Why Ambarella Stock Is Up 18% After Earnings

The chip maker reported better-than-expected quarterly earnings and revenue. (Dreamstime)

Ambarella stock was soaring Friday after the artificial-intelligence chip maker reported strong quarterly results and projected a blockbuster quarter ahead.

The company posted adjusted earnings of 15 cents a share for the second quarter, surpassing analysts’ consensus estimate of 5 cents, per FactSet. Revenue totaled $95.5 million, up nearly 50% from the prior year and above Wall Street’s call for $90 million.

Perhaps more important, Ambarella’s third-quarter forecasts were well above analysts’ expectations. The company estimated revenue to be between $100 million and $108 million for the quarter ending Oct. 31. Analysts polled by FactSet had expected $91.1 million in third-quarter revenue before the earnings print.

Ambarella stock climbed 18% to $83.14 on Friday.

The company secured key customer wins from internet-of-things company Samsara and drone maker Arashi Vision , which does business as Insta360. The strong results didn’t appear to stem from customers pulling forward purchases amid tariff concerns, management said.

“Every time I have a meeting with my peers in our customer base, one of the topics is always about supply chain,” said CEO Feng Ming Wang in a conference call. “Nobody is telling us that they are building excessive inventory.”

Ambarella’s customer wins showcased the diversity of its internet-of-things business, Needham analyst N. Quinn Bolton wrote in a research note Friday. The Internet of Things will likely be Ambarella’s primary growth driver over the next couple of years until the company can secure an automotive design win, Bolton added.

Needham reiterated a Buy rating for the stock and lifted its price target to $100 from $90.

Write to Nate Wolf at nate.wolf@barrons.com