Hesai Group American Depositary Share, each ADS represents one Class B ordinary share 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Hello, everyone. Thank you for joining Hesai Group's second quarter 2026 earnings conference call. Our earnings release is now available on our IR website at investor.hesaitech.com, as well as via Newswire services. Today, you will hear from our CEO, Dr. David Li, who will provide an overview of our recent updates. Next, our CFO, Mr. Andrew Fan, will address our financial results before we open the call for questions. Before we continue, I refer you to the safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Please also note that the company will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earnings release and SEC filings. With that, I'm pleased to turn over the call to our CEO, Dr. David Li.

David, please go ahead. Thank you, Yuanting.

Hello, everyone. Thanks for joining us. Let me start with the headline. The second quarter of 2026 marks a major turning point for Hesai. We are opening a truly exciting new chapter in our history. Over the past decade, we have built the technology, manufacturing engine, and commercial scale required to lead the lidar industry. Today, we are setting our sights on a much larger opportunity, expanding Hesai into a full stack infrastructure platform for robotics and physical AI, empowering them to see, understand, and act. The simplest way to think about Hesai now is three layers. First, see. Our lidar lets intelligent machines see the physical world, what things are, where they are, how fast they are moving, and how the scene changes around them. Second, understand. COSMO turns real environments into reusable AI-ready 3D spatial assets, so intelligent machines learn from the world instead of guessing at it.

Third, act. Our robotic actuation modules turn intelligence into precise physical motions. We are already seeing commercial momentum across all these layers. Our core LiDAR business keeps scaling profitably and generating strong cash flow. COSMO Shift prototypes in July 2026 secured initial orders and remains on track to contribute revenues in the third quarter of 2026. Actuation modules started generating revenues in the second quarter of 2026 and are ramping fast. Together, these three layers form an integrated platform, opening up a significantly larger addressable market than we saw a year ago. Let me start with see. ADAS was our first big commercialization market and is still a phenomenal cash engine. Think about it. A modern intelligent car is arguably the most widely deployed robot on Earth, and the industry has moved beyond the question of can the car drive itself.

The question now is whether it can do it safely every single time with backup when something fails. That is a completely different bar. Regulation is catching up fast. In China, the first mandatory national safety standards for Level 3 and Level 4 will take effect in 2027. In the U.S., proposed New Jersey legislation would require commercial autonomous vehicles to run two independent sensing technologies beyond cameras, typically LiDAR and radar. So the vehicle still sees when the cameras don't. This is what we have been saying for years. LiDAR is the invisible airbag.

You never think about your airbag on a normal drive, but the one time you need it is the difference between a bad day and a catastrophe, and nobody removes airbags to save bucks. So the market is shifting from does it have LiDAR to better LiDAR and more LiDAR. Better means longer range, higher resolution, rock-solid reliability where it matters. This quarter, we won a design win with Great Wall Motor for mass production programs using our ultra-long-range high-end ETX LiDAR, with SOP expected in late 2026. ETX extends detection range to more than twice that of ATX. While ATX has already established itself as the benchmark for cost-efficient LiDAR. More means multi-LiDAR, full coverage, and higher redundancy. Momentum on our FTX blind spot LiDAR is strong.

Changan Automobile and other leading OEMs picked Hesai Group for multi-LiDAR programs, and Li Auto's L8 and L9, each equipped with four Hesai Group LiDARs, are now in mass production. Li Auto’s newly launched L6 model, priced around RMB 250,000, now offers an optional four LiDAR configuration. Four LiDARs at a mainstream price point. That is the moment an advanced feature goes mass market, and that is how content per vehicle compounds. Globally, we are accelerating too. Following Mercedes-Benz, we won a major design win with Volkswagen, covering multiple models from its China joint venture brands, an expanded collaboration with GAC Toyota. We are also riding along with Chinese automakers that are going global, with meaningful overseas volume expected in 2027. Our leadership is also reflected in third-party market data.

Per Gasgoo, we took 44% of China’s long-range ADAS LiDAR market in June 2026 and have been number one in China for the long-range ADAS LiDAR market for 17 straight months. Now, here is where it gets fun. That same demand for high-performance 3D sensing is expanding rapidly into humanoids and other intelligent machines. Morgan Stanley estimates that robots could deploy roughly six times as many LiDAR sensors as automotive by 2050. You can only drive one car at a time, but in the future, you might interact with many different robots in a day. We are already leading this trend. We work with more than 50 embodied AI companies worldwide, with recent orders coming from Unitree, Robiant, Galbot, Galaxea, Dexmo, and many others. Our JT128 has become the go-to LiDAR for humanoid and quadruped robots, and the numbers are frankly remarkable.

Robotics LiDAR shipments in the second quarter almost tripled compared with the same quarter last year. Following year-over-year growth of 47% in 2023, 67% in 2024, and 426% in 2025. We expect another two to three times shipment increase in full year 2026. The next leap is going from geometry to meaning. Classic LiDAR gives you the skeleton of the world: distance, shape, and position. A robot needs to know what a thing is, not just where it is. That is Picasso, our full-color, ultra-sensitive 6D SPAD SoC. People love to frame the debate as camera versus LiDAR. That is like asking a human to choose between color and depth. You need both. Picasso fuses them on one chip. We are pleased to share that the Picasso SoC is now SOP-ready.

Since its launch in April 2026, the full-color ETX, powered by Picasso, has secured initial design wins, including KargoBot. It is now undergoing customer validation and advancing into RFI and RFQ discussions with leading robotaxi operators and global automakers. Because depth and color come off one chip under one timestamp, you get intrinsically time-aligned, multi-modal information, exactly the fuel world models need. We believe Picasso will be the eyes of the next generation of robots. Then layer two, understand. Helping robots understand and learn from their environments. This is where COSMO comes in. COSMO is a spatial intelligence platform that integrates an AI spatial camera, AI algorithms, 3D spatial assets, and cloud services into one unified system for capturing, reconstructing, and understanding the physical world. It addresses the sim to real gap bottleneck. Robots need enormous digital representations of the physical world that are geometrically accurate and physically grounded.

Training on bad inputs is like teaching a kid from a blurry textbook. Plenty of pages, but they may learn the wrong things. COSMO makes the textbook sharp. It turns real environments into high-fidelity, editable, interactive 3D assets. Reality itself as the training ground. That is exactly the foundation robotic scaling laws need without the model collapse risk from low-quality inputs. Validation came fast. Prototypes went out this July, and within seven days, we had orders from a lineup of leading humanoid robotics companies, including Galbot. Customer feedback has been extremely encouraging. COSMO reconstructs a 200 sq m restaurant at roughly five times the efficiency of a leading alternative, with such high fidelity that even four millimeters text on a menu remains clearly visible. Scale that across thousands of scenes, and you get the generalization robots need to walk into an actual home.

Cosmo also goes well beyond robotics, cultural tourism, film and TV, games, advertising, and beyond. Imagine standing on stage at a concert or on the field for a historic sporting moment. Cosmo turns real places into reusable digital assets. Since the April preview this year, more than 200 prospective partners have come to us, and initial revenues are expected to land in the third quarter within SGI. The part which I am most excited about is the business model of Cosmo. The AI spatial camera is the front door. Behind it sits proprietary algorithms, cloud services, and a compounding library of 3D spatial assets. Every deployment adds assets. A richer library enables more applications. More applications attract more users. More users create more assets. That is a flywheel. Recurring revenues, network effects, and real operating leverage. Cosmo doesn't digitize a space once.