Deep Dive | Hesai's "Thrilling Leap" Targets Physical AI

By: 308

Edited by: Wen Wei

"From the first growth curve to the second growth curve, Hesai is at a strategic engine switch period, and there is indeed uncertainty."

In response to Hesai Technology's first quarter 2026 financial report released on May 19, an investor who has long followed the LiDAR industry commented like this. Behind this evaluation, the most direct evidence is that Hesai optimized the financial report structure in this report, dividing the business into two major sectors: "LiDAR Business" and "Strategic Growth Business (SGI)".

However, at the same time, in this switching period, Hesai Technology also inevitably faces some doubts.

In fact, Hesai Technology provided a revenue of 680 million yuan in the first quarter, and the net profit performance was indeed quite good. Its net profit under non-GAAP increased by 452.9% compared to the same period in 2025—moreover, on the day the financial report was released, Hesai also announced becoming Mercedes-Benz's L3 LiDAR strategic partner.

Despite this, after the release of Hesai Technology's first quarter financial report, Hesai Technology's US stock and HK stock prices still both fell more than 9% in a single day.

Behind a series of phenomena, the aforementioned investor stated: Any enterprise's strategic engine switch essentially requires a process from being questioned to being recognized, and we still need to give Hesai some patience.

Performance and Stock Price: Why the Mismatch?

If looking at Hesai Technology's own business vertical development, it is undoubtedly in its best state since inception.

Looking back at the full year of 2025, Hesai's 2025 revenue reached 3.0276 billion yuan, a year-on-year increase of 45.8% compared to 2.0772 billion yuan in 2024. Moreover, Hesai achieved full-year profitability for the first time in 2025, with a full-year GAAP net profit of 435.9 million yuan.

This best annual performance in history laid a solid foundation for Hesai Technology's financial performance in the first quarter of 2026.

The latest financial report shows that in the first quarter of 2026, Hesai Technology's revenue was 680.6 million yuan, a year-on-year increase of 29.6% compared to 525.3 million yuan in the first quarter of 2025—of which the product revenue from LiDAR was 679.7 million yuan, occupying the absolute main position.

From the profit performance perspective, Hesai Technology's net profit in the first quarter was 18.3 million yuan RMB. In comparison, the net loss in the first quarter of 2025 was 33.4 million yuan. Under non-GAAP, excluding share-based compensation expenses, Hesai Technology's net profit in the first quarter was 47.7 million yuan. Compared to 8.6 million yuan in the same period of 2025, it increased by 452.9%.

If looking at the above two most key financial indicators, Hesai Technology's overall business development and financial status are actually constantly improving.

So why did the capital market still give negative feedback?

At its core, a high-probability factor is still related to gross margin.

Specifically, Hesai Technology's gross margin in the first quarter was 39.1%, which is also when Hesai Technology's single-quarter gross margin again fell below 40. In comparison, in the first quarter of 2025, Hesai Technology's gross margin was 41.7%—this means that Hesai Technology's gross margin showed a clear decline.

In response, Hesai Technology explained that this is mainly because the product revenue with a relatively lower profit margin increased.

If looking at the gross margin change from a longer perspective, Hesai's gross margin in 2024 was 42.6%, and the full-year gross margin in 2025 was 41.8%—this means that from 2024 to the first quarter of 2026, Hesai Technology's gross margin overall showed a downward trend.

In fact, the decrease in Hesai Technology's gross margin is essentially the result of its ASP decrease.

First quarter data shows that Hesai Technology's LiDAR shipment volume was 471,723 units, an increase of 140.9% compared to 195,818 units in the same period of 2025, of which ADAS LiDAR shipments increased by 141.9% year-on-year, and robot LiDAR shipments increased by 137.8% year-on-year.

However, under the 140.9% LiDAR shipment growth year-on-year, Hesai Technology's first quarter total revenue only increased by 29.6%. The reason behind this is that the average selling price (ASP) of its LiDAR clearly dropped significantly.

So, why did Hesai LiDAR ASP drop so significantly?

In fact, in a previous financial report conference call, Hesai CFO Fan Peng clearly stated that Hesai Technology LiDAR ASP decline is driven by product mix, because ADAS LiDAR prices are lower than robot LiDAR, and follow the typical annual automobile price decline trend.

He also emphasized at the time that the expected future decline will shrink.

But it is clear that from the first quarter's performance, in the background of increasingly fierce competition in the Chinese automobile industry as a whole and thin industry-wide profit margins, Hesai Technology inevitably was affected by the macro environment in the ADAS business sector, and its LiDAR ASP also declined to a certain extent on the basis of 2025.

Support Points, Not Just Partnering with Mercedes

For Hesai Technology, LiDAR ASP decline is actually a double-edged sword.

After all, on one hand, it indeed helps Hesai Technology cut through the weeds in the LiDAR market, gain more automobile client customers, and even penetrate into the market below 100,000 yuan, which can help Hesai gain a larger ADAS LiDAR market share; and sales volume after the fact helps dilute R&D costs. This also constitutes the foundation of Hesai's entire business system.

In this financial report, Hesai Technology also cited data from Gasgoo, stating that its market share in the field of on-vehicle main LiDAR in China has been the leader for 14 consecutive months, and reached 55% market share in March 2026.

But on the other hand, ASP decline erosion of gross margin is obvious, which in turn affects the capital market's value assessment of Hesai Technology to a certain extent.

For this point, Hesai actually knows well.

It is precisely because of this that Hesai Technology has talked about strategies to improve ASP and gross margin on multiple public occasions.

Previously, Hesai management has stated multiple times that the decline in ASP will, to a certain extent, be offset by the increase in the number of LiDARs per vehicle and higher performance, higher-priced L3 products (ETX)—at the same time, gross margins in international markets will also be higher.

Now, from the latest dynamics, Hesai has achieved certain business breakthroughs in these established strategies.

For example, in mid-May, Li Auto newly released the new Li Auto L9 full series standard equipment Hesai LiDAR, among which the new Li Auto L9 Livis single vehicle carries 4 Hesai LiDARs, including 1 ATL-P forward main radar and 2 side and 1 rear FTX pure solid-state radar—this car also became the world's first production model equipped with Hesai FTX pure solid-state LiDAR.

With the release of this car, Hesai Technology has indeed achieved a leap from "one car one LiDAR" to "one car multiple LiDARs" on the ADAS LiDAR shipment path.

More worth attention is the L3 technology platform.

In addition, Hesai also clearly stated that the previously released ETX is expected to start SOP in 2026, has already obtained multiple LiDAR design orders from Li Auto, Xiaomi, and Changan Automobile, and plans to start SOP in 2026-2027—this new technology platform facing L3, to a certain extent, helps support the improvement of Hesai LiDAR profit space.

Of course, from the current dynamics, Hesai has also found another support point, which is internationalization.

On the same day the May 19 financial report was released, Hesai announced becoming Mercedes-Benz's LiDAR strategic partner, and was confirmed as its L3 autonomous driving model supplier. The new supply agreement signed this time will comprehensively support Mercedes-Benz's vehicle projects in European and Chinese markets, and the required capacity will be guaranteed by Hesai's newly completed Thailand "Galileo" manufacturing center.

Not only that, after reaching the L3 cooperation with Mercedes-Benz, Hesai also announced winning a new European top OEM award, with an order scale exceeding 1 million units, covering more than ten models of its joint brands in China—this can also be seen as another layer of breakthrough for Hesai in the international dimension.

It is worth mentioning that at the NVIDIA GTC conference held in March this year, Hesai was selected as the LiDAR partner for NVIDIA's L4 solution Hyperion 10—clearly, reaching such cooperation with tech giant NVIDIA is more beneficial for Hesai to layout L4 and the international market.

Second Growth Curve: When Will It Arrive?

As the company's business foundation, Hesai's LiDAR still has a lot of potential.

From Hesai's implementation practice, its LiDAR not only covers the ADAS scenario, but has also long targeted the robot scenario, and the gross margin space in the robot scenario is larger than the ADAS scenario—moreover, through cooperation with NIU, Hesai even applied LiDAR to the two-wheeled electric vehicle scenario.

Despite this, Hesai has long been dissatisfied with being just a LiDAR enterprise.

In fact, earlier in 2026, Hesai CEO Li Yifan publicly emphasized that Hesai is evolving into a key enabler of Physical AI, digitalizing the real world, redefining human and robot perception and action methods, which places Hesai at the forefront of the AI-driven Fourth Industrial Revolution.

Not only that, at the Hesai Technology Open Day held in April, Hesai used Physical AI as the company's focus, announced starting strategic elevation, evolving from "Spatial Perception" to "Spatial Intelligence", and thereby released a series of new dynamics outside of LiDAR business.

The highlight is Hesai's new Spatial Intelligence AI hardware product Kosmo. It is essentially a handheld productivity device that can be used to record the 3D world, integrating Hesai's specially developed LiDAR and several cameras, achieving 3D world recording through hardware-level 3D fusion perception and software-level spatial perception algorithms and AIGC algorithms.

Hesai stated that this product will be officially released in the second half of the year.

Regarding Kosmo, in the financial report, Hesai Technology stated that as the first product of Hesai Technology SGI, it has already received the first batch of orders, and will start a new scaled business model centered on hardware, AI software, spatial data, and future platform services.

Hesai expects that it will not only bring steady recurring revenue, but also unlock huge potential market space in robot simulation training, immersive media, 4D Entertainment and other fields.

Not only that, regarding Kosmo's gross margin, Hesai management emphasized in this financial report's conference call that Kosmo's profit structure is higher.

It is worth emphasizing that Hesai Technology also stated that this product may initially face the B-side market, and in the long run may face C-side individual consumers for sales. This means that in Hesai's long-term business model construction, it may shift from a To B enterprise to a "To B + To C" enterprise. This clearly means a larger revenue space.

Besides Kosmo, Hesai's business reach in the robot field has extended from "eyes" to "muscles". Hesai stated that it has gone deep into the power module underlying architecture, independently developed and mastered the core technology in this field—Hesai's layout in this business field is also part of its SGI strategy.

In this financial report, Hesai also announced that SGI is expected to start contributing revenue in the second quarter of 2026, expected to contribute about 100 million yuan RMB net income in 2026, and expected to contribute about 500 million yuan RMB net income in 2027—and with the expansion of SGI business and its synergy with LiDAR business, Hesai's 2026 financial performance is expected to strengthen quarter by quarter.

Clearly, in Hesai's overall development strategy, SGI business has become a new strategic support point.

From this perspective, the reason why Hesai's first quarter financial report faced negative feedback in the capital market is essentially because Hesai is at a jump from a single pivot of LiDAR to a "LiDAR + SGI" dual pivot strategic focus, and SGI has not yet formed financial support, causing this jump to be momentarily void for Hesai, and leading to capital market questioning and confidence decline in the short term.

In a certain sense, this questioning is also something Hesai Technology must experience in the strategic transformation process.

In response, the aforementioned investor stated that what Hesai wants to do is, through a new strategic elevation, to play the role of "Physical AI Infrastructure", and from a long-term perspective, once Hesai achieves a clear support point in SGI business in the future, it has the opportunity to become "The CATL of Spatial Intelligence".

So, from the outside world perspective, for Hesai to truly welcome the real second growth curve, it still needs to wait for Kosmo and other SGI new businesses belonging to give clear support in the financial and profit level, so that there is a chance to land on the Physical AI battlefield with larger volume and profit space, thereby meeting the market's high expectations.

This process will not be particularly fast—but undoubtedly, Kosmo's listing time and pricing strategy will be a most worth observing point when Hesai Technology SGI strategy goes to implementation.