By George Glover

Ambarella stock was soaring Wednesday after the semiconductor maker's better-than-expected earnings eased fears about slowing demand for its products.

Shares in the company, which sells chips used in video recording, streaming, and self-driving cars, jumped 25% to $85.30 in premarket trading. Futures tracking the small-cap Russell 2000 index were up 0.5%.

After Tuesday's close, Ambarella reported an adjusted profit of 11 cents a share on revenue of just under $83 million for the three months ended Oct. 31. Analysts were forecasting a profit of 3 cents a share on revenue of $79 million, according to FactSet consensus estimates.

The company's guidance for the current quarter also topped expectations. It expects revenue of between $76 million and $80 million, compared with analysts' expectations of $73.5 million.

The latest results could be a sign Ambarella has turned things around after a rough patch. Shares have rallied 30% over the past three months, shaking off worries about slowing demand for semiconductors.

"Company specific factors are more than offsetting broad market weakness, " President and CEO Fermi Wang said in an earnings release.

Wall Street thinks he's right. In a research note published Wednesday, Needham analyst Quinn Bolton said that while the wider market for auto chips looks weak, a "wave of new products" and partnerships with car makers including XPeng and Honda Motor will boost the stock.

"Ambarella's second strong beat and raise in a row demonstrates solid execution through a tough macro environment," he said, raising his price target to $100 from $90. That implies Ambarella shares can climb 46% from their level as of Tuesday's close.

Write to George Glover at george.glover@dowjones.com

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November 27, 2024 06:56 ET (11:56 GMT)

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