Lidar shipments climbed nearly 80%, yet the cost of chasing growth is becoming visible in the bottom line. On August 18, Hesai Group (NASDAQ: HSAI) reported unaudited results for the second quarter of 2026, with revenue reaching RMB 860.8 million, up 21.9% year over year. Net profit under US GAAP came in at RMB 70.55 million, a 60.0% increase, marking the fifth consecutive quarter of profitability.

That headline profit figure, however, masks a sharp squeeze in core operations. Operating profit for the quarter stood at just RMB 2.195 million, down 90.4% from RMB 22.852 million in the same period last year. Gross profit rose to RMB 345.2 million, an increase of about RMB 44.77 million year over year, but gross margin slipped to 40.1% from 42.5%. The company attributed the decline to a higher revenue mix from products with relatively lower margins.

Shipment volume tells a similar story of price pressure. Lidar unit shipments grew 78.4% year over year, significantly outpacing revenue growth, as lower average selling prices offset part of the volume gains. On the cost side, research and development expenses climbed to RMB 231.2 million, up about RMB 31.95 million, driven largely by investments in strategic growth businesses. Selling and administrative expenses together added roughly RMB 10.51 million. Meanwhile, other operating income fell to RMB 4.66 million from RMB 27.62 million, a drop of about RMB 22.97 million. These expense increases exceeded the gross profit gain, resulting in an operating profit decline of approximately RMB 20.66 million year over year.

Segment data reveal the drag from new ventures. The lidar business generated RMB 815.9 million in revenue and RMB 66.24 million in operating profit, while the strategic growth segment brought in RMB 44.94 million in revenue but posted an operating loss of RMB 64.04 million, nearly wiping out the lidar division's operating profit. The net profit still grew thanks to items below the operating line. Interest income rose by about RMB 37.98 million year over year, and new investment income of RMB 36.57 million was recorded. Foreign exchange losses, however, swung to RMB 23.18 million from a gain of RMB 6.94 million in the prior year period. These interest and investment gains offset the operating profit decline.

As such, the sustained profitability and the shift in core operating earnings should be viewed separately. Going forward, lidar remains the primary revenue and profit engine for Hesai. The company disclosed that it has secured design wins for multiple models from Volkswagen's China joint venture, with Great Wall Motor's ETX project expected to begin mass production by the end of 2026. Li Auto has also expanded its multi-lidar configuration from the L8 and L9 to the L6. In the second quarter, robot lidar shipments reached 142,400 units, up 193.4% year over year, adding a fresh source of volume growth.

Beyond lidar, Hesai is advancing its spatial intelligence platform Kosmo and robotic actuator modules. Kosmo delivered prototype samples in July, with revenue contribution expected to begin in the third quarter. The robotic actuator production line is already operational, with over 10,000 units delivered by the end of the second quarter. The company has raised its 2026 revenue guidance for strategic growth businesses to RMB 200 million to 300 million, up from a previous RMB 100 million, and projects around USD 100 million in revenue with breakeven for that segment in 2027. These targets remain company forecasts.

For the third quarter, Hesai expects revenue of RMB 1.1 billion to 1.15 billion, representing year-over-year growth of roughly 38% to 45%. As new businesses scale, whether the strategic growth segment can narrow its losses will directly influence the pace of improvement in operating profit.

Risk Disclosure: Market conditions carry risk, and investment decisions should be made with caution. This article does not constitute personal investment advice and does not account for individual investors' specific investment objectives, financial situations, or needs. Readers should consider whether any opinions, views, or conclusions herein fit their particular circumstances. Investment at your own discretion.