Why Ambarella shares are rising today

Ambarella (AMB 9.48%) the stock is rising in Wednesday’s trading. The imaging company’s stock price rose 10.3% as of 1:15 p.m. ET, according to data from S&P Global Market Intelligence.

After the market closed yesterday, Ambarella released results for the second quarter of its current fiscal year (which ended July 31). The company delivered sales, earnings and forward guidance that beat market expectations, and investors are buying the stock today.

Ambarella exceeds expectations and shows AI momentum

Ambarella reported a loss of $0.13 per share on sales of $63.7 million in fiscal Q2, beating the average analyst estimate of a loss of $0.19 per share on sales of $62.1 million in the quarter . Revenue for the company’s artificial intelligence (AI) products hit a new high in the period, and management expects momentum in the category to help the business grow double-digit sales on a sequential quarterly basis in Q3. The company believes its new products will lay the groundwork for the business to branch out its computer vision into more advanced AI networks and take advantage of trends including generative artificial intelligence.

For the third quarter, Ambarella is recommending sales of between $77 million and $81 million. If the company were to hit the midpoint of that range, it would represent a 56% increase over the $50.6 million in sales it posted last year’s quarter. Management also expects the business to deliver non-GAAP (adjusted) gross margin between 62.5% and 64% and forecasts adjusted operating expenses between $49 million and $51 million.

Wall Street is getting more bullish on Ambarella shares

Following better-than-expected results in the second quarter, Ambarella shares received a wave of positive coverage from analysts. For example, Morgan Stanley raised its price target from $67 per share to $73 per share and maintained an overweight rating on the stock. Meanwhile, TD Cowen raised its target from $65 per share to $75 per share. Stifel was even more bullish, reiterating a buy rating on Ambarella and raising his price target for the stock from $75 per share to $80 per share. Bank of America and Craig-Hollum also raised their valuation targets for the company.