Microvast (MVST) Q2 FY26 earnings call

Microvast reported Q2 FY26 revenue of $87.3 million, a 4.5% decrease year-over-year, primarily impacted by a $2.7 million tariff refund. Gross profit was $25.8 million with a gross margin of 29.5%, down from 34.7% in Q2 FY25, mainly due to higher raw material prices and lower production utilization.

Operating expenses increased 16.1% year-over-year to $27.5 million, driven by higher legal fees and R&D labor costs. The company recorded a GAAP net loss of $12 million and an adjusted net loss of $5.3 million, with non-GAAP adjusted EBITDA at $3.6 million.

U.S. sales decreased year-over-year, affected by the $2.7 million tariff refund and a customer pulling product into 2025 due to tariff uncertainty^🌐. European sales demonstrated strong growth, increasing 35% in the quarter and contributing 61% of total quarterly revenue, up from 43% last year.

Conversely, APAC sales declined significantly by 23% in the quarter and 45% year-to-date, attributed to shifting regulatory and geopolitical dynamics, as well as a demand shift towards lower-cost products in India.

Net cash used in operating activities for the 6 months ended June 30, 2026, was $33.3 million, a substantial decrease of $77.6 million compared to cash generated in the prior year, primarily due to a $60.6 million reduction in net income (adjusted for noncash items) and a $17 million net change in operating assets and liabilities.

Net cash used in investing activities was $3.3 million, mainly for a U.S. office building and Huzhou Phase 3.2 expansion. Net cash generated by financing activities increased by $15 million to $8.2 million, driven by bank borrowings. The quarter ended with $143.1 million in cash, cash equivalents, and restricted cash.

The Huzhou Phase 3.2 expansion has completed installation and commissioning of production equipment, with production capacity currently ramping up. SOP (Start of Production) is expected in 2026, adding up to 2 gigawatt-hours of annual production capacity for large battery cell platforms.

In the U.S., the pack line assembly in Clarksville, Tennessee, remains on schedule for initial output by year-end 2026. However, the construction of the larger battery plant at the Clarksville site is contingent on securing additional financing or strategic partnerships.

Microvast achieved a milestone with its series-connected bipolar cell architecture, successfully scaling a 17-layer monolithic stack to approximately 72 volts with no liquid electrolyte in laboratory tests. This prototype retained about 88.5% capacity after 200 cycles. The design targets robotics applications, aiming to eliminate heavy interconnects and enhance safety.

Hotbox testing up to 200°C showed exceptional stability with no ignition or smoke, even after internal short events, demonstrating significant safety potential.

The company is exploring ultra-high-capacity chemistries, including an all-solid-state silicon-sulfur cell. Early laboratory prototypes achieved an initial specific capacity of over 1,000 milliampere-hours per gram, retaining over 90% capacity after 15 cycles. A 5-layer bipolar design uses simultaneous cathode expansion and anode contraction to self-compensate for volume changes during cycling, mitigating contact loss.

This technology is targeted for commercial and defense drones, potentially increasing flight endurance and payload capacity by eliminating external pressure^🌐 fixtures.

Microvast's strategic priorities for the second half of 2026 include accelerating the path to profitability, scaling with margin discipline, and expanding into high-barrier heavy industry and transit markets. The company is focusing on tightening operational execution, protecting gross margins, and deploying targeted innovations like the KAF electric powertrain for high-margin customer commitments.

Huzhou Phase 3.2 is a central catalyst for 2026, supporting next-generation cell demand, while Clarksville's pack line is on track for year-end output.