Ambarella stock fell 14.4% despite beating earnings expectations, reporting $0.27 EPS on $106.5 million sales. The company saw a 31% increase in revenue but a 1% decrease in gross margin, resulting in a net loss of $0.35 per share. Ambarella is focusing on integrating AI into its chips for future growth.

Investors are concerned about Ambarella’s earnings miss even though the company provided strong guidance for Q4, with expected revenue of $97-103 million. Despite positive free cash flow year-to-date, the stock may be overvalued at a price-to-free cash flow ratio of nearly 58. With 31% sales growth, Ambarella stock is considered a sell.

The Motley Fool Stock Advisor team did not include Ambarella in their list of top 10 stocks to buy now, highlighting the potential for significant returns with other picks. Past recommendations like Netflix and Nvidia have seen exceptional growth, suggesting that Ambarella may not offer the same level of returns for investors in the future.

Read more at Yahoo Finance: Why Ambarella Stock Just Crashed