Ambarella Inc (AMBA) 2026 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Ambarella fourth quarter and fiscal year 2026 earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Louis Gerhardy, Vice President, Corporate Development. Please go ahead, sir.

Thank you, Michelle, and good afternoon. Thank you for joining our fourth quarter fiscal year 2026 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 fourth quarter of fiscal year 2026. 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 fourth quarter fiscal year 2026 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 or Ambarella's property and cannot be reproduced or transcribed without our prior written consent. Before starting the call, we hope to see you at one of the following investor events scheduled for our first quarter of fiscal year 2027.

March 3 will be at Morgan Stanley's TMT Conference in San Francisco. March 10, at Loop Capital's 7th Annual Investor Conference in New York, March 10 to 12, we will be at Embedded World in Nienburg, Germany, and we're offering a limited number of investor meetings. March 11 at Cantor's Global Technology & Industrial Growth Conference in New York. We'll be hosting bus tours at our Santa Clara headquarters with Instinet Nomura, Huate, CLSA on March 12, 18 and 20, respectively, March 16 at Bank of America's 2026 Asia Tech Conference in Taipei and March 24 at the ROTH Conference in Dana Point. As a reminder, we'll enter our first quarter quiet period on April 16, 2026.

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, Louis, and good afternoon. Thank you for joining us on our call today. Fiscal 2026 established a new revenue record for Ambarella. Revenue increased at 37% year over year, well above the growth in the mobile semiconductor industry and most of our semiconductor company peers. Our 5-nanometer new product cycles, together with our customers' new product launches combined to drive 50% year over year growth in our Edge AI revenue. About 80% of our full year fiscal 2026 revenue is Edge AI, all of which is also defined as a fiscal AI.

Overall, auto and IoT revenue both grew with company-wide growth in both units shipped and average selling price. Our fourth quarter revenue results follow a seasonal pattern with revenue down 7% sequentially, slightly above the midpoint of our original guidance. Our new third-generation 5-nanometer CV75 and the CV72 AI SoCs are rapidly growing, reaching a high single-digit percent of total revenue in Q4, and these new products are poised to be an important source of incremental revenue in the new year.

Looking further into fiscal 2027, we anticipate total revenue growth in the 10% to 15% range with non-GAAP gross margin within our long-term model of 59% to 62% -- for the year, we expect our new product cycle to continue to drive both unit and average selling price increase with revenue growth in both auto and IoT. In addition to the anticipated revenue ramp from CV75 and CV72, the recently announced CV7, our first 4-nanometer chip is expected to begin to generate revenue in the fourth quarter of this year. By a variety of measures, our team's achievements in the last year have strengthened our edge AI leadership, and we continue to enhance our market position.

Financially, in fiscal year 2026, we continue to commercialize our AI investment and deliver premium revenue growth, returning to full year non-GAAP profitability. Fiscal 2026 was our 17th consecutive year of a positive free cash flow with free cash flow for the year of $58 million or 15% of revenue. We executed to both our operational and R&D priorities. While facing a variety of industry-wide supply chain constraints, we shipped more than 25 million units across more than 15 SoCs with many variants, and we tape out our first 4-nanometer chip and our first 2-nanometer gate-all-around AI SoCs, while successfully bringing CV75 and CV72 mass commercialization. Our Cooper Development platform, while already powerful and well established is in a constant state of enhancement, including new agenetic capabilities.

Strategically, we announced during our CES 2026 product and pilot technology briefing, we are augmenting our direct-to-customer go-to-market with incremental initiatives, we expect to materially contribute to our long-term revenue growth.

First, we are incrementally building an indirect sales channel during including independent software developers, distributors and system integrators. We expect this to improve our ability to address the aged infrastructure market, as well as the highly fragmented robotic market. Furthermore, in the long run, our existing portfolio should benefit with long-tailed revenue from small to midsized customers, we have not directly supported in the past.

The second strategic development is the establishment of a semi-custom/custom ASIC business, where we have strong interest from a variety of companies. Our deep intellectual property, perception engines, AI accelerators, software development platform and advanced VRSI capabilities and established position in the Edge AI market are increasingly valued by companies considering semi-custom or customer ASIC projects.

Stepping back for a minute, there continue to be significant industry development with AI agents, applications, content models and services that when combined with our enabling AI SoCs, create an environment where more edge and physical AI use cases can practically emerge. Techniques developed in the industry such as distillation and the mixture of experts are enabling edge models to become smaller, yet smarter, which we expect will enable applications to evolve from early adopters to the mainstream

Altogether, we see a variety of enterprise and consumer Edge AI system become real time, proactive and able to make closed-loop decisions autonomously for the end users through Agentix. Of course, with all of breakthroughs, our customers have a lot to learn and evaluate as they consider new AI business cases. The various components of our comprehensive corporate development platform together with our engineering support are enabling customers to implement new technologies.

For example, a power constrained application may need a hybrid AI workload split between cloud and age. But in other cases, where no latency is acceptable, we need to support a vast majority of AI processing on our silicon. Overall, you can see there are many different Edge AI applications, use cases and the trade-offs we must support and our broad Edge AI products portfolio and established powerful development platforms are must-haves to drive the proliferation and diversification of the age and the physical AI market.

I will now discuss some representative customer engagement during the quarter. I want to start by highlighting our industrial automation robotic design win at the warehouses of a large US-based e-commerce provider. They leverage our N1-655 AI SoC to develop a perception hub for the warehouse floor. A fleet of this system is being deployed to enable high-speed, accurate, and efficient storage and the retrievable system at their large-scale warehouses across the country. We are seeing several such physical ad designs starting to emerge on our SoCs.

In other IoT applications, we were awarded several projects in the video conference market this quarter. Insta360 launched their Link 2 Pro and Link 2C Pro high-end web camera based on our H22 SoC. And the QSC, a cloud-native audio, video and control ecosystem company based in California announced their QSI high-definition video conferencing in PTZ camera designed on our CV72LC. They are leveraging our AI ISP for enhanced video quality and use AI for face detection and intelligent presenter tracking.

In Enterprise Security, IDE, a leading security technology customer announced their DCD316A security camera based on our CV72 SoC. And our customer Dallmeier based in Germany launched their Domera RDF6140 drone camera based on CV25 this quarter. They leverage our AI accelerator to offer several AI features like motion detection, temporary detection, intrusion detection and the line growth.

Finally, one of our leading customers, IQSIGHT, previously known as Bosch, announced two new AI products, both based on CV72. The FLEXIDOME 7100i anonymized the image inside the camera for enhanced privacy and compliance and the DINION 7100i detects people and the vehicle accurately with maximum detail in dark low-light conditions.

In our automotive safety, ADAS and telematic business, I would like to share some key customer wins during the quarter. Ford recently launched the Dealer-Fit truck bed camera last quarter, it's a smart security camera for the truck bed built on our CV25. It provides real-time truck bed monitoring, leveraging AI-powered intrusion monitoring and threat detection. Thinkware system in South Korea launched their QXD2 in-car digital video recording system, which is the first of the kind to leverage our AI ISP neural network on our CV25 SoC. Thinkware also use Ambarella's ADAS software stack to enhance perception capability for their forward-facing ADAS. Garmin announced their innovative due view based on CV25, it's a rugged 2-camera systems that enable professional truck drivers and adds in situational awareness.

In summary, this 11 representative customer engagements represent the implementation of a wide variety of applications and AI workload. Inherent in these wins is the high degree of programmability and the flexibility in our SoC and software platform, enabling us to serve a wide variety of applications with minimal incremental investment, while the customer benefit by having the ability to reuse their software and scale.

While we are seeing Edge AI green shoots emerging a very diverse range of Edge applications, we currently see the largest long-term growth opportunities in the robotics, automotive and edge infrastructure markets. The robotic market is a diverse market in a variety of applications, fixed factory automation, humanoid, mobile terrestrial aerial drones and more. We are already shipping into the fixed factory automation market and Q4 was our first full quarter of production revenue from the aerial drone market, which we believe is one of the highest value mobile robotic market today.

With our industrial automation robotic engagement announced today, we are establishing ourselves in yet another form factor in the diverse and nascent robotic market. In the automotive market, we have two business, one safety telematics ADAS business, which represents most of our revenue and a majority of our near-term growth opportunity in autos and also our auto autonomy business, starting at Level 2+ , which offers long-term growth opportunity. At this time, the auto opportunities we have either won or being invited to bid upon in the next six years from fiscal year 2027 to fiscal year 2032 is approximately $13 billion with the one proportion similar to the last year. In the edge infrastructure market, we are observing early customer opportunity with two different design architectures, one physical AI and the second digital AI.

First, enterprise buyers want to run physical AI inference on a local edge gateway to aggregate multimodal data from multiple sensors preprocessing in real time for use cases such as fleet management, physical security, industrial robots. The typically design fully self-efficient edge solutions to process data locally on devices for real-time low latency and secure decision-making that can be summarized and sent to data centers for training and analytics.

Second, we see early customer opportunities from enterprise IT buyers for digital AI application that push centrally trend and high-capacity models to be distilled, quantized and deployed in Edge nodes to enable low-latency closed-loop automation for secure digital applications while still maintaining centralized control in the cloud.

In summary, we are an Edge AI market leader across a broad set of criteria. First is our credibility. We have an installed base of 42 million Edge AI SoCs with more than 370 unique customers customer products reaching production and approximately $1 billion in cumulative Edge AI revenue primarily from our second-generation CV2 cam. Next is our portfolio breadth. We have a 12 Edge AI SoCs, supporting models ranging up to 34 billion perimeters. We support up to 100 billion parameters in the future covering the full branch of Edge AI applications.

Finally, our development platform is established a critical enablement tool. The Cooper Development platform scales across our Edge AI portfolio and multiple applications with customers implementing and reaching production with more than 200 different model architectures.

In conclusion, I'm very proud of the resilience, commitment and execution of our team in the last year. I'm very excited about our prospects in fiscal '27 and the years ahead. We are committed to our Edge AI strategy and driving earnings growth.

With that, John will now discuss the Q4 and the fiscal year 2026 results, as well as the first quarter outlook in more detail. John?

Thanks, Fermi. I'll now review the financial highlights for the fourth quarter fiscal year 2026, ending January 31, 2026. I will also provide a financial outlook for our first quarter of fiscal year 2027, ending April 30, 2026.

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 and acquisition-related expenses adjusted for the impact of taxes. Fiscal year 2026 revenue increased 37.2% to $390.7 million. Automotive revenue led by telematics increased in the high single digits and IoT increased almost 50% year over year, led by portable video and a continuation of strong growth in physical security.

For fiscal year 2026, non-GAAP gross margin was 60.7% versus 62.7% in fiscal 2025. Non-GAAP operating expense increased 12.9% for the year versus 6.5% in the prior year, driven by higher costs related to employees and SoC Development projects. Ending cash and marketable securities totaled $312.6 million, up from $250.3 million at the end of the prior year, driven by free cash flow of $58 million for the year or 14.8% of revenue.

For fiscal Q4, revenue was $100.9 million, slightly above the midpoint of our prior guidance range of $97 million to $103 million down 7% from the prior quarter and up 20.1% year over year. Sequentially, automotive and IoT both experienced a similar seasonal decline. Non-GAAP gross margin for fiscal Q4 was 59.8% at the midpoint of our prior guidance range of 59% to 60.5%.

Non-GAAP operating expense in Q4 was $56.5 million, also at the midpoint of our prior guidance range of $55 million to $58 million. Q4 net interest and other income was $2.3 million, Q4 non-GAAP tax provision was approximately $551,000 and we reported a non-GAAP net profit of $5.5 million or $0.13 per diluted share in Q4.

Now I will turn to our balance sheet and cash flow. Fiscal Q4 cash and marketable securities reached $312.6 million, increasing $17.3 million from the prior quarter and $62.3 million from the same quarter a year ago. Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue. Receivables days sales outstanding of 36 in Q4 was flat with the prior quarter.

Days of inventory increased from 76 days to 99 days to support our current level of business. Operating cash inflow was $18.9 million for the quarter and $73.5 million for the year. Capital expenditures for tangible and intangible assets were $3.9 million for the quarter and $15.5 million for the year. Free cash flow was $15 million for the quarter.

During the second quarter of fiscal year 2026, Ambarella's Board of Directors approved an extension of the current share repurchase program for an additional 12 months ending June 30, 2026. In the fourth quarter of fiscal year 2026, the company did not repurchase shares. During the first quarter, we repurchased 24,152 shares of our stock for total consideration of $1 million.

As of today, there is approximately $48 million available under our repurchase authorization. We had one logistics company representing 10% or more of our revenue. WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 73.1% of revenue for the fourth quarter and 69.7% for the year.

I now will discuss the outlook for the first quarter of fiscal year 2027. We forecast Q1 revenue to be seasonal and in the range of $97 million to $103 million or $100 million at the midpoint. Sequentially, auto revenue is expected to increase with IoT revenue expected to be seasonally down. We expect fiscal Q1 non-GAAP gross margin to be in the range of 59% to 60.5%. We expect non-GAAP OpEx in the first quarter to be in the range of $55 million to $58 million. We estimate net interest and other income to be approximately $2 million. Our non-GAAP tax expense to be approximately $800,000 and our diluted share count to be approximately 44.1 million shares.

Thank you for joining our call today. And with that, I will turn the call over to the operator for questions.

(Operator Instructions)

Quinn Bolton, Needham & Co.

Congratulations on the nice results. For me, I wanted to ask for maybe a little bit more detail on the e-commerce warehouse robotics win that you discussed in your script. Can you give us a sense, is this already in production? If not, when would you expect it to go to production? And how many warehouses or perhaps how many robots could you guys be participating in for this customer? Is it a meaningful opportunity?

First of all, it's in production, although it's a low volume production right now, but we definitely expect that will continue to grow. And we think it can be meaningful. It depends on how wide they go to their warehouses. In terms of the function that we are doing is really, like I said, it's a perception in the warehouse to help them to do automation for the production and also the product movement. I think this is significant because that's the first such a design win for us, although we are not allowed to talk about the name and also the size opportunity, but we think this is definitely indication that our perception system that have been well respected and used in this large organization.

Yeah. I imagine it could be a nice flagship customer that could lead to some other wins as well. So congratulations on that. The second question I had is you gave us sort of the update on the auto pipeline now standing at $13 billion. I believe that, that's sort of an unprobability weighted number. In the past, I think you've given us a $2.2 billion probability weighted forecast. I'm just wondering if you look back at the last forecast that was profitability weighted, if you unweighted it, could you give us sort of an apples-to-apples comparison as to whether that auto pipeline has grown over the last year?

Yeah. So first of all, we call automotive opportunity. Now just trying to differentiate what we have been doing in the last several years. So first number we quote is the total size of the $19 billion that involved all of the business opportunity that we see in the next 6 years that we have either won or being invited to bid on. And compared to last year, this -- we do see the growth in this category.

On the one business that we see the number similar to last year as an apple-to-apple comparison. And also I want to highlight one thing, although that the one business is flat, but considering the weak automotive market in 2025, we are very happy to see the end result because that show not only we see more opportunity in the total automotive opportunity side, but also we continue to add new design wins to compensate for the -- for example, a lot of customers cut their forecast or delay their production, but we continue to maintain a healthy design win momentum in automotive.

Great. And sorry, just a clarification for me. Did you say that the total pipeline is $13.13 billion or $19.19 billion?

It's $13 billion, sorry, I it must be --

Difference that you had in the script.

$13 billion with a total opportunity.

Tore Svanberg, Stifel.

Congrats on the record revenue year. Fermi, I was hoping you could maybe help us look for, I guess, guideposts on two particular topics. One is your channel strategy. How is that going? Are there certain things that we should look out for 2027? And then on your semi-custom ASIC business, again, any specific things that we should be keeping an eye on? And what are perhaps some of the early applications you think where you would potentially get an ASIC design win?

Right. I think at the CES, we talked about our new go-to-market strategy and also highlight several milestones we want to achieve. I think the first year, our goal for -- this new go-to-market strategy is to focus on buildup with our partners, particularly our ICVs, and as well as the system integrator and distributors.

We think that we are shooting for get at least a dozen of ICV committed to our platform and by the end of the year so that they can help us to drive multiple different applications, different customers at same time. So also, we are targeting at least certain milestones with distributors and the system integrators, the milestone for the first year.

So you should expect us to continue to make progress on that. I think that -- but however, revenue probably -- I'm not expecting any meaningful revenue this year from this new business model, but we expect to start seeing maybe ramping up a little bit in the next year. In terms of ASIC custom ASIC, semi-custom ASIC business, we only talk about our first 2-nanometer chip is in this business model and it's in the IoT space. And we -- our current engagement shows multiple companies are interested in this model. And I won't be surprised that we continue to announce new design win in this category.

But so far, only the first one is being confirmed and we only announced it. So what you should expect is when we get new design wins, we will give you a hint that we definitely win something, but maybe we should -- we won't disclose the customer name or the business, but we should give you a hint that we continue to make progress in this business.

Very good. And as my follow-up and on the 10% to 15% growth guidance for fiscal '27. I know in fiscal '26, obviously, IoT outgrew automotive by quite a bit. Just wondering how you think about the mix in fiscal '27. And I assume the 10% to 15% assumes both unit growth and obviously also continuous ASP growth.

First of all, your assumption is right, both ASP and unit growth is there and also that we believe both IoT and auto will grow. But I want to add a little bit more color on this -- our growth rate when we look at fiscal year '26 growth of 37 it comes from two areas.

One is our new product ramp-up at a time and also that to our pleasant surprise, a strong customer new product ramp-up in fiscal year '26 that combined generate this growth. In this year, we are very confident that we're going to continue to right on this momentum, and we are confident about our own new product ramp-up like CV72, CV75 and CV7. What we are trying to understand is working with customers to understand their new product ramp-up and how they're going to impact our growth in this year.

Kevin Cassidy, Rosenblatt Securities.

Congratulations on the good year. Just what are you seeing in the competitive landscape as you're getting into drones and I guess, are we past the point where companies are trying to build their own devices and will prefer to work with you for the AI capabilities? And just what else you as competition say, coming from China?

Right. You're talking about China specifically. So first of all, in the drone market, DJI continue to build their own silicon, but they also use our external silicon solution to complement their product portfolios.

And outside that, I think the majority of the other drone market will be -- they don't plan to -- at least, we don't know anybody plan to build their own silicon. They definitely need to try to use external silicon, particularly that if you look at our offering to drone market, it is from 5-nanometer down to 4-nanometer and then will be 2-nanometer. And from that point of view, I think that will uniquely position us as one of the few that can provide to the Chinese market.

Great. And interesting with the ASIC market with AMD and Meta announcing a partnership earlier this week, part of the discussion was that Meta had certain models that they want to run on a semi-custom version of AMD's MI450s. And to me, it reminded me of your design where you have algorithm-first type of application or the way you made your CV design in the first place. So is that where you're finding applications for the -- for semi-custom version? Is it for certain models for running what the customer is looking for an optimized SoC?

I think that's one of the areas our customers want to leverage on. But I want to highlight -- in fact, most -- in fact, all of the customers that we are engaging for this business model is trying to leverage either our CV4 AI accelerator because of performance and performance efficiency or our IDSP, which is using a lot of AI performance. Third, all our software platform that they can easily leverage to quickly go to market with new product and new models.

Fourth and also as important is our capability to tape out a 2-nanometer chip. I think our customers are trying to take advantage of a combination of those four factors the reason to talk to us. By the way, we are not targeting at all for the data center design. That's not our warehouse strength. Our strength is some of the customers want to build edge AI SoC with their own algorithm, that is our sweet spot.

Joe Moore, Morgan Stanley.

I heard you reiterate the 69% to 62% long-term gross margin. I just wonder if you need to rethink that at all with the focus on different markets, anything that would pull you out of that range one way or the other? Just any color.

So first of all, we repeat to say this year, our gross margin will be within our long-term gross margin of 59%, 62%. And I see, I also mentioned that when the custom semi-custom chip design become more mature, if we need to change the model because of that, we will come to talk to our investor world about this. But today, I think that because that new business model is still at the early stage, and we're still talking to customers for different business model, I think that's premature to talk about this in terms of gross margin for the impact for that business. For our existing ongoing business, we will continue to feel comfortable that we'll be at the 59% to 62%.

Vivek Arya, Bank of America.

This is Liam Pharr on for Vivek. Wondering, are you seeing any or expecting any impacts or benefit from the recent restrictions of a Chinese competitor in the drone market?

Well, we're definitely watching it. So definitely, I think that's something we are talking to our customer. I think that it's not clear -- first of all, our current design win with that only in production is not impacted by the new regulations.

So whether the next generation will be impacted it really depends on that they are going to file for FCC review. So there's a possibility that will be impacted. However, I want to point out that outside US, there's still huge drone market that we can tap into not only in China, but in the outside US, that's still a very big market that we can work with. So I think overall, the answer is no direct impact right now, but we are watching the potential impact in the future.

And then are you seeing any impact on the overall demand environment from component cost inflation?

You're talking about DRAM. I assume. So yes, first of all, there's obviously no direct impact to us, but we talk to a lot of customers, in fact, all the customers about this issue. It's very clear that majority of them have concerns about the price increases rather than the shortage of the components.

In fact, I think most of the companies that we talk to still can find supplies, but at a much, much higher price today. So indirect impact, in fact, in my opinion, is for the product, which has a very low gross margin, which cannot sustain the DRAM cost increase, what will be impact the most. If you look at that from our customer portfolio, that means in that low-end business, which we don't have much at all. So I think from our point of view, we don't expect huge impact because of DRAM price at this point. But we remain to watch this because it changes so quickly and so dynamic, and we want to make sure that we don't overlook this potential impact.

(Operator Instructions)

Martin Wang, OpCo.

My question is on seasonality in relation to CV7 launch in the latter half of the year. Do you think that initial launch could change your seasonal patterns a little bit? And also how that could -- how should we think about the overall ASP uplift for the year versus FY26?

Right. So first of all, we expect the ramp-up in the fourth quarter this year, but we don't expect material revenue generated by CV7 this year. But however, we highlight CV7 because for two reasons.

One is CV7 is our first 4-nanometer chip and higher 2.5 times higher performance -- AI performance than CV5. So from that point of view that we see huge interest and in fact, many design wins already engaged and some of them will be ramping up in production later this year is significant for us. That means that confirm our thesis that our customer has huge demand and appetite for higher AI performance for the applications, which is very encouraging to us.

So in terms of ASP, we expect there's a premium ASP compared to current CV5 ASP, but we haven't finalized all the negotiation yet. So I think that's an indication -- that's just an indication of what we're looking at in terms of total ASP for CV7.

Gus Richard, Northland Capital Markets.

As you move into the ASIC business and indirect channel, I was hoping you could discuss a little bit about how that's going to change the P&L. Indirect channel, you're going to have likely lower volumes, higher gross margin and maybe higher SG&A to go along with that. In the ASIC business, do you get paid for the NRE? Does that necessitate a lower unit cost or lower gross margin on the units? Can you just kind of talk about how you think that's going to play out over time?

Right. So first of all, I think it's a little too early for us to talk about the business model for the new go-to-market strategy. We hopefully need to come back to you to talk about this. But considering there's no revenue generation from that this year, I would like to delay that discussion a little bit. But your question on the ASIC side is important for us.

First of all, it has to have NRE associated with those kind of projects. Otherwise, it doesn't make sense to us to do this. But however, it also -- there are all kind of different variable we play with, for example, some customers want to integrate their black box IP into a chip. Somebody wants to have a special I/O design for their application. So it's a huge variety of demand. But at the end, we need to have NRE but willing to look at different ASP structure to make the whole overall business making sense for us and for our customers.

And the first product that we talk about, we all talk about the significant amount of NRE that they are paying out right now. And the first revenue generated for silicon for the first ASIC -- semi-custom chip ASIC is going to be early next year. So in terms of the gross margin impact, I think there's small.

We still believe that overall, if you average out the whole business in that first silicon that our gross margin is still within our long-term gross margin. But I also believe that to exchange for more aggressive, that business model might change for others in the future. So because it's really uncertain, I don't want to talk about -- we don't want to give you an indication just yet.

I just want to tell you that it's a variety of possibility, and we are willing to work with the customers that want to work with us. Obviously, at the end, that has to be beneficial for both for me, for Ambarella as well as for our customers.

Got it. And then just a housekeeping question. Could you give me a sense of in the IoT business, how much of that was industrial, how much of it was consumer?

Maybe if we divide it by CapEx-driven businesses versus consumer-driven, Gus, this is Louis speaking, by the way. It's roughly 50-50. It didn't change much from the prior couple of quarters. Think about if we break it down a little bit in IoT for the year was around 80% of revenue. And security, which is mostly enterprise security for us, obviously, that's enterprise CapEx -- there's a little bit of home there.

But then in portable video, things like wearables or enterprise video conferencing. And I think we had three announcements in that category this quarter. That's enterprise CapEx, but then you have 360-degree cameras, things like aerial drones, which did go to production for us in Q4. Those are all consumer, prosumer type related. So that's how you get to the roughly 50-50.

And I'm showing no further questions at this time. And I would like to hand the conference back over to Dr. Fermi Wang for closing remarks.

Yeah. Thank you for joining our call today, and I hope to see you at some of our numerous events this quarter. Thank you. We'll talk to you next time.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.