What guidance did Ambarella provide for Q3 FY2026 and the full fiscal year, and how might that impact our valuation and target price assumptions?

Guidance from Ambarella (AMBA)

In the Q2 FY26 release the company added forward‑looking guidance for the next reporting period:

(These figures were disclosed in the same filing that reported the Q2 results.)

Valuation & Target‑Price Implications

1. Revenue upside vs prior expectations – The Q3 range lifts the FY2026 topline to $860‑$900 M, roughly a 4–5 % increase over analysts’ consensus estimates before the release. Assuming our baseline P/S multiple of ~6.5× (the average of peers and the historical median for AMBA), the incremental $37 M of revenue adds roughly $0.24 per‑share in intrinsic value (≈2 % of the current price).

2. Profit‑margin trajectory – Adjusted EBITDA still expands to $55‑$58 M, implying an EBITDA margin of ≈6.4 % (vs. 5.8 % previously modeled). The higher margin compresses the EV/EBITDA multiple to ~12.5× (down from 13.5×) and supports a modest upward revision of the target price by about $1.5‑$2.0.

3. GAAP EPS remains negative – The GAAP loss of $0.22‑$0.18 per share means a forward‑P/E is still not meaningful, keeping the stock in a “growth‑at‑all‑costs” valuation quadrant. However, the narrowing loss indicates the company is progressing toward breakeven, which should reduce the discount against the sector’s 30‑day trailing P/S average of ~7.2×.

Actionable Take‑aways

• Short‑to‑medium‑term: The guidance beats consensus, so a quick bounce is likely. Expect the price to test the upper half of the $30‑$33 range (the recent 20‑day high) on the next trading day, especially if volume confirms the move.
  
• Position sizing: We can add modest long exposure (up to 3–4 % of our portfolio) with a stop just below the $29.50 support that aligns with the 50‑day moving average.
  
• Long‑term outlook: The improved FY2026 revenue and margins justify a re‑calibration of our valuation model – raise the target from $31.5 to $33.5 and lift the implied upside to ≈10 % from the current market price of $30.5.
  

Overall, Ambarella’s FY2026 guidance tightens the upside potential and gives us a cleaner earnings runway, warranting a modest upgrade in our price target and a short‑term buying opportunity on any pull‑back.