Hesai Group earnings call: scale, margins and SGI

Hesai Group Sponsored ADR ((HSAI)) has held its Q1 earnings call. Read on for the main highlights of the call.

Hesai Group’s latest earnings call painted a picture of a company balancing rapid scale with disciplined profitability. Management highlighted robust revenue growth, expanding margins and dominant market share, while acknowledging near‑term pressure from deliberate investments in new strategic growth initiatives that are not yet profitable but are central to its long‑term vision.

Mercedes-Benz partnership cements Level 3 lidar credentials

Hesai confirmed it has become a strategic lidar partner and supplier for Mercedes‑Benz Level 3 models in Europe and China. Production will be supported by its new Galileo manufacturing center in Thailand, a move that should speed global OEM penetration and strengthen the company’s position in premium assisted‑driving programs.

Shipments scale toward multi-million unit volumes

The company underscored its manufacturing scale, noting it delivered a record 1.6 million lidar units last year. Management now expects shipments to roughly double to 3.0–3.5 million units in 2026, signaling strong demand and reinforcing Hesai’s claim to leadership in the rapidly expanding ADAS lidar market.

Q1 2026 revenues and earnings extend growth streak

For the first quarter of 2026, net revenues reached RMB 681 million, or about USD 99 million, up 30% year over year and marking the eighth straight quarter of revenue growth. GAAP net income came in at RMB 18 million, with non‑GAAP net income at RMB 48 million, confirming that growth is translating into bottom‑line gains.

Margins remain solid despite investment cycle

Hesai reported a gross margin above 39% in Q1, a healthy level for a hardware‑heavy business under price pressure. The core lidar segment generated RMB 42 million in GAAP operating profit, extending its GAAP profitability streak to four consecutive quarters and its non‑GAAP profitability to six.

Global and China market share leadership strengthens

According to Yole Group, Hesai ranked number one globally in long‑range ADAS lidar shipments in 2025 with a 43% market share. In China, Gasgoo data showed the company’s share reached about 55% in March 2026, roughly triple the second‑largest player and marking the 14th straight month at the top.

Backlog, model count and OEM launches indicate strong demand

Hesai’s sensors are now featured in 56 vehicle models across 24 brands showcased at the Beijing Auto Show, underscoring broad OEM adoption. The company’s backlog exceeds 6 million units, and Li Auto has begun deliveries of a multi‑lidar model, signaling the start of mass deployment for Hesai’s FTX blind‑spot lidar.

Picasso and ETX push the frontier of lidar technology

The firm highlighted its Picasso chip, billed as the first 6D full‑color SPAD‑SoC that fuses RGB and depth at the chip level, aiming to deliver richer perception. Hesai also promoted its ETX platform, supporting up to 4,320 channels and a 600‑meter range, and noted an exclusive design win with KargoBot ahead of expected ETX series production in the second half of 2026.

Kosmo anchors new AI-driven strategic growth initiatives

Hesai introduced Kosmo, an AI‑integrated spatial intelligence device that can reconstruct 200 square meters in about one‑fifth the time of current 3DGS and roughly one‑fiftieth of traditional methods. Early orders are in hand, and management expects strategic growth initiatives to generate around RMB 100 million in 2026 revenue, with a potential ramp to about RMB 500 million in 2027.

Q2 outlook points to continued double-digit growth

Management guided Q2 revenue to RMB 850–900 million, implying roughly 20–27% year‑on‑year growth, on shipment guidance of about 650,000 units. The company reaffirmed full‑year lidar shipment expectations of 3.0–3.5 million units, backed by a backlog above 6 million, and indicated that SGI will begin contributing to revenue from the second quarter.

SGI segment losses weigh on near-term results

Hesai’s SGI segment posted an operating loss of RMB 51 million in Q1 as the company invests ahead of revenue. Management emphasized that commercialization is still in its early stages, meaning SGI currently drags on consolidated operating profit even as it is expected to become a higher‑margin, software‑heavy business over time.

Operating expenses rise with R&D and new initiatives

Total operating expenses rose 9% year over year in the first quarter, largely due to targeted R&D and spending on SGI projects. While this investment phase pressures near‑term operating leverage, Hesai argued it is building future product and software platforms that should support higher long‑term growth and margin expansion.

Blended ASP pressure reflects ADAS mix shift

Management acknowledged that blended lidar average selling prices are declining as product mix shifts toward lower‑priced but higher‑volume ADAS lidars. The company framed this as a by‑product of healthy market expansion, though it does place downward pressure on average unit revenue even as total volumes and overall revenues rise.

Uncertain early economics for SGI offerings

Kosmo and robotic actuation modules are being sold through customized pricing and pilot programs, leaving long‑term ASPs and unit economics still unsettled. This early‑stage uncertainty around SGI revenue predictability and margins adds another variable for investors, even as the company positions the segment as a key future profit driver.

SGI profitability sacrificed for long-term upside

Management reiterated that SGI is expected to deliver higher‑margin, software‑rich revenues over time but will remain loss‑making in the near term. Upfront R&D, commercialization and platform investments drove the RMB 51 million Q1 operating loss in the segment, reflecting a deliberate tradeoff between short‑term profitability and longer‑term optionality.

Guidance underscores confidence in scale and profitability

The company expects quarterly momentum to build through the year, with Q2 growth on top of Q1’s RMB 681 million revenue and more than 471,000 unit shipments. Hesai plans to keep GAAP profitability even as SGI ramps toward about RMB 100 million in 2026 and potentially RMB 500 million in 2027, and it expects SGI to be accretive to group gross margins over time.

Hesai’s earnings call delivered a bullish narrative of scale, market share and disciplined profitability in its core lidar franchise, offset by planned losses in emerging AI‑driven businesses. For investors, the story hinges on whether the company can maintain its shipment and margin trajectory while turning SGI from a drag into the higher‑margin growth engine management is betting on.