AMBARELLA INC Income Taxes Disclosure

14. Income Taxes

The Company consists of a Cayman Islands parent company with various foreign and U.S. subsidiaries. Under the current laws of the Cayman Islands, the Company is not subject to tax on its income. For purposes of the reconciliation, prior to adoption of ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, between the provision (benefit) for income taxes at the statutory rate and the effective tax rate, a notional U.S. 21% rate is applied to pretax income (loss) as a result of the following for the periods indicated, respectively:

The Company conducts its business in several countries and regions and is subject to taxation in those jurisdictions. The Company is incorporated in the Cayman Islands with foreign subsidiaries in the U.S., China, Taiwan, Italy and other foreign countries and regions. As such, the Company’s worldwide operating income is subject to varying tax rates and its effective tax rate is highly dependent upon the geographic distribution of its earnings or losses and the tax laws and regulations in each geographical region. Consequently, the Company has experienced lower effective tax rates as a substantial amount of its operations are conducted in lower-tax jurisdictions. If the Company’s operational structure was to change in such a manner that would increase the amount of operating income subject to taxation in higher-tax jurisdictions, or if the Company was to commence operations in jurisdictions assessing relatively higher tax rates, its effective tax rate could fluctuate significantly on a quarterly basis and/or be adversely affected. Dividend distributions received from the Company’s U.S. subsidiary and certain other foreign subsidiaries may be subject to local country withholding taxes when, and if, distributed. Deferred tax liabilities have not been recorded on unremitted earnings of certain subsidiaries because management’s intent is to indefinitely reinvest any undistributed earnings in those subsidiaries. If dividend distributions from those subsidiaries were to occur, the liability as of January 31, 2026, would be approximately $9.1 million.

As of January 31, 2026, and 2025, the Company had net deferred tax liabilities after valuation allowance of $0.1 million and $0.5 million, respectively. The Company continued to evaluate the need for a valuation allowance by considering among other things, the nature, frequency and severity of current losses, reversal of taxable temporary differences, tax planning strategies, future projections in the U.S. and the duration of statutory carryforward periods. Based on the current projections of the Company’s future taxable income, and overall evaluation of other related evidence, management determined it is not more likely than not that the U.S. deferred tax assets will be realized, and therefore, valuation allowance remains necessary.

The Company has Federal and California net operating losses of $45.0 million and $1.0 million, respectively, as of January 31, 2026. The Federal net operating loss can be carried forward indefinitely, if not utilized. The California net operating loss begins to expire in fiscal year 2044, if not utilized. For financial statement purposes these carry forwards are offset by reserves for uncertain tax positions.

The Company also has Federal and California state research and development credit carryforwards of approximately $35.1 million and $41.7 million, respectively, as of January 31, 2026. The Federal credits begin to expire in the fiscal year 2036. The California credits can be carried forward indefinitely.

Utilization of the net operating loss and research credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations as defined by the U.S. Internal Revenue Code Section 382, as amended, and similar state provisions as well as separate return year limitation which limits the utilization of loss generated before a company joins the consolidated filing group. The annual limitations may result in the expiration of the U.S. Federal and state net operating loss (NOL) and research credit carryforwards before utilization. The Company has a full valuation allowance against all U.S. deferred tax assets due to lack of more likely than not future utilization of these deferred tax assets.

The Company applies the provisions of FASB’s guidance on accounting for uncertainty in income taxes. As of January 31, 2026, the Company had approximately $18.4 million in unrecognized tax benefits, $1.1 million of which would affect the Company’s effective tax rate if recognized. The remainder of the unrecognized tax benefits would not affect the effective tax rate due to the full valuation recorded for U.S. deferred tax assets. The following table sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:

The Company classified $0.9 million and $0.9 million of income tax liabilities as other long-term liabilities as of January 31, 2026, and 2025, respectively, because payment of cash or settlement is not anticipated within one year from the balance sheet date.

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company recorded an expense of $0.1 million, a benefit of $0.5 million, and an expense of $0.05 million for interest and penalties related to uncertain tax positions for the fiscal years ended January 31, 2026, 2025 and 2024, respectively. The Company recorded noncurrent liabilities of $0.2 million and $0.1 million related to interest and penalties for uncertain tax positions at January 31, 2026, and 2025, respectively.

The primary jurisdiction where our foreign earnings are derived is the Cayman Islands, where the Company is domiciled. The Company files income tax returns in the U.S. federal jurisdiction as well as many U.S. state and foreign jurisdictions. As of January 31, 2026, the Company’s fiscal year 2023 through 2026 tax years are generally open and subject to potential examination by U.S. federal tax authorities. The Company’s fiscal year 2022 through 2026 tax years are generally open and subject to potential examination by state tax authorities. The Company’s fiscal years 2019 to 2026 remain open to examination by foreign tax authorities. Fiscal years outside of the normal statute of limitations remain open to audit by tax authorities due to tax attributes generated in those earlier years, which have been carried forward and may be audited in subsequent years when utilized.

The Company regularly assesses the likelihood of adverse outcomes resulting from potential tax examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. During the fiscal year ended January 31, 2026, the gross amount of unrecognized tax benefits decreased by approximately $2.1 million to $18.4 million. The decrease was primarily due to the release of certain reserves for uncertain tax positions where the statute of limitation has lapsed, offset by reserves for uncertain tax positions related to research credits. If the estimates of income tax liabilities prove to be less than the ultimate assessment, then a further charge to expense and balance sheet tax footnote disclosure could be required. If events occur, and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities could result in tax benefits being recognized in the period in which the Company determines the liabilities are no longer necessary.

As of January 31, 2026, the Company’s long-term income taxes payable, including estimated interest and penalties, was approximately $1.1 million. The Company was unable to make a reasonably reliable estimate of the timing of payments in individual years due to uncertainties in the timing of tax audits, if any, or their outcomes.