in the chip so that they can use a smaller DRAM size.

Fermi Wang: The biggest direct impact to us is most of our customer are handling this DRAM shortage by doing, first of all, they are trying to source different DRAM supplier or to cut down the DRAM utilization per product, or basically how to optimize the DRAM utilization in a chip so that they can use a smaller DRAM size. All those activity require we put in our FAE support to help our customer. We're happy to do that because that's definitely something we need to do to help our customer.

Speaker #5: And all those activities require we putting our FAE support to help our customers. We're happy to do that because that's definitely something we need to do to help our customers by the same time, I think that's probably the biggest direct impact to us on the engineering resource requirement.

Fermi Wang: At the same time, I think that's probably the biggest direct impact to us on the engineering resource requirement.

Speaker #4: Okay, thank you. And then as a follow-up, the inventory—you sort of described it as supporting product ramps, but it was a pretty big increase.

Joseph Moore: Okay. Thank you. As a follow-up, the inventory, you sort of described it supporting product ramps, but it was a pretty big increase. Can you give us any more color, make us feel comfortable with that amount of inventory build? Thank you.

Joe Moore: Okay. Thank you. As a follow-up, the inventory, you sort of described it supporting product ramps, but it was a pretty big increase. Can you give us any more color, make us feel comfortable with that amount of inventory build? Thank you.

Speaker #4: Can you give us any more color? Make us feel comfortable with that amount of inventory built. Thank you.

Speaker #7: Hi, Joe. Yeah. I mean, if you look back in the last couple of quarters, we were running kind of lean. And over the last few quarters, we have looked at kind of the opportunities that are coming to us with the strong growth that we had last year.

John Young: Hi, Joe. Yeah. If you look back in the last couple of quarters, we were running kind of lean. Over the last few quarters, we have looked at kind of the opportunities that are coming to us. With the strong growth that we had last year, we wanted to position ourselves in the right product categories to be able to continue to serve our customers. Going from a fairly low number of days of inventory at points in last year, we wanted to build a bit of inventory heading into this year to be able to do that.

Speaker #7: And we wanted to position ourselves in the right product categories to be able to continue to serve our customers. So, going from a fairly low number of days of inventory at points in last year, we wanted to build a bit of inventory heading into this year to be able to do that.

Speaker #5: And Joe, is Fermi just want to add another color on this? Samsung has officially informed us that their supply is getting tighter. Obviously, we have secured our supply, but we feel that's prudent for us to build up a little inventory just in case we run into a different supply issue.

Fermi Wang: Joe, just for me, just want to add another color on this. Senso has officially informed us that their supply is getting tighter. Obviously, we have secured our supply, but we feel that it is prudent for us to build up a little inventory just in case we run into a different supply issue. From that point of view, I think you also heard that supply chain become a problem for everybody. We just try to be prudent to build up some inventory just in case.

Speaker #5: So from that point of view, I think you also heard that the supply chain has become a problem for everybody. We just try to be prudent and build up some inventory, just in case.

Speaker #4: Makes sense. Thank you so much.

Joseph Moore: Makes sense. Thank you so much.

Joe Moore: Makes sense. Thank you so much.

Speaker #3: Thank you. Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Please proceed.

Operator: Thank you. Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Please proceed.

Speaker #8: Hi, thanks for taking my question, and congratulations on all the great progress. Along those lines, you're building out the indirect sales channel. I think you mentioned six groups hired.

Kevin Cassidy: Hi, thanks for taking my question, and congratulations on all the great progress. Along those lines, you're building out the indirect sales channel. I think you mentioned six groups hired. Maybe if you could describe these a little better geographically, and then also, do they have application engineers? Yeah, I'll just stop with those questions.

Speaker #8: Do these—maybe if you could describe these a little better geographically? And then also, do they have application engineers? Yeah, I'll just stop with that, those questions.

Speaker #5: Right. So, first of all, there are many in the United States right now, obviously, but we are definitely trying to go to Japan and Europe to expand our ISV.

Fermi Wang: Right. First of all, there are many in the United States right now, obviously, but we are definitely trying to go to Japan and Europe to expand the ISV, but today, all six of them are US-based. In terms of size of those ISVs, it's really from large to small, but more importantly, it's really about what's their current engagement with the end customer. We're looking at ISV can add value, can easily pull their software onto our platform, and so they can go to their existing customer with our solution. Those are ISV we're engaging, and more importantly, they are really enabling applications that we have not touched in the past. Overall, from that point of view, we are happy with the progress that we made in a short period of time since we announced this at CES.

Speaker #5: But today, all six of them are US-based. In terms of the size of those ISVs, it's really from large to small. But more importantly, it's really what's their current engagement with the end customer.

Speaker #5: We're looking at ISVs who can add value, can easily pull their software onto our platform, and so they can go to their existing customers with our solution.

Speaker #5: So, those ISVs are engaging. And more importantly, they are really enabling applications that we have not touched in the past. So overall, from that point of view, we are happy with the progress that we have made in a short period of time since we announced this at CES.

Fermi Wang: Those are ISV we're engaging, and more importantly, they are really enabling applications that we have not touched in the past. Overall, from that point of view, we are happy with the progress that we made in a short period of time since we announced this at CES. I think six of them is just a beginning. I think our goal is to double that in this year, and hopefully we can continue to build on momentum based on that.

Speaker #5: But I think six of them is just a beginning. I think our goal is to double that this year, and hopefully we can continue to build our momentum based on that.

Fermi Wang: I think six of them is just a beginning. I think our goal is to double that in this year, and hopefully we can continue to build on momentum based on that.

Speaker #8: Yeah. Kevin, it's Lewis. In addition, for this indirect effort, in addition to the ISVs we just talked about, there's significant effort building out channel partners and even system integrators as part of this effort.

Louis Gerhardy: Yeah, Kevin, it's Louis. In addition for this indirect effort, in addition to the ISVs we just talked about, there's significant effort building out channel partners and even system integrators as part of this effort. This is really important to help us serve markets like edge infrastructure that need a lot of technical support or very fragmented markets like robotics. A lot of efforts going into the ISV channel partners and even system integrators.

Speaker #8: And this is really important to help us serve markets like edge infrastructure that need a lot of technical support or very fragmented markets like robotics.

Speaker #8: So a lot of efforts going into the ISV channel partners and even system integrators.

Speaker #2: Okay, great. Yeah, that was going to be part of my follow-up question—of how much of a, I hate to use the term, but a cookie-cutter approach can it be? That someone can go in with a lot of the solution already and help out a customer?

Kevin Cassidy: Okay, great. That was going to be part of my follow-up question of how much of a, I hate to use the term, but the cookie cutter approach can it be that someone can go in with a lot of the solution already and help out a customer. Is that the idea?

Speaker #2: Is that the idea?

Louis Gerhardy: Yeah. You might have multiple ISVs working on one project. If I understood the question right, it's not just always something right off the shelf, cookie cutter, as you said, but you might have ISVs, you might have channel partners, and you might have system integrators all involved on one project. I think it's pretty far from being cookie cutter. It's very sophisticated software. As these workloads get more complex, you need that whole indirect ecosystem to play a role in many of these designs we're pursuing.

Speaker #5: Yeah.

Speaker #6: Yeah. You might have multiple ISVs working on one project. So if I understood the question right, it's not just always something right off the shelf.

Speaker #6: Cookie-cutter, as you said. But you might have ISVs. You might have channel partners, and you might have system integrators all involved on one project.

Speaker #6: So, I think it's pretty far from being cookie-cutter. It's very sophisticated software. As these workloads get more complex, you need that whole indirect ecosystem to play a role in many of these designs we're pursuing.

John Young: Kevin, just to add, part of the decision-making, engaging with some of these ISVs is seeing the expertise that they have in different verticals. Some of them have expertise across multiple verticals, it's really trying to take a holistic approach to that engagement and cover as many verticals as we can with folks who specialize.

Speaker #7: And, Kevin, just to add, part of the decision-making in engaging with some of these ISVs is seeing the expertise that they have in different verticals.

Speaker #7: And some of these, some of them have expertise across multiple verticals. So, it's really trying to take a holistic approach to that engagement and cover as many verticals as we can with folks who specialize.

Kevin Cassidy: Okay, great. Thank you.

Speaker #2: Okay. Great. Thank you.

Speaker #3: Thank you. Our next question comes from the line of Christopher Rolland with Susquehanna. Please proceed.

Operator: Thank you. Our next question comes from the line of Christopher Rolland with Susquehanna. Please proceed.

Speaker #6: Thanks so much for the question, guys. My question is I think a few quarters ago, you talked about doing some infrastructure. Putting your chips basically into servers.

Christopher Rolland: Thanks so much for the question, guys. My question is, I think a few quarters ago, you talked about doing some infrastructure, putting your chips basically into servers. I think it was for security camera applications, but potentially other. Have you had any other further engagements there on the infrastructure side?

Speaker #6: I think it was for security camera applications. But potentially other have you had any other further engagements there on the infrastructure side?

Speaker #5: Yes, we do. Edge infrastructure continues to be a focus, and we have N1655. We are not only engaging with customers, we also have design wins that we're working on.

Fermi Wang: Yes, we do. Edge infrastructure continues to be a focus. We have N1-655. We have not only engaging with customer, we also have design wins that we're working on. The first product will probably come out, I would say, H2 of this year. In the same time, we are definitely building a roadmap to continue to address this opportunity. We haven't talked about our next generation chip and also the potential updates on that. I think next time we should give you more updates on the edge infrastructure. That's meant to be a very important direction for us.

Speaker #5: The first product we'll probably come out with, I would say, in the second half of this year. And at the same time, we are definitely building a roadmap to continue to address this opportunity.

Speaker #5: So we haven't talked about our next-generation chip and also the potential updates on that. But I think next time, we should give you more updates on the edge infrastructure.

Speaker #5: We meant this to be a very important direction for us.

Speaker #8: Yeah. Just to put it in perspective, based on the products we have now, it's a couple hundred million dollars SAM. For things like AI vision box.

Louis Gerhardy: Yeah, just to put it in perspective.

Christopher Rolland: Thanks.

Louis Gerhardy: Based on the products we have now, it's a couple hundred million dollars SAM for things like AI vision box, as we come out with more products and build out this indirect ecosystem that, as we mentioned, will help the edge infrastructure business. You'll see us update the SAM appropriately when we have more products here. Definitely a high focus area, and it's part of that indirect channel we were just talking about.

Speaker #8: But as we come out with more products and build out this indirect ecosystem that, as we mentioned, will help the edge infrastructure business, you'll see us update the SAM appropriately.

Louis Gerhardy: You'll see us update the SAM appropriately when we have more products here. Definitely a high focus area, and it's part of that indirect channel we were just talking about.

Speaker #8: When we have more products here, so definitely a high-focus area. And it's part of that indirect channel we were just talking about.

Speaker #6: Great. Thank you, Louis. Thanks from me as well. And then for my second question, just on the robotics opportunity—I think last quarter you mentioned warehouse robotics.

Christopher Rolland: Great. Thank you, Louis. Thank you, Fermi. For my second question, just the robotics opportunity. I think last quarter you mentioned warehouse robotics. Any other engagements there? If you could talk about humanoids and engagements there, that'd be interesting too.

Speaker #6: Any other engagements there? And then if you could talk about humanoids and engagements there that'd be interesting too.

Speaker #5: Right. So we talk about different applications. This time, in fact, last time we talked about this warehouse design win and now we are definitely in extensive engineering development cycle with them.

Fermi Wang: Right. We talk about different applications this time. In fact, last time we talked about the warehouse design win, now we are definitely in an extensive engineering development cycle with that. More importantly, on top of that, we have multiple design wins in this quarter in the span of many different applications. I talk about it in my script. I think the most important thing is now we focus on that for any robots, there are multiple different solutions today. One is just purely video, the other one is perception. The third one is using fusion to put a different sensor together. Fourth one is really become the controller or decision maker for this whole robot system. Our design win is in all these areas, more focused on the perception side because our expertise on the video and also fusion side.

Speaker #5: But more importantly, on top of that, we have a multiple design wins in this quarter in the span of many different applications. I talk about it in my script.

Speaker #5: But I think the most important thing is now we focus on that for any robots, they are multiple different solutions today. One is just purely video.

Speaker #5: The other one is perception. The third one is using fusion to put different sensors together. And the fourth one is really to become the controller or decision-maker for this whole robot system.

Fermi Wang: The third one is using fusion to put a different sensor together. Fourth one is really become the controller or decision maker for this whole robot system. Our design win is in all these areas, more focused on the perception side because our expertise on the video and also fusion side. I think it's across different applications and also focused on perception and also decision-making part of the robotic solution. There are some of the humanoid type of applications in that design wins, but we are not in a place to talk about just yet.

Speaker #5: Our design win is in the oldest areas, but more focused on the perception side because of our expertise in video and also the fusion side.

Speaker #5: So I think it's across different applications. And also focus on perception and also decision-making part of the robotic solution. There are some of the humanoid type of applications in that design wins.

Fermi Wang: I think it's across different applications and also focused on perception and also decision-making part of the robotic solution. There are some of the humanoid type of applications in that design wins, but we are not in a place to talk about just yet.

Speaker #5: But we are not in the place to talk about that just yet.

Speaker #6: Excellent. Thank you, Fermi.

Christopher Rolland: Excellent. Thank you, Fermi.

Speaker #3: Thank you. One moment for our next question. That comes from Martín Young with Oppenheimer. Please proceed.

Operator: Thank you. One moment for our next question. That comes from Martin Yang with Oppenheimer. Please proceed.

Speaker #2: All right, thank you for taking my question. First, a couple of questions on LTA. Are you able to say or quantify how many other potential partners you have in your LTA discussion?

Martin Yang: Thank you for taking my question. First, couple of questions on LTA. Are you able to say or quantify how many other potential partners you have in your LTA discussion?

Speaker #5: We only announced two. We're talking about potential, but there's no other concrete information we can disclose at this point.

Fermi Wang: We only announced two. We're talking about potential, but there's no other concrete information we can disclose at this point.

Martin Yang: Got it. Also on LTA, for example, the one with Hanwha spanning over multiple years, do you need to also secure wafer supply from your foundry partner regarding those LTA agreement?

Speaker #2: Got it. And then also on LTA. So for example, the one with Hanwha spending over multiple years. Do you need to also secure wafer supply from your foundry partner regarding those LTA agreements?

Fermi Wang: First of all, I believe that our relationship with Samsung, although we only try to secure a wafer commitment every year, but in the last 18 years, we never have any problem to secure the wafer we want for our customers. I expect that our wafer supply for five or two nanometer from Samsung will not be an issue for us, although that there is a lot of discussion that Samsung is also gaining momentum on those process nodes. Obviously we don't have any long-term contract with any suppliers. That might be a question you're asking, but I don't think that's a contract we're going to sign with any supplier anytime soon.

Speaker #5: First of all, I believe that our relationship with Samsung — although we only try to secure wafer commitment every year — in the last 18 years, we have never had any problem with securing the wafers we want for our customers.

Speaker #5: So I expect that our wafer supply for 5/4/2 nanometer from Samsung will not be an issue for us. Although there's a lot of discussion that Samsung is also getting momentum on those process nodes.

Speaker #5: And obviously, we don't have any long-term contract with any suppliers. And that might be a question you're asking. But I don't think that's a contract we're going to sign with any supplier anytime soon.

Fermi Wang: That might be a question you're asking, but I don't think that's a contract we're going to sign with any supplier anytime soon.

Martin Yang: Got it. Last question also on LTA, do you view your relationship with Samsung and your design capabilities as a key value prop when you try to secure long-term agreements with other customers?

Speaker #2: Got it. And last question. Also, on LTA. Do you view your relationship with Samsung and your design capabilities as a key value prop when you try to secure long-term agreements with other customers?

Speaker #5: Absolutely. Because one long discussion with any customer on LTA is how you secure your wafers, particularly on the 4-nanometer, 2-nanometer process node.

Fermi Wang: Absolutely. One long discussion with any customer on LTA is how you secure your wafers, particularly on the 4 nano, 2 nanometer process node. In fact, some of the time we have to really bring our supplier partners into a conversation to make sure our customers feel comfortable with it. By the way, I can say that today, Samsung announced Samsung has their official company-wide event talking about their 2 nano process, and they made an announcement that NVIDIA and Ambarella are the 2 nanometer customers that commit to their process node as official press release from Samsung.

Speaker #5: In fact, some of the time, we have to really bring our supplier partners into the conversation to make sure our customers feel comfortable with it.

Speaker #5: By the way, I can say that today Samsung announced that they had their official company-wide event, talking about their 2-nano process.

Fermi Wang: I can say that today, Samsung announced Samsung has their official company-wide event talking about their 2 nano process, and they made an announcement that NVIDIA and Ambarella are the 2 nanometer customers that commit to their process node as official press release from Samsung.

Speaker #5: And they made an announcement that NVIDIA and Ambarella are the 2-nanometer customers that come into their process node. That's an official press release from Samsung.

Martin Yang: That's great. Thank you, Fermi.

Speaker #2: That's great. Thank you, Fermi.

Speaker #3: Thank you. And as a reminder, to ask a question, simply press *11 to get in the queue. That is *11 to get in the queue.

Fermi Wang: Thank you.

Operator: Thank you. As a reminder, to ask a question, simply press star one one to get in the queue. That is star one one to get in the queue. Our next question is from Suji Desilva with Roth Capital Partners. Please proceed.

Speaker #3: Our next question is from Sujit DaSilva with Roth Capital. Please proceed.

Suji Desilva: Hi, Fermi. Hi, John, Louis. Quick question on robotics as well. I'm curious, you have a breadth of wins there. Are those across the board on your product portfolio, or does that category lean towards the leading edge products, the leading edge nodes? Just want to understand where robotics is intersecting your product portfolio.

Speaker #8: Hi, Fermi. Hi, John, Louis. So, quick question on robotics as well. I'm curious, as you have a breadth of wins there, are those across the board on your product portfolio?

Speaker #8: Or does that category lean toward the leading-edge products, the leading-edge nodes? Just want to understand where robotics is intercepting your product portfolio.

Fermi Wang: All the products that we have design win is our CV product line. Most of that is our 5-nanometer products. There are some 10-nanometer, but majority is 5-nanometer products. In fact, there are also our 4-nanometer products in there, too. It's really covering our CVflow architecture. That's the main reason people using us, but more focused on the 5 nanometer for the performance efficiency.

Speaker #5: All the products that we have designed win is our CV product line. It's really most of it is our 5 nanometer products. There are some 10 nanometer, but majority is 5 nanometer products.

Speaker #5: In fact, there are also our 4 nanometer products in there too. So it's really covering our CV flow architecture. That's the main reason people are using us.

Speaker #5: But more focus on the 5-nanometer for the performance efficiency.

Speaker #8: Got it. Okay, and then a question, perhaps for John. Should we expect typical seasonality this fiscal year, this calendar year? Or are there factors that might be swinging it differently than in prior years?

Suji Desilva: Got it. Okay. A question perhaps for John. Should we expect typical seasonality this fiscal year or this calendar year, or are there factors that might be swinging it differently than prior years?

John Young: Suji, I think the expectation is to continue to see the seasonality that we've seen in the past at this point.

Speaker #7: Sujit, I think the expectation is to continue to see the seasonality that we've seen in the past at this point.

Speaker #8: Okay. Great. Thanks, John. Thanks, everybody.

Suji Desilva: Okay, great. Thanks, John. Thanks, everybody.

Speaker #3: Thank you. Our next question is from Ross Seymour with Deutsche Bank. Please proceed.

Operator: Thank you. Our next question is from Ross Seymore with Deutsche Bank. Please proceed.

Speaker #9: Hi, guys. Just one follow-up for you. Given the change in the business more automotive this year relative to the IoT side and then longer-term some of the robotics and IoT and edge AI, physical AI, everything you've talked about on the call, how do you see that impacting either benefiting or being a little bit of a headwind to your gross margin in both the near-term and long-term from those dynamics, please?

Ross Seymore: Hi, guys. Just one follow-up for you. Given the change in the business, more automotive this year relative to the IoT side, longer term, some of the robotics and IoT and Edge AI, physical AI, everything you've talked about on the call, how do you see that impacting, either benefiting or being a little bit of a headwind to your gross margin in both the near term and long term from those dynamics, please?

Speaker #5: Right. So, Ross, in fact, since three quarters ago, we started really watching our gross margin carefully. I think that today, what I can say is, based on all the things that we just discussed, we believe that we are going to stay with our current long-term gross margin model, which is between 59% to 62%.

Fermi Wang: Right. Ross, in fact, since three quarters ago, we start really watching our gross margin carefully. I think that today what I can say is based on all the things that we just discussed, we believe that we are going to stay with our current long-term gross margin model that's between 59% to 62%.

Speaker #9: Got it. Thank you.

Ross Seymore: Got it. Thank you.

Speaker #5: Thank you.

Fermi Wang: Thank you.

Speaker #3: Thank you. In this concludes our Q&A session. And I will pass it back to Dr. Fermi Wang for closing comments.

Operator: Thank you. This concludes our Q&A session, and I will pass it back to Dr. Fermi Wang for closing comments.

Speaker #5: And thank you for joining our call today. I really hope I can see you at some of our events this quarter. Thank you.

Fermi Wang: Thank you for joining our call today. I really hope I can see you at some of our events this quarter. Thank you. See you next time.

Speaker #5: See you next time.

Operator: This concludes our conference. Thank you for participating, and you may now disconnect.

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