Key Points SES AI plans to aggressively expand battery capacity in Korea. Its target market is drone buyers from the U.S. and Europe. 10 stocks we like better than Ses Ai › Shares of SES AI (NYSE: SES) jumped 13.7% in early Thursday trading after the developer of artificial intelligence (AI)-enhanced lithium-ion batteries announced a big collaboration in Korea. Image source: Getty Images. A massive drone deal Lithium-metal and lithium-ion batteries are not new, but SES AI uses AI to discover new ...

Core Insights - The article focuses on the cannabis sector, emphasizing technical stock analysis, option strategies, small cap strategies, and emerging markets [1] Group 1 - The author expresses a beneficial long position in the shares of SES, indicating confidence in the stock's performance [2] - The article is a personal opinion piece, with no external compensation influencing the views presented [2] - There is no business relationship with any company mentioned, ensuring an unbiased perspective [2] Group 2 - The article does not provide specific financial data or performance metrics related to the cannabis industry or SES [3] - No investment recommendations or suitability advice is given, maintaining a neutral stance on investment decisions [3] - The views expressed may not represent the broader opinions of Seeking Alpha, highlighting the individual nature of the analysis [3]

Company Overview - SES AI Corporation is focused on modernizing lithium batteries and has seen its stock price increase over 400% in the past year, currently trading under $2 per share with a market cap of under $700 million [1][3] - The company was founded in 2012 and went public in 2022 through a special purpose acquisition company [3] Industry Context - The lithium battery industry is poised for modernization and AI innovation, with applications in various sectors including automobiles and drones [2] - The total addressable market for lithium battery innovations could exceed $500 billion by 2032, indicating significant growth potential [14] Financial Performance - SES reported a revenue of $7.1 million in Q3 2025, with an upward revision of revenue guidance from $20 million to $25 million [10][11] - The company is experiencing a lower net loss and has engaged in share repurchases, which are positive indicators for long-term success [6] Strategic Moves - SES has acquired UZ Energy and formed a partnership with Hisun New Energy Materials, marking a significant turning point for the company [8] - The company has released its AI software, Molecular Universe, which accelerates battery material discovery and enhances its service platform [2] Growth Projections - The energy storage industry, a key area for SES, is projected to have a compound annual growth rate (CAGR) of 27% over the next five years [9] - If SES can maintain a CAGR of 20% for the next 20 years, a $25,000 investment today could grow to nearly $1 million by 2045 [9] Market Sentiment - The stock's dramatic rise is partly attributed to broader investor sentiment in the AI and electric vehicle sectors, although some analysts caution that the increase may be based on hype rather than financial fundamentals [12][13]

Revenue and Financial Performance - Revenue from customers for the three months ended September 30, 2025, was $7.1 million, and for the nine months, it was $16.4 million, primarily from service-related contracts and ESS product shipments [94]. - Total operating expenses for the three months ended September 30, 2025, were $22.3 million, a decrease of 34.9% compared to the same period in 2024 [93]. - Interest income for the three months ended September 30, 2025, was $2.3 million, down from $3.7 million for the same period in 2024, reflecting a decrease of $1.4 million [109]. - Net cash used in operating activities was $48.0 million for the nine months ended September 30, 2025, primarily due to a net loss of $56.0 million [121]. - The net decrease in cash, cash equivalents, and restricted cash for the nine months ended September 30, 2025, was $93.5 million, compared to a decrease of $19.6 million for the same period in 2024 [118]. - The company expects to sustain substantial operating expenses without generating sufficient revenues for several years, relying on cash on hand and marketable securities for at least 12 months [116]. Expenses and Cost Management - Research and development expenses for the three months ended September 30, 2025, decreased by $8.8 million, or 36%, to $15.6 million compared to the same period in 2024 [100]. - General and administrative expenses decreased by $3.1 million, or 32%, to $6.7 million for the three months ended September 30, 2025, compared to $9.8 million for the same period in 2024 [106]. - Miscellaneous expenses increased to $0.7 million for the three months ended September 30, 2025, from $0.5 million for the same period in 2024, primarily due to foreign currency translation losses [111]. - Capital expenditures were $2.1 million for the nine months ended September 30, 2025, significantly lower than $12.0 million for the same period in 2024 [125]. Acquisitions and Strategic Initiatives - The acquisition of UZ Energy for approximately RMB 183.5 million ($25.8 million) is expected to enhance the company's capabilities in the ESS market [92]. - The company transitioned from developing A-Sample batteries to B-Sample batteries in 2024 to meet automotive manufacturers' requirements [90]. - The company has converted two EV A-sample production lines to focus on UAM cell production, indicating a strategic shift towards urban air mobility applications [90]. Technology and Innovation - The company achieved a 95% prediction accuracy in its AI for Safety program in 2024, meeting its target for the year [87]. - AI for Manufacturing aims to optimize cell design and improve manufacturing quality, potentially accelerating production timelines [86]. - The company believes its AI-enhanced Li-Metal battery technology can charge to 80% in less than 15 minutes, significantly reducing charging times for EVs [88]. Financial Obligations and Assets - The company had total contractual obligations of $26.2 million as of September 30, 2025, including $16.2 million in purchase obligations and $9.9 million in operating lease obligations [128]. - The Company evaluates goodwill and indefinite-lived intangible assets for impairment annually or more frequently based on ASC Topic 350, with the latest assessment indicating no impairment as of September 30, 2025 [134]. - The fair value of deferred consideration related to business combinations is determined using management judgment and contingent on future financial performance metrics [134]. - Intangible assets acquired from business combinations, including trademarks and patents, are initially measured at their estimated fair values and amortized on a straight-line basis over their estimated useful lives [133].

Core Insights - SES AI Corporation has reported its Q3 earnings, which were highly anticipated by investors due to the significant implications for the company's future performance [1]. Financial Performance - The Q3 earnings report is crucial for understanding SES's profitability and operational efficiency, which are key indicators for potential investment opportunities [1]. Investment Perspective - The focus on sustained profitability, characterized by strong margins, stable and expanding free cash flow, and high returns on invested capital, is emphasized as a more reliable driver of returns than valuation alone [1].

Core Insights - SES AI Corporation reported a quarterly loss of $0.06 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.05, representing an earnings surprise of -20.00% [1] - The company generated revenues of $7.12 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 42.36%, compared to zero revenues a year ago [2] - The stock has underperformed the market, losing about 5% since the beginning of the year, while the S&P 500 gained 15.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.05 on revenues of $5.5 million, and for the current fiscal year, it is -$0.14 on revenues of $19.81 million [7] - The estimate revisions trend for SES AI was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - SES AI operates within the Zacks Automotive - Original Equipment industry, which is currently ranked in the top 41% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - The performance of SES AI's stock may be influenced by the overall industry outlook, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Financial Data and Key Metrics Changes - The company reported a record revenue of $7.1 million for Q3 2025, representing a 102% increase from the previous quarter [4][11] - Gross margin for Q3 was 51%, with service revenue contributing a gross margin of 78% and product revenue at 15% [11][12] - GAAP net loss for Q3 was $20.9 million, an improvement from a loss of $22.7 million in Q2 2025 [12] Business Line Data and Key Metrics Changes - The revenue split for Q3 was approximately 55% from service revenue related to automotive OEM customers and 45% from product revenue primarily from UZ Energy's energy storage system sales [11] - ESS revenue, following the acquisition of UZ Energy, accounted for about 45% of total revenue in Q3 [6] Market Data and Key Metrics Changes - The company anticipates significant growth in the energy storage system (ESS) market, projecting UZ Energy's revenue to grow from $10 million-$15 million in 2025 to potentially double in the following year [14][36] - The company is also targeting the drone market, leveraging its South Korea facility to meet the demand for high-energy density pouch cells [7][36] Company Strategy and Development Direction - The company is focused on an all-in-on AI strategy, highlighted by the launch of Molecular Universe 1.0, which aims to enhance battery material discovery and development [4][9] - A joint venture with Hyzen New Energy Materials was established to manufacture new electrolyte materials discovered through Molecular Universe, addressing specific market needs [7][18] - The company plans to expand its SaaS offerings and material supply, expecting revenue from materials to surpass SaaS revenue in the future [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, emphasizing the transformative potential of Molecular Universe across various battery chemistries and applications [9][36] - The company expects to see a hardware-software integrated platform with multiple revenue streams, indicating a strong growth trajectory for 2026 and beyond [9][14] Other Important Information - The company exited Q3 with a strong liquidity position of $214 million, indicating sufficient capital to support growth initiatives [13][42] - The company repurchased 1.3 million Class A shares for a total investment of $1.6 million during the quarter [12] Q&A Session Summary Question: Can you talk about the Hyzen JV opportunity? - The Hyzen JV was formed in response to requests from Molecular Universe enterprise users, aiming to supply new electrolyte formulations discovered through the platform [17][18] Question: How do you expect the monetization of Molecular Universe to play out? - The monetization will be a mix of SaaS revenue and material supply, with material supply expected to generate higher revenue than SaaS [21][22] Question: Can you provide an update on the trial testing of Molecular Universe? - The number of enterprise users trialing Molecular Universe has increased to nearly 40, with plans for on-premise deployment for larger companies [24] Question: What are the different subscription options for Molecular Universe? - The company offers various enterprise tiers based on the depth of models and database size, with options for joint development for larger customers [29][31] Question: What is the growth outlook for UZ Energy and other revenue streams? - UZ Energy is expected to see significant growth, with potential doubling of revenue next year, alongside growth in the drone and EV markets [36]

Financial Data and Key Metrics Changes - The company reported a record revenue of $7.1 million for Q3 2025, representing a 102% increase from the previous quarter [4][11] - Gross margin for Q3 was 51%, with service revenue contributing a gross margin of 78% and product revenue contributing 15% [11][12] - GAAP net loss for Q3 was $20.9 million, an improvement from a loss of $22.7 million in Q2 2025 [12] Business Line Data and Key Metrics Changes - Approximately 45% of Q3 revenue came from the energy storage system (ESS) business following the acquisition of UZ Energy [6][11] - The revenue split for Q3 was approximately 55% from service revenue related to automotive OEMs and 45% from product revenue from UZ Energy [11] Market Data and Key Metrics Changes - The company expects to grow UZ Energy's revenue from approximately $10 million to $15 million in projected full-year 2025 revenue, with significant growth anticipated in the coming years [14] - The company is targeting the $300 billion global ESS market for market share gains [14] Company Strategy and Development Direction - The company is focused on an all-in-on AI strategy, highlighted by the launch of Molecular Universe 1.0, which aims to enhance battery material development [4][9] - A joint venture with Hyzen New Energy Materials was established to manufacture new electrolyte materials discovered through Molecular Universe [7][18] - The company plans to leverage its South Korea cell factory to meet the growing demand for high-energy density pouch cells in the drone market [7][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the revenue growth potential from Molecular Universe and its integration into various applications, including ESS and drones [9][36] - The company anticipates a doubling or tripling of total revenue in the next year due to multiple growth opportunities enabled by Molecular Universe [36] Other Important Information - The company exited Q3 with a strong liquidity position of $214 million and expects to maintain liquidity between $195 million and $200 million by the end of 2025 [13][42] - The company repurchased 1.3 million Class A shares for a total investment of $1.6 million during Q3 [12] Q&A Session Summary Question: Can you talk about the Hyzen JV opportunity? - The Hyzen JV was formed in response to requests from Molecular Universe enterprise users who wanted the company to manufacture new materials discovered through the platform [17][18] Question: How do you expect the monetization of Molecular Universe to play out? - The monetization will be a mix of SaaS platform and materials supply, with material supply expected to generate higher revenue than SaaS [21][22] Question: Can you provide an update on the trial testing of Molecular Universe? - The number of enterprise users trialing Molecular Universe has increased to nearly 40, with plans for on-premise deployment for larger enterprises [24] Question: Can you elaborate on the new enterprise tiers? - The new enterprise tiers differ in database size and model depth, catering to various customer needs from medium-sized companies to larger enterprises [29][30] Question: What is the growth outlook for UZ Energy and other revenue streams? - UZ Energy is expected to grow significantly, with potential doubling of revenue next year, alongside growth in drones and EV applications [36]

Financial Data and Key Metrics Changes - The company reported a record revenue of $7.1 million for Q3 2025, representing a 102% increase from the previous quarter [4][11] - Gross margin for Q3 was 51%, with service revenue from automotive OEMs contributing a gross margin of 78% and product revenue from UZ Energy at 15% [11][12] - GAAP net loss for Q3 was $20.9 million, an improvement from a loss of $22.7 million in Q2 2025 [12] Business Line Data and Key Metrics Changes - Approximately 45% of Q3 revenue was attributed to the energy storage system (ESS) business following the acquisition of UZ Energy [6] - The company launched three sub-tiers within its enterprise offerings to provide greater value to enterprise users [5][30] Market Data and Key Metrics Changes - The company expects to grow UZ Energy's revenue from an estimated $10 million-$15 million in 2025 to a significantly larger figure in the coming years [13] - The global ESS market is projected to be worth $300 billion, presenting substantial growth opportunities for the company [13] Company Strategy and Development Direction - The company is focused on an all-in-on AI strategy, with the recent launch of Molecular Universe 1.0 aimed at enhancing its product offerings [4][9] - A joint venture with Hyzen New Energy Materials was established to manufacture new electrolyte materials discovered through Molecular Universe [7][18] - The company aims to integrate hardware and software solutions to create a multi-revenue stream platform [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the revenue growth potential from Molecular Universe and its applications across various battery chemistries [9][15] - The company anticipates a doubling or tripling of revenue in 2026 due to multiple growth opportunities in ESS, drones, and EV applications [36][37] Other Important Information - The company exited Q3 with a strong liquidity position of $214 million, allowing for sustainable growth and long-term success [12][15] - The company repurchased 1.3 million Class A shares for a total investment of $1.6 million during Q3 [12] Q&A Session Summary Question: Can you talk about the Hyzen JV and its opportunities? - The Hyzen JV was formed in response to requests from Molecular Universe users, aiming to supply new formulations discovered through the platform [17][18] Question: How do you expect the monetization of Molecular Universe to play out? - The monetization will be a mix of SaaS platform and materials supply, with expectations for growing subscription revenue and material sales [20][23] Question: What is the status of the trials with battery companies? - The number of enterprise users trialing Molecular Universe has increased to nearly 40, with plans for on-premise deployments [24][25] Question: Can you elaborate on the new enterprise tiers? - The new enterprise tiers differ in database size and model depth, catering to various customer needs [30][31] Question: What are the growth prospects for UZ Energy? - UZ Energy is expected to see significant revenue growth, with projections to double in the coming year [36] Question: What is the roadmap for Molecular Universe in 2026? - Future developments will include expanding features to cover electrode and process optimization, as well as creating portable versions for battery companies [45] Question: What is the status of pouch cells for drones? - The company is converting its production line to meet the growing demand for pouch cells, particularly for drones [46]

Financial Results - SES AI Corporation released its financial results for the fiscal quarter ended September 30, 2025, on November 5, 2025[4]. - The report does not include specific financial metrics or performance indicators for the quarter[6]. Shareholder Communication - The company issued a letter to shareholders detailing a business update alongside the financial results[4]. - The letter to shareholders is furnished as Exhibit 99.1, while the press release is Exhibit 99.2[7]. - The press release announcing the shareholder letter was also issued on November 5, 2025[5]. Company Information - The company is listed on the New York Stock Exchange under the symbol SES for Class A common stock and SES WS for warrants[2]. - SES AI Corporation is incorporated in Delaware and has an IRS Employer Identification Number of 88-0641865[1]. - The exercise price for the warrants is set at $11.50 per share[2]. - The report was signed by Jing Nealis, the Chief Financial Officer of SES AI Corporation[11]. Compliance and Standards - The company has not elected to use the extended transition period for complying with new financial accounting standards[3].