10-Q: SES AI Corp Q3 2026: Losses Widen, Gross Margins Shrink

SES AI Corporation reported a decrease in revenue for the third quarter of 2026 compared to the prior year, alongside a substantial drop in gross profit margin and continued operating losses, while also addressing potential NYSE delisting concerns.

Summary

• SES AI Corporation reported a net loss of $13.4 million for the three months ended September 30, 2026, compared to a loss of $20.9 million in the same period of 2025. For the nine months ended September 30, 2026, the net loss was $43.4 million, down from $56.0 million in the prior year.
• Revenue for the third quarter of 2026 was $6.6 million, a decrease of 6.7% from $7.1 million in the third quarter of 2025. However, for the nine months ended September 30, 2026, revenue increased by 12.1% to $18.4 million from $16.4 million in the prior year.
• Gross profit margin significantly declined to 4.9% for the three months ended September 30, 2026, from 51.1% in the prior year. For the nine months, the gross margin was 14.6%, down from 65.7% in the prior year.
• Operating expenses decreased by 15.9% to $18.7 million for the three months ended September 30, 2026, and by 23.2% to $58.2 million for the nine months ended September 30, 2026, primarily due to reduced R&D spending.
• The company received a notice from the NYSE in July 2026 for not meeting the minimum average closing price requirement and is proposing a reverse stock split to address this.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to continued net losses, a significant decrease in gross profit margin, and ongoing concerns about meeting NYSE listing requirements, despite some revenue growth.

Positives

• Revenue for the nine months ended September 30, 2026, increased by 12.1% to $18.4 million compared to $16.4 million in the same period of 2025.
• Research and development expenses decreased significantly, by 38.6% for the three months and 42.1% for the nine months, indicating cost control in this area.
• The acquisition of UZ Energy in September 2025 contributed to increased product revenue for ESS, with $12.6 million in revenue and a $1.9 million pre-tax loss recognized from the acquired entity in the first nine months of 2026.
• The company has $70.7 million in cash and cash equivalents and $66.6 million in short-term investments as of September 30, 2026, providing a liquidity runway.
• A gain of $1.8 million and $6.0 million was recognized from the change in fair value of Sponsor Earn-Out liabilities for the three and nine months ended September 30, 2026, respectively.

Negatives

• Net loss for the three months ended September 30, 2026, was $13.4 million, and $43.4 million for the nine months ended September 30, 2026.
• Gross profit margin saw a substantial decrease to 4.9% for the three months and 14.6% for the nine months ended September 30, 2026, down from 51.1% and 65.7% respectively in the prior year.
• Revenue for the three months ended September 30, 2026, decreased by 6.7% to $6.6 million from $7.1 million in the prior year.
• The company received a deficiency notice from the NYSE in July 2026 for failing to meet the minimum average closing price requirement and is seeking stockholder approval for a reverse stock split.
• General and administrative expenses increased by 37.4% for the three months and 27.7% for the nine months ended September 30, 2026, driven by professional services and personnel costs.

Risks

• The company expects to continue to incur losses for the foreseeable future and may never achieve or maintain profitability.
• Substantial additional capital will be needed in the future, and the company may be unable to meet its future capital requirements.
• Failure to satisfy NYSE listing requirements could lead to delisting, severely diminishing the value of an investment.
• The market for drone cells may not achieve the growth potential expected.
• Challenges may arise in developing NDAA-compliant manufacturing capacity for drone cells, and demand may not materialize.
• If batteries fail to perform as expected, the ability to develop, market, and sell them could be harmed.
• The company relies on third-party manufacturing and logistical services, many of which are located outside the U.S., exposing it to international business risks.
• The company is involved in securities class action litigation and shareholder derivative litigation, the outcomes of which are uncertain.

Future Outlook

The company expects to continue to incur losses for the foreseeable future and may never achieve or maintain profitability. It anticipates needing substantial additional capital to fund its business and may be unable to meet future capital requirements. The company is also pursuing expansion of its NDAA-compliant drone cell manufacturing capacity and commercialization of its Molecular Universe platform, which are expected to drive future revenue growth but also involve significant investment and market uncertainties.

Management Comments

• We expect to continue to incur losses for the foreseeable future. While we expect to become profitable eventually, our projections are based on internal assumptions that may prove incorrect, and we may never achieve or maintain profitability.
• We will need substantial additional capital in the future to fund our business and may be unable to meet our future capital requirements, impairing our financial position and results of operations.
• We believe that our cash-on-hand and marketable debt and equity securities will be sufficient to meet our principal working capital and capital expenditure requirements and fund our ongoing research and development, operational and commercial activities, for at least 12 months from the date of this Quarterly Report.

Industry Context

StockSavvy.ai notes that SES AI Corporation operates in the highly competitive and rapidly evolving battery technology and AI-driven materials discovery sectors. The company's focus on Lithium-Metal batteries, Energy Storage Systems, and AI for material science positions it at the intersection of several key growth trends, including electrification and advanced computing. However, the significant capital requirements and long development cycles typical in these industries, coupled with intense competition from established players and emerging startups, present considerable challenges.

Comparison to Industry Standards

• The company's gross profit margin of 4.9% for Q3 2026 is significantly lower than established battery manufacturers like LG Energy Solution or Panasonic, which typically maintain gross margins in the double digits.
• SES AI's R&D spending as a percentage of revenue has been high, reflecting its early-stage, innovation-driven model, but the recent reduction in absolute R&D spend may indicate a shift towards commercialization or cost-saving measures.
• The company's net loss per share of ($0.04) for Q3 2026 is a common characteristic of early-stage technology companies investing heavily in growth, but it contrasts with the profitability of mature players in the broader energy storage market.

Legal Proceedings

• A putative class action lawsuit was filed on April 27, 2026, alleging false statements and omissions in SEC and public disclosures regarding business prospects.
• Two shareholder derivative suits were filed in July and August 2026, alleging directors breached duties to the company, based on similar allegations as the class action.

Stakeholder Impact

• Shareholders: Potential delisting from NYSE due to low stock price, ongoing net losses, and uncertainty of future profitability could negatively impact share value and liquidity. A proposed reverse stock split may not guarantee improved trading price or liquidity.
• Creditors: The company's need for substantial future capital raises potential concerns about its ability to service debt if not managed effectively.
• Employees: Continued focus on R&D and potential headcount adjustments (as indicated by R&D expense reductions) could impact employee morale and retention.
• Suppliers: Reliance on third-party manufacturing and logistics, particularly outside the U.S., could lead to supply chain disruptions affecting product availability and costs.

Next Steps

• Seek stockholder approval for a reverse stock split at the December 10, 2026 annual meeting to address NYSE listing requirements.
• Continue to ramp up manufacturing capacity of the Chungju, South Korea drone cell line to an installed capacity of three million NDAA-compliant cells per year by the end of the second quarter of 2027.
• Continue to develop and commercialize the Molecular Universe platform.
• Continue to integrate UZ Energy into the company's internal control system.
• Monitor compliance with conditions attached to the Korean government grant.

Key Dates

Recommendation

The company continues to report significant net losses, a sharp decline in gross margins, and faces the immediate risk of delisting from the NYSE. While there is revenue growth in certain segments and a focus on future technologies, the financial performance and ongoing capital needs, coupled with litigation risks, suggest a high level of risk for investors at this time.

Keywords

Lithium-Metal batteries, Lithium-ion batteries, Energy Storage Systems, AI-enhanced materials discovery, Drone cells, NDAA-compliant manufacturing, UZ Energy acquisition, Molecular Universe