Li Auto Q2 loss widens; Q3 revenue outlook misses estimates
- Li Auto reported a Q2FY26 adjusted loss of $(0.22) per share, missing consensus of $(0.01)
- Revenue fell 15.1% YoY to RMB25.7 billion, though topping analyst estimate of US$3.70 billion
- Gross margin contracted to 11.0% due to raw material cost pressures and product mix shifts
- Q3 delivery guidance of 95,000-100,000 units missed analyst expectations
- Company launched new Li i8 BEV model; Li Mega and Li i9 launches scheduled for September
*this image is generated using AI for illustrative purposes only.
Li Auto Inc (NASDAQ: LI) reported a quarterly adjusted loss of $(0.22) per share for the second quarter of fiscal year 2026, missing the analyst consensus estimate of $(0.01) by 2100%. The Chinese EV maker’s shares touched a new 52-week low as the stock fell 2.2% to $12 following the results.
Total revenues fell 15.1% year-over-year to RMB25.7 billion (US$3.8 billion), though this figure topped the analyst estimate of US$3.70 billion. Vehicle sales revenue dropped 16.7% to RMB24.1 billion, reflecting lower delivery volumes and a shift in product mix that reduced average selling prices. Conversely, revenue from other sales and services rose 17.6% to RMB1.6 billion.
What the Numbers Show
The divergence between gross profit decline and operating expense stability highlights significant margin pressure. While gross profit plummeted 53.3% year-over-year to RMB2.8 billion due to a vehicle margin contraction from 19.4% to 9.4%, operating expenses remained relatively flat at RMB5.1 billion (down only 2.0% YoY). This cost structure rigidity turned the operating result from a RMB827 million profit in Q2FY25 to a RMB2.3 billion loss in Q2FY26. Additionally, non-GAAP net loss narrowed 28.9% quarter-over-quarter to RMB1.5 billion, indicating some sequential stabilization despite the annual deterioration.
Management attributed the margin compression to cyclical fluctuations in upstream raw materials, particularly chips, PCBs, and lithium carbonate, driven by AI sector demand. CEO Xiang Li stated the company decided not to pass these price increases to customers, aiming instead to stabilize margins through in-house technological advancements, such as proprietary batteries and chips, and efficient supply chain management. CFO Johnny T. Li noted that gross margin improved sequentially to 11%, helped by the new Li L9, with expectations for further expansion in the second half as the product mix improves.
Financial Performance
Gross margin contracted by 9.1 percentage points year-over-year to 11.0%, primarily attributable to the lower vehicle margin. Research and development expenses held steady at RMB2.8 billion, while selling, general, and administrative expenses fell 16.2% to RMB2.3 billion, driven by reduced employee compensation.
Despite the operational losses, cash flow dynamics improved sequentially. Net cash provided by operating activities swung to a positive RMB15.0 million, reversing significant outflows in previous quarters. Free cash flow improved to negative RMB1.3 billion, compared to negative RMB3.8 billion in Q2FY25 and negative RMB7.4 billion in Q1FY26. Li Auto held US$12.9 billion (RMB87.5 billion) in cash as of June 30, 2026. The company has repurchased a total of 91.7 million Class A ordinary shares for total consideration of about US$631.5 million.
| Metric | Q2FY26 | Q2FY25 | Change |
|---|---|---|---|
| Revenue | RMB25.7 billion | RMB30.2 billion | -15.1% |
| Gross Profit | RMB2.8 billion | RMB6.1 billion | -53.3% |
| Gross Margin | 11.0% | 20.1% | -9.1 pts |
| Operating Loss | RMB2.3 billion | RMB0.8 billion profit | N/A |
| Net Loss | RMB1.7 billion | RMB1.1 billion profit | N/A |
Product Updates and Outlook
Li Auto delivered 98,330 vehicles in Q2FY26, an 11.5% year-over-year decline from 111,074 units in Q2FY25, but an increase from 95,142 units in Q1FY26. The company launched the all-new Li L8 and refreshed Li L6 models in June and July 2026, respectively. Management noted robust order flow for the new Li L6, reinforcing its position in the RMB200,000-to-300,000 SUV segment. Chairman and CEO Xiang Li stated that Li Auto remained China’s top-selling domestic auto brand in the market for new-energy vehicles priced above 200,000 yuan during the first half of the year.
The company expanded its charging infrastructure to 4,141 super charging stations with 22,841 stalls as of July 31, 2026. As of June 30, it operated 495 retail stores across 160 cities and 536 service centers across 220 cities.
For the third quarter of 2026, Li Auto expects vehicle deliveries between 95,000 and 100,000 units, representing a year-over-year increase of 1.9% to 7.3%. Total revenues are projected between RMB26.6 billion and RMB28.0 billion. This forecast fell below the analyst estimate of US$5.11 billion.
The company is advancing its BEV lineup with the launch of the rear-wheel drive Li i8 in late July. The new generation Li Mega is scheduled for launch on September 2nd, featuring rear-wheel steering and active anti-roll bars. The all-new flagship BEV SUV Li i9 will also launch in mid-September. Management expects BEV sales to account for an even larger share of total sales over time, complementing the EREV lineup where each currently accounts for 50% of total sales.
How will the aggressive expansion of Li Auto's BEV lineup in September impact the company's overall gross margins, given the historically lower profitability of pure electric vehicles compared to its EREV models?
Can Li Auto's strategy of absorbing rising upstream costs for chips and lithium carbonate sustainably protect market share without triggering a prolonged period of negative operating cash flow?
What is the potential risk to Li Auto's 'top-selling domestic brand' status if competitors like BYD or NIO accelerate price cuts in the RMB200,000-to-300,000 segment where the new Li L6 is positioned?
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