Xos (XOS) Q3 2026 earnings review
Xos wins mobile battery orders, but cuts its 2026 plan
Xos, a maker of electric trucks and mobile battery systems, delivered a tiny rebound in shipments while cutting its full-year targets again. Revenue fell 66% from a year ago to $5.5 million on 33 units, and although chief executive Dakota Semler pointed to a 34% gross margin excluding one-offs, accounting gross margin was 15% after inventory write-downs. By our math, the lowered full-year plan still requires fourth-quarter sales to jump to $8.5 million.
| Revenue | $5.5M -66% from a year ago (+17% from last quarter) |
|---|---|
| Unit deliveries | 33 units 130 a year ago (30 last quarter) |
| Gross margin | 15.3% 34.4% excluding inventory write-offs |
| Full-year revenue outlook | Cut $9M to $25–35M (second straight cut) |
⚖️ Verdict: 🔴 Bearish
The story got worse because delayed orders from the second quarter turned into downward order revisions in the third, forcing a second straight cut to the full-year revenue, unit, and profit targets. In addition, ongoing cash burn and debt payments required $2.8 million in share sales that helped push the share count up 49% from a year ago. One positive: Xos shipped its first mobile battery units to Waymo in London and to electric utilities.
The question now is whether mobile battery orders from utilities and data centers can scale fast enough to cover overhead before cash runs low. Either fourth-quarter shipments double to meet the new plan, or volumes stay near thirty units and force heavier share dilution to pay the $8 million of debt due within a year. Fourth-quarter deliveries and the product revenue split in the quarterly filing will tell.
🐂 Bull Case
Mobile Storage Wins Utility and Waymo Orders
Xos is trying to rely less on commercial electric trucks by selling the Xos Hub, a mobile battery unit that charges vehicles and powers job sites where grid connections take years. Chief executive Dakota Semler said the Hub "powered a hyperscaler’s data center construction project" during the quarter.
The company also shipped its first Hubs outside the United States, "supporting Waymo’s autonomous vehicle operations in London", and delivered units to municipal and investor-owned utilities that placed follow-on orders for the fourth quarter. In addition, California approved its larger 420 and 630 kilowatt-hour ChargerHub models for state funding vouchers, and the company began producing higher-capacity units at its Byrdstown factory.
These deployments matter because utilities and autonomous fleets are repeat buyers that can order in volume. Still, the new customers have not replaced lost truck sales, as total third-quarter deliveries reached only 33 units. Furthermore, Semler said a fourth-quarter priority is to "bring PowerHub rental and deployment partners online", showing that its largest storage product is still setting up sales channels.
What to watch: the revenue split between trucks and powertrains and Hubs in the third-quarter filing. A figure above the second quarter's $3.5 million would show mobile storage is growing even as total company volume shrinks.
Cost Cuts and Inventory Releases Cushion the Drop
With sales running at a fraction of last year's level, Xos has relied on overhead cuts and factory inventory reductions to slow its losses. Finance chief Liana Pogosyan said the company has reduced inventory by $3.1 million since the end of 2025 as it works to "convert working capital to cash".
Inventories ended September at $21.8 million, down from $23.5 million in June and $25.0 million at year-end. Operating expenses — overhead, research, and sales costs — fell 12.8% from a year ago and 2.5% from last quarter to $8.3 million, driven by general and administrative spending dropping from $6.5 million to $5.3 million. Those savings helped narrow the nine-month operating loss by 13.9% to $20.0 million despite revenue falling by nearly half.
What to watch: fourth-quarter inventory levels when full-year results arrive. Another drop of $2 million or more would show Xos is finally shipping finished units that were waiting for customer pickup.
🐻 Bear Case
Second Straight Outlook Cut as Orders Revise
Last quarter Xos lowered its full-year targets after customer orders slipped into the second half of the year. This quarter those delayed orders did not show up in volume, as the company delivered just 33 units and $5.5 million in revenue, down 66.4% from a year ago when it was fulfilling a large stepvan order for UPS.
Instead of recovering in the second half, Xos cut its 2026 outlook for a second consecutive quarter "due to results to date and changes in the expected product mix and volume expectations for the fourth quarter as a result of order revisions".
- Full-year revenue outlook: cut to $25–35 million from $35–43 million (originally $40–50 million)
- Full-year unit deliveries outlook: cut to 185–250 units from 250–350 units (originally 350–500 units)
- Full-year operating loss excluding one-offs: widened to $17.2–20.5 million from $11.4–14.7 million
The phrase "order revisions" is worse than a delivery delay because it means customers are reducing or changing what they planned to buy. Even after the cut, by our math the middle of the new plan requires $8.5 million of revenue and about 60 units in the fourth quarter, nearly double the third quarter's unit pace.
What to watch: fourth-quarter unit deliveries against the implied 27 to 92 unit range. A reading near the bottom of that range would show that customer demand remains weak heading into 2027.
Cash Burn and Debt Bills Force Share Sales
Xos has warned in past filings that its cash reserves may not last twelve months without outside funding, and its third-quarter cash flow shows why that pressure persists. Pogosyan said that reducing convertible debt and inventory alongside lower overhead "gives us a leaner cost base and a cleaner balance sheet as we execute against our revised full-year outlook".
During the quarter Xos burned $2.5 million in operating cash and $2.7 million in free cash flow, bringing nine-month free cash burn to $7.0 million against $3.0 million of cash generation a year ago. To pay a $1.5 million installment on its convertible note and cover operating losses, Xos sold $2.8 million of new stock through its at-the-market offering program, yet cash still slipped from $13.2 million to $12.1 million.
Those stock sales carry a heavy cost for existing owners, as weighted average diluted shares rose 49.1% from a year ago to 14.55 million. With $8.0 million of convertible debt due within twelve months and another $6.0 million due after that, ongoing cash burn requires continuous share issuance.
What to watch: year-end cash and fourth-quarter share sales when annual results are reported. If cash falls below $10 million even after new stock sales, debt payments in 2027 will require larger financing.
Inventory Reserves Create the Margin Jump
Xos highlighted that its gross margin excluding one-offs jumped to 34.4% in the third quarter from 7.2% in the second quarter and 16.1% a year ago, calling it a demonstration of operational efficiency. Standard accounting tells a much flatter story, because gross margin under accounting rules rose only 3.2 percentage points from last quarter to 15.3%, and actually slipped 0.2 points from a year ago.
The 19.1 percentage-point gap between the two margin figures comes from $782 thousand of inventory reserve charges and $276 thousand of physical inventory adjustments that Xos wrote off in cost of goods sold and then added back to its preferred measure. Because writing down unsold or obsolete parts is a real manufacturing cost when orders are being revised, the 15.3% accounting margin is the cleaner gauge of factory profitability.
What to watch: the gap between accounting gross margin and gross margin excluding one-offs in the fourth quarter. A gap narrower than 5 percentage points would show inventory write-downs are behind the company.
Risks this quarter didn't answer
Four standing concerns and watch items depend on footnote tables that live in the quarterly filing rather than the earnings release.
- Powertrains and Hubs revenue split: not in the release; Note 3 of the quarterly filing will show whether Hub sales rebounded from the second quarter's $3.5 million.
- Blue Bird powertrain order book: no update on remaining orders after 96 units were delivered through the first quarter; the filing or call transcript will show if Blue Bird ordered more.
- Customer concentration: four customers made up 69% of revenue last quarter; the filing's concentration note will show whether utility and Waymo orders broadened the base.
- Tariff costs on batteries and electronics: unmentioned in the release; the management discussion in the filing will show if July tariff increases hurt unit costs.
💲 Other KPIs
Uncollected customer bills fell 23.1% from $6.04 million at the end of 2025 to $4.64 million. Collecting older incentive and fleet bills has helped Xos bring in cash over the past year, but with receivables now down to a small balance, future cash flow must come from new sales and inventory reductions.
Xos reported a net loss of $7.61 million, or $0.52 per share, compared with a $6.89 million loss last quarter and $2.14 million of net income a year ago. Last year's profit came from a one-time $9.39 million accounting gain when the company exited its Mesa, Arizona factory lease; excluding that gain by our math, last year's net loss was $7.25 million.
🔮 Guidance
Cut. The electric vehicle and storage maker lowered its full-year sales target by $9 million at the middle of the range, implying a 34.8% drop from 2025. By our math, that leaves $3.5 million to $13.5 million for the fourth quarter ($8.5 million at the middle, up 62.6% against an easy 2025 comparison). It is the second cut in two quarters: $0M, -$6M, -$9M.
Cut. Management reduced the full-year delivery plan by 82.5 units at the middle of the range, pointing to a 33.7% decline from last year's 328 units because of customer order revisions. With 158 units delivered in the first nine months, by our math the plan leaves 27 to 92 units for the fourth quarter (59.5 at the middle, compared with 33 in the third quarter). Sequence of moves: 0, -125, -82.5 units.
Cut. The full-year operating loss target excluding one-offs worsened by $5.8 million at the middle of the range to $18.85 million, though that is still 22.6% smaller than 2025's $24.35 million loss. By our math, after a $12.87 million loss in the first nine months, the outlook implies a fourth-quarter loss of $4.3 million to $7.6 million ($6.0 million at the middle, worse than the third quarter's $4.1 million). Sequence of moves: $0M, -$0.45M, -$5.8M.
❓ Key Questions
What caused the fourth-quarter customer order revisions?
Xos blamed its second straight outlook cut on fourth-quarter order revisions and product mix changes. Investors need to know whether customers cancelled orders outright or switched from higher-priced trucks and PowerHubs to smaller kits.
How much revenue came from Hubs versus Blue Bird powertrains?
The earnings release did not break out revenue by product line. Because Xos had already delivered 96 of its roughly 100 disclosed Blue Bird powertrain orders by March, the third-quarter product split will show if powertrain sales have stalled.
Why did inventory reserve charges jump to $782 thousand?
Inventory reserve adjustments nearly tripled from last quarter's reversal and created a 19-point gap between accounting gross margin and gross margin excluding one-offs. Management should clarify which vehicle or battery parts are being written down.
How will Xos fund the $8 million of current convertible debt?
With $12.1 million in cash, $2.7 million in quarterly free cash burn, and $8.0 million of convertible debt due over the next twelve months, Xos relied on $2.8 million of share sales this quarter. How much more equity dilution is planned?