It has been about a month since the last earnings report for Ambarella (AMBA Quick QuoteAMBA - Free Report) . Shares have added about 7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ambarella due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Ambarella's Q1 Earnings & Revenues Top Estimates

Ambarella reported first-quarter fiscal 2022 non-GAAP earnings of 23 cents per share, handily outpacing the Zacks Consensus Estimate by 35.29%. The reported figure jumped significantly from the prior-year quarter’s earnings of 4 cents per share.

Meanwhile, revenues of $70 million beat the consensus mark of $69 million and increased 28% year over year. Recovery in the automotive and other markets was a positive. Ambarella’s top-line growth was also driven by improvement in the security-camera business.

Customer & Market Details

Ambarella had two customers that contributed more than 10% in the reported quarter. WT Microelectronics, a fulfillment partner serving multiple customers, accounted for 63% of the company’s revenues. Chicony, a Taiwanese OEM, which manufactures for multiple customers, contributed 16%.

Moreover, the company noted that it continues to gain SoC share in the professional security-camera market outside China. Momentum in Ambarella’s CV flow SoCs in professional IP cameras across all geographies continued in the reported quarter.

Operating Details

Ambarella reported non-GAAP gross margin of 62.9%, up 380 basis points (bps) year over year in the first quarter.

A healthy customer mix supported by impressive operational execution aided gross-margin expansion during the first quarter and offset the higher expenses incurred to overcome supply-chain challenges.

On a non-GAAP basis, operating expenses were $35.4 million, up 6% sequentially. Seasonal increase in payroll taxes and increased headcount led to the increase.

Total headcount at the end of the first quarter was 803, with about 81% of the employees dedicated to engineering. Roughly 66% of Ambarella’s total headcount is located in Asia.

Net inventory was $33.1 million as of Apr 30, 2021, up 26.8% sequentially.

Balance Sheet & Cash Flow

As of Apr 30, 2021, Ambarella had cash and cash equivalents & marketable securities of $435.5 million compared with $440.7 million as of Jan 31, 2021.

During the first quarter, the company generated an operating cash outflow of $4.5 million.

Guidance

For second-quarter fiscal 2022, revenues are expected between $74 million and $77 million. Non-GAAP gross margin is anticipated to be 61-62%. Non-GAAP operating expenses are projected at $36-$37.5 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 34.36% due to these changes.

VGM Scores

At this time, Ambarella has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Ambarella has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.