Resumen de la teleconferencia de resultados del Q2 del ejercicio fiscal 2027 de Ambarella

Puntos clave

• Ambarella (NASDAQ: AMBA) presentó unos ingresos en el segundo trimestre del ejercicio fiscal 2027 de 108,1 millones de dólares, lo que supone un aumento del 7,7% trimestral y del 13,2% interanual, impulsados por unos ingresos récord en IA en el extremo.
• El margen bruto no GAAP se situó en el 59,3%, mientras que el beneficio neto no GAAP alcanzó los 8,2 millones de dólares, o 0,18 dólares por acción diluida.
• Los ingresos del sector automotriz marcaron un récord histórico para la compañía gracias a que la adopción de la IA en vehículos comerciales se mantuvo fuerte. El segmento de IoT también creció en comparación con el trimestre anterior, con los negocios orientados a empresas superando a los enfocados en el consumidor.
• La dirección proyectó unos ingresos para el tercer trimestre fiscal de entre 115 millones y 124 millones de dólares, con un punto medio de 119,5 millones de dólares, impulsados por la demanda de IA física en el segmento de IoT.
• Ambarella elevó su previsión del mercado total abordable útil a cinco años vista desde los 8.500 millones de dólares en el ejercicio fiscal 2027 hasta los 22.900 millones de dólares en el ejercicio fiscal 2032, lo que representa una TCAC de aproximadamente el 20%. Se prevé que el segmento de IoT represente cerca del 70% de la oportunidad en el año terminal.
• El suministro y los precios de la memoria siguen siendo las principales incertidumbres. La dirección señaló que las previsiones para el tercer trimestre fiscal están respaldadas, pero continúa evaluando si los clientes podrán asegurar suficiente memoria para la demanda del cuarto trimestre fiscal.

Datos financieros principales

WT Microelectronics representó el 60,2% de los ingresos trimestrales, mientras que Hakuto supuso el 11%. Ambarella no recompró acciones durante el trimestre, aunque su consejo de administración autorizó un nuevo programa de recompra de 50 millones de dólares hasta el 30 de junio de 2027.

Desempeño comercial y operativo

Ambarella indicó que los resultados del segundo trimestre fiscal contaron con el respaldo de un marcado aumento de los ingresos procedentes de sus SoC de IA CV75 y CV72 de 5 nanómetros. Tanto los ingresos del sector de IoT como los del automotriz aumentaron en comparación con el trimestre anterior, con el crecimiento automotriz superando ligeramente al de IoT.

La compañía se está expandiendo más allá de los SoC de IA en el extremo orientados a cámaras hacia la infraestructura de IA en el extremo. Su nuevo acelerador de IA X7 está en fase de distribución de muestras y se ha diseñado para funcionar como coprocesador de IA junto a los SoC de Ambarella o procesadores anfitriones ARM y x86 de terceros. La dirección afirmó que los contratos de diseño actuales se dirigen a un consumo energético de aproximadamente 4–5 vatios y que el acelerador requiere una huella de memoria relativamente pequeña.

Ambarella atribuyó gran parte del aumento de su previsión de mercado a cinco años a nuevos productos de infraestructura edge, lo que incluye SoC de IA adicionales aún no anunciados y una línea independiente de productos aceleradores. Entre las aplicaciones objetivo se incluyen la seguridad, el comercio minorista, la hostelería, la logística, la atención médica, la robótica y el IoT industrial.

La empresa también anunció dos alianzas de canal indirecto:

• CapGemini combinará las plataformas de IA de consumo eficiente de Ambarella con sus capacidades de ingeniería, integración de sistemas y despliegue en empresas.
• Macnica cerró un acuerdo de siete años para respaldar productos de IA física e infraestructura de IA en el extremo, lo que incluye el desarrollo del ecosistema de software, la integración técnica y actividades conjuntas de comercialización.

La dirección señaló que cada alianza podría representar una oportunidad de ingresos de aproximadamente 500 millones de dólares a lo largo de siete años. Las adopciones iniciales de diseño podrían generar ingresos el año que viene, pero se prevé que los ingresos significativos para la estimación global de Ambarella lleguen en un plazo de dos a tres años.

El primer proyecto semipersonalizado de Ambarella, el SoC CV8 de 2 nanómetros, sigue previsto para generar sus primeros ingresos de producción en el ejercicio fiscal 2028. La empresa explicó que otro proyecto cancelado de desarrollo de conducción autónoma, que resultó en una reducción de 9 millones de dólares en gastos de I+D bajo norma GAAP, no era una de las oportunidades de desarrollo semipersonalizado comentadas con anterioridad.

La tracción en robótica también aumentó. La dirección afirmó que la cartera de proyectos ha crecido por encima de los 15 acuerdos de diseño y de los aproximadamente 100 millones de dólares en ingresos potenciales detallados en la llamada de resultados anterior. Entre los nuevos proyectos del trimestre se incluyó un robot cuadrúpedo basado en el chip CV72.

Previsiones de la dirección

La dirección anticipa una estacionalidad favorable en el tercer trimestre del ejercicio fiscal, con un crecimiento impulsado por la demanda de IA física procedente del mercado de IoT. La empresa mantuvo su objetivo de margen bruto no GAAP a largo plazo del 59%–62%, incluso a medida que se desarrolle su canal de ventas indirectas.

Riesgos y factores a vigilar

El suministro de memoria es la principal incertidumbre a corto plazo. Ambarella no compra ni revende memoria, por lo que la dirección afirmó que el aumento de los precios de la memoria no afecta directamente a su margen bruto. Sin embargo, una disponibilidad limitada o unos costes de sistema más elevados podrían reducir los volúmenes de producción de los clientes y, a su vez, los pedidos de chips de Ambarella.

La dirección informó de un escaso impacto en los ingresos derivado de las condiciones del mercado de memoria en el segundo trimestre fiscal o en sus perspectivas para el tercer trimestre fiscal. La visibilidad sobre el cuarto trimestre fiscal sigue siendo menos clara mientras la empresa colabora con los clientes para evaluar la disponibilidad de memoria y posibles soluciones alternativas.

Los costes de la cadena de suministro en general también están aumentando, ya que los proveedores priorizan la demanda de los centros de datos de IA. Ambarella tiene previsto repercutir los incrementos de costes pertinentes a sus clientes para sostener su objetivo de margen bruto a largo plazo.

El nuevo mercado de infraestructura edge está muy concurrido. La dirección señaló a NVIDIA, Qualcomm y a numerosas empresas emergentes (startups) como competidores, al tiempo que destacó la eficiencia energética de Ambarella y su plataforma consolidada de hardware y software como elementos diferenciadores clave.

Aspectos destacados del turno de preguntas y respuestas con analistas

• Posicionamiento del X7: El acelerador se puede comercializar junto con los propios SoC de Ambarella o con procesadores ARM y x86 de terceros. Permite a los clientes añadir rendimiento de IA sin necesidad de rediseñar la placa base.
• Impulso del canal: Se prevé que Macnica agrupe oportunidades fragmentadas de pequeño y mediano tamaño, mientras que CapGemini se centrará en despliegues empresariales más amplios y complejos. Macnica ya ha identificado actividad en drones, comercio minorista y fabricación.
• Arquitectura robótica: La dirección prevé que la robótica siga una trayectoria de integración similar a la de los vehículos autónomos. La mayoría de los clientes actuales busca soluciones de percepción, pero los planes a más largo plazo incluyen cada vez más arquitecturas basadas en controladores de dominio.
• Modelo semipersonalizado: Los clientes aportan las especificaciones del producto, mientras que Ambarella trata de reutilizar su propiedad intelectual en aceleradores de IA, NPU, ISP, codificadores y CPU. La compañía también busca conservar la capacidad de vender los chips resultantes a clientes no competidores.
• Impacto en el margen bruto: Por el momento, la dirección no prevé que los acuerdos con CapGemini y Macnica modifiquen el objetivo a largo plazo del margen bruto no GAAP del 59%–62% de la empresa.

Transcripción completa de la llamada de resultados

Transcripción completa de la conferencia de resultados

Comentarios de la dirección

Operator

Thank you for standing by, and welcome to the Ambarella's Second Quarter Fiscal Year 2027 Earnings Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Louis Gerhardy, Vice President, Corporate Development. Please go ahead, sir.

Louis Gerhardy

Thank you, Jonathan, and good afternoon. Thank you for joining our second quarter fiscal year 2027 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 2027. 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 file with the SEC.

Access to our second quarter fiscal year 2027 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 starting the call, we hope to see you at one of the following investor events that we have scheduled in our third quarter. First, on September 8, we'll host a DNB Bus Tour at our offices in Santa Clara. September 9, we'll be at Citi's 2026 Global TMT Conference in New York. September 15, we'll participate in Piper Sandler's Growth Frontiers Conference in Nashville. September 16, we will host Sanford Bernstein's 8th Annual West Coast Semiconductor Bus Tour. And during the week of October 4, we will have a European NDR with cities to be determined. Also available to investors during the third fiscal quarter will be our booth and presentations at the AI Infrastructure Summit in Santa Clara on September 15 to 17. We hope to see you there where we will lead the Physical AI track with a number of edge AI and robotics demos in our exhibit area.

Fermi is now going to provide a business update for the quarter. John will review the financial results and outlook, and then the 3 of us are available for your questions.

Fermi?

Fermi Wang

Thank you, Louis, and good afternoon. Thank you for joining our call today. Driven by a new record level of edge AI revenue, we reported fiscal Q2 revenue slightly above the midpoint of our guidance with non-GAAP EPS of $0.18, and with guidance for seasonal fiscal Q3. By product, we are in the midst of a very steep revenue ramp with our 5-nanometer CV75 and CV72 AI SoCs. And by market, we had sequential growth in both IoT and Auto with automotive revenue driven by commercial vehicles.

The market is increasingly recognizing the strategic value of edge AI as well as our edge AI and Physical AI platform leadership. We continue to make significant progress with the expansion of our edge AI platform leadership, including new go-to-market strategies and engineering and market development for a number of new higher-value AI SoCs, some of which extend our reach into entirely new markets. We remain optimistic about the long-term secular growth opportunities in the edge AI market and our R&D priorities are aligned with both the Physical AI markets that represent a vast majority of our total revenue today as well as the robotic and edge infrastructure markets that are in the early stages of developing.

Altogether, our technology, product and new go-to-market combined with the significant secular growth in edge AI are increasing our 5-year serviceable market forecast today. Before I review our new market forecast, I would like to step back and discuss the market environment we are in. Demand signals for the application of edge AI remains strong. At the same time, it is obvious that memory vendors and the entire supply chains are prioritizing AI data center demand, which is resulting in rising supply chain costs for everyone. Surging memory price and the scarcity of supply are impacting the entire industry.

Related to this, we are providing significant assistance to customers who are attempting to create a wide variety of workarounds to the memory situation. Ambarella itself is also facing rising supply chain costs, and we plan to pass this cost to our customers to maintain our long-term gross margin target of 59% to 62%. Returning to our rolling 5-year serviceable market update, I would like to remind you of our methodology. Our SAM for any given year is based on the products we expect to have available for production in that year, overlaid on the total available market projections from a number of third-party research firms.

So our 5-year SAM captures any revenue-generating products announced or unannounced on our road map in the next 5 years. Our prior 5-year rolling SAM was announced in May 2025 and projected a 5-year fiscal year '26 to fiscal year '31 compounded annual growth rate of about 18%, with Auto representing a slightly higher proportion of the terminal year. Our new 5-year rolling SAM from $8.5 billion in fiscal year 2027 to $22.9 billion in fiscal year '32 represents a CAGR of about 20% with IoT markets now representing about 70% of the terminal year.

While there are several factors behind the strong growth and the underlying mix change, I will focus on the most important change. In the last year, it has become clear that operational efficiency or the ability of our enterprise to generate more revenue and/or to reduce expenses is likely to be a key driver of our emerging edge infrastructure business. Operational efficiency at the edge refer to the use of open weight and distilled models running on on-premise inferencing hardware in contrast to the large frontier models that run in the cloud. Benefits of this approach include reduced latency, data protection, privacy, lower bandwidth costs and high reliability.

Target markets include security, retail, lodging, logistics, healthcare and more. The on-premise operational efficiency use case has emerged with growing expectations for sustainable high-volume inferencing and increasingly for agentic AI and Physical AI application that can perceive, reason and ultimately act in the physical world. The key question has become who can help the enterprise lower the cost per useful AI inferencing outcome? This is where Ambarella's superior performance per watt portfolio kicks in, providing the efficient edge intelligence needed to enable this next-generation agentic and Physical AI workload at scale.

With this perspective, in the last year, we have several new products in development targeting on-premise hardware or what is commonly called edge infrastructure. As you know, we already have our N1-655 AI SoC in the market, and we have additional unannounced AI SoCs in development. We also are implementing a stand-alone AI accelerator product line targeting the edge infrastructure market. Together, this new edge infrastructure products, both AI SoCs and stand-alone AI accelerators represent the single most important reason for the upward revisions in our SAM.

Before I introduce our first stand-alone AI accelerator, allow me to be clear about our terminology. We define edge AI SoC as one integrating all of the accelerated computing functions into a single chip, camera perception, AI accelerators, CPUs, encoding and so on. We define an AI accelerator as an AI processor that is not camera specific and targets a wide variety of digital or physical modalities. We believe this type of multi-modality is critical for edge infrastructure applications that target operational efficiency.

While not formally announced, I would like to preview one of the new AI accelerators that will anchor this new product category for us with another well-defined, well-performed product already behind it. We refer to this new AI accelerator as X7. This SoC is sampling now and expected to land initial design wins in edge infrastructure applications where it can serve as an AI coprocessor for host processors such as ARM or x86. Together with our new product thrust, expanded market reach and the SAM, we expect our revenue growth to be supported with 2 incremental go-to-market strategies. First is the multistep establishment of indirect sales channel and the second is a semi-custom chip strategy, both of which will augment our existing direct sales efforts.

As a reminder, virtually all our revenue is generated by our direct sales teams. And today, I'm excited to announce 2 material partnership agreements to develop our indirect sales channel. Combined, these 2 partnership plan to drive a significant amount of incremental revenue over the next 7 years through customers who have largely been unserved by us so far. First, today, we announced Ambarella's strategy partner with CapGemini designed to help enterprise adopt edge AI and Physical AI solution faster by reducing the complexity of moving from evaluation to scalable deployment.

By combining Ambarella's power-efficient AI software and platforms with CapGemini's global engineering, system integration and industry expertise, the partnership aims to help customers improve operational efficiency, enhance real-time decision-making and deploy intelligent system and in physical world environment with greater speed, scalability and confidence.

In our second partnership to develop our indirect channel, today, we also announced a 7-year agreement with Macnica, a leading global technical distributor. Macnica will support both Ambarella's Physical AI and the new edge infrastructure products by developing and supporting an independent software vendor ecosystem, including onboarding, technical integration support and joint go-to-market progress. With this ecosystem in place, Ambarella solution can be offered as individual component or as a complete bundle for multiple edge AI vertical markets, including video analytics, smart city, edge computing platforms, robotics, industrial IoT, intelligent transportation systems, retail analytics, security and surveillance.

I want to emphasize the importance of the indirect channel to serve small and midsized customers and highly fragmented market like robotics. However, the indirect channel is also critical to support our more complex AI SoC targeting the edge infrastructure where a broad network of partners is vital for our long-term success. Meaningful revenue is expected in 2 to 3 years and will grow as we introduce new products for the market. Our second incremental go-to-market is our semi-custom opportunity, which can enable us to gain more share in existing market and reach into new markets.

We have our first semi-custom project underway, the 2-nanometer CV8 SoC, which is expected to generate first production revenue in fiscal 2028. And we are in discussion with other companies for additional semi-custom chip projects. Our representative customer engagement this quarter once again demonstrates Ambarella's expanding traction across a broad set of applications, robotics, automotive, security, trail cameras and smart video intercoms. With a CV72-based quadruped robot validates Ambarella's high resolution, high multi-camera edge AI capabilities in robotics. A major S&P 100 communication equipment company announced an AI-based enterprise video intercom, further extending our reach in the emerging access control market.

We landed another win with Moultrie for AI trail cameras and win with Canon, Suprema, IDS and Sepro further strengthen our AI monitoring pipeline with CV75, CV72, CV5 wins using our own AI ISP software. Through Tier 1s, we had 2 in-cabin vehicle wins with Tier 1s in China, one for driver monitors and one -- the other for more complex camera monitor system used in Audi and the VW vehicles. The breadth of these wins and the wide variety of corresponding AI workloads highlight the programmability and the flexibility in both our AI SoCs and our Cooper Developer Platform. This ease of use is facilitating the onboarding and expansion of our indirect sales channels. Very few competitors can offer this type of proven platform with more than 50 million edge AI SoCs shipped.

In conclusion, I remain very excited about the overall growth opportunity of the edge AI market and our company-specific growth drivers put us in a unique position to benefit. Ambarella is expanding beyond low-power AI SoC to deliver the complete foundation for Physical AI, and we are becoming a full stack Physical AI platform provider.

With that, I will now turn it to John.

John Young

Thank you, Fermi. I'll now review the financial highlights for the second quarter fiscal year 2027 ending July 31, 2026. I will also provide a financial outlook for our third quarter of fiscal year 2027 ending October 31, 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. In addition, this quarter, as described in our Q1 fiscal 2027 10-Q filing as a subsequent event, we recognized a $9 million reduction in our GAAP research and development expense due to the cancellation of a customer's development project. We do not expect any impact on our non-GAAP outlook from this development. For fiscal Q2, revenue was $108.1 million, slightly above the midpoint of our prior guidance range of $105 million to $111 million, up 7.7% from the prior quarter and up 13.2% year-over-year.

Automotive revenue established a new revenue record on continued strength as the commercial vehicle adoption of AI remains strong, and Auto revenue slightly outpaced the growth in our IoT business, where our enterprise-driven businesses outperformed our consumer-led businesses. Non-GAAP gross margin for fiscal Q2 was 59.3%, below the midpoint of our prior guidance range of 59% to 60.5%. Non-GAAP operating expense in Q2 was $57.4 million, slightly below the midpoint of our prior guidance range of $56 million to $59. Q2 net interest and other income was $1.8 million. Q2 non-GAAP tax provision was approximately $344,000. We reported Q2 non-GAAP net profit of $8.2 million or $0.18 per diluted share.

Now I'll turn to our balance sheet and cash flow. Fiscal Q2 cash and marketable securities were $272.3 million, decreasing $5.5 million from the prior quarter, but increasing $11.1 million from the same quarter a year ago. The sequential decrease in cash and marketable securities was primarily due to higher payments for IP licenses. Receivables days sales outstanding decreased from 35 to 32 days. While inventory dollars declined 4% sequentially, the days of inventory increased from 145 days to 157 days. Operating cash outflow was $260,000 for the quarter.

Capital expenditures for tangible and intangible assets were $6.8 million for the quarter. Free cash outflow was $7.1 million for the quarter. During the second quarter of fiscal year 2027, we did not repurchase shares of our stock. During the second fiscal quarter, Ambarella's Board of Directors authorized a new $50 million repurchase program valid through June 30, 2027. The repurchase program does not obligate the company to acquire any particular amount of ordinary shares and it may be suspended at any time at the company's discretion. WT Microelectronics, a logistics partner in Taiwan that ships to multiple customers in Asia, was 60.2% of revenue for the second quarter. Hakuto, a logistics and distribution partner in Japan, was 11% of revenue in the quarter.

I'll now discuss the outlook for the third quarter of fiscal year 2027. We are anticipating favorable seasonality in our fiscal third quarter with revenue in the range of $115 million to $124 million or $119.5 million at the midpoint. At the midpoint, we expect our growth to be led by Physical AI demand from the IoT market. We expect fiscal Q3 non-GAAP gross margin to be in the range of 59% to 60%. We expect non-GAAP OpEx in the third quarter to be in the range of $56.5 million to $59.5 million. We estimate net interest and other income to be approximately $1.9 million, our non-GAAP tax expense to be approximately $700,000. And our diluted share count is expected to be approximately 44.9 million shares.

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

Operator

[Operator Instructions] And our first question for today comes from the line of Christopher Rolland from Susquehanna.

Preguntas y respuestas

Dylan Ollivier

This is Dylan Ollivier on for Christopher Rolland. So it's nice to see your road map sort of expanding, and I know that you announced this X7 accelerator. I was hoping to hear a little bit more about this new chip. Is this a chip that you can bundle with your existing N1 portfolio? Or does this address a different part of the stack?

Fermi Wang

So yes, Chris, for the X7, this is -- chip is an accelerator, which can be bundled with any host, including our own chip. So in fact, that some of our customers using a certain part number and when they feel they need to have more AI performance for certain workloads, the X7 give them a flexibility to upgrade the product without redesign the board. So this accelerator definitely is a way to design that. But in addition to supporting our own SoCs, but any other CPU like ARM or Intel chip, Intel CPUs that we can also bundle X7 with that as an AI accelerator.

Dylan Ollivier

Great. I appreciate this. And for my second question, I wanted to ask about sort of the Physical AI and humanoid opportunity. Is this responsible at all for this increase in SAM? Are there any new engagements or new designs that you can point us to?

Fermi Wang

Yes. So definitely, that's a big part of that. And last -- in the last earnings call, we talked about 15 design wins for the robots, including for roughly $100 million. Although we didn't give you another breakdown, but I can say that we add more design wins to that pipeline and a higher revenue target. So from that point of view, we continue to make progress. But in addition to robots, I also think that edge infrastructure and also enterprise security as well as portable video are all the reasons that we are increasing our SAM number.

Louis Gerhardy

Yes, Dylan, we did -- Fermi mentioned a quadruped robotic dog with the CV72 chip this quarter. So continue to add on to the robotics wins we've described before.

Operator

And our next question comes from the line of Joe Moore from Morgan Stanley.

Joseph Moore

I wonder, first, in terms of the broader ecosystem, you talked about some of the challenges in memory. What is that meaning for your business? Do you think -- is there a risk of pull forwards or things like that because people are trying to get ahead of memory price increases? Is there pressure on you? Just what are you seeing from that memory impact from your customers?

Fermi Wang

Right. So we continue to monitor this situation very closely, by talking to customers all the time. So for Q3, we are comfortable with our -- the guidance we provide today. In Q4, we continue to talk to customers to make sure our customer will have -- we can secure enough memory for a Q4 business. That's definitely the uncertainty that we are dealing with.

Joseph Moore

Okay. That's helpful. And then in terms of opening up to a broader ecosystem, distribution partners, things like that, I think you made the comment about -- that would take a couple of years to inflect. I guess I would sort of think that those customers would act a lot more quickly and would -- that pipeline could build a lot more quickly than what you had seen previously in automotive. Just what do you -- what was the comment that I maybe misunderstand there? And then what is the time line to start to see traction from that kind of broader ecosystem?

Fermi Wang

Right. So when I say 2 to 3 years, we talk about meaningful revenues. And I agree with you that we -- in fact, we already start seeing a small amount of design wins, which can generate revenue next year. But when we talk about meaningful revenue that will have an impact to our revenue forecast, I think that will take 2 to 3 years. In fact, when we talk to both CapGemini and Macnica, we kind of -- in fact, the range of revenue we are expecting from this collaboration is $0.5 billion with each one of them. So from that point of view, we're definitely looking forward to gradually ramp up the revenue for the next couple of years and start seeing meaningful revenue behind that.

Operator

And our next question comes from the line of Tore Svanberg from Stifel.

Tore Svanberg

Congratulations on the Macnica and CapGemini partnerships. I'm curious on those for me. What are some of the early use cases that those 2 partners are going to be helping you with? Maybe you can call it some markets or applications. And how should I think about that in the context of your Cooper platform? Are they going to be working with you on Cooper? Are they going to be providing some of their own software? Just curious how that's going to play out?

Fermi Wang

Right. So -- let me answer the second question first. Yes, both of them will use Cooper. In fact, that's a key driver for them to select to work with us because they see a very mature software platform they can immediately tackle on and start building around it, generating infrastructure for their own product line. So that our mature AI SoC as well as a mature Cooper software platform is the probably most critical engineering aspect that we offer to our partners.

Go back to the potential market that we are talking about. In fact, there are multiple of them. And in fact, when I talk to Macnica, CEO in that meeting, they are highlighting that they have already started winning design wins with our solution on drones, on retail channels and also manufacturing. So that is definitely -- you can see that it's really a large market that. But -- however, most of the design win is small and segmented at beginning, but can ramp up to -- if they can ramp up to large volume of business, that will take time. But we already start seeing our partners start talking about different applications.

Louis Gerhardy

Tore, it's Louis. They can work together as well. As Fermi said, Macnica can serve small to midsized markets that oftentimes are very fragmented. But really for CapGemini, it's large enterprise customers, and you can look at who they've talked about before. Those are the type of customers we'd really go after with them. So they're very complementary to each other.

Tore Svanberg

Very good. And as my follow-up, on the edge infrastructure market, this is obviously a completely new area. It sounds like that's the sort of biggest contributor to your increased SAM. I'm just curious, who's going to be some of your partners there? I mean, are these going to be your end customers sort of building their own infrastructure? Or is there going to be like an intermediary company that's building it? Is it going to be the traditional server guys? Yes, just curious how that's all going to play out?

Fermi Wang

Well, I think, obviously, we're going to continue to talk to some of the large customers directly. But at the same time, we're counting on CapGemini and Macnica help us to penetrate this because they're already in that market, they're already selling solution to the existing edge AI customer with their existing solution. So working with them will help us to ramp up our revenue much faster than just were talking to direct customer directly.

Operator

And our next question comes from the line of Quinn Bolton from Needham & Company.

Quinn Bolton

I just wanted to ask just longer term on the -- sorry, Macnica and CapGemini partnerships. Does that change the long-term gross margin target? I assume that there's probably some allocation of revenue that would be attributed to those partners. And so I'm wondering if that has any gross margin implications as that indirect channel ramps?

Fermi Wang

Right. So today, I think our long-term gross margin is still 59% to 62%. We are definitely trying to continue to watch because this is just -- we just start ramping up this business. If there's any change, we'll definitely inform our investors. But today, for us, after we talk to CapGemini and Macnica, we don't feel there's any need to change that target today.

Quinn Bolton

Got it. And then I guess just a clarification on the $9 million charge for the project that was canceled. Was that a semi-custom project that was canceled? And does that have any impact on your expected revenue time line for the semi-custom business?

John Young

Yes. Thanks, Quinn. It is not one of the semi-custom opportunities that we were -- that we've talked about. It was a development project with I guess, you could say, an automotive customer, auto autonomy customer. And we've been negotiating the termination of that for quite some time. And in Q2, we finalized the agreement.

Operator

And our next question comes from the line of Kevin Cassidy from Rosenblatt Securities.

Kevin Cassidy

Going back to the shortage on the memory side and you've got near-term visibility. But I'm wondering on the designs, I know a lot of your customers or the market out there is probably dominated by a GPU-based embedded product that uses much more DRAM than yours would. Are you seeing any additional interest because you're more efficient with DRAM content?

Fermi Wang

Well, yes, first of all, the memory situation is dire for everybody, but some of our competitor who has more money to buy more memories. But however, any customer who come to us for the edge AI or Physical AI, they probably only use GPU for their first-generation product, and they understand. So the memory cost is just one reason, but more importantly, it is power efficiency and other reason. But the memory cost definitely is a driver for people start considering what's the more efficient way to do the product. So I agree with you that some of the -- most -- in fact, almost all the customers who come to talk to us is because our power efficiency solution and the lower cost solution than what they're using.

Kevin Cassidy

Okay. And maybe along the same lines with the AI accelerator, you'd be competing against a GPU that uses a lot of memory also. What is the memory architecture inside your X7?

Fermi Wang

Well, in fact, that we need a much smaller footprint. For example, we only need 4 megabytes memory for the accelerator running large language model. So just give -- show you the -- and more importantly, the accelerator, the power envelope you have to fit in is anywhere between 4 to 5 watts in the current design win. So all of the power efficiency, memory size and also cost is really helping us to penetrate this market right now.

Operator

And our next question comes from the line of Suji Desilva from ROTH Capital.

Sujeeva De Silva

just a clarification for me on the X7 chip. Is that competing really only with edge GPUs? Or is it other AI specialty chips? Or how should we think about the competitive landscape for this new offering?

Fermi Wang

Right now, well, in addition to NVIDIA and Qualcomm having similar products in this market space, there are probably 50 start-up companies doing similar chips. So it's a crowded space. But however, at the end, it's really about the power efficiency because I just talked about to run a certain workload, you have to have a mature -- not only a power-efficient solution, but mature hardware and software, which I think we are one of the very few that can do that today.

Sujeeva De Silva

Okay. That's helpful for me. And then my other question is you're talking about customization now projects. I'm just wondering what's precipitated the demand from the customers or your push to provide customization? What's newer versus your standard product history now that's driving the need for that or your desire to do that?

Fermi Wang

I think you're talking about the optimization for the memory situation. Is that correct?

Sujeeva De Silva

Well, I think...

Louis Gerhardy

Semi-custom.

Fermi Wang

Oh, semi-custom.

Sujeeva De Silva

Semi-custom, I apologize. Yes.

Fermi Wang

So -- yes. For semi-custom customers, in fact, we basically allow our customers give us a spec and we build on the spec. But however, when we negotiate spec with a customer, we need to make sure that we can sell the spec to somebody else. So we -- for the semi-custom chip, we pretty much build a purpose chip for the one customer, which they benefit from this. But at the same time, we can sell the chip to others that are not competing with the key customer. That's the business model and how it works on the engineering side.

Louis Gerhardy

But of course -- Suji, it's Louis. We'll try to offer as much of our own IP in those semi-custom chips as possible. For example, we have our own IP for the AI accelerator, the NPU for all the perception capabilities, including ISP, and the encoder, the CPUs, all of those functional blocks are available for a customer to develop a semi-custom or custom chip with.

Operator

And our next question comes from the line of Liam Pharr from BofA.

Liam Pharr

Is there a way to frame how much memory cost inflation you're absorbing this quarter, either in basis points or maybe what gross margin would have been without any memory cost inflation? And is the path back above 60% feasible while memory prices stay elevated? Or does that require pricing to come down?

Fermi Wang

Right. So first of all, the memory price doesn't impact our gross margin. It really only have a potential to impact how many chips our customers can buy. So memory cost because we don't buy memory, and we don't resell memory. So the memory price has no impact to our gross margin. So that -- I think I hope that answers your question. But the real question for us is how that memory cost can -- because our customers need to increase the price, whether that will reduce the total volume they can sell and therefore, reduce the total ordering to us, that's something we need to continue to observe. In Q2 and Q3, we see a little impact on our revenue because of memory situation. We continue to watch for the Q4.

Liam Pharr

And then I guess for my follow-up, Q3 is guided up 10.5% roughly sequential versus 13.5% last year. How much of this next quarter is normal seasonality versus underlying end demand strength? And given you flagged Q4 memory supply, obviously changing the demand picture, how should we think about Q4 seasonality and whether the full year 10% to 15% is still reasonable for the full -- for the guide?

Fermi Wang

Right. So I think the outcome this year is still a little uncertain because of the memory constraint that you talk about. And like I said, we continue to talk to our customer for that to monitor how that impacts our performance in Q4. Barring for any memory impact to our revenue, I think that you should expect Q4 was a regular seasonality.

Operator

And our next question comes from the line of Gus Richard from Northland.

Auguste Richard

Robotics architecture look an awful lot like an autonomous car in terms of what it needs to do. And I'm just wondering, you have a domain controller for autos and you have the CV products. Are you seeing any traction in the domain controllers? And -- and then any clarification on where you're seeing the strength? Is some of this coming out of China?

Fermi Wang

Right. First of all, you're 100% right that a lot of robot design system architecture looks just like autonomous driving car, which I totally agree. And however, I think the robotic market situation really reminds me autonomous driving 7 years ago when that at that time, all of our automotive customers in trying to just using individual modules and put the solution together and start demoing and selling the first generation product. I think this is how we are at with the current robots. We see a lot of customers are rushing out their first-generation product by putting individual components together to demo their capabilities.

However, we do believe that integration path of the robotic will be very similar to what happened to the autonomous driving car. It is there will be people going to buy perception system, but down the road, people want to buy domain controller. We do see both opportunity today, but I would say majority of our customers today is asking for perception modules, perception solution. But on their road map, they want to have a way that can buy a domain controller in the long run. So I think we have a complete road map. We can sell just perception system to a customer today. In fact, people want to buy brain -- domain controller like for the brain of the robots, we have the solution, too. But our plan is we're going to continue to develop solution for both so that we can cover the total space of robotics.

Auguste Richard

Got it. And then just if I think about, again, robots, cars are 2D and robots are 3D. And I'm just wondering, is one of the limitations of penetration training and can you help your customers train robots. Thinking about humanoid, but -- go ahead, sorry.

Fermi Wang

Right. So in terms of training, it's really about how to collect data. One thing we help our customers is we build a platform for people to collect data easily. And also we provide a platform that can provide a service to help people to label those data automatically. So people can use our system to -- reference design to collect data. In fact, some of the, I would say, the people doing mapping, generating the 3D mapping are using our system to collect data. And also, we are providing service to some of our automotive customers that we can -- using our tools to auto labeling all of the data they generate. Those are 2 things we can help to provide assistance on the training side.

Operator

And our final question for today comes from the line of Martin Yang from Opp & Co.

Martin Yang

Fermi, you sized the potential revenue from CapGemini and Macnica pretty similarly, but they face different variety of customers. Can you maybe talk about the methodology you arrived at those dollar figures? Is a similar methodology or a very different approach to size those potential markets?

Fermi Wang

Yes. Go ahead.

Muneyb Minhazuddin

This is Muneyb just jumping in there. I think both Fermi and Louis were commenting earlier about how complementary they were, right? So I think, one, on the Macnica side, I think Louis has commented, it was is large-scale, medium, large kind of customers we haven't addressed in the past. So think of them as a large volume play where we've typically directly engaged with high-volume customers. These will start aggregating a whole bunch of small, midsized customers that we did not have access to in the past. So it's a volume play, and I think Fermi already indicated that we're starting to see some small design wins come through with these distribution.

And then if you think about CapGemini, it's more of a value play. And I think Louis indicated before, these are large enterprises and customers who will bring complex solutions, deploy at scale to enterprises. So the modeling is on both slightly different. One, distribution channels, reseller scaling with small design wins, so building up small volume. The other ones are large customers and logos, which have much larger opportunity deals, but complex opportunities. So on both sides, the modeling is done on value versus volume. And I think the earlier question was also, you should see different time lines on this.

So we do expect faster time lines on the distribution side and more longer time lines on the more larger complex opportunities. But the modeling has been built out over 7 years of how this will come to fruition. And of course, they are -- some of them new to our products. So initial ramp-up, market making, pilot opportunities is what we are allowing for. But we will keep you updated as we start winning some large deals and meaningful revenue, as Fermi pointed out, in future quarters.

Martin Yang

Great. I have a follow-up on X7. Is that accelerator chip primarily targeted for as a channel product? Or there's no distinction between for channel or for direct?

Fermi Wang

There's no distinguish. And in fact, that I'm expecting that both CapGemini and Macnica will do product rapid design for that and targeting different customers.

Operator

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Dr. Fermi Wang for any further remarks.

Fermi Wang

And thank all of you for joining our call today, and I hope to see you and talk to you next time.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.