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  Title	Earnings call transcript: SES AI reports Q4 2025 revenue growth, stock jumps
  ID	30745230
  External ID	249f8d1902033c20fe4d4b74f9bd6513
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  Published Date	March 4, 2026, 5:01 p.m.
  Summary	Earnings call transcript: SES AI reports Q4 2025 revenue growth, stock jumps
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  Content	SES AI Corp (SES) reported its fourth-quarter 2025 earnings, revealing a revenue of $4.6 million, which was below the forecasted $5.98 million, resulting in a revenue surprise of -23.08%. Despite meeting earnings per share (EPS) expectations with a loss of $0.04, the company's stock surged by 10.32% to $1.71 in after-hours trading, reflecting positive market sentiment. Key Takeaways SES AI achieved a tenfold increase in annual revenue, reaching $21 million in 2025. Q4 2025 revenue grew 124% year-over-year, despite missing forecasts. The stock rose over 10% post-earnings, indicating strong investor confidence. The company maintains a robust liquidity position with $200 million in cash. Company Performance SES AI demonstrated significant growth in 2025, with full-year revenue of $21 million, marking a substantial increase from $2.1 million in 2024. This was the company's first full year of meaningful revenue generation. The fourth quarter saw a 124% year-over-year increase in revenue, despite falling short of projections. The company's strategic focus on energy storage systems, particularly through its acquisition of UZ Energy, contributed to this growth. Financial Highlights Revenue: $4.6 million in Q4 2025, up 124% YoY. EPS: Loss of $0.04, meeting forecast. GAAP gross margin for Q4 2025: 11.3%. Non-GAAP operating expenses in Q4 2025: $13.5 million, a 44% decrease YoY. Liquidity: $200 million at year-end 2025. Earnings vs. Forecast SES AI's EPS met expectations with a loss of $0.04, while revenue fell short of the $5.98 million forecast, resulting in a negative surprise of 23.08%. The shortfall was attributed to logistical constraints pushing $1.5 million in revenue to Q1 2026. Market Reaction Despite missing revenue forecasts, SES AI's stock climbed 10.32% in after-hours trading, closing at $1.71. This positive movement reflects investor optimism about the company's long-term growth prospects, particularly its strategic initiatives in the energy storage market. The stock's remarkable performance extends beyond a single session—shares have delivered a 201% return over the past year and gained 63% in the last six months, according to InvestingPro data. InvestingPro analysis suggests the stock remains undervalued at current levels, with the company appearing on the platform's most undervalued stocks list. Investors should note that the stock generally trades with high price volatility, one of 14 key insights available in the comprehensive InvestingPro Tips for SES. Outlook & Guidance SES AI projects continued revenue growth, with future quarters expected to benefit from the integration of UZ Energy and the expansion of its energy storage systems. The company forecasts a gradual improvement in EPS, with projections of a $0.03 loss per share in early 2026. Wall Street analysts maintain a bullish outlook, with price targets ranging from $2 to $4, suggesting significant upside potential from current levels. For investors seeking deeper insights, SES is among the 1,400+ US equities covered by InvestingPro 's comprehensive Pro Research Reports, which transform complex financial data into clear, actionable intelligence through intuitive visuals and expert analysis. Executive Commentary CEO John Smith stated, "Our significant revenue growth in 2025 underscores the strength of our strategic initiatives and the successful integration of UZ Energy. We are confident in our ability to continue delivering value to our shareholders." Risks and Challenges Logistical constraints may impact revenue recognition. The competitive landscape in the energy storage market could pressure margins. Regulatory changes could affect the company's operations and cost structure. Q&A During the earnings call, analysts inquired about the impact of logistics on revenue and the company's strategy to mitigate these challenges. Management emphasized efforts to improve supply chain efficiency and expand production capacity. Full transcript - SES AI Corp (SES) Q4 2025: Tamia, Conference Call Moderator : Good afternoon. Thank you for attending today's SES AI fourth quarter and full year 2025 earnings results call. My name is Tamia, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to your host, Kyle Pilkington, Chief Legal Officer. Kyle Pilkington, Chief Legal Officer, SES AI : Hello, everyone, and welcome to our conference call covering our fourth quarter and full year 2025 results. Joining me today are Qichao Hu, Founder and Chief Executive Officer, and Jing Nealis, Chief Financial Officer. We issued our shareholder letter just after 4:00 P.M. today, which provides a business update as well as our financial results. You'll find a press release with a link to our shareholder letter in today's conference call webcast in the investor relations section of our website at ses.ai. Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions, and uncertainties which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. The risks and uncertainties that could cause our results to differ materially from our current expectations include, but are not limited to, those detailed in our latest earnings release and in our SEC filings. On this call, we are introducing non-GAAP financial measures as a supplement to our GAAP results. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. These non-GAAP measures should not be considered in isolation or as a substitute for any GAAP measure, and our definitions may differ from those used by other companies reporting similarly titled measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our latest earnings release. With that, I'll pass it over to Qichao. Qichao Hu, Founder and Chief Executive Officer, SES AI : Thanks, Kyle. Thanks, everyone, for joining today. We had a study in 2025 with full year revenue of $21 million compared to a little over $2 million for 2024. Gene will walk through our financials and the outlook shortly. This tremendous growth was due to the final contributions from our services agreements with Honda and Hyundai as we completed our EV development work with them. We also had three and a half months of revenue from the acquisition of UZ Energy for our energy storage ESS business. While we are pleased to report full year revenue in the range of our previously issued guidance, it's a milestone we reached and the year-over-year growth we are expecting from full year contributions in our three revenue-generating business units and for recognizing potential value in the Molecular Universe that has us really excited. I'm very proud that we made more progress in the past year than the previous 10-plus years combined. This development of the Molecular Universe has sped things up for us. SES continues to be well-positioned to solve the issues of battery development and safety requirements. With the Molecular Universe, our own in-house AI for science company, we have been able to help customers overcome standard timelines in the adoption of new technology. We also have a front seat to see how energy transition needs are requiring more integration of AI software and hardware, along with precise battery health monitoring. As we described before, SES has three revenue-generating business units: ESS, drones, and materials. ESS, which is the largest market for batteries, is bigger than EVs and bigger than drones. At Battery World 2024, we announced our entry into the ESS market. Through our acquisition of UZ Energy, we are now serving customers across the globe, from Australia to Europe to the Middle East, and now we are entering the North American market. The ESS business is our largest near-term revenue driver. UZ Energy is a leader in commercial and industrial ESS, and has sold almost a gigawatt hours of hardware to customers ranging from residential to C&I to grid. We are now able to collect a large amount of historical ESS LFP graphite data, and then for all future UZ products, we plan to incorporate our Predict feature from Molecular Universe into a small box to achieve near zero drift state of charge, SOC degradation, health, safety, and other SoX algorithms, and automated non-disruptive recalibration, which helps improve UZ's ability to Predict battery health and reduce maintenance costs for customers. Energy source systems are financial assets. The value to our customers depends on delivering consistent and long-term performance. Historically, UZ supplied only the hardware to customers, mostly LFP and graphite lithium-ion cells. Now, since we acquired UZ, SES has the opportunity to provide an operating system to the hardware and sell customers a complete package to meet their ESS needs. We're seeing some early traction with UZ sales efforts as they were able to sign a multi-year $20 million contract with a major distributor recently at the Intersolar conference. Drones are the next business unit I want to highlight. The drones market requires high energy density and high power density batteries to achieve longer flight time and greater payload. This is where our lithium metal and high silicon-carbon lithium-ion batteries really shine. The U.S. defense drones market in particular is where we see the most consequential near-term opportunity and where we are devoting most of our attention and investment. It's worth spending a moment on why the drone market is a natural fit for deploying our lithium metal anodes and proprietary electrolyte. One, a drone battery needs 2x the energy density of conventional lithium-ion. Ultimately, you need at least 400 watts per kg to be state-of-the-art and a realistic roadmap to 500 watts per kg to win. In other words, range and payload matter. Drone batteries need a high C-rate and power for the drone to maneuver and accelerate. We've solved for this. Third, drone batteries need to be manufactured at scale. We've demonstrated this in our EV B-sample developments. Fourth, drone batteries need abundant and inexpensive materials, and the military demands that the supply chain to be National Defense Authorization Act or NDAA compliant. We recently announced we expect to convert our EV B-sample line in Chungju South Korea facility to manufacture NDAA-compliant cells for drones. This is the same facility that we've developed and built the world's first 100 amp-hour largest lithium metal cell back in 2021. This facility has been NDAA compliant since 2021. To meet the drone demand, we plan to convert our lines from EV pouch 100 amp-hour cells to 10 amp-hour pouch cells. In this line, we're also planning to deploy our AI for safety and AI for manufacturing to ensure quality and cost-effectiveness. In addition to our Korea facility, we're also exploring even larger NDAA compliant and more versatile cell form factor manufacturing capacities in Southeast Asia. We'll have more to update on our NDAA compliant manufacturing capacity and locations later this year. Our third revenue-generating business unit is materials. Both SES and our Molecular Universe users have also been discovering new electrolyte materials for other applications that we don't build cells for currently. Last fall, we announced a JV with Hyzon to leverage their 150,000 ton annual global capacity to produce these materials at a commercial scale to supply to other battery manufacturers for consumer electronics and ESS. At this time, we are anticipating that the Hyzon JV will only produce materials for Molecular Universe discoveries. Through the Molecular Universe, we discover 6 breakthroughs that are currently being tested by over 40 customers. These breakthroughs, which will be the basis of the revenue we expect from this business in 2026, include: 1, better cycle life and storage for EV applications. 2, better cycle life and power density for drones. 3, better low-temperature cycle life and power density for heavy-duty trucking. 4, better cycle life and longer life for consumer electronics. Fifth, better cycle life and low-temperature performance for ESS and EVs. Sixth, better cycle life and storage for consumer electronics. We also have a pipeline of new breakthroughs that are being tested by customers, which we expect will provide further potential revenue for this business. Last but not least is what we have been referring to as our own AI for science company. That is, of course, Molecular Universe. I want to be clear on how we view the MU's role in this company. While its SaaS revenue continues to build momentum and is expected to make a small contribution in 2026, its biggest contribution is the inherent value of this business on its own and the IP that drives competitive advantage in the ESS, drone, and materials business. Molecular Universe has the potential to become a modern-day encyclopedia, with battery being its volume one. It provides extremely valuable scientific data and intuition to AI for science models. Over the course of the year, we will continue to explore how we can best demonstrate or unlock MU's value. In terms of demonstrating that value, I will point to our recent investor presentation. In that presentation, we noted there are several AI for science companies that are either pre-revenue or have less revenue than the MU that have already tagged valuations exceeding $1 billion through private capital raises. These are the closest comps to the Molecular Universe. We are keeping an eye on how well these transactions have performed. We're really excited about the long-term value of Molecular Universe as a platform, not just for batteries, but all science. As well as the near-term revenue growth from drones, materials, and ESS operating systems. Our priorities for 2026 and beyond are, 1, leverage the new business unit leadership and structure to execute on the ESS and drone cell opportunities ahead of us. We've brought on industry veterans to lead these efforts as well as hardware and software integration still. Second, execute on the conversion of our NDAA-compliant line in Korea from EV cells to drone cells and line up additional capacity in Southeast Asia that is also NDAA compliant. Third, continue the growth of UZ Energy's existing hardware business in Australia, Middle East, and Europe, and begin expansion into the US. Fourth, deliver on existing novel electrolytes discovered by the Molecular Universe in the materials business and expand our pipeline. Fifth, leverage MU's material discovery capabilities to accelerate new product development. Sixth, continue to focus on our CapEx-light business model in ESS cells and materials to offset the projected R&D spend in the Molecular Universe. Before I turn it over to June, I want to express my gratitude for our teams who are working super hard to make all of this happen. Thanks to all of you for being on this journey with us. Now here's June for financial updates. Jing Nealis, Chief Financial Officer, SES AI : Thank you. I will discuss our financial performance for the fourth quarter and full year of 2025 and provide context on how we're deploying our capital to support SES AI's long-term growth and the strategies Qichao outlined earlier. Revenue for the fourth quarter of 2025 was $4.6 million, representing a $2.6 million or 124% increase year-over-year. Full year revenue came in at $21 million, in line with our guidance, impacted primarily by logistics constraints that delayed shipments at the end of the year, resulting in approximately $1.5 million of revenue being pushed out to the first quarter of 2026. As Qichao noted earlier, revenue for full year 2025 was within our previously issued guidance range of $20 million-$25 million and was up nearly tenfold from the prior year, a year in which we first achieved revenue generation. Our Q4 gross margin on a GAAP basis was 11.3%, driven by the higher mix of ESS product sales in the quarter, which carries a lower margin profile relative to our service revenue. On a non-GAAP basis, which excludes stock-based compensation as well as depreciation and amortization allocated to cost of revenue, our Q4 non-GAAP gross margin was 11.7%. For full year 2025, our GAAP and non-GAAP gross margin was 53.8% and 55.7%, respectively. As we have noted previously, we expect growth margin to vary from quarter to quarter as our revenue mix across products, SaaS, and services evolves. We expect the growth margins on our product revenue to improve as we scale volume and optimize the cost structure through our CapEx-light business model and JV partnerships. Turning to operating expenses. Our GAAP operating expenses for the fourth quarter of 2025 were $18.2 million, compared to $30.4 million for the same period prior year, a 40% decrease year-over-year. On a non-GAAP basis, which excludes stock-based compensation as well as depreciation and amortization, fourth quarter operating expenses were $13.5 million, compared to $24.2 million for the same period prior year, a 44% decrease. For full year 2025, our GAAP operating expenses were $93.9 million, compared to $110.5 million in 2024, a 15% decrease. On a non-GAAP basis, full year operating expenses were $73 million versus $82.3 million in 2024, an 11% decrease. The year-over-year improvement in operating expenses on both GAAP and non-GAAP basis reflects the progress we have made in optimizing our cost structure while continuing to invest strategically in Molecular Universe platform and our commercial growth initiatives. Adjusted EBITDA for the fourth quarter of 2025 was a loss of $13.8 million, compared to a loss of $23.2 million in the fourth quarter of 2024, representing a 40% improvement. For the full year 2025, Adjusted EBITDA was a loss of $62.6 million, compared to a loss of $81.5 million in the full year of 2024, a 23% improvement year-over-year. We believe this growth reflects the positive operating leverage beginning to emerge in our business as revenue scales as well as our sustained focus on financial discipline and cost management across the organization. Our GAAP net loss for the fourth quarter was $17 million or $0.05 loss per share. Excluding stock-based compensation, depreciation, and amortization, changes in fair value of sponsor earnout liabilities and including interest income, our non-GAAP net loss for the fourth quarter was $11.8 million or $0.04 loss per share. This is a improvement over 2024 fourth quarter's GAAP net loss of $34.5 million or $0.11 loss per share, and non-GAAP net loss of $19.9 million or $0.06 loss per share. For the full year 2025, our GAAP net loss was $73 million or $0.22 loss per share, compared to a GAAP net loss of $100.2 million or $0.31 loss per share in 2024. On a non-GAAP basis, full year net loss was $53.2 million or $0.16 loss per share, compared to a net loss of $66.4 million or $0.21 loss per share in 2024. The year-over-year improvement on both GAAP and non-GAAP basis reflects the progress we're making in scaling revenue and managing our cost structure as we advance customer engagements, develop the Molecular Universe platform and position the business for growth in 2026. A detailed reconciliation of GAAP net loss to Adjusted EBITDA and non-GAAP net loss per share is included in the financial tables at the end of the shareholder letter. I want to highlight that our GAAP net loss in any given quarter can be meaningfully impacted by non-cash mark-to-market movements in the fair value of our sponsor earnout liabilities, which are required to be remeasured each reporting period under GAAP. These non-cash gains or losses are not reflective of our underlying operating performance, we believe excluding them provides a clearer picture of the progress we're making in the business. This is one of the reasons we're introducing Adjusted EBITDA beginning this quarter. We utilized $10.4 million in cash for operations during the fourth quarter and $58.4 million for the full year 2025. We deployed $3.3 million on the UZ Energy acquisition and $2.9 million on CapEx and returned $1.6 million to shareholders through share repurchases during 2025. This improvement in cash utilization is consistent with the Adjusted EBITDA progress I noted earlier and reflects the financial discipline we have maintained as we scale the business. We exited 2025 with a strong liquidity position of $200 million, coming in at the top end of our previously communicated expectation of ending the year between $195 million and $200 million. Our CapEx-light business model remains a core financial discipline, and we are confident our current liquidity provides a strong runway to fund operations and execute on our 2026 growth initiatives. For full year 2026, we expect revenue to be in the range of $30 million-$35 million, representing approximately 43%-67% growth over full year 2025 revenue. As Qitao noted earlier, our full year 2025 revenue included one-time contributions from OEM services contracts. If we compare the growth expected from the three businesses on an apple-to-apple basis, the revenue growth rate is even higher. On the margin front, our three businesses carry different profiles, and the mix may shift as we scale. Our ESS hardware business, which will represent the largest share of revenue in 2026, is expected to operate at around 15% growth margin. As we layer in the hardware-software bundle and grow the operating system attach rate, we see a potential path to expanding margins in that business over time. Our drone cells business is earlier in this commercial ramp, but we expect growth margins north of 20% as volumes build through the year. Our materials business, which will sell electrolyte materials through our joint venture with Hisun, is also a products business, and we expect it to carry a margin profile in the 10%-20% range. On a blended basis, we expect consolidated growth margin to be around 15%, with room to improve year-over-year as we scale. Our operating expenses for full year 2026, we expect approximately 15% further reduction from the 2025 level. This reflects our continued investments in the Molecular Universe platform. While we are committed to financial discipline, we believe this level of investment is appropriate given the long-term value we're building and the early commercial traction we're seeing from MU-driven material discoveries. We're not anticipating meaningful growth in operating expenses beyond this level and will continue to evaluate opportunities to improve operating leverage as revenue scales and to accelerate the monetization of the MU platform. On capital expenditures, we continue to operate a CapEx-light model as a core financial discipline. For 2026, we expect CapEx to remain in the single-digit millions, primarily directed towards the conversion of South Korea facility from EV cells to NDAA-compliant drone cells, as well as the evaluation of contract manufacturing capacities in Southeast Asia. We entered 2026 with $200 million in liquidity. We are well-funded to scale and grow, giving us the financial flexibility to execute on the opportunities ahead of us. We believe 2026 will be the year in which the full architect of our multi-revenue stream platform comes together and begins to deliver. We are well-capitalized, financially disciplined, and positioned to execute on that vision. We appreciate your continued support and confidence in SES AI. Thank you. Now I will turn the call back to the operator. Tamia, Conference Call Moderator : Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. The first question comes from Derek Soderberg with Cantor Fitzgerald. You may proceed. Derek Soderberg, Analyst, Cantor Fitzgerald : Yeah, thanks for taking my questions. On the final contribution from the Honda and Hyundai development work, just was wondering, you know, what's sort of next for that program? You've sort of proven manufacturability recently. Obviously, your technology is sort of game-changing for the EV market. You know, what's next for those relationships, Honda and Hyundai? When are you gonna commercialize that for EVs? Qichao Hu, Founder and Chief Executive Officer, SES AI : Yeah, Derek, in terms of next step, previously the next step was to go from B-sample to C-sample. I think now, I mean, there's no surprise that the EV market is slowing down and almost no automaker is investing in next-gen battery technology. I don't mean like early stage battery technology in terms of A-sample and B-samples, but no one's investing in mass scale production of next-gen technology, which is C-sample, which is what we were trying to get to next. We hit all the technical milestones, but the C-sample is on hold. In terms of next step with the OEMs, we are focusing on selling materials that we have developed, the electrolyte materials, we are focusing on that. In terms of the full-blown lithium metal C-sample, we'll see when the market returns. The technology is there, and this is why we've been focusing on converting the lines for drones production and also applying the AI for safety, the battery analytics software that we developed for EV for ESS markets. In terms of next steps for the OEMs, we're focusing on material supplies also converting the line for drones applications and using the safety analytics software for ESS. Derek Soderberg, Analyst, Cantor Fitzgerald : Got it. Then just quickly, what was the one-time service amount? Can you quantify that impact to fiscal 25? Qichao Hu, Founder and Chief Executive Officer, SES AI : Simone, you wanna take that? Jing Nealis, Chief Financial Officer, SES AI : I, yeah. For 2025, the service revenue was $13.6 million. Those are primarily driven by the Honda and Hyundai service agreement. That's the one time service agreement I, we were talking about. Derek Soderberg, Analyst, Cantor Fitzgerald : Got it. For 26, you don't expect any of that to sort of recur, just, you know, given what Qichao just explained. Jing Nealis, Chief Financial Officer, SES AI : Correct. Derek Soderberg, Analyst, Cantor Fitzgerald : You know, the guidance. Jing Nealis, Chief Financial Officer, SES AI : Correct. Yeah Derek Soderberg, Analyst, Cantor Fitzgerald : ...is really just ESS, drones and materials. I was wondering if you could sort of break that down for us or help us, you know, try to understand by segment, you know, ESS, drones, materials. Can you help us kinda quantify how each of those contribute to the guidance range? Then, any help sort of modeling kinda the first half or second half, you know, what portion of revenue in the first half, second half, anything like that would be helpful. Jing Nealis, Chief Financial Officer, SES AI : I can take that. Derek Soderberg, Analyst, Cantor Fitzgerald : Go ahead. Jing Nealis, Chief Financial Officer, SES AI : Yeah, for. Derek Soderberg, Analyst, Cantor Fitzgerald : Yeah. Jing Nealis, Chief Financial Officer, SES AI : For 2026 guidance, given it's the first year we're giving guidance including all three business units, we wanted to be more conservative to start the year. As far as breaking down the revenue sources, ESS gonna still be a large portion of our revenue, so of that $30 million-$35 million guidance, I would say probably around 65% will come from ESS, at least. The remaining portion will be drones and materials. For those two, we're expecting it to be more second half of the year loaded, given we're still in the ramping and business development stage. So those two are gonna be more towards second half of the year. Percentage-wise, around 65 from ESS and the remaining for those two. Derek Soderberg, Analyst, Cantor Fitzgerald : Got it. That's helpful. I'll pass it on. Jing Nealis, Chief Financial Officer, SES AI : Thank you. Tamia, Conference Call Moderator : Thank you. The following comes from Winnie Dong with Deutsche Bank. You may proceed. Winnie Dong, Analyst, Deutsche Bank : Hi, thank you for taking my question. Just curious, as we look out to maybe like the next two to three years, if we just look at the different business areas, you know, ESS, drone materials, and also you have the Molecular Universe as well, how would you characterize like the growth profile of each of these areas in the next, you know, two to three years? Which one has maybe the potential for the largest growth, if there's a way to think about it? Separately for Molecular Universe, I know you've been talking about, you know, different tiers of revenue from larger corporations and smaller ones. Could you share like currently what might be the largest bottleneck for adoption from these customers? I have a follow-up. Thanks. Qichao Hu, Founder and Chief Executive Officer, SES AI : Yeah. We, on the first one, from a size of revenue, and a product perspective, ESS and drones, we expect these two to grow very rapidly, especially on ESS. We're, after we acquire UZ, we're not just selling the hardware anymore. Now we're adding this Predict feature on top. That's really exciting because now we're turning a regular UPS battery pack into an asset that the asset owners can use for energy trading. It's like supply and demand. On the demand side, you have conventional VPP software, but on the supply side, no other VPP software can have as accurate and advanced monitoring of the battery health, battery safety, battery degradation, and all the parameters than ours. We have a really precise estimation of the state of health of the battery so that gives you a advantage. It's almost like we say this in energy trading, it's almost like having Warren Buffett at your fingertip when it comes to your energy trading if you know that level of precise health of your battery. We are really excited about this Edge Box enhanced virtual power plant, especially with this tool that we can add on top of UZ's hardware. That's ESS. Drones. Drones is all about supply chain. It's all about being NDA compliant and then supplying to US and allies drones. Also with the new Drone Dominance program. We've had this line in Korea. It's been NDA compliant since 2021. We built this line for GM. It was 100 amp hour lithium metal cells. Now we're converting that to 10 amp hour cells for drones. We have an advantage because we have this asset. It's been NDA compliant since 2021. That market is also growing very rapidly, especially under the new Drone Dominance program. I think these two are the most exciting from a size of revenue growth. As Ju mentioned earlier, the bulk of the revenue from this year, 2026, we expect will come from these two areas. In terms of Molecular Universe, we are making very exciting progress, and we're getting some of the largest battery companies and car companies to sign on to this platform. We expect to make some announcements in the coming months. I think, in terms of bottleneck, I think just... it's just new. For example, AI for science has been used in drug discovery a lot. Not so much in materials, not so much in chemicals, and not so much in batteries. It's just new. Finally, as we said, we use that platform, and then we demonstrate that we could actually indeed use that and develop six new materials. I mean, previously it was like it would take you a few years to discover 1 material, and then we've discovered 6 materials in just over about 9 months, 9 months to a year. Later we'll add more features to it, and hopefully we can get you 6 new materials per month and then per week. That acceleration of rate of discovery, that's something we're quite excited about. Winnie Dong, Analyst, Deutsche Bank : Got it. Thank you for the, for the detail response. I wanted to ask the question about OpEx in 2026. It seems like you're characterizing a spending level that is, you know, lower than 2025, and that is going to likely sustain at this 2026 level on a go-forward basis. Can we maybe just understand the reason for that? You know, if you're looking to grow, you know, these different areas of the business, you know, what is it that you've done that I guess allows you to, you know, not have to spend further to grow the business? Thanks. Jing Nealis, Chief Financial Officer, SES AI : I can address that. I think the 2026 reduction, partially is coming from just being disciplined on spending cash on OpEx in general. We've been reducing G&A and also R&D expenses year-over-year. If you go back to 2023, 2024, 2025, year-over-year, we're managing our costs very efficiently. That's that part. Second, the MU as an internal tool for AI for science is creating a lot of efficiencies. Also as part of growth into these three businesses, we're more focused as far as spending cash on product development related to R&D. There will be growth as far as spending-wise on the SG&A side, like sales and marketing, but it's not linear to the revenue growth. Overall, together, including R&D and SG&A, we forecast this year to be lower than last year and then sustain at least for the foreseeable future. Winnie Dong, Analyst, Deutsche Bank : Got it. That's helpful. Thank you. Qichao Hu, Founder and Chief Executive Officer, SES AI : Thank you. As a quick reminder, if you'd like to ask a question, please press star one. The next question comes from Colin Rusch with Oppenheimer. You may proceed. Colin Rusch, Analyst, Oppenheimer : Thanks so much, guys. You know, can you talk a little bit about the drone market and the volume of customers you're working with and how mature those relationships are, you know, in terms of working through the design process, and potentially being able to announce, you know, a purchase award here over the next, call it several quarters? Qichao Hu, Founder and Chief Executive Officer, SES AI : Yeah. The drones market is really going through a lot of pressure to change supply chain with NDA compliance requirements. We are focusing on some of the top customers, for example, customers that will order in the range of single-digit millions to potentially more than $10 million a year. Yes, we are mainly focused on those larger customers. We actually started testing engagement with them last year. Last year was really when everyone tried to change the supply chain. I think if a major drones manufacturer hasn't changed the supply chain by now, I think it's almost a bit too late. A lot of the testing engagement started last year. Now we are in the final stage of converting the lines. For example, right now in Boston, we can make a pilot scale less than 100,000 cells per year. In Korea, we can make about 200-300 cells per year. We're trying to expand that. In Southeast Asia, we're also looking to expand to several million cells per year. These are all for NDA compliant cells for drones customers. Colin Rusch, Analyst, Oppenheimer : Excellent. You know, obviously you've had some really meaningful success on at the molecule level, leveraging some of the AI capabilities. I'm curious about your ability to leverage some of that knowhow into pack level design and even into system integration design and modeling out some of the duty cycles that may be, you know, just accelerate some of the adoption as you look at some of the robotics and drone opportunities. Qichao Hu, Founder and Chief Executive Officer, SES AI : You're saying how we can apply this to pack level instead of cell level? Colin Rusch, Analyst, Oppenheimer : Yeah. You know, yeah, at the pack level and even the system level design, you know, beyond that pack level. Qichao Hu, Founder and Chief Executive Officer, SES AI : Yeah. Yeah, we're starting to add that feature. We've got some requests from automakers that want to do the design and then Predict features at the pack and system level. We are adding those features. Also for energy storage, right now we are adding Molecular Universe Predict into the systems. The Predict, we put that in a small box, we call that Edge Box. That works at a cell level and also the pack and system level. Colin Rusch, Analyst, Oppenheimer : Excellent. Thanks so much, guys. Qichao Hu, Founder and Chief Executive Officer, SES AI : Thanks. Tamia, Conference Call Moderator : Thank you. Next question comes from Mark Shooter with William Blair. You may proceed. Mark Shooter, Analyst, William Blair : Hey, Qichao. Thanks for taking my questions here. I believe I heard you say that the auto OEM JVs are on hold. Could you clarify that a bit? Then I'm seeing that the industry is, especially the auto industry, is trying to move away from lithium metal. At the same time I'm seeing some local competitors actually enter the public markets here with a lithium metal product. Has any of the engagement appetite with your OEM customers changed around lithium metal? How are you looking at this? Qichao Hu, Founder and Chief Executive Officer, SES AI : I mean, we were developing pure lithium metal as well as hybrid lithium metal and then silicon anode, and then we met all the technical requirements. It just in terms of OEM appetite for high energy density batteries, I would say back in 2021, the OEM appetite for high energy density batteries was very high. Now. And that's still there, but maybe at R&D level, A-sample level, and demo car level, but not at C-sample level, which is like mass production. I'm not seeing any other OEMs that's going to mass production with a next-gen chemistry. There's a lot of price pressure, cost pressure, and most OEMs are switching to just LFP graphite. Mark Shooter, Analyst, William Blair : Yeah. Okay. That makes a lot of sense, and that justifies what we're seeing too, so that confused me a bit. Switching gears to the ESS market, which is rapidly growing. That is a fragmented market with many different levels to it. I'm wondering, what do you see as the most value add? Where would you play? What is the strategy for the UZ Energy acquisition? What section of that energy storage market would you play in, and why are you most advantaged to that section? Qichao Hu, Founder and Chief Executive Officer, SES AI : Yeah. Yeah. Exactly. The ESS market is very fragmented. It's got a long tail. The benefit that we bring... The ESS market currently does not have a stable, widespread operating system, maybe except for Tesla. In ESS it's like Tesla and then long tail, very fragmented. What we can provide is almost like the Android version. For commercial, industrial, and then for data center applications, the asset owners actually wanna use their battery packs for energy trading. They're not able to do that, and they're not able to differentiate if they use conventional virtual power plant softwares. What we can do is because we actually collect the data from the battery, we can have a very accurate estimation of cell charge, cell health, cell safety, degradation, power, all these different features. What that means is when you do the trading, it's supply and demand. Demand is set by the market, by weather, by if there's any major sporting events. The supply, that's set by accurate estimation of SoX, and then that we can provide. That's where this Edge Box enhanced virtual power plant really shines. I think the value that we can provide is we can provide this operating system, this to not just use these battery packs, but to multiple of this long tail, this fragmented market. Kyle Pilkington, Chief Legal Officer, SES AI : Great. Thanks, Yujing. Tamia, Conference Call Moderator : Thank you. There are currently no other questions queued, so I'll pass it back over to Kyle Pilkington. Kyle Pilkington, Chief Legal Officer, SES AI : Thank you. As with in our past earnings calls, we offer investors the opportunity to submit questions in advance. We'll cover a brief selection of those questions now. The first question is there a binding definitive agreement with Top Material yet? Can you generally provide some details on current NDAA compliance status? Qichao Hu, Founder and Chief Executive Officer, SES AI : Top Material is one of the options we are exploring. As I mentioned earlier, we've had this Korea facility since 2021. It's been NDA compliant since 2021. We are focusing on converting this to produce drones batteries. In addition to this, to our own Korea facility, we're also looking at options in Southeast Asia, potentially offer better pricing, better value, and larger scale to customers. Again, they're all NDA compliant. Actually, we just updated our website, now we have a updated drones battery product brochure that's on the website. The cells are NDA compliant. Kyle Pilkington, Chief Legal Officer, SES AI : Great. I think we have time for one more. The question is: With Wildcat and BMW and Ionics and Porsche securing JDAs for AI-driven materials, how is SES AI protecting its Molecular Universe data advantage to ensure it doesn't lose OEM partners to these specialized private competitors? Qichao Hu, Founder and Chief Executive Officer, SES AI : I think we announced that we're offering Molecular Universe to the public mid last year after these other announcements were made. Then Molecular Universe, if we look at the latest version of Molecular Universe 1.5, and we have a 2.0 coming out soon, it really is a game-changing platform for battery development in the EV space. We're seeing a lot of the OEMs and big battery companies actually using this platform. Kyle Pilkington, Chief Legal Officer, SES AI : Great. Thanks. That's all we have for the investor questions, so I'll pass it back to the operator to conclude the call. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. Is SES a bargain right now? The fastest way to find out is with our Fair Value calculator. We use a mix of 17 proven industry valuation models for maximum accuracy. 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