On August 18, Hesai Group (HSAI) disclosed its unaudited results for the second quarter of 2026, reporting revenue of 860.8 million yuan, a 21.9% year-over-year increase. Net profit, calculated under US GAAP, reached 70.55 million yuan, up 60.0% from a year earlier, marking the fifth consecutive quarter of profitability.

Contrasting with the net profit growth, the company's operating profit for the quarter stood at a mere 2.195 million yuan, a sharp 90.4% decline from the 22.852 million yuan recorded in the same period last year. During the quarter, gross profit increased to 345.2 million yuan, rising by approximately 44.77 million yuan year-over-year, though the gross margin slipped from 42.5% to 40.1%. The company attributes this shift to a higher revenue share from products with relatively lower gross margins.

Lidar shipments surged 78.4% year-over-year, significantly outpacing revenue growth, as lower average selling prices offset some of the shipment gains. The impact on expenses was more direct, with research and development costs climbing to 231.2 million yuan, an increase of roughly 31.95 million yuan year-over-year, primarily linked to investments in strategic growth initiatives. Sales and administrative expenses combined rose by about 10.51 million yuan. Meanwhile, other operating income dwindled from 27.62 million yuan to 4.66 million yuan, a decrease of approximately 22.97 million yuan. These shifts outweighed the gross profit increase, resulting in an operating profit decline of about 20.66 million yuan year-over-year.

Segment data further illustrates the impact of new business investments. In the second quarter, the lidar segment generated 815.9 million yuan in revenue and 66.24 million yuan in operating profit, while the strategic growth business brought in 44.94 million yuan in revenue but posted an operating loss of 64.04 million yuan, nearly offsetting the lidar segment's gains. The continued rise in net profit was buoyed by items below the operating profit line. Interest income increased by roughly 37.98 million yuan year-over-year, and new investment income of 36.57 million yuan was added, while foreign exchange gains swung from a 6.94 million yuan gain last year to a 23.18 million yuan loss. These interest and investment gains helped counterbalance the decline in operating profit, highlighting the need to examine sustained profitability and core operating earnings separately.

Looking ahead, lidar remains the primary revenue and profit driver for Hesai Group. The company disclosed that it has secured design wins for multiple vehicle models from Volkswagen's Chinese joint venture, with the Great Wall Motor ETX project expected to enter mass production by the end of 2026. Additionally, Li Auto has expanded its multi-lidar solution from the L8 and L9 models to the L6. In the second quarter, robot lidar shipments reached 142,400 units, up 193.4% year-over-year, adding a new source of shipment growth.

Beyond lidar, the company is advancing its spatial intelligence platform Kosmo and robotic actuator modules. Kosmo delivered its first prototypes in July, with revenue contributions anticipated starting in the third quarter. The robotic actuator production line is already operational, having delivered more than 10,000 units by the end of the second quarter. Hesai Group has raised its 2026 revenue guidance for the strategic growth business from 100 million yuan to between 200 million and 300 million yuan, and expects this segment to achieve approximately 100 million US dollars in revenue with breakeven results by 2027, though these targets remain company projections.

For the third quarter, the company forecasts revenue of 1.1 billion to 1.15 billion yuan, representing growth of roughly 38% to 45% year-over-year. As new business lines expand, the ability to narrow the strategic growth segment's losses will be pivotal in determining the pace of operating profit improvement.