CBAK Energy Earnings Call: Growth Surges, Margins Squeezed

Cbak Energy Tech ((CBAT)) has held its Q4 earnings call. Read on for the main highlights of the call.

CBAK Energy’s latest earnings call painted a picture of rapid revenue growth and aggressive expansion, set against heavy margin pressure and continued losses. Management argued that the current profit squeeze is the price of scaling up new lines and vertically integrating materials, with the payoff expected to emerge from 2026 onward as capacity ramps and efficiencies improve.

Quarterly Revenue Surge

Consolidated net revenue for Q4 2025 jumped 131.8% year over year to $58.80 million, underscoring powerful momentum in the closing months of the year. Management highlighted strong customer demand across segments as evidence that the company’s expanded capacity is starting to translate into top-line gains.

Full-Year Revenue Growth

For full-year 2025, consolidated net revenue reached $195.19 million, up 11% versus 2024, marking another record year for sales. The more modest annual growth rate versus Q4’s surge reflects earlier-year ramp timing and the gradual transition from legacy products to new battery formats.

Raw Materials (Hitrans) Turnaround

The Hitrans raw materials business delivered a standout turnaround, with 2025 revenue soaring 123% year over year to $89.21 million. Q4 alone saw Hitrans revenue of $27.98 million, a 944.1% spike, helped by an up-cycle in raw material prices and stronger downstream orders.

Strong LEV and REV Growth

Light electric vehicle (LEV) revenues in Q4 surged 524.2% to $12.92 million, underscoring rapid uptake in two-wheeler and related applications. Revenue from REV products for the full year climbed 252% to $36.36 million, signaling that newer platforms are gaining real commercial traction.

Battery Business Revenue Expansion

The core Battery segment continued to expand, with Q4 revenue rising 35.8% year over year to $30.82 million. For 2025, the Battery business contributed $105.98 million to consolidated revenue, confirming its role as the company’s main growth engine despite transitional challenges.

Cash Generation and Liquidity

CBAK ended 2025 with $75.68 million in cash, cash equivalents and restricted cash, up from $60.79 million a year earlier, providing a buffer during the ramp period. Operating cash flow also improved, rising to $48.55 million from $39.70 million in 2024, indicating that growing sales are translating into real cash generation.

Capacity Additions and Product Launches

The company commissioned a new 40135 cell production line in Dalian at the end of 2025 with 2.3 GWh of capacity, aimed at high-demand applications. In Nanjing, Phase II added two new lines totaling 3.0 GWh atop the existing 1.5 GWh, with management noting that demand for 40135 cells already far exceeds available supply.

Strategic Vertical Integration and Asset Investment

Capital expenditures totaled $44.65 million in 2025, funding new facilities across Dalian, Nanjing, Zhejiang and Anhui as CBAK deepens its manufacturing footprint. Hitrans is building a 10,000 MT cathode plant and 37,000 MT precursor facility, scheduled to enter operation from 2026 through the first half of 2027, supporting a more vertically integrated cost base.

Commercial Partnerships and Market Expansion

Management spotlighted new and expanding partnerships with names such as SPIRO in Africa, Anker Innovation, Scania’s Posida unit, Ather Energy, Schneider ACE Battery and Inverted Energy. These ties, along with growth in India, Vietnam through DAT and African markets, position CBAK as an increasingly global supplier in LEV and storage niches.

Corporate and Supply-Chain Measures

To mitigate changing trade and tax dynamics, CBAK set up a Malaysian subsidiary in April 2025 to localize supply and reduce exposure to Chinese export tax rebate cuts. Shareholders also approved a redomicile from Nevada to the Cayman Islands, which management says should streamline corporate structure and cross-border operations.

Non-Operating Income Support

Other income rose to $8.27 million in 2025, notably boosted by a $5.0 million compensation payment tied to a cancelled customer order. While this one-time item helped soften reported losses, management made clear it should not be seen as a recurring earnings driver.

Significant Margin Compression

The downside of the aggressive build-out showed up in profitability, with Q4 gross margin falling to 7.3% from 13.1% a year earlier on gross profit of $4.28 million. For 2025, gross margin slid to 9.4% from 23.7%, as higher unit costs, lower yields and under-absorbed fixed costs weighed on the bottom line.

Reported Losses

CBAK posted a Q4 operating loss of $8.01 million and a net loss attributable to shareholders of $7.38 million, reflecting the compressed margins. For the full year, operating loss was $18.44 million and net loss attributable to shareholders reached $9.38 million, underscoring that profitability remains a medium-term goal rather than a current reality.

Ramp-Up Related Cost Pressure

Management attributed much of the earnings drag to ramp-up costs for the new 40135 line in Dalian and Phase II 32140 lines in Nanjing, both of which are still early in their learning curves. With Nanjing Phase II not expected to reach full capacity until early 2027, or optimistically the second half of 2026, margin recovery is likely to be gradual.

Decline in Energy Storage Sub-Segment

While newer formats grew, the energy storage sub-segment saw a 10.6% revenue decline in Q4 as legacy 26650 cells at Dalian were phased out. This deliberate shift away from older products is temporarily dampening storage revenues, but the company expects new models to fill the gap over time.

Rising Operating Expenses

Operating expenses climbed 12% year over year, reflecting the cost of growth, with R&D up 21% to $15.8 million as CBAK invests in next-generation formats. General and administrative expenses increased 16% to $16.20 million, driven by higher headcount and infrastructure to support the expanded manufacturing base.

Macro Headwind: Export Tax Rebate Phase-Out

The Chinese export tax rebate on lithium-ion batteries was cut from 13% to 9% and is slated to fall to 6% by April 2026 and then to zero by January 2027, creating a structural margin headwind for exports. Management views its Malaysia localization strategy as critical to cushioning the impact, but acknowledges a period of pressure as policy changes phase in.

Derivatives and Hedging Loss

CBAK’s first steps into financial hedging produced a non-cash derivative fair value loss of about $0.44 million in 2025. While small in absolute terms, the charge highlights the learning curve involved in managing commodity and currency risks alongside rapid operational expansion.

Supply vs Demand Imbalance

Demand for the company’s new 40135 cells currently outstrips supply, with management stating that every unit produced is being sold, indicating strong product-market fit. However, this tightness also means CBAK cannot yet fully monetize demand until the new lines reach stable high-volume output.

Timing Risk on Margin Normalization

Executives cautioned that while the Dalian ramp should complete in the first half of 2026, Nanjing Phase II will need longer, leaving a multi-quarter window of elevated costs. Investors should expect ongoing margin volatility until yields improve and fixed costs are spread over a larger, more efficient production base.

Forward-Looking Guidance and Outlook

Management guided to record consolidated sales in 2026 as the Dalian 40135 line completes ramp-up and Nanjing Phase II progressively fills, with gross margins expected to recover gradually in the second half of 2026 and improve for the full year. They pointed to Hitrans’ growth and new cathode and precursor plants, robust cash flow, stepped-up R&D and the Malaysia strategy as key levers for scaling profitably through 2027 despite export rebate cuts.

CBAK Energy’s earnings call offered a classic growth-versus-profit tradeoff: revenues, capacity and customer reach are all rising fast, but margins and net income are under strain as new assets come online. For investors, the story now hinges on execution, with 2026–2027 shaping up as the proving ground for whether today’s heavy investment can translate into sustainable, higher-margin growth.