Ambarella Inc (NASDAQ:AMBA) posted second quarter fiscal 2016 earnings yesterday afternoon. Although the chip manufacturer beat earnings estimates, management posted lackluster guidance for the third quarter, causing the stock to fall nearly 10% in pre-market trading this morning.

The report looked fine on the surface. Ambarella posted non-GAAP earnings per share of $0.88, ahead of the analyst estimate of $0.80 and up significantly from $0.37 posted in the same quarter a year prior. The company also beat revenue estimates of $81.7 million, posting $84.2 million for the quarter and marking a 79% increase year-over-year.

However, the concern came when management shed light on guidance for the quarter currently in progress. CFO James Laplante expects Ambarella to post Q3 revenue between $90 million and $93 million. The analyst consensus was $92.33 million. Furthermore, the company noted that it enjoyed the launch of several products in the quarter reported, contributing to strong revenue. These launches are usually marketed in the third quarter and consequently, analysts are expecting the next earnings report to take a hit.

Analysts were quick to spot the weak outlook and weighed in accordingly.

Quinn Bolton of Needham rated Ambarella earlier today, reiterating a Hold rating on the stock though no price target was provided. Bolton noted that the results were better than expected thanks to “strength in wearable, flying and automotive cameras.” However, he also pointed out that management’s future guidance “was only in line with expectations,” and not above. Bolton explained, “We believe investors are likely to be disappointed with the in-line guidance but may be most concerned with the outlook for wearable camera revenue to decline both Q/Q and Y/Y in what is typically a seasonally strong quarter.”

Quinn Bolton has rated AMBA 8 times since November 2012 with an 80% success rate recommending the stock and a +64.6% average return per AMBA rating when measured over a one-year horizon and no benchmark. Overall, Bolton has a 59% success rate recommending stocks with a +19.5% average return per rating.

Separately, Joseph Moore of Morgan Stanley reiterated a Hold rating on the chip manufacturer and lowered his price target from $100 down to $95. The analyst noted that Ambarella is performing well in its new sector of home security, but the risk/reward scenario is not compelling. Furthermore, Moore pointed out that this recent quarter enjoyed the revenue of new product launches, which normally occur in this quarter. Consequently, this quarter’s growth will be lower than normal.

Joseph Moore has rated AMBA 7 times since November 2012, earning a 100% success rate recommending the stock with a +82.4% average return per AMBA rating when measured over a one-year horizon and no benchmark. Overall, Moore has a 60% success rate recommending stocks with a +11.9% average return per rating.

AMBA consensus

Out of the ten analysts polled by TipRanks in the last three months, 5 are bullish on AMBA and 5 are neutral, giving the stock an analyst consensus rating of Hold. The average 12-month price target on the stock is $106.25, marking a 38% potential upside from current levels.