Serve Robotics Inc. Common Stock 2026 Q2 Earnings Call

Thank you, operator. Welcome to Serve Robotics' second quarter 2026 earnings call. With me today are Serve's Co-Founder and CEO, Ali Kashani, and our CFO, Brian Read. During today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP and non-GAAP measures can be found in our earnings release filed earlier today. Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today, except as required by law.

For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today, as well as the risks and uncertainty described in our most recent annual report on Form 10-K, as supplemented by our most recent quarterly report on Form 10-Q, and in our other reports and filings made with the SEC. We published our quarterly financial press release and our updated corporate presentation to our investor relations website earlier today, and we ask you to review those documents if you haven't already. With that, let me hand it over to Ali.

Thank you, Steve, and good afternoon, everyone. We have important updates to share with you today. First, I want to give you an update about our Uber partnership and then share our Q2 results and update our full year 2026 guidance. We will discuss what took place in Q2 that has led to the new guidance and also what we are investing in and some of the exciting updates that are coming down the pipe. Let's start with the Uber partnership. From the first quarter of 2022 through the first quarter of this year, delivery volume through Uber grew for 17 consecutive quarters. In Q2, that trend reversed for the first time. This was caused by lower-than-expected robot utilization.

While customer and merchant demand has remained steady and our fleet performance has been improving, we believe the reversal in Q2 was largely due to the changes in the operating model and the integration between the two companies. Our extensive discussions with Uber since the emergence of this trend in Q2 have clarified that we really have differing views about the operating model to scale our shared autonomous fleet. This includes things like fleet coordination or merchant integration. Our experience across partners shows that having alignment on integration and operating models can really produce better outcomes from the same underlying technology and fleet. Case in point, in the same time frame, we saw deliveries with another food delivery partner grow nearly 50% in a single quarter.

Based on the volume decline and some of these recent broader discussions with Uber, we don't currently expect that it would make sense to renew our agreement when it expires in early 2027. That's unless we can improve the operating model meaningfully. This assessment was formed very recently, and we are sharing it with you promptly. We will continue to engage with Uber, and we are open to finding a path to continue working together. I do want to be transparent with you about the conclusion that we have reached, at least with the information that we have today. Ultimately, we need to focus our resources where we see the clearest path to high utilization and operational leverage so that we can unlock the most value for the communities that we serve.

We believe that Serve will be in a stronger position because we'll be able to allocate our resources to stronger, more beneficial partnerships and activities that we think will generate better long-term returns and values for the company. I want to take a moment and say Uber has been a really important anchor partner for Serve. It's been a real privilege working with a company that has really reshaped urban transportation. Together, we helped validate this category and build critical operating experience, and we've scaled our fleet to a level that matters. Working with Uber was a great way to bootstrap our platform, and we really value that partnership and what it enabled over the last five years. This brings me to the financial impact of what changed in Q2. We did not meet our expectations in Q2, given that the delivery volume had declined.

As a result, we are materially reducing our full year revenue guidance. Our Q2 revenue was $3.2 million. That's a 9% increase sequentially over Q1 and over 400% increase year-over-year. It is, however, below the level that we required to support our prior outlook. As such, we are lowering our full year 2026 revenue guidance from $26 million to a range of $9 million-$10 million, and we are matching this revenue update with real cost discipline across the second half operating and capital expenses. Brian will dig into that with you in more detail shortly. The principal driver of this change is the removal of the delivery volume growth that we had assumed for the second half. The Q2 results no longer support that expected ramp, we have removed it from our outlook.

Even the Q2 results, as well as our success in diversifying our revenue, Uber represented a limited share of our Q2 revenue. The magnitude of the guidance change, therefore, reflects the removal of a substantial expected future ramp, not the loss of a large existing revenue stream. Let me explain why we view this as a disciplined portfolio decision and not something that changes our conviction in automating last-mile delivery. Our revenue base is already diversified across delivery, advertising, and hospital robotics. As mentioned, our other delivery marketplace channel, DoorDash, grew nearly 50% sequentially last quarter. I'm also happy to share that we'll be announcing another major delivery marketplace partner in the coming weeks. Our advertising revenues accounted for nearly 50% of our robotic food delivery revenues last quarter. This is despite the headwinds of geopolitical macro pressure on advertising spending.

Last but not least, our hospital robotics business continues to generate contracted recurring revenue at attractive margins. So far this year, we have signed seven multi-year contract extensions with our hospital customers and two new hospitals, demonstrating continued customer demand for our healthcare automation platform. We are therefore making a disciplined portfolio decision. With our platform now operating at meaningful scale, we are allocating fleet capacity, capital, and operating attention toward opportunities with clearer demand signals, higher expected utilizations, and attractive unit economics and stronger alignment of visions and incentives. We believe this is going to make us a stronger company in the long term. We already have several commercial and product initiatives underway that broaden our distribution, increase our merchant accessibility, expand our direct demand, and improve the capabilities of our autonomy platform.

These initiatives were in development long before Q2 as part of our planned diversification strategy, now they're starting to bear fruit. On August 17, we plan to provide our 2026 summer announcement, which includes updates across four areas: a new delivery marketplace partnership, two new market launches, a merchant integration product, and new technology advances. Based on our analysis of our markets, back-of-house integration requirements really constrain a significant portion of otherwise addressable restaurant order volume. Almost two-thirds of delivery orders in our operating areas can't benefit from robotic last-mile delivery due to back-of-house integration barriers. Our new product, Beacon, is a standalone countertop device that connects customers and restaurants with Serve Robots directly. Because it has its own cellular connectivity, it requires nothing from the restaurant beyond a consistent source of power.

That means we are not dependent on a restaurant's internet or existing point-of-sale system anymore, which has historically been a source of integration friction across the industry. With Beacon, our aim is to work with most restaurants, regardless of their infrastructure, including merchants that aren't connected to third-party delivery platforms. This is really exciting. Later this fall, we also expect to introduce an additional product designed to expand direct customer demand and broaden the types of goods and use cases that our network can serve. We are reimagining how things move around cities, not just food from restaurants, but anything from anywhere to anyone. Beyond our solutions for merchants and customers, we are also in late stages of exciting new partnerships that we believe can support materially higher robot utilization. That means the same robots generating multiple times the value for our partners and customers.

In recent months, we are seeing inbound interest from major companies across a range of industries, from food services to logistics and beyond. We are advancing a number of commercial programs designed around denser order allocation, simpler merchant integration, and materially higher fleet utilization. We will announce each program as it reaches the appropriate contractual and launch milestones. Of course, I can't really share a preview of announcements without talking about our technology. We also have an announcement coming later this year about our autonomy stack. We want to highlight some major milestones we have achieved in creating new powerful AI models that are making our robots safer, faster, smarter, and more reliable, and more capable than ever before. Let me leave you with four points. First, our previous guidance assumed continued growth in Uber delivery volume during the second half of the year.

The ramp we expected did not materialize in Q2, and we have removed it from our outlook. This was primarily caused by changes in the operating model and integration of our fleet in this particular partnership and not because of any sudden decrease in customer demand or our delivery quality. Second, Uber has been a really important anchor partner in building Serve, but absent a meaningful change in the operating model, we do not currently believe that we will renew the agreement after it expires in early 2027. We'll continue working constructively with Uber, of course, and remain open to a new path. Third, our conviction in last-mile autonomy is higher than ever given the diverse traction we are realizing. The momentum we are seeing across multiple delivery channels really reinforces that distribution, merchant integration, and fleet operating models are really central to utilization and economics.