SERES Q1 Revenue Rises but Profits Plunge — Where Did the Money Go?

Revenue Up, Profit Down: SERES Q1 Earnings Raise Market Concerns

SERES released its 2025 first-quarter financial report, painting a picture of stark contrasts: revenue grew 34.46% year-over-year, extending the strong sales momentum of the AITO series, but adjusted net profit nosedived 73.87%, nearly returning the company to the edge of marginal profitability. The market can't help but ask — if more cars are being sold, where is the money going?

Key Figures: A Severe Divergence Between Revenue and Profit

Looking at the core financial metrics, SERES maintained rapid revenue growth in Q1, largely thanks to the continued strong sales of models like the AITO M9 and M7. However, the profit side of the ledger has left investors deeply concerned. With adjusted net profit plunging over 70%, the profit the company retains per vehicle sold is shrinking dramatically.

This "revenue without profit" scenario is not uncommon in the new energy vehicle industry, but the sheer magnitude of SERES' decline still exceeded market expectations. Gross margin pressure and rising expense ratios all point to the same reality: costs are devouring profits.

Where Did the Money Go? Three Major Cost Drivers Emerge

1. Huawei Revenue-Sharing: A Sweet Burden

SERES' deep partnership with Huawei has been the core engine behind its sales takeoff, but this collaboration comes at a significant price. Huawei's contributions in smart cockpit and intelligent driving technologies correspond to hefty technology licensing and revenue-sharing fees. As sales volumes climb, these expenditures swell in tandem. In short, the more cars SERES sells, the more it pays Huawei — and this cost directly eats into profit margins.

2. Continued Ramp-Up in R&D Spending

SERES is not content to simply serve as Huawei's "contract manufacturer." In recent years, the company has steadily increased its independent R&D investment, seeking to build proprietary capabilities in areas such as three-electric systems (battery, motor, electronic controls) and vehicle platforms. Q1 R&D expenses are expected to have maintained high growth, which bodes well for long-term competitiveness but undeniably adds short-term profit pressure.

3. The Double Squeeze of Channel Expansion and Price Wars

Since the start of 2025, the price war in the new energy vehicle market has intensified further. While maintaining competitive end-market pricing, SERES has also been accelerating its offline channel buildout, driving sustained increases in sales and administrative expenses. The cumulative costs of promotional subsidies, store operations, and headcount expansion have further compressed profitability.

From a Single-Track Strategy to a Two-Front Squeeze

SERES' past strategy was clear-cut — go all-in on Huawei and leverage the AITO brand for a dramatic turnaround. That path worked, and the sales figures are the best proof. But now, the company faces a far more complex situation.

On one hand, deep dependence on Huawei means that control over core technology and profit distribution remains in someone else's hands, with collaboration costs growing rigidly. On the other hand, building independent capabilities requires continuous cash burn with no short-term returns in sight. The former is a "golden cage," the latter a "necessary growing pain" — with pressure mounting on both fronts simultaneously, profits are being squeezed to the limit.

Even more concerning is the possibility that Huawei may open its intelligent vehicle solutions to more OEM partners in the future, which could further dilute SERES' "exclusive advantage" and put the sustainability of its revenue growth to the test.

How Is the Market Reacting?

Following the earnings release, market sentiment has been divided. Bulls argue that SERES is in a strategic investment phase of "trading profits for scale," and that R&D and channel investments will translate into competitive moats within the next two to three years. Bears worry that amid ongoing industry price wars and rigid Huawei collaboration costs, SERES' profitability inflection point may arrive later than expected.

Outlook: The Balancing Act Between Scale and Profitability

For SERES, the central question of 2025 has shifted from "Can we sell well?" to "Can we actually make money?" In the coming quarters, the market will focus on several key signals:

• Can gross margins stabilize and recover? This depends on progress in supply chain cost reduction and product mix optimization.
• Will the Huawei partnership model be adjusted? Changes in revenue-sharing ratios and the depth of collaboration will directly impact profit performance.
• What progress is being made on proprietary brands and technology? The ability to gradually reduce dependence on a single partner will be critical.

Strong revenue growth proves SERES' market appeal, but capital markets ultimately judge companies on profits. How the company finds the optimal balance between its Huawei partnership and independent development — and between scale expansion and profitability — will determine whether this is merely a "temporary growing pain" or a "structural predicament." The window of time for management to answer this question is not wide.