10-Q: QuantumScape Boosts Cash, Advances QSE-5 Amid Losses

QuantumScape reports a strengthened cash position and progress on its QSE-5 battery technology, including a live EV demonstration, while continuing to incur significant operating losses.

Summary

• Cash and cash equivalents increased to $225.8 million as of September 30, 2025, up from $140.9 million at December 31, 2024.
• Marketable securities grew to $777.9 million as of September 30, 2025, from $769.9 million at December 31, 2024, contributing to total current assets of over $1.0 billion.
• Net loss for the three months ended September 30, 2025, improved to $(105.8) million from $(119.7) million in the prior year period.
• Net loss for the nine months ended September 30, 2025, improved to $(334.9) million from $(363.3) million in the prior year period.
• Research and development expenses decreased by 5% to $92.1 million for the three months ended September 30, 2025, but increased by 4% to $288.8 million for the nine months ended September 30, 2025.
• General and administrative expenses significantly decreased by 31% to $22.9 million for the three months and 38% to $73.3 million for the nine months ended September 30, 2025, primarily due to lower stock-based compensation and reduced legal/professional fees.
• The company completed its At-the-Market (ATM) offering, raising approximately $264.2 million in net proceeds during the nine months ended September 30, 2025.
• An Amended and Restated Collaboration Agreement with PowerCo SE (Volkswagen Group) was entered into in July 2025, with PowerCo agreeing to contribute up to $130.7 million for the QSE-5 Project over the next two years, subject to technical milestones.
• A live demonstration of solid-state lithium metal batteries powering a Ducati motorcycle equipped with QSE-5 cells was showcased at IAA Munich in September 2025.

Sentiment

Score: 4

Explanation: The company shows technical progress and a strong cash runway, but remains pre-revenue with substantial ongoing losses and significant development, production, and commercialization risks. The reliance on future capital raises and intense competition temper optimism, leading to a neutral-to-slightly-negative sentiment.

Positives

• Cash and cash equivalents, combined with marketable securities, provide a strong liquidity position of over $1.0 billion as of September 30, 2025.
• Net loss decreased by 12% for the three months and 8% for the nine months ended September 30, 2025, compared to the prior year periods.
• Completion of the ATM offering generated approximately $264.2 million in net proceeds, bolstering capital resources.
• The collaboration with PowerCo SE (Volkswagen Group) was amended to include a commitment of up to $130.7 million in project contributions over two years, signaling continued partnership and funding for QSE-5 development.
• Successful live demonstration of QSE-5 battery cells powering an electric vehicle (Ducati motorcycle) at IAA Munich in September 2025 marks a significant technical milestone.
• Management believes current cash resources will last through 2029, partly due to the shift to a licensing arrangement with PowerCo, which is expected to have lower costs and capital requirements than a joint venture.

Negatives

• The company remains pre-revenue and incurred significant operating losses of $115.0 million for the quarter and $362.2 million for the nine months ended September 30, 2025.
• Accumulated deficit reached approximately $3.7 billion from inception through September 30, 2025.
• Net cash used in operating activities was $(186.3) million for the nine months ended September 30, 2025.
• Net cash used in investing activities was $(17.1) million for the nine months ended September 30, 2025, a shift from providing $237.9 million in the prior year, primarily due to changes in marketable securities activity.
• Interest income decreased by 12% for the three months and 19% for the nine months ended September 30, 2025, mainly due to a decrease in interest rates.
• The company recorded approximately $24.4 million in impairment charges for fixed assets no longer in use during the nine months ended September 30, 2025, including leasehold improvements from a terminated lease.

Risks

• Significant challenges remain in developing solid-state battery cells and producing them at higher volumes with acceptable performance, quality, consistency, reliability, throughput, safety, and costs.
• Delays or failures in achieving development objectives may delay or prevent successful commercialization of the technology and negatively impact the business.
• Production challenges, including delays and cost overruns related to planning, permitting, construction, equipment installation, and operations start-up of pilot lines, could impact timelines.
• Failure to meet targets around cost, performance characteristics, or other specifications set by the company or its customers/partners could harm the ability to develop, market, and sell battery technology.
• Reliance on third-party suppliers for necessary materials, components, or equipment, with potential for disruptions, increased costs, and geopolitical risks (e.g., tariffs, trade restrictions).
• Inability to control the costs associated with operations and raw materials (e.g., lithium, nickel, cobalt) could adversely affect the business.
• Dependence on complex machinery for operations, with risks of unexpected malfunctions, repairs, and spare parts availability.
• Inability to attract and retain customers, including licensees, during the product development stage or for higher volume production, could adversely affect future growth and success.
• Early obsolescence of production equipment due to changes in cell design or production processes could result in accelerated depreciation and harm results of operations.
• The relationship with Volkswagen and PowerCo is subject to risks, including failure to achieve milestones, reliance on PowerCo for scale-up, and potential conflicts of interest.
• Concentration of agreements and relationships may restrict business operations, commercialization opportunities, and revenue generation.
• Inability to accurately estimate future supply and demand for batteries incorporating the technology could lead to inefficiencies and hinder revenue generation.
• Failure to protect or assert intellectual property rights, including joint ownership arrangements with partners, could harm the business and competitive position.
• Exposure to intellectual property infringement claims or other litigation, which may be time-consuming and costly.
• Patent applications may not result in issued patents, or patent rights may be contested, circumvented, invalidated, or limited in scope.
• The battery market is highly competitive, with established lithium-ion technology and emerging alternative solid-state technologies (e.g., silicon-anode batteries) posing significant competition.
• Future growth and success are dependent upon consumers' willingness to adopt EVs, which faces challenges like raw material availability, charging infrastructure, and economic uncertainty.
• The company is an early-stage company with a history of financial losses and expects to incur significant expenses and continuing losses for the foreseeable future.
• Risks and tradeoffs related to pursuing various business models (sole manufacturing, joint ventures, licensing) could adversely affect profitability and reputation.
• Expectations and targets regarding technical, pre-production, and production objectives are based on assumptions that may prove incorrect, leading to delays or non-achievement of milestones.
• Dependence on IT systems, with risks of disruption, security incidents, or alleged violations of data handling laws.
• Exposure to risks related to the use of artificial intelligence by the company, its suppliers, partners, and competitors.
• Evolving scrutiny and changing expectations regarding environmental, social, and governance (ESG) practices could adversely affect the business, brand, and reputation.
• Involvement in litigation, regulatory actions, or government investigations and inquiries could have an adverse impact on profitability and financial position.
• Potential exposure to product liability claims, which could harm financial condition, liquidity, and reputation.
• Subject to anti-corruption, anti-bribery, anti-money laundering, financial, and economic sanctions laws, with non-compliance leading to fines and penalties.
• Inflation and increased interest rates may adversely affect financial condition and results of operations.
• Global trade issues, changes in trade policies, export regulations, and tariffs could substantially harm the business and operating results.
• Environmental and safety risks and requirements relating to hazardous materials and production processes could adversely affect the business.
• Volatility of Class A Common Stock, with sales of substantial amounts by the company or stockholders potentially causing dilution and price reduction.
• Inability to raise additional capital on attractive terms, if at all, could materially and adversely affect operations and prospects.
• Manipulative activity by short sellers could drive down the market price of Class A Common Stock.
• Results of operations may fluctuate significantly due to changes in judgments, estimates, and assumptions in financial statements.
• Concentration of ownership among a few stockholders and the dual-class structure of Common Stock may prevent other stockholders from influencing significant corporate decisions.
• Anti-takeover provisions in the Certificate of Incorporation or Bylaws and under Delaware law could make an acquisition more difficult.
• Limitations to stockholders' ability to obtain a chosen judicial forum for disputes.
• No expectation of cash dividends in the foreseeable future.
• Inability to attract and retain key employees and qualified personnel could harm the ability to compete.
• Facilities or operations could be damaged or adversely affected by natural disasters and other catastrophic events outside of control.
• Economic, financial, or banking crises may materially and adversely affect the business, financial condition, and results of operations.
• Changes in U.S. or foreign tax policies could materially affect results of operations and financial condition.
• Ability to use deferred tax assets to offset future taxable income is subject to certain limitations.
• Insurance coverage may not be adequate to protect from all business risks.
• Inability to comply with NYSE continued listing standards could lead to delisting.
• Significant expenses and administrative burdens as a public company could have an adverse effect on the business.
• Material weaknesses in internal controls could adversely affect the business and financial reporting accuracy.
• Risks arising from the complexity of financial transactions and associated accounting and financial reporting requirements.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• Changes to analyst publications about the company, business, or market could cause the price and trading volume of securities to decline.

Future Outlook

The company expects to incur significant expenses and continuing losses for the foreseeable future until significant production of its lithium-metal solid-state batteries begins, which is not expected in the near future. It anticipates increased research and development expenses as it invests in additional plant and equipment for product development, building prototypes, and testing. The company believes its cash resources will last through 2029, partly due to the transition to a licensing arrangement with PowerCo. However, it may need additional cash resources due to changed business conditions or unanticipated delays, potentially requiring further equity or debt financing. The company intends to continue investing in R&D to improve battery cell performance, production processes, and reduce costs, while exploring opportunities in other markets beyond automotive EVs.

Management Comments

• We are developing next-generation battery technology for EVs and other applications, designed to offer greater energy density, faster charging, and greater safety compared to today's conventional lithium-ion batteries.
• We expect to incur significant expenses and continuing losses for the foreseeable future, as we are a development-stage company with no revenue to date.
• Our performance and future success depend on several factors that present significant opportunities but also pose significant risks and challenges.
• We have demonstrated capabilities of our solid-state separator and battery technology in single-layer and multilayer cell cycling data, and in 2022, shipped our first A0 prototype battery cells to multiple OEMs for testing.
• In 2023, we announced our first targeted commercial product, the QSE-5, a cell with a capacity of approximately 5 amp-hours.
• In 2024, we began producing low volumes of our first B-sample cells and shipping them for automotive customer testing, with an energy density of over 800 Wh/L and <15 minute 10% to 80% fast-charging capability.
• In September 2025, we and PowerCo SE made the first live demonstration of our solid-state lithium metal batteries powering an electric vehicle, showcased in a Ducati motorcycle equipped with QSE-5 battery cells at the IAA Munich.
• Based on our current business plan, we believe that our cash resources will last through 2029, in part due to our transition from a joint venture to a licensing arrangement with PowerCo, which is expected to have significantly lower costs and capital requirements.
• We may need additional cash resources due to changed business conditions or other developments, and if such financing is not available, we may be forced to decrease our level of investment in product development or scale back our operations.

Industry Context

The EV battery market is rapidly evolving and highly competitive, characterized by changing technologies, competitive pricing, and evolving government regulations. Challenges include the availability and affordability of critical raw materials (lithium, nickel, cobalt), the adequacy of EV charging infrastructure, and concerns over battery performance, safety, and recyclability. Economic uncertainty, fluctuating interest rates, energy prices, and geopolitical events also influence consumer purchasing decisions. Chinese production has significantly driven down the costs of lithium-ion batteries for EVs, with China's average battery pack price approximately 30% lower than costs in Europe and the United States as of 2024. Competition is intensifying from other solid-state battery efforts globally, including government-backed initiatives like China's All-Solid-State Battery Collaborative Innovation Platform, and emerging technologies such as silicon-anode batteries.

Comparison to Industry Standards

• The company's QSE-5 B-sample cells are reported to have an energy density of over 800 Wh/L and <15 minute 10% to 80% fast-charging capability, which are competitive performance metrics for next-generation EV batteries.
• The company believes its solid-state lithium-metal battery technology is designed to offer greater energy density, faster charging, and greater safety compared to today's conventional lithium-ion batteries.
• The elimination of the anode bill of materials and associated manufacturing costs in the company's solid-state battery cell is projected to result in a meaningful cost of goods sold (COGS) advantage once sufficient scale and process maturity are achieved, compared to conventional lithium-ion cells.
• The company acknowledges that Chinese production has significantly driven down the costs of lithium-ion batteries for EVs through massive scale and government support, noting that China's average battery pack price was approximately 30% lower than costs in Europe and the United States as of 2024, setting a challenging benchmark for cost competitiveness.

Management Changes

Corporate Governance

Legal Proceedings

• Two shareholder derivative suits filed in February 2021 in the United States District Court for the Northern District of California against 11 officers and directors, consolidated and currently stayed.
• A shareholder derivative suit filed in October 2024 in the United States District Court for the Northern District of California against current and former officers and directors, currently stayed.
• Four shareholder derivative suits filed in June through August 2022 in the Court of Chancery of the State of Delaware against current and former directors and officers, consolidated and stayed, with an amended complaint filed July 30, 2024.
• A shareholder derivative action filed in the United States District Court for the District of Delaware on February 22, 2024, against current and former directors and officers, currently stayed.
• Two additional shareholder derivative actions filed in May 2024 and October 2024 in the Court of Chancery of the State of Delaware against current and former directors and officers, with the May 2024 action currently stayed.
• Two Private Attorneys General Act (PAGA) wage-and-hour actions filed in Santa Clara County Superior Court by former employees, along with a related class action in arbitration, currently stayed. An agreement in principle to settle these claims was reached in April 2025.
• Aggregate amount accrued for legal matters was approximately $4.0 million as of September 30, 2025, down from $12 million as of December 31, 2024.

Related Party Transactions

• Volkswagen Group, including its affiliates Volkswagen Group of America, Inc. (VWGoA) and Volkswagen Group of America Investments, LLC (VGA), is a related party stockholder with approximately 25.2% voting interest as of September 30, 2025.
• In July 2025, the company entered into an Amended and Restated Collaboration Agreement with PowerCo SE, a wholly-owned battery cell company of the Volkswagen Group, for the industrialization of QSE-5 technology.
• Under the amendment, PowerCo has agreed to contribute up to $130.7 million for the QSE-5 project over the next two years, subject to the completion of certain technical milestones and other project goals by a joint scale-up team.
• No payments had been received from PowerCo as of September 30, 2025, but payments will be recorded as a liability upon receipt and reclassified to Additional Paid-In Capital (APIC) upon extinguishment, reflecting a capital transaction due to the significant related party relationship.

Stakeholder Impact

• Shareholders: Experience continued dilution from equity offerings (ATM offering completed) and potential future capital raises. The dual-class stock structure and concentrated ownership limit influence on corporate decisions. Stock price volatility remains a significant risk.
• Employees: Stock-based compensation remains a significant component of overall compensation, with changes in performance conditions affecting recognition. The company's ability to attract and retain key talent is crucial for development success.
• Customers (OEMs): The development and sampling of QSE-5 B-sample cells and the live EV demonstration are positive steps towards meeting customer specifications and potential commercialization. Delays in product development or pilot line scale-up could impact customer relationships.
• PowerCo SE (Volkswagen Group): The amended collaboration agreement and commitment of up to $130.7 million for the QSE-5 project strengthens the partnership, but the company's reliance on PowerCo for scale-up and commercialization introduces risks related to PowerCo's performance and financial condition.
• Suppliers: The company's reliance on third-party suppliers for materials and equipment means they are impacted by the company's development timelines and potential supply chain disruptions or cost fluctuations.
• Creditors: The company's strong cash and marketable securities position provides a buffer, but continued operating losses and the need for future capital raises could be a concern if not managed effectively.

Next Steps

• Continue improving the cathode, including exploring cobalt-free compositions and dry electrode processing.
• Focus on continued improvement in quality, consistency, and reliability of cells and separators, including automation and process control.
• Increase throughput of separator production to support internal development, prototype sampling, and supply chain development.
• Advance cell design to achieve target cell design and capacities set by customers, varying layer count, dimensions, and packaging as needed.
• Overcome production challenges to produce sufficient volumes of separators and prototype battery cells for development, customer evaluation, and product qualification.
• Continue developing proprietary higher-volume separator production processes to reduce cost, increase throughput, and improve quality.
• Build out the pilot line in San Jose, California, to provide sufficient quantities of separators and cells for internal development, customer sampling, and initial QSE-5 production.
• Support collaboration and future technology transfer activities as part of the PowerCo collaboration and potential future commercial arrangements.
• Work closely with automotive OEMs to make solid-state battery cells widely available over time, including through customer sampling and joint development agreements.
• Explore opportunities in other large and growing markets such as stationary storage, consumer electronics, data centers, robotics, defense, and aviation.
• Potentially seek additional equity or debt financing if current cash resources become insufficient to satisfy cash requirements.

Key Dates

Recommendation

QuantumScape is a pre-revenue company in a highly speculative and capital-intensive industry. While it has a strong cash position of over $1.0 billion, which is projected to last through 2029, and has demonstrated technical progress with its QSE-5 battery cells, including a live EV demonstration, it continues to incur significant operating losses. The collaboration with PowerCo provides crucial funding and validation, but commercialization remains years away and is subject to substantial development, production, and market adoption risks. The stock's extreme volatility and the inherent uncertainties of a development-stage company suggest that it is not suitable for all investors. Existing investors who believe in the long-term potential of solid-state battery technology and are comfortable with high risk should hold, acknowledging that significant milestones and challenges lie ahead before profitability can be achieved. New investors should approach with extreme caution due to the high-risk profile.

Keywords

Solid-state battery, Lithium-metal battery, EV battery technology, QSE-5, PowerCo, Volkswagen Group, Battery development, Energy storage, Automotive OEM, SEC filing, 10-Q, Financial results, Research and development, Capital raise, Liquidity, Prototype cells, Pilot line, Intellectual property, Corporate governance