Ouster's Margin Continues to Improve: Can It Retain the Momentum?

Core Insights - Ouster Inc. (OUST) is a physical AI company that has significantly improved its net margin, which increased by 2716 basis points in the first half of 2025 [1][8]. Financial Performance - The company is still operating at a loss and anticipates continued cash burn through at least 2026, but is focused on improving net margin and moving towards sustainable profitability [2]. - For 2025, OUST aims for third-quarter revenues between $35 million and $38 million, targeting 30-50% annual revenue growth and maintaining a gross margin of 35-40% [3][8]. - OUST's shares have gained 201.4% year to date, although this performance is below the industry average [7]. Business Strategy - Ouster is transitioning from a hardware-driven business model to one focused on software-enabled solutions that generate recurring revenue streams [3][8]. - The company believes its digital LiDAR sensors are among the highest-performing and lowest-cost solutions available, targeting a total addressable market projected to reach $19 billion by 2030 [4]. Competitive Landscape - OUST competes with Aeva Technologies (AEVA) and Luminar Technologies (LAZR), both of which are also improving their net margins through cost control and partnerships [5]. - Aeva is advancing its 4D LiDAR technology to lower production costs, while Luminar focuses on innovation in advanced LiDAR sensors and software [6]. Valuation and Estimates - OUST trades at a price-to-sales multiple of 10.94, significantly higher than the industry average of 2.07 [10]. - The Zacks Consensus Estimate for OUST's EPS for the third and fourth quarters of 2025 has remained unchanged over the past 30 days, indicating stability in earnings expectations [11][12].