Ambarella Inc
NASDAQ:AMBA
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Ambarella Inc
Earnings Call Analysis
Q2-2025 Analysis
Ambarella Inc
In the second quarter of fiscal year 2025, Ambarella generated revenue of $63.7 million, marking a 17% increase from the previous quarter and a modest 3% year-over-year growth. This performance was largely driven by a substantial 70% contribution from the Internet of Things (IoT) sector, indicating Ambarella's strengthening presence in this market. Interestingly, the company's focus on artificial intelligence (AI) capabilities led to higher average selling prices for its products, contributing positively to its revenue mix.
Looking toward the next quarter, Ambarella's guidance suggests total revenue between $77 million and $81 million, translating to a noteworthy projected sequential growth of 24%. This outlook is supported by anticipated double-digit growth in both the IoT and automotive sectors. For the entire fiscal year 2025, the management remains confident in achieving revenue growth in the mid- to high teens percentage range compared to the previous year, maintaining their earlier estimates of $250 million in total revenue.
Despite positive growth indicators, Ambarella is not immune to external pressures. The current economic environment presents challenges, particularly within the automotive segment, which is experiencing a slight downturn in global production. Moreover, the ongoing electric vehicle (EV) OEM shakeout and mixed spending dynamics in the IoT market signal cautious optimism. However, company-specific advancements, particularly in AI-driven solutions, are expected to offset some of these headwinds.
A significant portion of Ambarella's growth strategy relies on its new product introductions, notably its CV5, CV7, and CV3-AD families, which all incorporate enhanced AI capabilities. The CV5 is currently in production, with expectations to exceed one million units sold this year. The CV7 family is anticipated to enter production by the end of fiscal year 2025, facilitating further revenue growth through advanced AI applications. As these new products ramp up, the company expects substantial impacts on its growth trajectory over the coming years.
In fiscal Q2, Ambarella achieved a non-GAAP gross margin of 63.3%, reflecting effective expense management strategies that kept operational expenses lower than anticipated. The company reported a non-GAAP net loss of $5.5 million, equating to a $0.13 loss per diluted share. On a positive note, cash and marketable securities rose by $16.5 million to reach $219.8 million, demonstrating healthy liquidity amidst the revenue fluctuations.
Ambarella is witnessing a favorable market trend, with OEMs and Tier 1 businesses increasingly seeking AI-enhanced solutions. The ramping demand for computer vision applications signifies a strong market position for Ambarella, particularly as it continues to announce new design wins across both the automotive and IoT markets. Notable developments include collaborations with Rivian in the automotive space and various enterprise IoT clients, which collectively bolster Ambarella's long-term revenue growth potential.
As the second half of fiscal year 2025 approaches, Ambarella forecasts a return to normal seasonality in its revenue streams, pushing back from a period of inventory reevaluation. The company expects a stabilization in demand as customers finish their inventory adjustments. Additionally, as the CV3 family gears up for production in fiscal year 2026, Ambarella is setting the stage for a potentially lucrative cycle of growth driven by innovation in AI technology, particularly within the automotive space.
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Hello, and thank you for standing by. Welcome to Ambarella's Q2 Fiscal Year 2025 Conference Call. [Operator Instructions]
I would now like to turn the call over to Louis Gerhardy, you may begin.
Thank you, Twanda. Good afternoon, and thank you for joining our second quarter fiscal year 2025 financial results conference call. On the call with me today is Dr. Fermi Wang, President and CEO; and John Young, CFO.
The primary purpose of today's call is to provide you with information regarding the results for our second quarter of fiscal year 2025. The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth and demand for our solutions, among other things. These statements are based on currently available information and subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. We're under no obligation to update these statements. These risks, uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results are more fully described in the documents we filed with the SEC.
Access to our second quarter fiscal 2025 results press release, transcripts, historical results, SEC filings and a replay of today's call can be found on the Investor Relations page of our website. The content of today's call as well as the materials posted on our website, are Ambarella's property and cannot be reproduced or transcribed without our prior written consent.
Before we start the call, I want to note that we will be participating on August 29, in Deutsche Bank's Technology Conference, will be September 4 at Citi's 2024 Global TMT Conference, September 17 in Bernstein's sixth Annual West Coast semiconductor bus tour and September '24 in Evercore ISI's ADAS AV and AI Summit. We hope to see you at one of these events.
Fermi will now provide a business update for the quarter. John will review the financial results and outlook, and then we'll be available for your questions. Fermi?
Thank you, Lois, and good afternoon. Thank you all for joining our call today. Our second quarter revenue was near the high end of our guidance range, increasing 17% sequentially. Auto revenue grew slightly, sequentially with stronger growth in IoT which represented about 70% of total revenue. We achieved record [indiscernible] AI influence revenue, which supported a higher blended average selling price in this quarter.
The midpoint of our fiscal third quarter revenue guidance implies about 24% sequential growth with double-digit sequential growth anticipated for both IoT and auto. In our last earnings call on May 30, we expressed confidence in the consensus fiscal year 2025 revenue estimate of $250 million. At this time, based on customer orders and the forecast, we expect our fiscal year 2025 revenue growth in the mid- to high teens percent versus last year.
I will now provide some additional insight into the gives and takes of our current outlook. First, our analysts indicate most of our customers have now completed the rebalancing of their inventory of Ambarella SoCs and our revenue in the second half of the fiscal '25 is expected to reflect actual end market demand.
Second, the overall economic environment is currently a headwind for us. As you have heard, global auto production is forecasted to be down slightly this year. There is an electrical vehicle OEM shakeout underway, and the enterprise and consumer IoT spending is mixed. So it should be clear, there are company-specific factors offsetting the headwinds and driving our strong results and outlook. There is rising demand for AI-powered -- powered solutions, including AI influence at the [ edge ] where we have been investing.
Most importantly, we are seeing initial revenue ramps from certain IoT and automotive customers, especially for our higher-priced new products. Our confidence is building in our new products, which we expect will lead to new waves of revenue growth in the years ahead. I would like to clearly define what I mean [indiscernible] products.
New products include the CV5, CV7 and the CV3-AD families, which are [indiscernible], most integrate our third-generation AI influence accelerator and all command above average ASPs. In this new product group, the first wave of revenue is from the CV5 family, which is ongoing and continue to ramp. We expect to easily exceed 1 million units shipped this year across more than a dozen design wins in IoT as well as automotive.
Our second new product revenue is expected from the CV7 family, which we expect to enter production at the end of fiscal year '25. The CV7 family also serve both auto and IoT applications, with initial revenue from computer vision applications expected to be followed by revenue from more advanced AI network such as clip and [ vision ] language model.
The CV3-AD family for L2+ and higher level of autonomy is also in our new product grouping. We remain highly focused on converting multiple OEMs and Tier 1 RFIs and RFQs for CV3 into the one cover, which will be incremental to the lead motor and the commercial vehicle wins we have previously discussed. We continue to expect the first full year of production for CV3 family in calendar year 2026 of fiscal year 2027 and growing from there.
Other new products, including our upcoming 2-nanometer offering [indiscernible 4D image radar for perception [ software ] and [indiscernible] driving [ software ] stack IP. And as the business case for these new products develop, we will provide more information on the timing of their revenue contribution.
Collectively, these new products are expected to represent a majority of our incremental revenue growth, and they are the primary source of the positive momentum we are reporting. While most of the new product revenue originates from CV5 today, in the years ahead, we are anticipating several important waves of new product growth.
I would now like to summarize representative customer activity in the quarter. During the quarter, [ Rivian ] introduced the second-generation [indiscernible] SUV and [indiscernible] pickup truck. This vehicles leverage Ambarella's 5-nanometer CV5 AI SoC to provide surround view images while driving as well as the [ gear ] guard camera function when the vehicle is parked. [ Samsara ], a leading provider of a commercial fleet [indiscernible] solution has introduced its [ CM-33 ] front facing and CM-34 [indiscernible] facing AI- cameras. Based on Ambarella's CV22 SoC, both cameras offer advanced low features, including lane departure and forward collision warning and the [ CN34 ] also offers driver behavior analysis, including mobile distraction and drowsiness detection.
In the China automotive market, OEMs continue to introduce new models with advanced camera-based features, leverage umbrella's SoCs. In August, [ BAIC ] joint venture company introduced the [indiscernible] passenger vehicle with an electronic mirror camera monitoring system based on our CV22 SoC. And the new car brand, [ Lucid ], a [ Cherry ] joint venture introduced its [ 8,7 ] passenger vehicle, including a driver monitor system based on our CV28 automotive SoC.
In Japan, we have started production of a smart real camera [indiscernible] Honda based on CV28. This is available in the navigation package option, and it provides drive assistance and smart parking, including detecting vehicles and lens behind the vehicle.
I will now review some of the representative customer engagements in our IoT business. In the enterprise security camera market, UMP market leader access introduced its [ P12 ] range of modular camera with thumbsize pinhole [ mini-dong ] sensor unit [ variance ] The cameras feature a deep learning processing unit based on our CV25 SoC for advanced analysis.
Also during the quarter, Japanese market leader, [ iPro ] introduced several new CV2-based products. The actual corner camera is based on Ambarella CV22 and this 5-nanometer camera includes a privacy guard feature for automatic blurring of faces.
In our other IoT market, we are pleased to see handheld camera manufacturers increasingly require more performance to support multiple AI applications while also requiring high resolution each back 4K or 8K from one or more cameras.
For example, [ InSa360 ] has introduced three CV5 [indiscernible] here. And recently, we also introduced the [indiscernible] wearable camera based on Ambarella's H22 SoC, the camera with just 1.4 ounces and include 4K video, [ 40 ] megapixel photo.
[indiscernible] brand of [ Pratico ] introduced its H2 post cellular [indiscernible] camera. For this announcement and the ones in the past, one can see we continue to expand our presence for AI influence at [indiscernible] age. Our CV2 products represent a vast majority of our AI revenue today, typically addressing computer vision applications for object detection and classification, providing real-time insights for a wide variety of applications.
Looking ahead, there is no doubt there is a significant build-out of AI training and inference capacity in data centers for the next-generation AI networks. We view this as a positive long-term leading indicator for our [indiscernible] business. In fact, our auto and IoT customers are increasingly asking us how we can help them with the new advanced AI networks, how they can be implemented as of [indiscernible].
Relative to AI computer vision, this new AI networks will require significantly higher level of computing performance and the efficiency we bring to the edge is critical. For Ambarella, our new products are expected to initially run for AI computer vision applications. However, beginning with the CV7 family, we can also address applications using this more advanced AI networks. Long term, we are optimistic about our significant investment in AI [ influence ] and how it positions us to scale to higher value-added products.
Now in the near to intermediate term, Q1 and Q2 were steps in the right direction. And one of our key objectives is to continue to drive revenue growth and achieve profitability while, sustaining the investment in our strategic R&D priorities. We will continue to actively managing our expenses, even though the cyclical downturn appeared to be over for us. Our goal is to turn the corner and drive positive earnings leverage in the next year with the anticipated revenue growth.
Now John will talk about the Q2 results and Q3 outlook in more detail.
I'll now review the financial highlights for the second quarter of fiscal year 2025 ending July 31, 2024. I will also provide a financial outlook for our third quarter of fiscal year 2025 and ending October 31, 2024. I'll be discussing non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation expense along with acquisition-related costs adjusted for the impact of taxes.
For fiscal Q2, revenue was $63.7 million, close to the high end of our guidance range, up 17% from the prior quarter and up 3% year-over-year. Non-GAAP gross margin for fiscal Q2 was 63.3%, slightly above the midpoint of our prior guidance. Non-GAAP operating expense was $47.7 million, $0.8 million lower than the midpoint of our prior guidance range of $47.5 million to $49.5 million, driven by continued expense management and the timing of spending between quarters, we remain on track to our internal product development milestones.
Q2 net interest and other income was $2.1 million. Q2 non-GAAP tax provision was approximately $299,000. We reported a non-GAAP net loss of $5.5 million or a $0.13 loss per diluted share.
Now I'll turn to our balance sheet and statement of cash flows. Fiscal Q2 cash and marketable securities increased $16.5 million from the prior quarter to $219.8 million. Receivables days sales outstanding decreased from 47 days in the prior quarter to 33 days, and days of inventory decreased from 123 to 108 days. Inventory dollars increased 8% sequentially and decreased 12% from a year ago. We generated positive operating cash flow of $16.7 million for the quarter. Capital expenditures for tangible and intangible assets were $2.6 million.
We had two logistics companies representing 10% or more of our revenue in Q2. WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 63% of revenue for the second quarter, while [ Hakuto ], a distributor in Japan was 10% of revenue for the quarter.
I'll now discuss the outlook for the third quarter of fiscal year 2025. As Fermi described, company-specific factors, in particular, our new product ramps are providing us with improved visibility into the second half of fiscal 2025. For fiscal Q3, we estimate our total revenue will be in the range of $77 million to $81 million, with sequential growth in both IoT and auto. We expect fiscal Q3 non-GAAP gross margin to be in the range of 62.5% to 64%.
We expect non-GAAP OpEx in the third quarter to be in the range of $49 million to $51 million, with the increase compared to Q2, driven by increased head count and project-related engineering expenses. We estimate net interest income to be approximately $1.8 million, our non-GAAP tax expense to be approximately $500,000 and our diluted share count to be approximately 41.7 million fully diluted shares.
Thank you for joining our call today. And with that, I will turn the call over to the operator for questions.
[Operator Instructions] Our first question comes from the line of Christopher Rolland with Susquehanna.
I guess my first one is, you referenced vision language models. Is this a new opportunity or an opportunity that you've been addressing for some time here? And how your architecture might be different from a GPU or an ASIC here? And is this a CV3 opportunity? I think you've maybe talked about a $1,000 ASP, something like that. Is that the kind of opportunity we're talking about here?
Yes. For vision language model, we demo our first [ LAVA ] model at the CES this year with a chip called [indiscernible], which is a derivative of a CV3 family chip. So it's our third generation inference engine, and we run the [ Lava ] model, which is a vision language model on [indiscernible] and since we give a demo, I think we attract a lot of customer interest. Most of them is interested in using a vision language model to hook up with multiple cameras and describe what the camera sees real time. So you can imagine that this is very important for our existing customer, both for enterprise IoT as well as maybe even for automotive.
So this is a feature that we've been talking about for 3 quarters. But I think recently, we believe we can even using CV72 to run a smaller model to enable the VRM running on camera to provide real-time feedback, which I think is a unique offering that Ambarella can do.
And then secondly, as I kind of look at your guidance for October, which was very strong and then reconcile it with the full year guidance that you gave, it implies maybe a significantly weaker Q4 than traditional seasonality. At least the way we track it would suggest.
I guess maybe you could just talk about maybe the moving parts here into January. What -- how you view traditional seasonality for the fourth quarter and the expectation for January, the implied expectation?
Yes. Thank you. So when we do the calculation, I believe the current guidance between Q3 and the whole year reflects a very normal seasonality for Q4. When we look at normal seasonality in the last 10 years, is anywhere between 7% to 10% negative, right? So if you take that calculation, I will find that our midpoint is probably in the range of normal seasonality. So I think that we expect -- we go back to normal seasonality because the inventory correction is done with us. We are ramping our products. And so that we believe that the [indiscernible] is reasonable.
Our next question comes from the line of Joe Moore with Morgan Stanley.
I wonder if you could talk about the outlook for the quarter. You talked about being driven by new products. Is that kind of content increases because you're migrating people to CV5? Are there new end markets or applications? Just kind of want to understand what's driving the strength in the coming quarter?
Right. So in fact, let's talk about that the new quarter. We can look at it from 2 different perspectives. One is the market, right? And the driver we see both automotive IoT has new product being introduced by our customer. On the IoT side and the LT enterprise as well as the other IoT products, we have customer introduced new products with much higher ASP than before. So that's definitely on the IoT side.
On the automotive side, both [indiscernible] and the [ Rivian ] are ramping up with CV5 in this quarter. So I think that just show you the -- on the market side.
But if you look at it on the product side, it really is a CV5 ramping up for the -- is the main reason for us to have the growth. But also CV22 go back to the normal growth rate after the inventory correction helps growth true. So those two reasons are on the product side.
Great. That's very helpful. And then separately, the announcement you had [indiscernible] motors a quarter ago. Can you just talk to is that leading to additional conversations in the China EV market? And just -- I know you're not ready to make any announcements there, but just how are you seeing the potential to increase traction with other OEMs in China?
Yes. I think that definitely with any design win that helps our momentum. And I think, like I said before, Chinese market is going to be -- continue to drive the innovation technology. So we continue to talk multiple OEMs and Tier 1s in China for CV3. So I think that's important for us, and we're going to continue to drive that. But at the same time, getting some European U.S. customer design wins is...
Our next question comes from the line of Tore Svanberg.
Congratulations on the strong results here. So Fermi, I just wanted to paint a little bit of a picture and maybe you can help me out here. So I mean, obviously, CV2 and CV22 has been doing well. The holy grail is CV3-N1, CV5, obviously now really ramping. What about CV75 and CV72. Are those going to ramp quite meaningfully to production next year? Or are those also more 2026?
Please stand by. Ladies and gentlemen, please stand by your conference call will resume momentarily. Please stand by.
Our next question comes from the line of Tore Svanberg.
Congrats on the strong results, guys. So Fermi, I was hoping you could just help me out a little bit with some of the product cycle here, right? Because obviously, CV2, CV22 has been doing well. We're now ramping CV5. Everyone's waiting for CV3 and [ N1 ]. But in the meantime, we got CV75 and CV72. So are we going to see pretty strong ramps from CV75 and CV72 next year? Or are those also going to be more 2026?
Yes. Thank you. First of all, sorry for the interruption. From a product point of view, I think CV5 will continue to be strong next year. We believe that the CV ramping up this year will continue next year. And CV72, we expect to start ramping up at the end of this year, and you will start seeing CV72 product shipping in the enterprise -- in the IoT enterprise next year ramping up. And it will start.
In fact, that's interesting because most of our customers when they design CV72 product, they plan for the traditional [ CN ] type of [ neural ] network. But we believe that in later stage after they ship the CV72 camera, they can use a software upgrade to upgrade newer -- more events, new network model like [ clip ] or vision language model to CV72. So we expect that the [ CV72 ] beginning is really serving our traditional IoT enterprise side, but it will enable new applications in the second half of next year, and we expect the life cycle of this product will be 3, 4 years just like before. And also, we have CD75 that will ramp up of mid- and low-end product for the CV7 family. So that is the ramping up situation.
Right. And so just to put that into perspective from a pricing perspective, right? Because obviously, you said that a lot of the growth right now is being driven by new products but higher ASPs. So when we especially look at CV72, that would still be a higher ASP product than CV5, right?
No. In fact, CV72 should compare that to CV22. CV5 is a high-end CV2 family. So CV72 is really coming -- you should treat that as a replacement of CV22-family has been 5 year old, and we need to refresh the cycle. So CV72, I will say, is a significant ASP jump for CV22 family and CV5 continues to be a high end of the market.
Yes. And Tore, just to add some perspective, our blended ASP today for SoCs is around [ 12 to 13 ] in all of these new products that Fermi was talking about CV5, CV7 family and then, of course, CV3, they would all bring our blended ASP higher as they ramp.
Our next question comes from the line of Ross Seymore with Deutsche Bank.
Can you hear me okay?
Yes.
Great. So first, congratulations on the strong report and guide. I know you talked about how this is new product driven, and I understand that methodology, but you also said that the inventory burn is done. So are we getting to the point where you're not burning inventory and so a big part of the step-up sequentially is that into the third quarter? And then from there, new products and normal seasonality applies. I'm just trying to figure out the new product side versus your comments that there's no longer an inventory burn either.
Yes. So first of all, we believe our inventory burn is down in Q2, maybe a little bit Q3 but not much because when we talk to a customer, they -- most of the big customers we told us they are done with the inventory correction also. So we are -- and also when we look at how -- with a very stable lead time from the foundry, and we watch how our customer give us PO and booking. We believe they are they are booking in a regular speed and they are not building up new inventory. So from that point of view, I think the inventory correction is downward for us.
And also when we look at -- the revenue growth compared to before, and most of them is contributed by the CV5 family as well as the CV22 coming back from the inventory correction and go back to normal growth. And those two things are the main reason we're seeing the growth this time.
I guess as my follow-up. I was hopeful you gave the full year commentary. I was just thinking -- some of the stuff you answered with [indiscernible] with the new products and the timing and when they're coming in, et cetera. If we just put that into an end market perspective to simplify it a little bit. How would you think the puts and takes on the growth rate of IoT versus automotive would be for next year? Do you expect one to grow significantly faster than the other? Is IoT going to be largely seasonal from here? With some new product kickers and automotive is the one that has very large stair steps as new customer ramps begin. Just how should we think about the relative growth rates and kind of linearity of them?
Right. So maybe in a very short term, in Q3, we think that automotive IoT will grow in a similar rate, we -- because I think both sides has a new product ramping up. For next year, although we haven't given any official guidance, I personally believe that the IoT has a better growth than automotive just because CV72 is an IoT device, and we believe that it will contribute more. But I do hope that after that CV3 family will kick in and start helping our growth rate at automotive.
Our next question comes from the line of Kevin Cassidy with Rosenblatt.
Clearly, you're in a very strong product cycle. You've had quite a few in the past. Can you, maybe Fermi, give us a comparison, what's this product cycle like we're different than past product cycles? Is there the customers maybe stickiness, the longer-term product cycle, software defending your product, just anything you can compare it to past cycles.
I think when I look at this product cycle, there are two things that our customer offering is which is really important for us. One is AI performance. As you can see, that CV5, one of the reasons using CV5 is that AI performance. And we're seeing our customers using AI to improve video quality and also using AI to add more AI functions, for example, to do object detection, to help the video editing or security camera guys using advanced network. So AI performance, just like what we predict, the performance requirement is getting higher and higher. I think it's sticky for us because when you increase your AI performance that for all the cameras, that power consumption continues to be important. So we are -- our unique offering is in -- continue to offer higher AI performance without increase too much of the power consumption, and that's going to continue to be our differentiation.
So like I said, if we -- we believe that AI performance requirement will continue to go up. If that's the case, I think this time, it will help us to have a sticky customer base.
Okay. Great. And just another in your 10% customers, [indiscernible] wasn't mentioned, should we imply that, that means consumer is getting to be less percentage of your overall revenue? And is that going to be the trend going forward?
Right. In the last few quarters, we talked about one of the weakness in the market size is our IoT home. We used to call it consumer IP [ can ], but it's really just the security camera using the home application. That [indiscernible] -- majority [indiscernible] designed within that category. That's why they are not 10% this time. And continues -- although we continue to have design wins in security home -- home security -- sorry, IoT home category, but I think that the growth rate there is much slower than price as well as other IoT or automotive.
Our next question comes from the line of Matt Ramsey with TD Cowen.
It's actually [ Sean O'Laughlin ] on here for Matt. And I'll echo the congratulations of others on the really positive guidance here. I wanted to dig in actually on the more traditional video processor side of the business. And I know that we saw a pretty significant decline in fiscal year 2024. I think at the time, it was categorized to something like $80 million or so of that decline from the traditional legacy video processing.
Should we sort of think about that as a potential another potential lever going forward? Or is the industry sort of moved on from that product segment into much more of the CV22 and beyond family that you've spent a lot of the call talking about it?
Right. So first of all, I think the market definitely moved more to total AI, but also Ambarella made a very clear decision several years ago that we want to pool all our limited resources on the AI growth. So we haven't taped out any video processor in the last few years. So I think that's also an important factor.
So we don't believe the revenue or unit number sales of video processor will increase in the future, but the decline rate was significantly slower than before. So I think that when the video processor declined in a much slower rate and our AI start generating more revenue. And that trend will help us to start showing up even the unit growth for the company as well as for the revenue.
Yes. That's crystal clear. And then on those new products, we talked a little bit about higher ASPs, but I was wondering maybe John could speak to the margin profile of those new products, considering that there are more advanced geometries and potential wafer pricing increases of foundry and stuff like that.
Great. Thank you. Yes, Sean. So at a high level, we don't anticipate the margin profiles as we go to smaller and smaller process nodes that the margin profile will change significantly from what we've seen over this last several process nodes. As we've said previously, our long-term gross margin range is 59% to 62%, and we expect to get into that long-term range as automotive becomes a larger portion of it. But that's more just kind of markets and commercial terms than, I would say, any kind of foundry issue.
Our next question comes from the line of Suji Desilva with ROTH Capital.
Congrats the progress here. I just wanted to clarify the growth you had in the fiscal second quarter, I think it was mostly IoT. Please correct that's wrong. And if it is, which applications kind of came back? Or did inventory burn in ordering resume in the IoT segment to help the fiscal second quarter?
Right. So for the second quarter, you are right, the IoT growth rate is a lot higher than automotive. And then the main area of growth is really IoT enterprise as well as other IoT category. And you can see that the IoT enterprise is really to stabilize the inventory quickly and go back to growth mode -- go back to the clean up of the inventory and go back to regular ordering pattern. And also the other IoT side that a few customers taking our CV5 into production, that helps.
Got it. And then flipping over to the auto side. You talked about in the CV3 helping ramp maybe in the '25 or potentially calendar '26 time frame. Do you have visibility into program ramps there and the timing of when those start to inflect to give us a sense? Roughly kind of where in the [ 25x25 ] time frame, autos would kind of have a growth inflection upward or program as starts?
Right. So we talked about calendar year '26 for CV3 ramp-up. The first one we talked about was the [indiscernible] motor. We have not talked about the models yet, and hopefully, that we can provide information in the near future.
[Operator Instructions] Our next question comes from the line of [indiscernible] with Needham & Company.
This is [indiscernible] on for Quinn Bolton. My first question is on Ambarella's passenger OEM win last quarter. Has that provided a halo effect for current passenger OEM engagements? Or more so, has there been a shift in sentiment with current OEMs that Ambarella is engaged with?
So first of all, I think any design win helps. So I think that every OEM design win, they consider different. But however, in the past, the -- while the issue, we talk about winning design win is our scale and also our automotive experience. So that first design will definitely help. But every [indiscernible] design will go to -- be fighting to -- against our competitors on different categories on the technology side, pricing side and also the customer support side. I think the first design win helps, but it cannot be deterministic to help us to win a future design.
And my follow-up question is on the China auto market. There has been some recent news of aggressive pricing between Chinese OEMs, and I was wondering if Ambarella is seeing any negative impacts from this?
Well, you're absolutely right. The pricing pressure in China market is very high, and we continue to see our current design win -- in fact, in the last quarters, we have announced multiple Chinese OEM, Tier 1 design wins for different type of products like ADAS, recorders, [indiscernible], monitors. So we do see the pricing pressures. But however, also, if you look at our total gross margin that John just talked about, I think, yes, always pressure there. But I think in the balance, we still think that our gross margin profile is not going to change a lot in the next few quarters.
[Operator Instructions] We have a follow-up question from the line of Ross Seymore with Deutsche Bank.
Sneak two quick ones in here. Louis -- or I think it might have been Fermi Wang that gave what typical seasonality is in the fourth quarter. To the extent seasonality is a framework that's going to matter more as we look into next fiscal year, however you want to define it? Can you just give us an idea of how you view seasonality?
Sure. Whether you look at 5-year averages or 10-year, which is as we look at both, you've got 4 down sequentially. You've got Q1 can be down sequentially. And then our strongest quarters are Q3 and Q2. The numbers vary a bit, if you do 5-year or 10-year average, but that's the average.
Got it. And then I guess one for John. As I think about next year, looking like it's going to be a much more significant revenue growth here. How do I -- how does the company think about OpEx relative to revenue growth? I know you've put a ton of that work in already and you've been spending ahead of the growth. But to the extent leverage is going to be an important metric in profitability, as Fermi mentioned, I just wanted to see how you guys think about that relationship.
Yes. I mean, obviously, there's lots of factors that go into the plan for next year, but the primary focus is to drive toward non-GAAP profitability. And so from an OpEx perspective, we're going to hold as hold incremental spend as low as we possibly can while still delivering on the road map.
Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Dr. Fermi Wang for closing remarks.
Twanda, I just noticed, we had one more pop-up. Martin, why don't we take that? Sorry to interrupt.
Our next question comes from the line of Martin Yang with Oppenheimer and Company.
A quick question on guidance. Is there anything happening regarding the non industrial IoT in your guidance that has helped with the strength?
Sorry, we didn't get a question clear. Can you say it again?
So is there anything regarding consumer IoT segment that helped with the guidance and the strength of the guidance in 3Q?
Yes. So this is really about consumer IP [ can ], what we call the IoT home now. And first of all, we still believe that's one of the markets that's weak for us because the market going to a low end model with limited performance requirement. However, with that, so the Q3 guidance, IoT home didn't help our Q3 guidance. However, the market continued to change and we start seeing some of the whole IoT people are thinking about adding language model like a [ VRM ] or [ clip ] on to their service.
If that happens, when that happens, I think that will definitely give us the opportunity to go back to sell CV75 type of product because if you want to run [ clip ] at age in a camera, I think very few chips can do that. So I think we are waiting to see whether that new function and a new network requirement will be happening or consumer [ IP can ]. If that happens, that would become a better fit for us. But for Q3 guidance, that market doesn't help.
I'll now turn the call back over to Dr. Fermi Wang.
Thank you, everybody, for joining us today and looking forward to talk to you in a different conference or next time. Thank you, guys.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.