SES AI (NYSE:SES) reported a narrower third-quarter loss and reiterated its 2026 revenue outlook as it ramps up production of drone batteries at its factory in South Korea.
The company said quarterly revenue rose 31% from the second quarter to $6.6 million, while its net loss narrowed to $13.4 million from $17.9 million. Energy storage accounted for approximately 47% of revenue, with the remainder coming from materials and, to a lesser extent, drone cell samples.
Founder and Chief Executive Officer Qichao Hu said the company completed the ramp-up of its Chungju production line to an installed capacity of 1 million National Defense Authorization Act-compliant drone cells a year. The line began running in early October and is producing and delivering cells to customers, he said.
SES AI is directing incremental capital toward drones and unmanned systems, while using energy storage as its current revenue base and its Molecular Universe platform to support battery development, Hu said.
Drone Orders and Expansion Plans
Hu said the company has more than 50 drone makers and battery-pack integrators in its pipeline seeking NDAA-compliant cells. Customer discussions point to potential demand exceeding 3 million cells annually, he said, although he did not describe that figure as committed orders.
SES AI plans to increase Chungju’s annual capacity from 1 million to 3 million cells by the end of the second quarter of 2027. The expansion will primarily address production bottlenecks and is expected to require approximately $5 million in incremental capital expenditure, Hu said.
For all of 2027, Hu said the company is targeting deliveries of at least 1 million to approximately 1.5 million qualified, NDAA-compliant cells. Installed capacity and actual qualified output are separate measures.
In response to analyst questions, Hu said SES AI had received orders from several participants and winners of the U.S. government’s Drone Dominance Program Gauntlet Challenge in October and November. He said the company was actively shipping cells to about half a dozen participants, with volumes moving beyond small samples.
“We go from thousands this quarter and then to tens of thousands starting Q1,” Hu said. He added that the company expects to share more information about production yield and cell costs starting in the first quarter of 2027.
Margins Fall as Older Inventory Is Sold
Chief Financial Officer Ray Liu said third-quarter GAAP gross margin fell to 4.9% from 22.6% in the second quarter, primarily because of lower-margin sales of older energy storage hardware inventory. SES AI is transitioning from a 5 kWh product to a 16 kWh product.
Liu said the company still has older inventory to sell and expects margins to come down as it offers those products at lower prices to clear stock. Hu said the newer product has been certified with Sol-Ark and that partners ATG and Sol-Ark are interested in it for 2027.
Third-quarter GAAP operating expenses declined approximately 8% sequentially to $18.7 million. The net loss amounted to $0.04 per share, compared with $0.05 per share in the second quarter. Results included noncash gains of $1.8 million related to sponsor earn-out liabilities and $2.2 million related to deferred consideration from the UZ Energy acquisition.
On a non-GAAP basis, the net loss narrowed to $10.7 million, or $0.03 per share, from $13.1 million, or $0.04 per share. Adjusted EBITDA was a loss of $12 million, compared with a $14.6 million loss in the preceding quarter.
Outlook and Balance Sheet
SES AI reiterated its full-year 2026 revenue outlook of $30 million to $35 million. With $18.4 million in revenue through the third quarter, Liu said the outlook implies fourth-quarter revenue of approximately $11.6 million to $16.6 million.
Hu said energy storage revenue is typically strongest in the fourth quarter and cited incoming drone orders as another reason for confidence in the forecast.
The company ended the third quarter with approximately $137 million in cash, equivalents and short-term investments and no debt, down from approximately $163 million at the end of the second quarter. The change included $9.2 million used to repurchase 16.2 million shares in September. Excluding the buyback, net cash used during the quarter was approximately $16.5 million, Liu said.
SES AI had approximately $19.1 million remaining under its repurchase authorization. Liu also said the company filed a proxy statement in October seeking shareholder approval for a reverse stock split intended to support its continued NYSE listing and broaden its eligibility for institutional ownership.
Battery Discovery Platform in Testing
Hu said Molecular Universe 4.0, known as M-Lab, is in active testing with two of the world’s largest battery makers. The system combines simulated data with experimental data from autonomous labs to help develop battery materials, according to the company.
SES AI hopes to begin selling complete M-Lab systems in the coming quarters, Hu said. He added that the company expects the platform to support most of its product development over the next three to five years.
About SES AI (NYSE:SES)
SES AI Corporation develops rechargeable lithium-metal batteries and artificial intelligence tools for battery development and management. Its work includes designing battery cells and materials intended to support applications that require high energy density, including electric vehicles and aviation. The company also develops its Molecular Universe platform, which uses AI and computational methods to identify and evaluate battery materials. SES AI applies its technology to battery discovery, cell development, safety monitoring and performance analysis.
