Ambiq Micro, Inc. (AMBQ) Earnings

Management highlights

- Market Demand: Management confirms a step change in demand for edge AI semiconductors, with end-user demand exceeding both company and customer expectations. Demand growth is broad across customers, end markets, and product lines, with lean channel inventory indicating growth is driven by underlying end consumption, not inventory replenishment. Deferred unmet demand exists due to supply constraints, which management expects to convert to future revenue as additional capacity becomes available.\n- Product and Technology: Ambic holds a unique market position enabling advanced on-device edge AI workloads while meeting critical ultra-low power requirements for battery life, privacy, and responsiveness. The company recently launched two new SoC families (Apollo 330 Plus, Apollo 510 Lite) that are already seeing strong customer demand, with revenue contribution expected to start in Q3 2026 and first customer device launches in early 2027. New AI software tools including HelioCore, Compression Kit, and the open-source Helia Profiler have been launched to expand the company's AI ecosystem, improve customer development speed, and enhance solution value. Next-generation products (Apollo 340, Atomic 110, Atomic 120) remain on track for customer sampling in early 2027, with strong customer interest already reported.\n- Financial and Operational: Ambic completed an upsized follow-on offering in June 2026, generating $168 million in net proceeds; total 2026 net proceeds from two offerings are $243 million, leaving the company with $366.8 million in cash and no debt as of quarter-end, providing full financial flexibility to invest in growth. Gross margin strength is driven by favorable product mix toward higher-value edge AI solutions and improved manufacturing efficiencies (including yield and test time improvements) that offset broader industry cost pressures. The company is prioritizing investment in R&D to expand its product roadmap and capture the large long-term edge AI market opportunity, which management estimates addresses a base of more than 20 billion already-deployed connected devices.

Guidance

- Q3 2026: Net sales guidance is set at $36 million to $37 million, representing approximately 100% year-over-year growth. Non-GAAP gross margin is expected to range between 46.5% and 47.5%, consistent with Q2 2026 performance. Non-GAAP operating expense is projected at $24 million to $25 million, including $2 million in planned intellectual property purchases, and non-GAAP loss per share is expected between $0.12 and $0.20.\n- Full Year 2026: Ambic maintains full-year 2026 net sales guidance of approximately $135 million, even amid ongoing industry-wide supply constraints, and remains on track to achieve doubled year-over-year net sales growth in the second half of 2026. Gross margin guidance has been updated from prior expectations of flat year-over-year margins to a forecast of modest year-over-year improvement, despite industry-wide cost and supply headwinds. Full-year 2026 non-GAAP operating expense is maintained at approximately $85 million, including $7 million to $10 million in planned intellectual property purchases tied to next-generation product development.\n- Product Roadmap: A meaningful revenue ramp for the Atomic 110 next-generation product remains on track for 2028.

Segment performance

Ambic Micro reports total Q2 2026 net sales of $33.9 million, an 89.7% year-over-year increase. By product line: Apollo 3 and Apollo 4 achieved double-digit year-over-year revenue growth, while Apollo 5 sales more than doubled year-over-year. By end market: Revenue outside of Ambic's three largest customers grew 143% year-over-year; sales to end customers in China accounted for 14% of total net sales, up from 12% in the year-ago quarter. Non-wearable end markets (medical, industrial, smart home/building) are on track to more than double their annual revenue in 2026, and 25%+ of the company's new design funnel for 2027 product launches comes from non-wearable end markets. Non-GAAP gross profit for the quarter totaled $16 million, up 109.3% year-over-year, with a non-GAAP gross margin of 47.2%, up 450 basis points year-over-year. Non-GAAP R&D expense was $11.2 million (up 55.5% YoY), non-GAAP SG&A expense was $8.2 million (up 23.7% YoY), and non-GAAP net loss was $1.8 million, a $4.1 million year-over-year improvement.

Risks & headwinds

- Industry-wide supply constraints impacting wafer manufacturing, packaging, substrates, and testing are limiting the company's ability to meet current strong customer demand, constraining near-term financial results even with robust underlying demand. Supply constraints are expected to persist into 2027 as demand outpaces available capacity.\n- Broad industry cost pressures and rising component costs are putting upward pressure on manufacturing costs, which could pressure margins if not offset by internal efficiency improvements and favorable product mix.\n- Penetration of non-wearable high-growth end markets (medical, industrial, smart home) is progressing, but market development takes longer than consumer wearable markets, so revenue contribution from these segments is growing more slowly than desired amid very strong growth in core wearable end markets.\n- Forward-looking results carry inherent uncertainty, as actual performance may differ materially from current guidance due to unforeseen supply chain disruptions or shifts in end market demand.

Analyst Q&A

• Q: What is the scale of unmet demand in 2026 due to supply constraints, and when do management expect supply issues to ease? /

  A: Management stated demand is growing week-over-week and will remain strong through the second half of 2026 and into 2027, but declined to provide a specific figure for unmet demand. They noted strong partnerships with supply chain chain partners allow the company to meet forecasted volumes as closely as possible, but some customer demand (for example pre-orders 3-5x higher than customer expectations for new May 2026 product launches) cannot be fulfilled immediately, and supply constraints will remain an ongoing issue to manage.\n\nQ: Why is gross margin performing better than expected, despite rising component costs and industry-wide supply constraints? / A: Two core factors drive stronger-than-expected gross margins: first, the company continues to win higher-value edge AI business with favorable average selling prices, and second, the company has delivered significant manufacturing improvements including higher product yields and reduced test times as products scale into mass production. These gains more than offset the broader industry cost pressures currently impacting the sector.\n\nQ: What is the current revenue mix between wearable and non-wearable end markets, and how is the non-wearable design funnel trending? / A: Core personal/wearable device revenue is growing extremely fast, and non-wearable markets have already doubled year-over-year in absolute terms, though fast wearable growth has kept the overall relative share of non-wearables from increasing quickly. Roughly 25% or more of the new design funnel for 2027 product launches comes from non-wearable end markets (medical, industrial, smart home), with strong growth momentum.\n\nQ: With a strengthened balance sheet from recent fundraisings, what is Ambic's strategy for inorganic growth? / A: Management confirmed the new capital will be used to expand the company's product portfolio, which could include both organic and inorganic opportunities beyond the already-announced Apollo and Atomic product lines, but declined to share further details at this time. The company remains focused on strong organic growth for the foreseeable future.