Hesai Group (HSAI) Earnings

Management highlights

**Company Strategic Transformation** - Hesai is transforming from a pure-play LiDAR manufacturer into a full-stack infrastructure platform for robotics and physical AI, structured around three core layers: "see" (LiDAR sensing), "understand" (spatial intelligence), and "act" (robotic actuation) - The transformation expands the company's total addressable market significantly beyond the original LiDAR market, creating a dual-engine growth model: core LiDAR generates steady cash flow and profitability, while SGI acts as a new high-growth engine **Core LiDAR Business Updates** - Secured a new design win with Great Wall Motor for mass production programs using its high-end ultra-long-range ETX LiDAR, with start of production (SOP) expected in late 2026; won additional design wins with Volkswagen China joint ventures and expanded collaboration with GAC Toyota - Gained strong momentum for its FTX blind-spot LiDAR for multi-LiDAR vehicle configurations; Li Auto's mass-produced L8/L9 models each use 4 Hesai LiDARs, and the new mainstream-priced L6 offers an optional 4-LiDAR configuration - Holds 44% of China's long-range ADAS LiDAR market as of June 2026, and has ranked number 1 in this segment for 17 consecutive months - Robotics LiDAR shipments nearly tripled year-over-year in Q2 2026, following 426% YoY growth in 2025; the company expects another 2-3x full-year shipment increase in 2026, with over 50 active embodied AI customers globally - The Picasso full-color 6D spat SOC, which fuses depth and color data on a single chip, is now SOP-ready, and full-color ETX LiDAR powered by Picasso has secured initial design wins **SGI Business Updates** - Cosmo spatial intelligence platform: Prototypes shipped in July 2026, and secured initial customer orders within 7 days, including from leading humanoid robotics companies; on track to begin generating revenue in Q3 2026. Over 200 prospective partners across robotics, media, tourism and gaming have expressed interest; it operates a flywheel business model with recurring revenue from cloud services and 3D spatial asset licensing - Robotic actuation modules: Started generating revenue in Q2 2026, with cumulative shipments exceeding 10,000 modules by quarter-end; the product delivers 3x higher torque density than leading competing products, 37% smaller form factor, and over 95% transmission efficiency. The company is ramping production to 10,000 modules per month in the near term, targeting six-digit full-year volumes in 2027, with full-body module SOP expected in H2 2026. Sharpa, a leading humanoid robotics company, will deploy a Hesai actuation-equipped robot for the world's first zero-retrofit full commercial shift at a Shanghai Dairy Queen in August 2026 **Consolidated Financial Performance** - Total consolidated net revenue hit RMB 861 million (USD 127 million), up 22% year-over-year, marking the 9th consecutive quarter of YoY revenue growth; gross margin held steady at 40% - GAAP net income reached RMB 71 million (USD 10 million), up 60% year-over-year, marking the 5th consecutive quarter of GAAP profitability; non-GAAP net income was RMB 101 million (USD 15 million) - R&D expenses totaled RMB 231 million, with the increase driven by targeted investments in SGI new product development

Guidance

- The company raised full-year 2026 SGI revenue guidance from RMB 100 million to a range of RMB 200 million to RMB 300 million, driven by faster-than-expected commercial traction for actuation modules. It expects SGI to reach ~USD 100 million (approx. RMB 700 million) in revenue in 2027 and achieve break-even that same year - Reiterated full-year 2026 total LiDAR shipment guidance of 3 million to 3.5 million units; reaffirmed full-year 2026 consolidated gross margin guidance of close to 40% - Reaffirmed full-year 2026 robotics LiDAR shipment guidance of over 500,000 units, and remains on track to hit this target - For Q3 2026, expects total consolidated revenue of RMB 1.1 billion to RMB 1.15 billion, with LiDAR shipments of 800,000 to 850,000 units; SGI revenue is expected to reach high eight digits RMB in the quarter - Long-term, expects SGI segment margins to reach ~40%, with Cosmo cloud and asset revenue carrying structurally higher margins than pure hardware products

Segment performance

The firm reports two business segments: 1) Core LiDAR Business: Revenue reached RMB 816 million (USD 120 million), generating operating profit of RMB 66 million (USD 10 million). Total LiDAR shipments exceeded 628,000 units, up ~80% year-over-year. ADAS LiDAR shipments were over 485,000 units (+60% YoY), and robotics LiDAR shipments were over 142,000 units (+193% YoY). This segment contributes 94.8% of total consolidated net revenue. 2) Strategic Growth Initiatives (SGI): This segment recorded its first revenue contribution in Q2 2026, reaching RMB 45 million (USD 7 million), driven by early demand for robotic actuation modules. It contributes 5.2% of total consolidated net revenue. The segment posted an operating loss of RMB 64 million, as the company continues investing in product development.

Risks & headwinds

- The company notes that new market segments including physical AI and humanoid robotics are still in early commercialization, with unproven long-term mass adoption trajectory and unclear ultimate market size for new products like Cosmo - Industry-wide pricing competition in LiDAR could pressure margins, though the company notes its structural cost and technology advantages mitigate this risk - New regulatory actions such as the FCC's recent rules on foreign-produced robotic devices could create operational or market access headwinds for overseas business. As of the call, the company sees no material direct impact on 2026 robotics LiDAR shipments, but will continue monitoring developments - SGI commercial and profitability targets depend on faster-than-expected technology validation and customer adoption, which may not materialize as projected

Analyst Q&A

• Q: The company raised SGI revenue guidance. What drove this increase, and what will the 2026 revenue mix between actuation modules and Cosmo look like? /

  A: The guidance hike is due to commercial demand and technology validation progressing much faster than the original forecast. Actuation modules will make up the majority of 2026 SGI revenue, as they already started generating revenue in Q2, and demand from key customer Sharpa exceeded projections. Cosmo will start contributing revenue in Q3 2026, with an expected low eight-digit RMB contribution this year. As Cosmo scales into cloud services and recurring 3D asset licensing after 2026, its revenue contribution will rise meaningfully, with a structurally higher margin profile than pure hardware products. The company did not disclose an exact split at this early stage.

• Q: What is your outlook for LiDAR market competition, pricing pressure, and market share, especially after a recent customer added an additional LiDAR supplier? /

  A: The trend of automakers adding more LiDAR suppliers per vehicle is actually positive, because it reflects growth in multi-LiDAR configurations that expand the overall market size. The total LiDAR opportunity per vehicle is growing, as most new models now carry multiple LiDARs for coverage and redundancy. Hesai has held 40-50% share of China's long-range ADAS LiDAR market for 17 consecutive months, while maintaining healthy pricing and margins. The company will not pursue a destructive price war to gain 100% share; it prioritizes technological leadership and capturing a leading share of industry profits over chasing unit share, similar to Apple's positioning in the smartphone industry.

• Q: Could you update full-year 2026 guidance and confirm if the 3-3.5 million unit LiDAR shipment guidance still holds? /

  A: The 3-3.5 million unit full-year 2026 LiDAR shipment guidance is reaffirmed. The company shipped ~1.1 million units in H1 2026, nearly double H1 2025, and the ADAS business follows typical auto seasonality with ~two-thirds of annual volume historically coming in H2. Growth is driven by rising LiDAR penetration in EVs (projected to hit 30-40% in 2026), multi-LiDAR configurations becoming standard for advanced driving systems, and rapidly growing robotics demand. In Q3 2026, non-ADAS LiDAR revenue is expected to reach close to or exceed half of total LiDAR revenue.

• Q: How do you see gross margin evolving, and what is the outlook for LiDAR average selling price (ASP)? /

  A: The full-year 2026 gross margin guidance of close to 40% is unchanged, and the company expects healthy margins to persist. While blended ASP may decline, total LiDAR content per vehicle is rising due to multi-LiDAR configurations, which can push total per-vehicle LiDAR revenue to $500-$1000 for advanced setups. Years of scale, in-house chip development and automation have driven steady cost reductions, offsetting any pricing pressure. Higher-mix growth in robotics LiDAR and overseas business also supports group margins, and long-term SGI is expected to hit 40% gross margins, with Cosmo carrying structurally higher margins.