UOB Kay Hian Private Limited
Date of Report: Friday, 29 August 2025
ECARX Holdings Inc: Is a Turnaround on the Horizon? Deep Dive into Q2 2025 Results and Strategic Outlook

Company Overview: ECARX Holdings Inc

ECARX Holdings Inc (ECX US) stands as a global pioneer in automobile intelligent solutions, specializing in the research and development of both software and hardware platforms. The company’s portfolio includes intelligent cockpit computing platforms, ADAS computing platforms, and central computing platforms. Serving a broad client base that includes 18 OEMs and 28 vehicle brands, ECARX products now feature in over 9.3 million vehicles worldwide.

Q2 2025 Financial Highlights: Losses Widen, H2 Recovery Anticipated

ECARX reported a net loss of US\$43 million in Q2 2025, up 10% year-over-year and 65% quarter-over-quarter. Adjusted for forex losses and exceptional items, the net loss reached US\$47 million, rising 24% YoY and 72% QoQ. Revenue fell 10% YoY and 7% QoQ to US\$156 million, but sales of goods actually increased 1% YoY and 8% QoQ to US\$131 million. The Antora & Skyland platforms contributed 56% of these sales, a notable increase from 28% in the previous year.

Margins Pressured by Product Mix and Competition

• Gross margin fell sharply to 10.8% in Q2 2025 (down 12.4ppt YoY and 9.0ppt QoQ), mainly due to a temporary shift in sales mix towards lower-margin hardware and delayed recognition of high-margin software and service orders.
• Industry competition also pressured average selling prices (ASPs).
• R&D and SG&A expenses as a percentage of revenue declined, signaling better cost discipline: R&D/revenue at 21.7% and SG&A/revenue at 15.0% in Q2 2025.

Key Financials & Forecasts: Turnaround Expected in 2026

The company’s financials project a turnaround, with net loss expected to shrink to US\$49 million in 2025, followed by a return to profitability in 2026 (US\$36 million net profit) and further growth in 2027 (US\$100 million net profit), assuming a 27% revenue CAGR.

Strategic Growth Drivers: Product Launches, Global Expansion, and Diversification

ECARX’s recovery and future growth are anchored by several strategic moves:

• New Product Launches: In the first half of 2025, ECARX rolled out the Pikes computing platform, Cloudpeak cross-domain software stack, and Flyme Auto 2 (debuting on Lynk & Co 10 EM-P and Galaxy M9).
• AI Innovation: The Antora 1000 platform, powered by AI, supported the successful launch of the Galaxy A7, which quickly became the top-selling hybrid mid-size sedan in its first week.
• Overseas Expansion: Revenue will benefit from the newly signed overseas CAD project and ongoing ADAS domain controller (ADCU) shipment growth.
• Customer Diversification: ECARX landed its first non-automotive customer for solid-state 3D lidar, breaking into the robotics sector with mass production scheduled for 2026.

Margin Outlook and Profitability Mix

• Gross margin assumptions for 2025-2027 have been cut to 16%/20%/20%, reflecting the shift to hardware sales and delayed software/service revenue recognition.
• Profitability is expected to improve as delayed high-margin NRE revenues materialize in H2 2025 and as software/service projects and international OEM contracts contribute more stable, higher margins.

Balance Sheet Snapshot

Cash Flow Trends

• Operating cash flow is projected to improve in 2026 and beyond, turning positive as profitability returns.
• Significant financing activities are forecast for 2025, with a net cash inflow of Rmb549m, but outflows expected in subsequent years as debt is repaid and investments continue.

Valuation and Analyst Recommendation

UOB Kay Hian maintains a BUY rating for ECARX Holdings Inc, with a target price of US\$3.40, based on a 10-year discounted cash flow (DCF) model (WACC: 14%, terminal growth: 4%). This implies a 39x 2026F PE and a 1.0x 2026F PEG, underlining expectations of strong earnings growth and margin recovery.

Investment Risks and Considerations

• Gross margin recovery is contingent upon the realization of delayed high-margin software and service revenues in H2 2025.
• Industry competition and ASP pressure remain risks to future performance.
• Expansion into robotics and international OEMs introduces diversification but with execution risks.

Conclusion: Strategic Inflection Point for ECARX Holdings

Despite a challenging Q2 2025, ECARX Holdings is positioning itself for a turnaround, leveraging new technologies, global expansion, and customer diversification. With margin recovery and profitability projected for 2026–2027, the company offers considerable upside potential for long-term investors, supported by robust product innovation and expanding market reach.