Ambarella Looking Past GoPro Amid Other Wearables, Drones

Ambarella's Q4 revenue and earnings soared late Tuesday as it capitalized on growing demand for chips that enable drones, wearables as well as security and automotive cameras to take high-definition video.

The Santa Clara, Calif.-based company, which provides video processor chips to camera makers such as GoPro (GPRO), reported a 161.5% increase in earnings per share excluding items to 68 cents, beating analysts' expectations of 49 cents. Sales rose 62% to $64.7 million, above views for $59.4 million.

For the current quarter, Ambarella (AMBA) forecast revenue of $64 million to $68 million. Analysts forecast Q1 revenue of $59 million.

Shares climbed 6% in late trading after closing up 2.3%.

CEO Fermi Wang said in a conference call that Q4 revenue was driven by expanded product offerings and customer growth across its core markets.

"We continue to see growth opportunities in new camera applications," Wang said, pointing to new uses with "flying cameras," security and wearable cameras, and "intelligent automotive" cameras.

In addition to those professional and consumer applications, Ambarella's compression chips are also used in broadcasting TV programs worldwide.

The company sees growth from new market entrants and devices. Wang noted Chinese smartphone manufacturer Xiaomi's launch Monday of its Yi wearable action camera, which uses Ambarella's chips, and three new camera models launched recently by GoPro.

He added that one "significant growth opportunity" ahead will come from automotive cameras with 360-degree viewing, aimed at replacing side- and rear-view mirrors.

Xiaomi's decision to use Ambarella's chips in its new action camera should contribute to Ambarella's revenue growth in Asia during 2016 and 2017, given the Chinese smartphone maker's strong brand and growing distribution, Canaccord Genuity analyst Matt Ramsay said Tuesday.

But although action sports cameras remain compelling, he thinks the enterprise security camera and other markets provide larger opportunities.

Wang said the professional Internet protocol-based camera market continues to grow rapidly, especially in China, as traditional, analog closed-circuit TV devices are replaced by digital IP cameras. Ambarella is experiencing growth from companies that offer home-monitoring cameras as part of their security services.