Ambarella Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 30, 2024

There are 12 speakers on the call.

Operator

welcome to the Ambarella's First Quarter Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr.

Operator

Louis Gerhardy, Vice President, Corporate Development and Investor Relations. Please go ahead, sir.

Speaker 1

Thank you, Jonathan, and good afternoon. Thank you for joining our Q1 fiscal year 2025 financial results conference call. On the call with me today is Doctor. 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 of fiscal year 2025.

Speaker 1

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. 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 filed with the SEC.

Speaker 1

Access to our Q1 fiscal 2025 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 materials posted on our website are Ambarella's property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter, then John will review the financial results and outlook and will be available for your questions after that. Fermi?

Speaker 2

Thank you, Louis, and good afternoon. Thank you for thank you all for joining our call today. Our Q1 results were 1% above the midpoint of our guidance range with revenue increasing 6% sequentially. As expected, both auto and IoT revenue increased sequentially and AI products were about 2 thirds of our total revenue. As previously discussed, our customers are in the midst of recovering from a cyclical inventory correction and the favorable impact from this is expected to carry into the Q2.

Speaker 2

We continue to expect our fiscal 2025 revenue to grow year over year, driven by both the cyclical tailwinds and the secular growth in our AI portfolio. The combination of this cyclical and the secular forces is expected to enable our AI inference revenue to grow more than 30% in fiscal 2025. Zooming out for a minute, the significant capacity being added to the AI training network infrastructure globally both for the ultimate deployment of AI inference at Edge, where we participate in the market. The deployment of AI inference at the edge enables end user to more practically take advantage of so many different AI breakthroughs. As focus on AI at the age of networks increase, we see AI influencing proliferating in multiple areas and we believe we are well positioned to take advantage of this.

Speaker 2

In fact, we are already in the early stage of demonstrating how it may play out for us. In Q1, for example, our customer engagement include our 1st passenger vehicle wins for our 5 nanometer CV3 AD family of AI central domain controllers. We added another CV3 AD win in the commercial vehicle market, secured multiple enterprise class AI influencing wins and even in other IoT cameras, we are reporting additional wins for our 5 nanometer per CV5 AI process. In the midst of this great change, our opportunity and the challenge is to develop AI technology and products that not only are extremely efficient for edge deployment, but also flexible enough to execute a very wide range of AI workload across all these disparate applications. We are already in mass production with our AI products for video intensive CNN networks such as detection, classification, fusion, planning, stitching, matting, tracking, framing, auto editing and the new network image signal processing.

Speaker 2

Now our 3rd generation of AI technology integrated into our CV3 AD and the CV7 series of SoC can support transforming networks for a variety of generative AI applications. I would now like to describe customer engagements that can offer some indication how it can play out for us. As you know, we have made significant investment into our CV3 AD family of automotive AI domain controllers and we expect the CV3 AD family to be a major revenue driver. So we are pleased to announce our first CV3 AD family wins in the passenger vehicle market, which complements our ongoing wins with the CV380 family in the commercial vehicle market. In April, during the Beijing Auto Show, we reached a strategic collaboration agreement with a battery electric vehicle company in China.

Speaker 2

This company will use our CV3 AD AI domain controllers in new passenger vehicle models. This is an important development for us in several regards. First, measured by the number of EV delivering calendar 2023, this OEM is considered one of the top 5 new EV companies in China. While most of the OEM deliveries were in China last year, the company has an impressive plan for globalization of its business. 2nd, Chinese automobile OEMs are aggressively and successfully adopting next generation technology into their vehicles, which aligns with our strategy to intersect the safety and autonomy domain with next generation technology, in particular Level 2 plus For example, to improve accuracy, many OEMs in China have aggressively adopted the BEV, former AI framework, for 3 d perception tasks in its autonomous driving software stack.

Speaker 2

And this high performance framework can leverage to a high degree the unique capability in our CV3 AD AI inference processors, including the ability to process transformers at low power. 3rd, the efficiency and the scalability of our CV380 family portfolio is also a major factor in the collaboration with Ambarella as the OEM can reuse this software on low, mid and high end vehicles. In April, we added another CV3 AD family win in the commercial vehicle market with the announcement of a strategic collaboration with Sunny Corporation. Sunny is one of the world's largest engineering machinery manufacturers providing heavy duty commercial vehicles to the global market. Saiyee intend to leverage Ambarella's CV3 AD family of automotive AI domain controllers to develop advanced automated driving solution on its next generation commercial and special purpose vehicles.

Speaker 2

The companies will collaborate on the joint development and the promotion of high performance, highly integrated automated driving solutions with Senyi's goal of achieving start of production for at least one model by calendar year 2025. At the Beijing Auto Show in April, Tier 1 NU Soft Reach announced a strategic partnership with Ambarella. The company's plan to expand on their existing relationship to jointly promote and explore AI based product technology and market development in areas including autonomous driving and the driver monitorings. MuleSoft's 3rd generation forward facing intelligent camera, XCUBE3.0 is powered by Ambarella's CV22 AI Vision SoC to target level 2 plus autonomy levels and has already been mass produced and deployed by automotive OEMs. We are pleased to announce that C Machine, the leading provider of driver monitoring system software, selected our CV25 for its own aftermarket system for commercial vehicles.

Speaker 2

The Guardian Generation 3 meets the European Commission's General Safety Regulation for Drosunus Detection, a requirement for all the new cars, vans, trucks and buses across Europe. And in April at the ISC West Security Exhibition, we successfully demonstrated the latest generated AI technology running Vision Language Model, VLMs, on our N1 and CV72 SoCs. Our demonstration includes using the multi model CLMs to search video recording to detect objects defined by tags and provide near instantaneous results without the need for training specifically for light object. This capability opens up a whole new range of AI based search capability for enterprise cameras and the premise based AI systems. Our 3rd generation AI inference technology includes specific support needed to efficiently run these new classes of networks.

Speaker 2

During the ISC West, we also announced and demonstrated our new 5 nanometer CV75 AI SoC, which provides the performance required to run the latest VLMs as well as AI based IQ enhancement. This capability to very efficiently run this cutting edge AI technologies is highly sold after for cost and the power constrained AI cameras used in enterprise, smart city, retail stores, robotic access control and AI based consumer devices. At the Enterprise Connect Conference in March, Poly, a leading global provider of workplace collaboration solutions and the wholly owned units HP launched its Studio E360. This center of table system utilizes a single 5 nanometer CV5 for 4 8 megapixel cameras with AI inferences processing choosing the optimal framing angle for in room participants. And also in Korea, the Korea activity for our AI SoCs remain high with leading security camera maker Han Hua introduced new AI model based on our CV22 and the CV2 AI SoCs and IDS introduced CV25 based models and the CPro introduced dual sensor AI camera based on CV22.

Speaker 2

In the other IoT market, we are pleased to see our 5 nanometer CV5 AI inference processor being utilized in another consumer cameras to significantly improve both image quality and to automate certain user interface functions. Insta360 introduced its X4 action camera in April with dual sensor for 3 60 degree 8 ks capture. In conclusion, I mentioned last quarter our goals are to restore revenue growth and profitability while continuing to drive our strategic R and D priorities. Q1 represented a step in the right direction, most specifically highlighted by our 1st passenger car passenger vehicle win for the CV380 family, But the expanding breadth of our CV customer engagement stands out, and we expect this to build a broad foundation on Pong with multiple applications can drive revenue growth and result in positive earning leverage for shareholders. The further commercialization and monetization of our technology and the products is of utmost importance to us And I'm excited about the opportunity before us and what we will achieve in the years ahead.

Speaker 2

With that, John will now discuss the Q1 results and outlook in more detail.

Speaker 3

Thank you, Fermi. I'll now review the financial highlights for the Q1 fiscal year 2025 ending April 30, 2024. I will also provide a financial outlook for our Q2 of fiscal year 2025 ending July 31, 2024. 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 expense along with acquisition related costs adjusted for the impact of taxes.

Speaker 3

For fiscal Q1, revenue was $54,500,000 dollars 1% above the midpoint of our prior guidance range, up 6% from the prior quarter and down 12% year over year. Non GAAP gross margin for fiscal Q1 was 63.4%, above the high end of our prior guidance range by 0.4%. Non GAAP operating expense was $46,700,000 approximately $2,600,000 higher than the prior quarter and $800,000,000 excuse me, $800,000 lower than the midpoint of our prior guidance range of $46,000,000 to $49,000,000 driven by continued expense management and the timing of spending between quarters. We remain on track to our internal product development milestones. Q1 net interest and other income was $2,300,000 Q1 non GAAP tax provision was approximately $607,000 We reported a non GAAP net loss of $10,500,000 or a $0.26 loss per diluted share.

Speaker 3

Now I'll turn to our balance sheet and cash flow. Fiscal Q1 cash and marketable securities decreased $16,600,000 from the prior $1,000,000 from the prior quarter to $203,300,000 Receivables days of sales outstanding increased from 44 days in the prior quarter to 47 days, while days of inventory decreased from 131 days to 123 days. Inventory dollars declined 2% sequentially and declined 31% from a year ago. Operating cash outflow was $15,000,000 for the quarter. Capital expenditures for tangible and intangible assets were $1,100,000 We had 2 logistics and ODM companies representing 10% or more of our revenue in Q1, WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia came in at 62% of revenue for the Q1 Chaconi and ODM who manufactures for multiple end customers was 13% of revenue for the quarter.

Speaker 3

I'll now discuss the outlook for the Q2 of fiscal year 2025. We remain confident our business is continuing to recover from the cyclical correction led by our AI inference products. For fiscal Q2, we estimate our total revenue will be in the range of $60,000,000 to $64,000,000 We expect sequential growth in both IoT and auto. We expect fiscal Q2 non GAAP gross margin to be in the range of 62.5 percent to 64%. We expect non GAAP OpEx in the 2nd quarter to be in the range of 47.5 dollars to $49,500,000 with the increase compared to Q1 driven by increased headcount and engineering related expense, including our first 2 nanometer SoC project.

Speaker 3

We estimate net interest income to be approximately $1,800,000 our non GAAP tax expense to be approximately $600,000 and our diluted share count to be approximately 41,100,000 shares. Ambarella will be participating in Bank of America's Global Technology Conference on Wednesday, June 5 in San Francisco, Mizuho's Technology Conference on June 12 in New York City and Rosenblatt's Virtual Age of AI Conference on June 13. We hope to see you at one of these events. Please contact us for more details. Thank you for joining our call today.

Speaker 3

And with that, will turn the call over to the operator for questions.

Operator

And our first question for today comes from the line of Christopher Rolland from Susquehanna. Your question please.

Speaker 3

Hey guys, can you hear me? Yes. Great. Thanks for the question. You brought up VLMs on the call.

Speaker 3

Just wanted to know a little bit more about that application. Does that increase your TAM overall? Is this additive to what you're doing in, for example, LLMs? How should we think about that?

Speaker 2

Right. So we start talking about LLM and start demoing our CES this year. And then we continue to watch the potential application that we can use with our solution for our customers. And we identify vision language model, which is really a large language model that can respond to text for search different objects or using that to describe different video scenes. And we have a live demo.

Speaker 2

In fact, we welcome you to give to call Lois to set up live demo for you, how the vision that we're managing model used in our with our current enterprise customers or other potential customers in that space. So this definitely is a brand new application that we identified by by the market and the customer and we're engaging with our current customer, particularly on the enterprise and security camera market and they showed extremely interest on this product because you can imagine that this is really a model that can replace the people who use to monitor the different cameras in a control center. And you can use a large language model not to give you early warning, but also have using packs to do a search of different objects without really training for those objects. And I think that's really a breakthrough for enterprise side and we expect that some of our customer will kick off projects with us with VMs in the near future. And we can use both N1 as well as CV72 for that product.

Speaker 3

Great. Thanks, Fermi. And then on the auto opportunity, making some progress here, sounds like on the Chinese EV side of things. Perhaps you can talk about the pipeline, kind of how you see expanding engagements of late here that you're seeing and whether you think there's going to be more to come and whether any of these could actually be implementing your software as well? Thanks.

Speaker 2

Right. So first of all, I definitely believe there will be more to come. And I also believe that the first design win is really show off that our what we have been talking about our strength, which is we can run really transformer most advanced network very efficiently in low power and also we have a scalable architecture that can really address using a sensor to address from low end to the high end vehicles and also that the power consumption that we're much lower than our competitors give a significant bound advantages in the design win. So that really is the reason we won. But also, I think it's important to point it out that just like the EV market, Chinese EV automakers are really aggressive by pushing technology envelope and for one of them adopting our Level 2 plus solution is will help us for other potential OEM design wins that we're building on.

Speaker 3

Thanks, Fermi.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Ethan Ptasznik from TD Cowen. Your question please.

Speaker 4

Yes. Hi, everybody. This is Ethan Ptasznik on for Matt Ramsay. Congrats on the great results. I wanted to ask, is the passenger vehicle win you guys discussed tonight likely to get CV3 to the tipping point with regards to wins at other OEMs?

Speaker 4

Are there and are there other OEMs waiting to see maybe another one kind of go first? Maybe if you guys could discuss those dynamics?

Speaker 2

Right. So first of all, I think the lifetime value of this design win is meaningful and also material for us. And also that they are very aggressive, the target NP date is the end of 'twenty five, early 'twenty six, and that will help us to really take our CV3 AD platform into production, therefore provide a mature solution to other companies who is considering our current solution. So I definitely believe that not only this design win is help to our pipeline, but also going to be a major help for us to secure other design wins in the near future.

Speaker 4

Okay, understood. And as my follow-up, you guys gave a lot of good information around the AI inference opportunity with revenue expected to kind of grow 30%, I think you guys said in fiscal 2025. And you called out some progress, I think it was enterprise applications. I was wondering how these how the early stages of this opportunity is playing out? What sort of impact some of the announcements you guys made at CES?

Speaker 4

I think it was the N1 SoC and the Cooper Development Platform. What's kind of driving that? How is the roadmap progressing? Any early feedback? And any additional insight would be helpful.

Speaker 2

Right. So just maybe refresh our Gen AI strategy. We definitely intend to leverage our current existing 3rd generation AI inference engine into a gen AI and LLM. And we demoed, like you said, CES N1 with Lava demo and then at the ISU S, we demoed with VLM running on both N1 and CV7. So our strategy for current generation has become very clear.

Speaker 2

First of all, we're going to focus on each application, both for each cameras, while each servers. 2, we'll focus on the workload that we can really can take advantage of our current silicon. And so that's really enterprise market as well as some adjacent market that can use those Lava model as well as VLM models. And we think we continue to believe that our opportunity for Gen AI revenues in 2026, we are not only demoing, we're sampling N1 and the CV72 to our key customers who are interested in Gen A application. So that's our 1st generation.

Speaker 2

And also, as you can see, I think, John mentioned that we're investing on 2 nanometer processing node. You can think that's a preparation for our next generation G and I solution. Although we didn't talk about our plan for that yet, we are trying to work on that. But we believe that with our second 2 nanometer technology development will significantly help us on the technology side for our roadmap.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Joe Moore from Morgan Stanley. Your question please.

Speaker 5

Great. Thank you. In terms of the passenger car win in China, can you talk about I think you mentioned it as an L2 plus if I heard you right, type of opportunity. Can you kind of describe like how many cameras per car and what capabilities you could offer there?

Speaker 2

Yes. So first of all, it is L2 plus car and because they have different models is anywhere from 7 to 10 7 to 10 cameras plus 5 radars configuration. And it's designed to do it from the highway level to city levels of autonomous driving.

Speaker 5

Great. Thank you for that. And then was this customer I know you have a probability weighted funnel. Was this customer somebody that you had anticipated had some probability within that funnel?

Speaker 2

Yes. And now I think with the next funnel discussion they should be in the 1 category instead of probability category. Perfect. Thank you so much. Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Your question please.

Speaker 6

Thanks and congratulations on the great results and the design win momentum. And maybe, Fermi, maybe you hinted, I was going to ask more questions about the 2 nanometer process technology. Do you have a timeline for when you'd have first silicon? And are you staying with Samsung? Or will this be with TSMC?

Speaker 6

Right.

Speaker 2

So this 2 nanometer will be sensor 2 nanometer and we plan to tape out second half of next year and get ready to go into production with 2026.

Speaker 6

Okay, great. And maybe just to follow-up on Joe's question, you mentioned that it's 7 to 10 cameras plus radar. Is that your radar in the design?

Speaker 2

We haven't talked about that yet. Okay. All

Speaker 6

right. Maybe I'll go to an easier question, which is your backlog visibility, if you're saying you're going to see growth in fiscal year 2025. Can you talk about your backlog visibility?

Speaker 2

Yes. Our backlog visibility is getting much better than before. In fact, that's the reason we feel comfortable that with the Street's consensus of $250,000,000 revenue forecast this year. And we with our lead times is really in the 24 weeks and that tell us that we should have a clear visibility to middle of Q4, reminding you that our Q4 is to January. So we see clear booking for Q3 and Q4.

Speaker 2

That's why we continue to feel comfortable with our guidance.

Speaker 6

Okay, great. Thank you.

Speaker 2

However, let me add one more sentence. I think that we while we are comfortable with the $250,000,000 consensus level, we believe there is a seasonality in Q4. So I think that's something we should consider. While we see the visibility, we definitely believe that we're going to continue to see the trend of Q2 to Q3 growth. But from Q3 to Q4, just like the normal seasonality before the COVID, we should have a seasonality in there.

Speaker 6

Okay, understood.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Quinn Bolton from Needham and Company. Your question please.

Speaker 7

Hi, this is Nick Doyle on for Quinn. Thanks for taking our questions. Maybe just zooming out a little bit, could you give us a pulse on the Chinese auto market overall? How do you see current EV demand and supply? And then you mentioned 2 CV3 wins in the passenger and commercial markets.

Speaker 7

Can you size those opportunities at all?

Speaker 2

Right. First of all, we don't play on the EV market, we'll play on the autonomous driving market, but they are very much correlated. I think what happened in EV is that Chinese automaker continue to aggressively push the technology envelope on the EV side. We see the same trend on the autonomous driving technology side. I think, for example, that almost all the RPQ that we're building in China, all of them require most advanced network like BEV former, very L2 plus CE level autonomous, all of that is really showing me that they are very Chinese automakers are very aggressive to push the technology envelope.

Speaker 2

And we believe that's played to our strength and we believe that we can take advantage of that. Although that EV market shows some slowness in terms of total market size, but I think that from the AD market point of view, we still believe that the growth is continuing to be there, and we expect that majority of the EV cars will have a level 2, level 2 plus system in the coming years near term.

Speaker 7

Okay. The margins, the gross margins were a bit of a bright spot in the quarter end guide. Could you expand on what's driving that?

Speaker 3

Thanks. Yes. So essentially it's mix. We had a little bit higher contribution than we had forecast for customer NRE projects that came through in the quarter. That's the main driver.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Tore Svanberg from Stifel. Your question please.

Speaker 8

Yes. This is Jeremy calling for Tore. And let me add my congrats on the growing CV3 design wins. Maybe a quick follow-up on the gross margin and NREs. Is the NRE something that is kind of like an ongoing project or sustainable in terms of contribution over the longer term?

Speaker 8

Just want to see the impact, I guess, to gross margins over the next 12 to 18 months. That's my first question.

Speaker 3

Okay. So yes, we did it is a project that will be ongoing in the near future. Our long term model though is 59% to 62% for gross margins. I think there may be a temporary blip up for this quarter, next quarter potentially as we've guided. But I think if you're thinking about long term modeling, I wouldn't see this as a new norm necessarily.

Speaker 8

Got it. And I guess in terms of this passenger vehicle design win, can you give us a little bit more detail in terms of like how many car models are impacted? If there's a way to kind of weight it in terms of how many of the new vehicles are likely to see this incorporated? And also I understand the ASPs even in L2 plus can have a pretty wide range, maybe 40 at the low end, 200 at the higher end. Can you

Speaker 2

currently, this OEM currently, this OEM has only a portion of the model has Level 2 plus in there. But I do believe just like any other Chinese OEM we talk to, they want to move to Level 2 plus to OLED models because they view that as a huge differentiation. So I think we expect when we go into production with this customer, all of the car they ship it will have a level some kind of level 2 plus solution there. As we talked about in the past, in our low end to high end chip, it can go anywhere from $50 to $400 and the midpoint is $100 plus to $200 That's the range we're looking at from ASP point of view. And we'll start addressing more we have we can disclose more with our customer.

Speaker 2

In terms of the size of this true opportunity, I really think that it's we talk about the significant I think it's in the north of $100,000,000 easily for the first design win, but we think that we can achieve more if we can continue to work with our customer, get more models and more other components into their car.

Speaker 8

Thank you, Perni. Sorry, I didn't quite catch how much how many millions was for the first design win?

Speaker 2

I said, low to $100,000,000

Speaker 8

Low to $100,000,000 North. North, got it. Thank you.

Operator

Thank you. One moment for our next question. And our next And our next question comes from the line of David O'Connor from BNP Paribas. Your question please.

Speaker 9

Yes, great. Thanks for taking my question guys. Maybe just going back to the Just going back to the seasonality in Q4, just looking back there pre COVID and you talked about, seems to be down like 15%, 20% Q on Q. Is that kind of the type of ballpark or zip code we should be thinking of for that Q4 seasonality or is it a bit more muted than that given the secular trends that you're seeing? That's my first question.

Speaker 3

Yes. So I think it's relatively difficult for us to give crisp visibility out into Q4. But I think if you're thinking about the full year guidance of or I should say the consensus of $250,000,000 I think that's definitely reasonable at this point. We don't have any issue with that. I think though the numbers, the percentages you're talking about are within reason?

Speaker 2

We have seen this kind of seasonality before COVID time. And I think we right now after the COVID done, after all the inventory correction is done, I think we're back to the normal seasonality. And with the clinical with the downturn, we haven't provided guidance in Q4, but I think if you look at the past history that will be probably if you look at the past, it will be similar to the seasonality we've seen before. Majority of that is in the IoT side, but a little bit on the auto side.

Speaker 9

Okay, got it. That's helpful. Thanks guys. And then maybe just a follow on on the CV3 win with the EV passenger vehicle. Just to clarify, I mean, this is separate to the Conte Bosch agreement.

Speaker 9

Does it have anything to do with that? And can you update us as well just on the status of those agreements, where they stand at the moment?

Speaker 2

Yes. First of all, this design has nothing to do with the county of Bosch. This Chinese guy is using a Chinese supply chain. And in terms of accounting, I will say that we continue to have very strong collaboration both on the SoC and the sulfur side. And also we continue to make progress moving toward our 1st SOP project that we talked about probably a year ago and that target NPTIME is currently 27.

Speaker 2

We continue to make great progress on that. And also we're actively bidding on the RFQs with county on this. So with the BOSCH side also we don't have a software development collaboration, but we do have working with them on the RFQs beating on some of the European design wins.

Speaker 9

Great. That's helpful. Thanks, guys.

Speaker 3

Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Richard Shannon from Craig Hallum Capital. Your question please.

Speaker 10

Hi guys. Thanks for taking my questions. Maybe touching on your comments about AI inference growing 30% or more this year. Maybe give us a sense here of how much this is weighted towards IoT versus automotive and then any kind of general sense here of how much this unit versus ASP driven? And then it seems like you do the basic math using the fiscal 'twenty five consent, it seems like AI would probably get a little over 70% of sales this year.

Speaker 10

Is that a decent math on that?

Speaker 2

I think your math is correct. Let me give you more color. I think first of all, our we have a lot of design wins on the CV5 and CV72, in particular CV5 we talk about that the production getting into production this year and we talked about that we're going to ship 1,000,000 units of CV5 this year and consider ASP is around $35 plusminus and that really help us to get ASP jump as well as revenue growth. So that's one side of CV growth. The other side of CV growth is that we believe CV72 will gain to production with enterprise IoT and that's another one.

Speaker 2

And but also but however, I also want to point out that even in automotive, we continue to shift. For example, we just announced a design win with NU Soft on the ADAS side with CV22 and as well as a few other design wins we had with automotive. So I think both IoT and the auto will continue to have a CV growth in there, but I think IoT is probably more.

Speaker 10

Okay, perfect. That's helpful, Jeremy. Follow-up question here on a different topic and that is kind of China U. S. Geopolitics here, obviously in the context of couple of nice wins here with your CV3 AD domain controller going into China.

Speaker 10

Just wondering if there's any change in the kind of the undercurrents of geopolitics that might make it a little bit more of a headwind to continue to do well there. Just want to get a general sense here if there's been any real change there.

Speaker 2

No, I don't think there's any meaningful change in the last 3 months. I think geopolitical situation continue to be an issue that we need to watch and deal with. I think that we talk about that Chinese market Chinese customer really want to make sure they use some local components. But however, I think with the advantage we have, especially for customers who are focusing on the export business, they also need to use silicon from outside China. So I think that's kind of balanced view we have right now and that haven't changed.

Speaker 2

We haven't seen any new regulation for any regulation to change this AI limitations.

Speaker 10

Okay, perfect. Great. Thank you, Fermi.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Kevin Carrington from Westpark Your question please.

Speaker 11

Yes, great. Thanks for taking my questions and let me echo my congrats on the strong results. Fermi, on the automotive side, I know you noted that you're more focused on autonomous driving and the market is pushing more towards EVs. But are you seeing combustion engine opportunities? And are any kind of automotive OEMs backtracking from originally thinking about developing EVs maybe giving you opportunities in combustion engine or hybrid vehicles as well?

Speaker 2

Absolutely. I don't think AD is exclusively for EV at all. I think we continue to see RFQs for commercial engine cars and also hybrid cars. So I won't say that's exclusive, but just that first design wins, it just happened to be a pure EV company. And that also shows you that all the EV company trying to find possible differentiations other than just the battery life, but also adding AD capabilities is one way they can differentiate.

Speaker 2

So I think that this AD application will go through all kinds of car including both EV as well as combustion engines.

Speaker 11

Okay, perfect. That makes a ton of sense. And then going off of Richard's previous question, you noted in your prepared remarks, AI inferences proliferating in multiple areas and your AI revenue would grow at 30% this year. You have a bunch of design wins in the pipeline. Is the AI inference market kind of taking off as quickly or not as quickly as you originally were kind of thinking?

Speaker 11

And is it developing into as large of an opportunity as you had imagined?

Speaker 2

Well, for the IoT side, I think we do think that enterprise IoT is growing as fast as we expected. We get some surprise on the other IoT space. But I think that one thing that didn't grow as much as we expect is automotive. We have been invested heavily on CV3 AD market and we got the first design win. I think there's a lot of things for us to work on to make sure that we can continue to take advantage of our investment in AI influence engine in automotive markets.

Speaker 11

Okay, perfect.

Speaker 5

Thank you.

Operator

Thank you. One moment for our next question. And our next question is a follow-up from the line of Tore Svanberg from Stifel. Your question please.

Speaker 8

Hi, yes. This is Jeremy again. Just a housekeeping question. Did you provide the split between auto and IoT? And if you could just refresh us on what those splits were for the last couple of quarters?

Speaker 2

Your total revenue split between auto and IoT, is that the question?

Speaker 8

Yes, that's right.

Speaker 2

Yes. So if you look at last year, I think IoT was roughly 2 thirds of total revenue and auto is 1 third. And if you look at inside IoT, enterprise securities still continue to be the largest portion and the last year consumer IoT and other IoT are roughly the same size. But if you look at the growth this year, I think that inside IoT, enterprise and other side IoT is growing faster. And auto also we expect a growth this year.

Speaker 8

Great. Thank you very much.

Operator

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Doctor. Fermi Wang for any further remarks.

Speaker 2

Thank you, everybody, for joining us today, and looking forward to see you talk to you in a conference call next time. Thank you.

Speaker 3

Thank you.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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Earnings Conference Call
Ambarella Q1 2025
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