Pointing this ways. Great. Thank you. Welcome back, everybody. I'm Joe Moore, Morgan Stanley Semiconductor Research. Very happy to have with us the CEO of Ambarella, Fermi Wang. Thank you. Fermi, thanks for being here. Maybe we could start out, you know, the AI focus. We talked a lot about Edge AI a year ago, the focus has really shifted to data center. There's a lot of activity in the Edge space and you guys have pivoted nicely to sort of attack that. Can you talk about that? You know, Before we get into the details, just the enthusiasm you have for the Edge AI opportunity- Right ... and what it means to you. In fact, that AI really developed fast, although, you know, data center take all of the investment and focus for AI side. AI definitely really develop very quickly and very nicely for us. First of all, everybody talk about robot today, which is a portion of a physical AI we talk about. We all believe that's gonna be huge market down the road, but today, most volume that we're focusing on is still, you know, from the enterprise security to the portable video to the drones. Those we talk about a lot. At this earning call, we talk another thing which is very important for AI is really we believe... In the past we talk about edge endpoints, cameras. This time we talk about, you know, building an AI box, not sitting on a data center but sitting at an edge, which aggregates all of the different sensor input and apply GenAI type of model on top of that to serve totally different purpose. Just give you one quick example. For example, at the CES, we demo with one of our software vendor that they collect the security camera feed to this AI box at the, you know, a retail store. With the new GenAI, they can turn this security camera into operational tools that can monitor the how the customer comes in, what they buy, and collect the customer data. Suddenly, security camera become your operation tool for your efficiency. Those kind of new application that you can think about almost all the retail store or any other operation can take advantage of the install base or video feed and using AI box to turn into a different application. That excite us because that really take a very little investment, you can turn on a huge market opportunity. The requirement is, for each application, you need a software vendor to write software on that. We need to have a system integrator integrate that box into existing infrastructure of the retail stores. We need to find partners who own that. For us to enable this, we call Edge infrastructure business. We are working with ISVs, with system integrators to enable. That's another market. We feel excited because we are seeing more and more AI application popping up, and we believe eventually the robots will be there driving huge volume, but before that, we see continuous of new application popping up, and we're going to continue to serve that. You had some really interesting demos at CES, which is not new for Ambarella. You've had great demos for a decade. What's new about it is the pace of implementation seems really rapid. We talked to guys where, you know, you made your software available to them months ago and they're productizing it already, you know, versus automakers- Right that have taken, you know, many, many years to get to production. You know, are you surprised by that? Are you seeing opportunities that you weren't aware of as you've opened that up? First of all, I'm surprised how fast our software vendor can really adopt our platform. It's by design. Five years ago, when we start looking at talking to a customer's biggest complaint is, "Every time we switch from one silicon to next silicon, I have to port your software over. That's time-consuming and waste a lot of resource. Why don't you make your software is portable?" That's where we start commit to do this Cooper development platform that will allow us, our customer to port application from one of our chip to another chip without too much effort. That take time for us to build the extra layer, so to separate out the hardware layer, but keep all the software layer open so that our customer doesn't need to spend a lot of time to port. It takes a few years to reach that. As soon as we reach that flexibility, this ISV demo you saw, we give our Cooper SDK to them three months before CES. They port the software over from our competitor's platform to us in less than few weeks and start demoing at the CES. That just show you when you have this not only a very powerful silicon platform, but a portable software platform, that really help our customer to enable new application quickly. I shouldn't really say that's new in the sense of Continental and Bosch said the same stuff. That's right. It was really fast for them to productize that. Of course, it's taken a very long time for that to turn into revenue... Right ... which is a different question. You've always had that kind of software flexibility built into the system and kind of a software-first mentality to development. Absolutely. In fact, today we fully recognize that building 2nm silicon take time, but take even more time for our customer to port software because that's out of our control. Make their life easier is helping us to get them time to market. What other IoT applications do you see emerging? I mean, you've always been, you know, near dominant with surveillance camera companies on the professional side. You've always seen a lot of opportunity to do, you know, stuff with those kinds of image data. Consumer's been a little harder because of the margins and things like that, as you see new opportunities, do you think those can open up? Are some of the new opportunities seem like they're opportunities from before that are coming back, like drones? Right. Just how are you thinking about IoT now as a market? Well, in fact, for IoT, there's also a market we talked about in the past is called wearable camera. Yeah. In the past, wearable camera is for policemen only. Yeah. Today, we are start seeing the wearable camera goes to the clerk at the retail stores, right? Everybody want to document what happened, you know, interaction between the service people to the customers, and that become a really big market. In fact, I want to mention another important application that we never talk about two years ago. For example, the Edge AI technology going to fleet management. In the past, fleet management is really just, you know, using a GPS to identify where the car is. Today, with AI-enabled camera and the telematics information, now you can enjoy using AI to help you to detect the environment, so you can safer work, driving environment. Also use that to provide more information about the condition of the drivers, the cars, the products, and the storage in the truck. With those information, they can build even better service to the fleet management customers. That, for example, Samsara is our biggest customer in that space. We see huge growth from them just in that space, and also seeing that almost all the people in that space start adopting Edge AI. That's just one simple example that Edge AI can apply to almost all the business to help them to get more productivity out. Okay, great. Thank you for that. Maybe we could talk a little bit about the business. You know, you had a nice growth year in 2025, good product cycles with CV5 and now starting CV7. You sort of started this year with a little bit more of a moderate view of this year's growth. Just how are you thinking about those growth dynamics? Right. When we look at fiscal '26, which is last year, when we start Q1 last year, our first guidance of the year was, you know, high teens. Mm. We end up growing 37%. What happened was that, you know, at beginning of the year, we were very confident about our own product ramping up growth, and we know that we're going to ramp up the product on time. What come as pleasant surprise to us is our customer ramping up faster than we expected. That's where we get this really outstanding growth last year. This year, we're standing at a very similar position. We are very confident our new product ramping up, including CV75, CV72, and CV7. In fact, we know that our first 2nm chip will ramp up first half of next year, which we've already seen that. We are quite confident about our own product ramp up. What we are trying to do is understand our customers ramp up with the new product, second half of this year. This will determine, you know, how we, how well we're gonna perform this year. You might be conservative again, but you wanna wait and see how that plays out. You know, you know me. You know, we try to be conservative all the time. You always do. Yeah. For sure. Okay. Maybe just speaking of earnings, to clarify the Insta360 lawsuit. Ironically, the night you reported, the stock was down a lot on a lawsuit that doesn't seem to have much fundamental impact. Well, in fact, that somebody, one of our investors, text us when we're still in that conference. Think about that. Fortunately, nobody asked that question because I don't know the answer. Fortunately, after that, we start talking to our customer, and also they made a public announcement that there's absolutely no impact to them. Therefore, there's absolutely no impact to us because of the lawsuit. They obviously have done a lot of work to work around the patent, getting the product that involve the patent. From our point of view, there's absolutely no impact to us. Okay, great. That's helpful. I guess going back to IoT, as you think about consumer opportunities, you know, you've had a lot of ramps of drones, then you sort of got priced out of the market a little bit. Same thing on doorbells, things like that. How do you think about that? I mean, on the one hand, the technology requirements in those markets are gonna grow as you actually incorporate AI, so you can get those kinds of premium margins. On the other hand, you know, is there a merit to thinking about a lower gross margin model so that you can participate more in those opportunities? That's absolutely true. We definitely want to play on the lower gross margin as long as they give us better leverage on the operating point. Yeah. I also want to point out, one of the reason that people can... You know, the lower-end product or lower priced product come in because there's no other feature differentiation. Yeah. The price become the only thing matters. You start putting resources into holding at declining margin. That's right. Not worth it. What we are trying to do is we are trying to invest on the market that we continue to see differentiation. You know, AI, particular Edge AI, you know, when we start doing a CV2 family, you need, I don't know, 2 TOPS, 3 TOPS performance. Today, our customer needs, say, needed 20 TOPS, 30 TOPS, maybe 50 TOPS performance because the applications require more and more AI performance. One is because of application, the other one is because of GenAI model, which is really big, and that require a huge amount of AI performance. As long as we can continue to offer differentiated technology and the ASP continue going up, I think that's market we can continue to maintain not only the growth, but also ASP and gross margin. Any market where when it happens that the price is the only thing matters, that's where I think we should consider maybe minimize the investment in the market and try to milk it through. AI, Edge AI is way ahead of that point yet. Yeah. Yeah, I mean, it seems like when you're incorporating AI features, there's a lot of headroom. Yeah. It's not like, you know, you're 4K, 120 frames per second and get to the next thing. Let me use an example. Our new chip, CV7, which is our first 4 nanometer chip, and the CV5 was our first 5 nanometer chip. CV7 have 2.5x AI performance than CV5. Mm. Just in within 2 years, our customers are demanding that kind of performance increase. I can say that for sure that our design in activity with CV7 is huge. In terms of multiple different applications. We can see that there are definitely application want to have more and more AI performance, and the CV7 hit the right spot. Great. Other categories within IoT, this portable video and others, and obviously Insta360 has become a big enough customer that we had to worry about that stuff the other day. How do you think about that part of the market? It seems like there's a lot of really cool stuff on display at CES around that. First of all, you know, before, you know, this kind of the video product coming out, you know, cell phone kind of take over, so they become the best video capture devices. If you look at the product built by Insta360 or DJI for the drone, for the 360 cameras, I think we can argue that they have a much better video capabilities than cell phone can be. From that point of view, for anybody who are interested in capturing the highest possible quality video or, you know, for the YouTubers that want to capture their own production video, that become a popular device. That's where we see huge growth for the total TAM of this kind of video capture device. We feel comfortable that the market going to continue to grow because the differentiation is on AI and on the video resolution side. We definitely think that's a market we want to continue to focus on. We also realize that, you know, it's having one really concentrated customer might not be the best for the company, and we the way to do is not to lose revenue from that. Yeah. a more revenue source on the different market, and that's exactly what we're trying to do, to get more AI application that we can address our current silicon and software solution and try to really dilute that concentration. Great. Thank you. I wanna pivot and talk about cars. I continue to be a big believer in your technology for ADAS applications and particularly advanced levels of autonomy, and the market just hasn't really gotten there yet. I still feel like the opportunity is there. It seems like you guys also are still investing for some of those opportunities, even if you're sort of having to burn not talking about it as much. Just, you know, how do you think about it? I mean, ultimately, it seems like we can't just ignore what Tesla FSD is doing, what China cars are doing in the autonomy space and just not start to follow down that path. Right. First of all, we definitely continue to work on those autonomous OEM design wins. One of the important reason is that not only we have technology, but also we throughout the process, we learn how to compete in that space. Although, you know, that we lost VW, but after the VW case, we get more, you know, recognition on the space. Almost all the new RFQ, RFI came to invite us to bid on. From that point of view, we get better visibility, even we lost the VW case. In fact, that reflects on our auto opportunity we disclose this time, right? We talk about $13 billion total auto opportunity we identify for the next six years. Compared to what happened last year, this number goes up. That fact reflects that we continue to bid on more projects. I also believe that autonomous driving is going to be a very important location. I think that any design win can drive meaningful, Sorry, a meaningful revenue change. More importantly, I really think that the software and the silicon investment we put at autonomous driving, now we start seeing that can go to, you know, robotic. Mm-hmm. When it go to drone application. Any autonomous drone will require similar software and hardware requirements as we develop for CV3 as autonomous solution. From that point of view, we are convinced that if we want to stay any kind of mobile robot market, our current investment is important. Maybe, you know, the combination of that existing business that we need to bid on and also future opportunity, we need to continue to have investment on that. I mean, it still seems like the technology that you showed with Continental and Bosch is better than anything that's been implemented in cars so far, at least, you know, outside of Tesla and China. You know, that was seven years ago now. It's been a long time. Five years at the body. Yeah. Yeah. Yeah. More than that. really, really big breakthrough kind of technology that has yet to just be adopted. You referenced the VW situation specifically. You know, what is the challenge? Is it that people in that world are reluctant to bet on smaller companies from a supply chain standpoint? What needs to happen to close that gap? You know, before VW, I really think that our company size is a problem. For any design win, we need to go in, you know, not only talking to their purchasing people, engineering people, but also the top management to explain why a company that, like, Ambarella can compete with NVIDIA and Qualcomm in terms of technology. Sometimes hard to convince them. I think we overcome that problem. For example, VW at the end, we talk about this. We lost the deal because our competitor put a financial deal in front of our customer to offset the decision at the end. We think that if that happens again, we know how to counteroffer that, and also that we continue to see more and more deal. I think we're in a better position to address this before, but I still believe that working with Bosch and Continental, as those large Tier 1s. Yeah. is continue to be important for us. If you have progress where you feel a high% chance that you're gonna win something, you're probably not gonna tell us about it.Until it becomes revenue? Is that a fair way. I think we learned from the lesson, right? Yeah. Yeah. Yeah. until we confirm that, we don't, we won't. The fact that you're not necessarily pointing to the funnel anymore doesn't mean that there isn't still a vibrant funnel opportunity. Well, in fact, that our funnel, you know. Yeah not funnel. The automotive opportunity growth- Yeah that's just indication that we continue to do our effort to make sure that we can win something in the near future. Yeah. Okay. That's very helpful. Then this idea, I mean, you can teach a car to drive itself. There's a lot of other things that you can teach robots to do. Right ... to do. I guess, how much have you thought about those opportunities and the focus on, you know, humanoid robots and all the super futuristic stuff? When you talk about military applications, defense applications, seems like your technology would have really viable use cases in those markets. Right. Anything, in fact, any mobile robots can take advantage of our technology, both on hardware and software side. All application you talk about, you know, definitely that can use our technology. I want to emphasize is that moving forward, if you want to do any, like, human, humanoid, although I think it's going to be far away from the high volume production, you need to have a very powerful GenAI type model. Mm-hmm. End-to-end model to control robots. Just from that point of view, my personal belief, humanoid is more complicated than Level 4 cars. Yeah. Level 4 car drive in an environment is well controlled. You have traffic light, you have sign, you have things. That's real tight. Humanoid, you have no limit working environment. Yeah. Anything could happen. From that point of view, the model you need to develop to guarantee not only works and functional, but also has safety concerns, security concern, all of that, it make things very difficult. What I'm trying to say is that's a roadmap. I think we talk about what kind of market we want to invest. We want to invest, there's a roadmap that we can continue to offer differentiated technology. That's where we want to be. Okay. Your software-first approach is helpful at driving those opportunities? Absolutely. In fact, that, you really don't want to put a water cooling system into your robots, right? You have to have be power efficient. From that point of view, that you have to make sure that you design a chip for this application, right? Obviously, that people going to using whatever they can access to put most like GPUs to prototype or generate first generation, second generation product. When you come to really mass production, when the power efficient matter, when the cost matters, you need to have a chip that designed for this application so that it can minimize not only the power, but also minimize the cost. Also minimize the theory, which has become so important this year. All of that is the reason I think that a chip that designed for specific application will win at the end. You talked about a warehouse robotics win. That's a market that actually historically hasn't used as much vision maybe as what we're starting to see. You've seen cobots and things like that. Yeah ... don't even have vision capability. Is that changing now? Are you starting to see the need for that? The particular design we mentioned in our earnings call Yeah is using video. Basically, the chip aggregate multiple video camera sensors and along with other sensors and do a sensor fusion for the perception. That's exactly the usage for this particular application wins. When I talk about robotic, we offer 3 type of different products. 1 is just 1 single camera using to detect object, which is very simple. The second product we're offering is a perception box that taking multiple input and doing a sensor fusion, then you identify the environment objects. That is the product we talk about in this one. The third one is really the, I think, the final solution, which is domain controller using one single chip to control the whole robot, not only perception, but also path planning, control the movement, functions of the moving arms, all of that within one controller. That's where it's not only you need a powerful AI processor, but you need an end-to-end software model. Yeah. That's where I think is the. Sounds a lot like CV3. Sounds like a CV3, but probably more. Yeah ... more higher performance than that. Yeah we are talking about the design we just talked about is really about perception box is sitting in the middle. Okay. I mean, you sort of talked about a full stack approach in automotive, but this is gonna be a much more fragmented customer base. Does that require allowing them to do more of the heavy lifting on the software side? How do you go to market in these kind of more fragmented spaces? First of all, I think we want to demo. We need to have a software that we can demo the basic function like perception, path planning, you know, movement, all of that. However, like you said, each robot require different control. There's no chance we can develop all applications for all the robots. What we need to do is really working with our software partners, system integrators, so they can help each customer to optimize all the software and the models, that is a new business model we talk about at the CES. We want to work with a partner like ISVs, system integrators, or, you know, the OEMs to build a complete solution for customers, they can maybe even add their own software on top of that. This kind of overall development platform need to be ready not only for robots, but also for each infrastructure box that we just talked about. Okay. Can you talk about semi-custom ASIC types products in the context of all of this? You know, this discussion started with our first 2nm chip that we tape out at the end of last year. When we start this project, one of our customer approaching us say, "Hey, I'm interested at, you know, doing a semi-custom chip with you, and by adding some of the special sauce into our chip," but they don't want to pay for the whole thing. Yeah, I was gonna say they know what a 2nm... Yeah. mask set cost. The reason they came to us because nobody want to afford that 2nm chip tape out. Yeah. However, the trade-out is they pay for a portion of the fee, but allow us to use that chip to sell to people, to customers not competing with them. Those arrangement definitely is a win-win because that cut back our R&D cost to develop the first 2nm project. Since then, since we start talking about this, many customers and maybe many new customer come to us says, "We are interested similar deal." The become us is what's our way? How do we determine who to engage, who not to engage? How we... Is that real business for us? We are at the stage now we need to make a decision by engaging maybe two to three customers to size up the opportunity, understand how difficult it is, and also go through our i's to make sure that we build this business that we can justify in the long term. If we decide to do, this is going to be a long-term business for us, now that obviously we could ramp up our go-to-market team as well as the VLSI team. Most important thing is that we need to make sure any customer come to us, they want to leverage first our IP, our video processing IP, our AI inference engine, our low-power technology, as well as 2nm technology. If anybody want to leverage those combinations, it's good customer. At the end, it's our way decide whether that's going to be a business we get to engage or not. How are you thinking about 2nm in the sense of, you know, CV3 was a really expensive chip that didn't ever get the traction that you wanted and do you have to replicate that investment at 2nm, or are you able to sort of focus on these more project-oriented or sort of defined application-oriented 2nm products? For 2nm, we definitely try to. When we tape out any 2nm chip, we need to identify not only just a customer, but potential sales, right? We are being very careful about defining what kind of 2nm chip we want to build. There's a guaranteed customer and guaranteed market for us to enable 2nm. From that point of view, we are not going to do another automotive chip at 2nm anytime soon. Yeah. The, we are gonna focus on the areas we know there's a customer demand and also have a high volume potential already. I think from that point of view, two nanometer is become, I think, important for the power efficient solution. If you really care about lowest possible power for robotic application, for any other HMI application, two nano become must have. The state of your 2nm comes from Samsung, you're very confident in the process technology underlying it? We are getting a lot more confident than before. Yeah. first of all... Does it help that Elon's putting a lot of volume through? Of course, you know. When Elon announced it, I feel so happy because I don't need to be the only one defense counsel anymore. However, I think throughout the last 12 months, working closely with Samsung Foundry on this process technology, we get to a point that we believe their yield will be not only acceptable, but also good enough for going to production. We are going to go to production first half of next year. I think that will happen. More importantly, it's not only us saying that, right? There are multiple other large companies are saying that. I think from that point of view, getting very comfortable that will happen. More importantly, working with Samsung become a advantage to us because that, TSMC has been telling people they don't have enough capacity. Yeah. for everyone. Yeah. Samsung not only have enough capacity for us, we secure all our capacity that require for 2026. Okay. We also secure the 2nm capacity for 2027. From that point of view, I think that Samsung definitely help us to give the confidence to our customers that they don't need to really worry about the supply chain, you know, for many different reasons. Yeah. Well, that's great. I just have one more question and go open it up to audience if there are any. I mean, you just, you've reinvented the company, I think, really for the third time around all of this. Starting out as sort of video processing and then incorporating AI capabilities and now sort of pivoting more towards the Edge. I guess what, where is the end point of that? What, what do you think the business mix looks like a few years out? I think automotive, given the Samsara commentary, is still gonna be a big part of it. How are you apportioning resources to automotive versus these other Edge AI markets? Even for automotive, I want to make clear that we are focusing on the project that can generate revenue. At the beginning, we focus on developing technology and invest heavily. Yeah. Now we kinda reposition that for automotive. Let's focus on the project that we know is gonna generate revenue. That already is a different huge change for us. I think it's more important to address your first question is, how do we see this company going to evolve in the next five years? I really think that edge AI will become a lot more visible in the next five years. Today, 95% of AI investment go to data center. Yeah. I think that will change. That will change because that you need to deploy real-time application based on AI. Everybody talking about, even OpenAI says they want to build a, you know, wearable device. Guess what? That's a Edge AI device. Right? I think that we still don't know what's the most, the killer app for Edge AI yet. We start seeing a lot of smaller market. Yeah. We believe that will happen. From that point of view, that we will continue to invest heavily on the Edge AI side, not only just on the video. Video is definitely our cash cow and going to continue milk and develop project on that. We also see that on the digital AI side, go to AI box to aggregate. That's also huge investment. Edge AI will be the key platform and key area we're gonna continue to play. Yeah. That's great. Let me see if there's questions from the audience. If not, we can wrap it up there. Fermi, congratulations, it's been a really successful year for you, everything you've achieved is really putting the company in an interesting place. Thank you, Joe. Thank you very much. Thank you. Thank you, guys.