Enovix (ENVX) Q2 FY26 earnings call: guidance and Q&A

How should investors think about smart eyewear volumes to reach optimal margin levels and the timeline to achieve this?

The smart eyewear market is in the millions of units, and Enovix is sampling to various customers, receiving strong feedback on energy density. While Q2 shipments were nominal, the company expects negative margins for the balance of the year due to early ramp costs. Healthy gross margins are anticipated as volumes scale in 2027 and beyond.

“The market itself, as I said the last quarter, the market is multiple millions of units and expected to grow year after year. We are sampling now to different customers who are in like various stages of building the products. Exactly how much we'll ship will depend upon how successful their products are and what share we win.”

asked by Colin Rusch · answered by Raj Talluri

Which drone applications is Enovix competing well in, and what are the key drivers for progress in this market?

Enovix sees tremendous interest in the drone market due to its competitive cell (360 Wh/kg) and TAA-compliant South Korea factory, with NDAA compliance expected by 2027. Key applications include public safety, interceptor drones, and ISR, where demand is expected to outstrip supply. The company is excited about its own factory's margin profile and added capacity.

“The main markets we are getting into there are markets where they want a few hundred cycles, for example, of flying time and also safety, public safety, interceptor drones, ISR and markets like that.”

asked by Colin Rusch · answered by Raj Talluri

With both lead and second smartphone OEMs moving to silicon-specific qualification, how standardized will this become, and when are POs expected from these customers?

Enovix has convinced customers that legacy graphite tests are not representative for 100% silicon anodes. The lead customer confirmed >1,000 cycles on 0.2C, and the final accelerated test with a hybrid protocol is expected to pass in Q4. After in-phone testing, volume production is expected in 2027. The company expects the market to adapt to these new protocols, making subsequent OEM qualifications easier.

“I think what has happened is over the -- what we've done over the last couple of quarters, we've really been able to convince the customers that when you move from graphite anodes to 100% silicon anodes, some of the legacy tests are not very representative of how the battery will actually perform in real life, which is, I think, a huge step forward that we've been able to accomplish.”

asked by Ruplu Bhattacharya · answered by Raj Talluri

Could management elaborate on the final accelerated cycle life test for smartphones, given the 1,000-cycle milestone was previously thought to be the last stage gate?

The final test is an accelerated cycle life test, using a hybrid protocol with varying discharge rates to better represent real-world phone usage. This test is designed to be completed faster than a traditional 0.2C test. Multiple protocols are being run jointly with the customer, with good results expected by Q4, followed by in-phone testing. The 0.2C test confirmation was an independent verification of internal results.

“The last test basically is what I call accelerated test, which basically means that they would like to discharge at a faster rate, as I mentioned, but not just all the way at the high rate, but some combination of a faster rate and some combination of a slower rate, which is kind of more representative of what a phone might actually do in the real world.”

asked by Mark Shooter · answered by Raj Talluri

What is the expected timeline for converting the $100M+ drone pipeline into firm orders and backlog?

Approximately $40 million of the drone pipeline is already in active testing and design win stages. Defense qualification cycles are shorter than smartphones. Revenue and scale are expected to align with the South Korea capacity coming online in mid-2027. Drone companies typically have 6-9 month cycles, while defense primes can be longer, around 18 months.

“Defense qualification cycles are shorter than smartphones because just of the need -- of what they need to get to production faster. And the revenue and scale aligns with our Korea capacity coming online in mid-2027.”

asked by Mark Shooter · answered by Raj Talluri

What drove the Zone 1 yield improvement, and what yield level is needed to confidently ramp production and invest in additional capacity?

The yield improvement in Zone 1 dicing is attributed to steady progress, including mechanical and process changes, reflecting disciplined efforts by the Malaysia team. While the commercial ramp for smart eyewear is already underway, the company is confident in its glide path to achieving healthy gross margins. The new COO, Michael Vyvoda, is expected to further accelerate this momentum.

“I think there's just been -- it has been time to put a lot of steady progress and a lot of focus on just kind of grinding out disciplined yield wins. And so there's a lot of tactical things that go in to represent and be reflected in that 4 percentage point increase.”

asked by Derek Soderberg · answered by Ryan Benton

What specific areas will the new COO, Michael Vyvoda, focus on for continuous improvement?

Michael Vyvoda will be responsible for the entire operational side, including both the Malaysia and South Korea factories, advanced manufacturing machines, and supply chain. The company emphasizes cross-pollination of battery manufacturing know-how from Korea to Malaysia and silicon knowledge from Malaysia to Korea, with support from the India R&D team.

“Michael will be responsible for both the factories in addition to advanced manufacturing machines that we need to build, in addition to supply chain, getting the right materials in place. So the entire operational side will be under him.”

asked by William Peterson · answered by Raj Talluri