QuantumScape Corp (QS) Q2 2026 Earnings Call Transcript

Thank you for standing by, and welcome to QuantumScape's second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Sam Kumar, QuantumScape's Senior Director, Investor Relations. You may begin, sir.

Thank you, Operator. Good afternoon, and thank you to everyone for joining QuantumScape's second quarter 2026 earnings call. To supplement today's discussion, please go to our Investor Relations website at ir.quantumscape.com to view our shareholder letter. Before we begin, I want to call your attention to the Safe Harbor provision for forward-looking statements that is posted on our website as part of our quarterly update. Forward-looking statements generally relate to future events, future technology progress, or future financial operating performance. Our expectations and beliefs regarding these matters may not materialize. Actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. There are risk factors that may cause actual results to differ materially from the content of our forward-looking statements for the reasons that we cited and I'll share on the letter from 10K and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes. Joining us today will be QuantumScape CEO, Dr. Sibha Sivaram and our CFO, Kevin Hedrick. With that, I'd like to turn the call over to Sibha.

Thank you, Sam. I'd like to start by discussing our automotive commercialization progress. this quarter we announced a partnership with Honda this is a multi-year agreement aimed at advancing our solid-state lithium metal battery technology for automotive and other applications in the Honda product portfolio Honda is renowned for their engineering excellence and product quality and has made significant investments in scaling up solid-state battery manufacturing capabilities. This partnership results from one of the most rigorous assessments of our technology to date. Our ceramic separator and anode-free lithium metal architecture enables QS to provide solutions to unlock the full potential of solid chain batteries. With Honda's diverse product portfolio this collaboration allows us an additional pathway to expand into new high-value markets we recently updated our ongoing collaboration and licensing arrangement with Volkswagen Power Co with a set of milestones and payments focused on automotive cell development larger format cells and our future technology roadmap we are also working with two other top 10 automotive OEM customers under existing joint development agreement we continue to strengthen our relationships with automakers in North America Europe and Japan and on this front we have shipped cells to an additional automotive OEM customer we also see broad based interest in our technology across a variety of applications beyond electric vehicles including AI data centers and other advanced applications such as aerospace and defense we believe that all these end markets can be served by our fundamental technology stack but each customer can benefit from an individually tailored go-to-market approach in order to serve our diverse and growing customer base we are establishing three business verticals QSEV for electric vehicles QSDC for AI data centers and QSAS for advanced solutions for applications including aerospace and defense QSEV is working with auto OEMs around the world including Volkswagen and Honda QSDC is engaged with ODMs to design solutions based on qsc5 technology for the fast-moving ai data center market and qsas has shipped qsc5 cells to a major american defense prime and is engaged with global players across the aerospace and defense industries next an update on the eagle line our highly automated pilot cell production line in San Jose, California. The Eagle line serves several purposes. Greater cell volumes allow us to meet customer demand for samples. Higher throughput accelerates the process development cycle. And automated equipment serves as a proving ground for scaling up production. Demonstrating scalable production of a unique technology on a first-of-a-kind automated line is a significant challenge and as such it is one of our four key annual goals applying our systematic methodical and iterative approach we have made significant operational progress with the Eagle line core tools are showing uptime greater than 90% key metrics of productivity are hitting our targets and we are currently ramping sample volumes and shipping cells to customers as we continue to improve process stability and control we aim to further double cell output in the second half of 2026 and anticipate customer sample shipments accelerating across all three verticals we are orchestrating a network of partners within the qs technology ecosystem with the aim of scaling up cell production as part of this effort we are working closely with established battery equipment vendors to lay the groundwork for future factories we also continue to collaborate with our ecosystem partners that Murata manufacturing and Corning working towards high volume ceramic separator production using our Cobra process next two updates on our technology first we have received consistent customer feedback that in addition to the combination of energy density and power capability the safety profile of our technology is highly valued competing next generation approaches such as silicon or lithium metal anodes with liquid electrolytes can pose serious safety hazards in contrast our proprietary ceramic separator is non flammable and non combustible which enables an improved safety profile relative to lithium-ion cells thanks to the increased cell output from the Eagle line we are able to conduct larger scale safety testing across a broad range of commercially relevant tests including nail penetration external short circuit and thermal stability testing up to 300 degrees Celsius whereas conventional lithium-ion testing stops at 200 degrees. We are pleased to report that larger scale testing continues to show that QSC-5 is a significantly safer cell design compared to both conventional and next-generation lithium-ion cells. We have also seen customer interest for our technology in cell form factors that are larger than the QSC-5. One benefit of larger format cells is improved packing efficiency which can result in higher cell level energy density in response to this customer interest we have demonstrated that our Cobra process can produce larger area separators for higher capacity cell design which shows the flexibility and scalability of our ceramic separated technology to meet customers requirements lastly I want to take a step back and look at the big picture QS was founded with the mission to revolutionize energy storage today it's becoming clear just how consequential that mission is transportation AI and defense are simultaneously undergoing fundamental transformations electric vehicles are reshaping the global automotive market drones and unmanned systems are rewriting the rules of different strategy and AI is unlocking new capabilities for every business and person on the planet these extraordinary developments all have one thing in common they all need better batteries we are positioning our organization to take advantage of these technology transformation QSBC is working to capitalize on exciting high value opportunities in the AI data center market and QSAS is engaging in customers in high-value aerospace and defense applications. With QF EV, we are advancing automotive commercialization with our four top 10 OEM customers, including the newly announced Honda partnership. The Eagle line is ramping up to enable increased customer shipments in the second half of the year, and we are investing in future technology roadmap with larger format cells and more in the pipeline. There is much work still to do, but our team has the talent and tenacity to overcome challenges as we industrialize our technology to make the most of these transformational opportunities. Thank you for your support, and we look forward to sharing more updates in the months ahead. With that, I'll turn things over to Kevin for a word on our financial outlook.

Thank you, Siva. GAP operating expenses and GAP net loss in Q2 were $106.1 million and $98.2 million, respectively. Adjusted EBITDA loss was $64.2 million in Q2, in line with expectations. For full year 2026, we reiterate our adjusted EBITDA loss guidance of between $250 million and $275 million. A table reconciling gap net loss and adjusted EBITDA is available in the financial statement at the end of our shareholder letter. Capital expenditures in the second quarter were $4.6 million. Q2 CapEx was primarily composed of investment into our technology roadmap and associated facility spend. For full year 2026, we lower our guidance for CapEx to be between $27 million and $37 million, reflecting capital discipline and cost savings on specific capital projects. We set a public goal for customer billings in 2026 to exceed customer billings in 2025. As of today, we have achieved this goal. Customer billings in Q2 were $10.8 million. Total customer billings through Q2 26 are $21.8 million, exceeding fiscal year 2025 customer billings of $19.5 million. Customer billings as a metric represents the total value of all invoices issued by Quantumscape to our customers and partners in the period, regardless of accounting treatment. As a reminder, customer billings may vary from quarter to quarter due to fluctuations in activity as we progress through various phases of engagement. This operational metric is not a substitute for revenue under US GAAP. We ended Q2 with $859 million in liquidity and will remain prudent with our strong balance sheet going forward. As always, we encourage investors to read more on our financial information, business outlook, and risk factors in our quarterly and annual SEC filings on our investor relations website.

Thanks, Kevin. We will begin today's Q&A portion with a few questions we have received from investors or that I believe would interest investors. Siva, we are now halfway through 2026. What proof points should investors evaluate to know if QuantumScape is tracking to our annual goal?

Sam, goal number one is to demonstrate scalable production with the Eagle Line. Taking a unique technology on a highly automated process from the ceramic separator to the unit cell to the fully assembled QSC 5 that meets customer requirements is a significant challenge. We are making strong operational progress and remain on track. Goal number two is to advance automotive commercialization with QSEB. We are working with four of the top 10 global automakers including our new deal with Honda. Adding another paying customer is a big step forward in our commercialization efforts. We also updated the PowerCo collaboration and licensing arrangement with milestones for automotive cell development and we shipped cells to an additional automotive OEM in this past quarter. Goal three is to enter into new high-value markets. We are very excited about the progress we are making in these new business verticals. We have appointed talented leaders to run QSDC and QSAS. QSDC is engaging with ODMs and data center architects to provide solutions for this fast-moving market. QSAS has shipped QSC 5 cells to a major American defense prime and we are engaged with global customers in aerospace defense and other advanced applications. Goal 4 is to go beyond QSC 5 with our future technology roadmap. This quarter, we showed larger format separators from COBRA, which enables higher energy density We have also shown new safety data this quarter with thermal stability, external short circuit and nail penetration results that are particularly outstanding compared to competitors. We are committed to sharing more on our technology roadmap later this year.

We are making the progress Siva discussed toward our technical and commercial goals while remaining disciplined stewards of capital. We have reiterated adjusted EBITDA guidance and total customer billings for 2026 are already higher than last year.

Siva, we are now organized into three business verticals.

What is our approach to serving automotive and non-automotive markets? we see broad based demand for better batteries across the board AI data centers aerospace consumer electronics medical devices defense and many other applications we believe they are all capable of being served by the QS technology platform the benefits of energy density power safety US supply chain and workforce all resonate with our customers for the qs ev vertical our automotive customers all have development pilot lines for batteries and high volume manufacturing capabilities for qsdc and qsas customers this may not be the case they are fast moving the number of customers is larger go to market has different channels we may involve odms and product integration looks different with more opportunities for value creation these new verticals increase the size of the market strengthen the fundamental technology platform and benefit the QS ecosystem which adds value to our customers across all verticals Siva what should investors take away from the recent updates to the VW and power core relationship and how do they reflect the progress being made

towards commercialization.

Sam, the relationship with VW Power Co. continues to be strong and the two teams are working closely together on site here in San Jose. The overall objectives of the collaborations are unchanged. Industrialize the QS technology and transfer the technology to Volkswagen Power Co. for automotive commercialization. Over the past two years we have continue to update and revise the scope of work as we progress this relationship. The updated scope of work includes milestones related to larger form factor sales as well as technology elements from QuantumScape's advanced product roadmap and we look forward to sharing more on that soon.

From a financial perspective, customer billings under the 2025 VW PowerCo collaboration agreement represent a cost share for QS expenses occurred under the agreed scope of work. Under the new scope of work, we've tied payments to deliverables aligned to our product roadmap. Additionally, we eliminated Modo-E related milestones given that the organizers put that race series on hiatus. As a result, even though the total possible payments under the agreement have reduced from approximately $131 million to approximately $75 million, we now project significantly reduced expenses for the project. We forecast a net neutral financial impact in terms of cash when compared to the 2025 scope of work. I'd refer investors to the 8K on file for more information.

Okay, thanks so much, Kevin. We're now ready to begin the live portion of today's call. Operator, please open up the line for questions.

Certainly. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our first question for today comes from the line of Gabriel Gonzalez from UBS. Your question, please.

Hey, guys. Thanks for taking my question. So, firstly, on the updated PowerCo agreement, the updated milestone framework appears to have shifted away from execution-oriented targets like battery cell delivery and validation over the next two years towards cell development and technology-related objectives. So, can you just help us understand the reasoning behind that change and should we view the absence of the earlier milestones as a change in expectations regarding their timing or suitability?

The Volkswagen Power Co. agreements, we update them every year. We have done that three years in a row. As the relationship progresses, we update it based on the milestones yet to come, and we have done that consistently. The relationship is very strong and our objectives remain the same this reflects that we will be paid based on the milestones that we both have agreed that we need to achieve which are aligned with our technology roadmap for instance the larger format cell the future technology milestones that we need to get etc there is not anything philosophically different about the objectives of the joint program.

Got it. Okay. Thank you for that color. And Kevin, you mentioned a neutral impact cash flow, the lower expenses for the project offsetting the lower cash inflow, but is there any impact to the $130 million rural fee prepayment from Power Co.? And if not, what's the progress update there, and should we expect those funds to come in this year or next year?

Great question, Gabe. You're correct that the $130 million prepay is unchanged here and is released by technical milestones and alignment on the form factor. And there, as we've laid out in the letter, we've made nice progress, as we've outlined with the Eagle line, and also with the demonstration of those larger separators coming off of our COBRA line.

Got it. Okay. Thank you. I'll pass it on.

Thanks, Gabe. Thank you. And our next question comes from the line of Etai McKellie from TD Cowan. Your question, please.

Hey, great. This is Justin on for Etai.

Hi, Justin.

So a super quick question. So you guys highlighted QSAS, the shipments of the QSE5 cells in the quarter. I guess, can you help us understand maybe some of the nuance around that shipment? Was it just natural ramp cadence associated with the Eagle line? Is there any kind of the deferral of milestones that might have freed up some incremental capacity that allowed those shipments? Just trying to get a better understanding, I guess, of maybe how that ramp is kind of progressing on yield, line times, cycle times, and any improvements or color you can provide, at least on that AI model update for the reliability improvements that may have contributed there as well.

Just a great question. So the answer is yes. The Eagle Line, obviously, is improving in productivity. As you would expect, taking a brand new technology, a very unique technology into a new highly automated line and getting the product out to meet customer demands is a difficult challenge. And we've been doing very good progress on the Eagle line through the last three months since we installed the line in February. and this allows us the increased volume allows us to there are three major benefits out of this a clearly it gives us more samples to ship to customers be the higher volume allows us to learn rapidly and three the Eagle line itself serves as the basis for the technology transfer for the higher volume lines later on with our customers so this naturally allowed us to be able to ship this out of the eagle line for a customer demand in the U.S. defense prime.

Super helpful. And then maybe on QSDC while we're on the topic, how far away do you kind of envision the initial shipments of samples into that vertical? Obviously, there's been progress in the quarter. Just trying to get an understanding of maybe the timeline as to when samples start hitting them and how quickly the conversion rate might be relative to the AS side of the business now?

Yeah, QSDC, as you all observe, is a very fast-moving business. And the demands are going up rapidly, and there are significant players involved. We are working closely with data center architects and ODMs that supply to these architects. We are working closely to develop designs that can be delivered to these ODMs to integrate. And it also allows us to do higher value in our integration in the product. So this is all coming together very rapidly. We have a new general manager for the business. Shahar Noy is getting ramped up on this very, very rapidly.

And then if I could sneak one final one in before jumping into Q, more mechanic-wise. On the Q2 billings of the 10.8, how much of that was power? Because I guess just trying to square up maybe the 75 in context of I believe it was 20 as of the end of Q1, just trying to figure out the incremental to see how much is left, at least on that milestone update that you guys provided from a payment perspective.

Yeah, thank you for the question. So there's certainly part of the mix. We don't, as practice, break out the billings into finer detail. I would mention that as part of our annual goals, we have a number of customer-facing ones. One is to advance automotive collaboration. You have the update to VW Today. You have the Honda relationship. Further success there means advancing those relationships and adding more. And also the letter goes into detail with making progress in other customer segments, including the AI data center and advanced solution spaces. So the goal is to advance those relationships as well, and you get a broader and broader portfolio of customer activity across that metric.

Awesome. Thanks, Dr. Kali. I'll jump back at you.

One other brief plug on the Eagle line, we did put out a video today between our COO, Luca, and his VP of Automation and Hardware, talking about the importance of the line and what it meant to bring it up. And also in the quarter, to the extent there's interest in the data center piece, We do have that new GM talking about the data center piece, the segment that we're targeting, and some early details on go-to-market.

Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11. Our next question comes in the line of Leisha Zak from HSBC. Your question, please.

Hi, Siva. Hi, Kevin. Thank you so much for taking my question. I just wanted to touch a little bit on the new vertical. Do you have any plans to expand the business into other different verticals? I'm thinking about consumer and how the technology you're developing fits well into it, but I'm just wondering if the new business verticals, like, you know, the data centers and aerospace will be your main focus along with Automotive, or are you open to exploring other opportunities?

Leisha, good to hear from you. Thank you. Yes is the answer to that question. We have clearly separated out QSEV and we have clearly separated out QSDC which is the data center business. The advanced solutions business explores all of the other opportunities including aerospace, defense, medical devices, and consumer electronics and other interesting areas. We do see substantive opportunities for the QS technology platform in many of these, particularly the QSC-5 form factor. The existing product can be shipped into many of these products, so we are actively exploring these opportunities as well.

Okay, thank you so much. And just another follow-up, you have noted in the remarks that AI data centers are transitioning into 800-volt DT designs that are similar to EV architectures. So given that there's an urgent power constraint, actually, that the hyperscalers are facing today, could that mean that QSVC could potentially reach higher volume compensation faster than QSVC because of this very intense or a strong demand from the market, which, you know, this requires some more complex vehicle integration. Does that make sense?

I do understand the question. The fact that the data center market has a lot of need, especially from energy to power, high quality power delivery is one of their biggest bottlenecks. And we, with our high energy and power density and particularly safety is a great fit for this market means that there is a lot of opportunity here so this is the reason we have to adapt three verticals so that we can put the focus on each of these verticals without sacrificing our our go-to-market focus on each of these we will be giving data center with its 800 volt transition coming up all the attention to make sure we capture that market as quickly as possible.

And Lesha, if you recall, expanding into high-value markets is one of our four annual goals. Our annual operating plan includes investments into go-to-market and commercialization capability, notably in sales, product management, and engineering. The hiring is going well, and we did reiterate our adjusted EBITDA guidance on this call.

Okay. Thank you so much, and congrats on the progress. Nice talking to you.

Thank you, Alicia. Thank you. And our next question comes from the line of John Sager from Evercore ISI. Your question, please.

Hey, John.

Hey, John.

Wanted to get some additional clarity on the PowerCo agreement. So my understanding is that under the old agreement, you had up to $130 million that would be billed through Q2 of 2021. under this new agreement it's 75 million through q2 of 2028 so if we're to say like roughly 41 million remaining through q2 28 is that correct sorry 34 million remaining through q2 of 28 because you build around 40 million so far i think yeah we uh you have the up to correct we haven't cleanly kind of broken out which portion of that from power co uh is over time but we'll just reiterate that you have the basics, right?

The F2 changed. The forecast expenses also went down, and we see a neutral cash impact when related to the 2025 scope work. That's correct, John.

And then on the timing for PowerCo, I think the last understanding is that, you know, they had said, you know, start of production, begin in 2029. Are you still on track there? And And what are the next, like, milestones that we'll kind of hear about as it relates to this partnership so that we can track, like, your progress towards that 2029 date?

So, John, all of our work goes through the Eagle Line. The Eagle Line progress is what determines how quickly we can transfer the technology to PowerCore to take it up there. And we are seeing great progress here. Eagle 9 got installed and released in February and from February to now we have integrated all the pieces of the Eagle 9 and now making sure their uptime is high, the productivity is good and now continuing to work on process stability and process control. These are the kind of things that allow us to increase the volume of output which we plan to double in the second half of the year. That allows us the confidence to work with Volkswagen PowerCode transfer.

And is 2029 still the target?

That is correct.

We have not announced any change from our original plans. Okay. And on the two new business lines, if I could ask one more, what is the focus for those business lines this year? Are you more focused on driving customer demand and JDAs, Or are you looking to sort of build out the ecosystem, meaning that, like, the first step is kind of you need to sign some more, sign a battery manufacturing partner?

Yeah. So these two new businesses, as they are starting up, the big advantage is that they use the power of the QSC5 platform. The QSC5 platform, with its no compromise performance across all aspects, is the foundation on which they are built. Our immediate next focus is on go-to-market. We are reinforcing the go-to-market personnel strategies to make sure we are able to service these customers as rapidly as possible. You are right, immediately afterwards, we should be focused on getting volumes out to them.

Okay, so first step, customers. Second step, find a partner to do the actual manufacturer.

Yeah, and John, if you recall, in the summer 2025 amendment to the PowerCo collaboration agreement, we expanded capacity of that license to up to 85 gigawatt hours. And that incremental five gigawatt hours was permitted by VW PowerCo to go outside of the automotive market. So PowerCo is certainly one channel. In the fullness of time, we are engaged with multiple different customers in that QuantumScape Advanced Solutions channel. The Eagle Line is a very powerful capability to do customer sampling, but in the fullness of time, we absolutely will need to add capacity.

Okay, thanks. Thank you. And our next question comes from the line. I'm Mark Delaney from Goldman Sachs. Your question, please.

Hi, you've got Ayush Ghosh on for Mark Delaney. Thank you for taking the questions. And on billings, nice to see the progress there with 2026 billings already exceeding 2025. Can you discuss the outlook for overall customer billings in the second half of the year, maybe relative to the first half?

So, thank you. We have made kind of steady progress. Last quarter, we added ecosystem partners for the first time. And as you mentioned, we have exceeded the 2025 levels in 2026, now that we're at 21, 28 million. In addition to VW Power Co., as highlighted in this letter, we added Honda, an amazing top 10 OEM partner with strength and engineering, both with an automotive and a broader set of product offerings at the end of a quite extensive diligence and selection process. So we are making nice progress there. As I referred to earlier, you should expect kind of customer billings to be a metric that has some variability into it. the things that we control would be to advance the relationships individually and to continue to add additional automotive partners as well as to start to add partners from these new spaces and to increasingly turn it into a portfolio.

Thank you for that and one more from me on the sort of non-automotive markets you know QSDC and QSAS and again nice to see the progress there. Can you discuss some of the timelines you're seeing from customers and production volumes that prospective customers are requesting, and how closely do these specifications align with your more traditional automotive roadmap? Thank you.

Great question. Now, going back to the prior question, just to finish the thought, Kevin was talking about Honda. Adding another paying customer that we can disclose is actually a big deal that helps the surrounding of that portfolio. now back on to QSDC and QSAS the automotive specifications are very well known each of the others have their own unique spec needs for instance safety is across the board very very very important to all of them especially in a data center right next to very high value GPUs safety is extremely critical power especially in the case of data center it is discharge power that is needed in the case of the data center again low temperature operation is not important but higher temperature operation is important in the case of military applications that we are looking at not losing capacity while being able to discharge substantive power is an important characteristic these are what we claim credit on the qsc5 platform that it is a no compromise platform that is able to supply power without losing capacity etc so you can see that these new businesses new verticals are are complementary, and they play off of the basic capabilities of the platform. Thank you.

Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. And our next question comes from the line of Winnie Dung from Deutsche Bank. Your question, please.

Thanks so much for taking my question. First one is a Honda. I was wondering if you can sort of describe the next steps to securing a deal-like particle for Honda and any sort of high-level timelines you have on internally.

Thank you, Vinny. As you know, Honda is renowned for their engineering expertise. They have spent a lot of money on solid-state battery development already they have a large pilot facility they came in and did a incredibly deep evaluation of the technology and saw the synergies how their core investments can be leveraged with our architecture the ceramic is common the Japanese ecosystem that exists that we have spent so much and creating they all go together with the ceramic the separator and and the lithium metal anode free architecture they clearly see that this is the way for them to enhance their solid-state portfolio across all of their products so our immediate job is to move this joint development into the next level of development and move it along the same template that we have developed with PowerCore Volkswagen, so we can move very quickly across their product portfolio.

Got it. Thank you so much. And then on the QSDC and QSAS, I was wondering if you can perhaps talk about some specific milestones that you guys have in mind for those two business lines. For instance, would it be like shipping sales to the data center, customers, or some form a partnership or any sort of announcement that we expect to see this year or perhaps into next year? Thanks.

So Vinny, yes, you will see announcements from us on both of these and that will give you a timeline. But on a general sense, I can use QSDC as an example. The 800 volt transition is in front of us. The megawatt rack also is just ahead of us. These all are going to be deployed in data centers towards the end of 2028, which means we need to be ahead of that with respect to developing an integrated product and delivering it to them. So you can see natural deadlines developing when these transitions are happening in the marketplace.

Okay, great. Thank you so much.

Thank you, Vinny. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Siva for any further remarks.

Thank you, operator. I'd like to recognize the entire QS team for their execution and to thank our shareholders for their continued support. We look forward to updating you on our programs in the months ahead. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.