Ambarella Inc(NASDAQ: AMBA) stock lost over 21.3% on September 1^st, 2017 (as of 11:55AM EDT; Source: Google finance) on their disappointing outlook. For the third quarter, the group forecasts their non-GAAP gross margin to be between 62% and 63.5% against 63% in second quarter of 2018 and 66.3% in pcp. Rising product mix of security revenues have hurt the group’s margins during the quarter. Moreover, the group forecasts a higher non-GAAP OpEx in the range of $28 million and $29.5 million during the third quarter, on the back of rising chip development costs as they started development of two more 10-nanometer CV chips.

The group forecasts revenues to decrease in the range of 3% to 7% for fiscal year of 2018. Factors contributing to the weak outlook is the decline in price drones from DJI which hurt the higher priced market segment. Moreover, weak revenue from Tier 2 customers also hurt the outlook. Slower than forecasted performance of the new virtual reality market contributed to the weak outlook. In addition, customers started to see a shortage of certain memory components in the market which would impact their camera build schedules later in the year consequently hurting demand for Ambarella chips. The group forecasts a decline in overall non-GoPro year-over-year revenue growth to 9% to 12%.

For the second quarter of 2018, Revenue rose 10% yoy to $71.6 million, while Gross margin under U.S. generally accepted accounting principles (GAAP) reached 62.6%, against 66.7% in the same period in fiscal 2017. Growth from IP security, of professional as well as home monitoring camera markets contributed to the performance.  The group is seeing ongoing performance from OEM auto business, with strong design win activity and revenue from OEM auto video recorders. They are investing in potential generations of highly intelligent, HD and Ultra HD cameras with particular emphasis on high performance computer vision functionality.

The group bought over 595,770 shares worth over $29.9 million. However, the stock lost over 40.4% in the last one year.