Ambarella (NASDAQ:AMBA) had the momentum to trade towards the $60 level after its Q3/2020 earnings report on Nov. 25. Even though profit-taking followed, the strong quarter suggests the stock is a good long-term stock to hold.
Ambarella reported Q3 non-GAAP EPS of $0.32. Revenue rose 18.5% to $67.9 million while the adjusted margin of 58.1%. It also forecast Q4 revenue of $55-$59 million and 56.5-58.5% in gross margin. Strong performance despite the US/China trade war is commendable. Its transition to a video AI company with mass shipments into the automotive and security camera market is progressing.
Nutanix (NASDAQ:NTNX) roared higher last week when it reported Q1 revenue rising 0.5% to $314.8 million. On its press release, it said:
"First quarter fiscal 2020 subscription billings grew 41% year-over-year to $276 million, representing 73% of total billings, and subscription revenue increased 72% year-over-year to $218 million, representing 69% of total revenue."
Now that revenue levels are at historic levels and subscription sales are healthy and the average contract term is 3.9 years, conservative investors should consider holding NTNX shares. Subscription billings will top 75% of the mix by Q4/2020, compared with 51% in Q1/2019. The subscription revenue mix was 69%, up from 41% in Q1/2019.
A combination of steady, predictable, subscription revenue and a jump in gross margin will appeal to investors who seek a system software growth play.
