Ambient backscatter communications is an emerging paradigm and a key enabler for pervasive connectivity of low-powered wireless devices. It is primarily beneficial in the Internet of things (IoT) and the situations where computing and connectivity capabilities expand to sensors and miniature devices that exchange data on a low power budget. The premise of the ambient backscatter communication is to build a network of devices capable of operating in a battery-free manner by means of smart networking, radio frequency (RF) energy harvesting and power management at the granularity of individual bits and instructions. Due to this innovation in communication methods, it is essential to investigate the performance of these devices under practical constraints. To do so, this article formulates a model for wireless-powered ambient backscatter devices and derives a closed-form expression of outage probability under Rayleigh fading. Based on this expression, the article provides the power-splitting factor that balances the tradeoff between energy harvesting and achievable data rate. Our results also shed light on the complex interplay of a power-splitting factor, amount of harvested energy, and the achievable data rates.