ECARX Holdings, Inc. Q2 FY2026 earnings call

Global Expansion Progress

• Continued development of the Volkswagen Group partnership, with engineering, supply chain, and support infrastructure being built out in Latin America, on track for a 2027 launch. The program covers full vehicle segments, pairing high-end Antora 1000 for premium vehicles with cost-effective Antora 500 for entry-level models.
• Launched mass production for 9 new models across 4 brands in Q2, 4 of which are destined for non-China markets including Europe, Southeast Asia, and South America. eCorex technology is now deployed on 12 million vehicles on the road globally.

Strategic Acquisitions and Partnerships

• Signed a definitive agreement to acquire the entire Flymeam software business for ~$266 million. The acquisition adds a mature, already deployed platform (Flymeam Auto in 2+ million vehicles, Flymeam OS as the core of eCorex's global Cloud Peak middleware) that enables deeper hardware-software integration, shorter customer integration timelines, and adds a recurring, non-hardware tied revenue stream from software licensing and custom development. Flymeam will operate as an independent software division to preserve R&D continuity.
• Entered a strategic partnership with TPK Holdings to co-develop the Orca LiDAR platform, marking eCorex's formal entry into the LiDAR market. eCorex leads system integration, sensor fusion, and global commercialization, while TPK provides optical design, engineering, and high-volume manufacturing. Mass production is scheduled to begin in 2028 at TPK's Thailand facility.
• Signed a share exchange agreement with Qualcomm Ventures, deepening the long-term strategic partnership to jointly develop specialized, integrated automotive solutions, including the upcoming Zenith platform built on Qualcomm's Snapdragon Elite automotive platform.
• Antora software was nominated for a leading international luxury brand's vehicle program in China.

Operational Strategy & Efficiency

• The 2025 lean operating strategy delivered targeted results: growing revenue and profitability despite a challenging Chinese automotive market and rising global memory costs.
• Internal AI deployment has reduced software development costs, with over 90% of developers now using AI-enabled cloud code tools in their workflows, creating structural efficiency as the company's software footprint expands with the Flymeam acquisition.

Total revenue for Q2 2026 increased 45% year-over-year (YoY) and 71% quarter-over-quarter (QoQ). Breakdown by segment: 1. Sales of Goods: Revenue of $196 million, up 73% QoQ and 50% YoY. High-end solutions (Tora and Pykes) now account for 42% of total shipments, growing 92% QoQ and 52% YoY. Pykes shipments alone increased 43% QoQ and over 2,000% YoY, driven by the 2025 strategic shift away from lower-margin legacy platforms to high-end, eCorex-architected solutions. 2. Software: Revenue of $0.7 million, down 42% YoY due to lower sales volume. 3. Services: Revenue of $28 million, up 21% YoY, driven by new Q2 model launches. Gross profit reached $44.5 million, with gross margin expanding to 19.8% from 10.8% YoY. Adjusted EBITDA remained positive at $0.5 million (down from $4 million Q1, which included a one-time $14 million partial share monetization), marking the fourth consecutive positive adjusted EBITDA quarter. Operating expenses declined 11% YoY against 45% revenue growth, delivering significant operating efficiency gains.

• Management reaffirms full-year 2026 revenue guidance at $1 billion to $1.1 billion.
• Management expects continued sequential increase in average selling price (ASP) through the second half of 2026, driven by the ongoing shift to higher-margin, high-end Pykes and Antora platforms and new model launches.
• Gross margin is expected to face continued pressure from rising global memory costs in upcoming quarters, even as higher memory costs are passed through to customers to support top-line revenue growth.
• Management anticipates software and services revenue will accelerate in the second half of 2026 in line with the faster new model launch cadence, which is heavily weighted to H2 2026.

• Challenging demand conditions in the Chinese automotive market have persisted through the first half of 2026, creating broader demand volatility.
• Sharply rising global memory costs create downward pressure on gross margin in upcoming quarters as existing inventory is depleted.
• Quarterly revenue and margin for software and services can be lumpy, as the bulk of current services revenue is tied to the timing of design contracts and vehicle launch cycles, leading to quarter-to-quarter variability.
• The shift away from lower-margin legacy platforms reduced total unit shipments temporarily, though this strategic shift has now improved overall revenue quality.

Q: Q2 hardware gross margin was stronger than expected despite rising memory prices. What is the gross margin outlook for H2 2026? Will margin pressure hit once existing memory inventory is depleted? / A: Strong Q2 gross margin came from three factors: timing lags between existing inventory purchases and passing higher memory costs through to customers, a higher mix of high-margin Pykes and Antora products, and 11% YoY operating expense reduction despite 45% revenue growth. Management confirms margin pressure will increase in H2 as existing inventory is used, but notes strong strategic supply chain partnerships with key memory suppliers Samsung and ZNXT, and that most memory price increases have already been passed through to customers, limiting long-term gross margin impact.

Q: High-end Tora and Pykes represented 42% of Q2 shipments. What is the outlook for ASP through H2 2026 as product mix shifts? / A: Management does not provide specific ASP targets, but confirms the ongoing upward ASP trend will continue. As legacy lower-end products are phased out and higher-performance new platforms scale, ASP will continue to rise. This trend aligns with broader industry shifts to software-defined vehicles, where integrated high-performance platforms reduce overall architecture costs for automakers while enabling more in-vehicle features.

Q: Why did software and service gross margin decline sequentially in Q2, with software license margin near breakeven? Is this an ongoing issue? / A: The quarterly software revenue line is very small (typically only $1 million to $2 million per quarter outside of major one-time events), so large percentage swings in revenue and margin are just normal quarterly business dynamics. Additionally, much of the company's software revenue is actually categorized under the services line item, tied to new product launch and development contracts, so single-quarter movements in standalone software margin do not reflect underlying business performance.