Ambarella’s (NASDAQ:AMBA) stock surged about 20% premarket on Wednesday after second-quarter results and guidance beat expectations, which also drew positive reactions from analysts.

Morgan Stanley kept its Overweight rating and raised the price target to $73 from $67 on the shares of Ambarella — which makes semiconductor solutions for human and computer vision applications, including video security, advanced driver assistance, or ADAS, electronic mirror, driver/cabin monitoring, and autonomous driving, among other things.

Analysts led by Joseph Moore noted that Ambarella had a strong quarter and outlook, and the company expects Internet of Things, or IoT, to lead near-term growth as they move beyond the inventory correction. The analysts continue to be excited about the company’s long-term opportunity with edge AI inference, with large automotive opportunities down the road.

Ambarella’s revenue came in at the high-end of their guidance, with most of the growth driven by IoT, which represented 70% of the company’s revenue. The company had a had record edge AI inference revenue in the quarter.

In the Long-term, the company sees rising demand for more advanced AI capabilities such as vision language models and CLIP at the edge, and see the significant build out of inference capacity as a long-term tailwind, the analysts added.

Inventory correction is mostly behind them, and the revenue for the second half of the year will reflect end market demand, with a strong content boost from new wins with 5 nm CV5 and CV7 chips that come at significantly higher average sales price, or ASP, according to the analysts.

The analysts added that Auto revenue grew slightly in the quarter, and will grow sharply in October. However, the analysts continue to expect the inflection point in CY2026, when the company’s CV3 products will drive long-term growth.

Meanwhile, WestPark Capital reiterated its Buy rating and $85 price target on Ambarella’s stock.

The analysts said that Ambarella guided October quarter revenue well above consensus estimates ($79M versus $69.1M) as the company’s customers completed their inventory re-balance and it now ships to true end-demand.

Despite macroeconomic headwinds from weak global auto production and mixed IoT spending, the team increased its revenue growth rate for FY25/CY24 (now expecting mid-to-high-teens year-over-year growth). This growth comes from several waves of new CV product ramps (CV5, CV7, and CV3 families) for both IoT and Automotive, with all new products coming with higher ASPs.

Ambarella (AMBA) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. The Seeking Alpha authors’ (total 1 analyst in this case) average rating is also Hold, but the average Wall Street analysts’ rating is more positive with a Buy.

Ambarella’s peers include Synaptics (SYNA), Credo Technology (CRDO) and Semtech (SMTC).