SES AI Accelerates Pivot to ESS and Drones as Key Milestones Land

Sol-Ark certification, Korea drone-cell scale-up, and first Molecular Universe order mark Q2 2026 progress despite steep stock drawdown.

SES · Earnings Call · 2026-08-11

A Pivot Finds Traction

SES AI is emerging from its EV roots with a sharper focus on energy storage systems and drone cells, and its second-quarter 2026 results show the pivot gaining traction. Revenue rose 46% year over year to $5.1 million, gross margin expanded to 22.6%, and the company reaffirmed its 2026 outlook of $30–35 million. More importantly, the quarter crystallized several commercial milestones that had been building quietly for quarters.

Commercial Milestones

The Sol-Ark certification for UZ's residential batteries is a breakthrough. As CEO Qichao Hu explained, “once you are certified and there's only like less than 5, there's like Enphase, there's Tesla, there's Sol-Ark, then really you're competing with like 3.” — Qichao Hu, Founder and Chief Executive Officer · 2026-08-11 This narrows the competitive landscape dramatically, especially given the recent FCC restrictions on foreign-made inverters. The Sol-Ark partnership also validates the Edge Box software-hardware bundle, which helps customers lower total costs by using multiple cell suppliers.

The drone cell business is scaling fast. The Korea plant is converting to 1 million NDAA-compliant cells per year, with production expected to start in about a month. “We expect to start producing 1 million NDAA-compliant cells per year in about 1 month at our Korea plant.” — Qichao Hu, Founder and Chief Executive Officer · 2026-08-11 Management sees "orders well into 2028" already, and top-5 customers alone need more than 1.5 million cells annually. The NDAA compliance angle is a key differentiator, as many customers want 100% Korean-cell manufacturing. This execution dovetails with earlier guidance, as Hu noted last quarter: “Drones qualification typically takes one to two quarters, and then we started those last year.” — Qichao Hu, Founder and Chief Executive Officer · 2026-04-23

Newer initiatives are also taking shape. Molecular Universe MU-3.0, the company's agentic workflow platform, shipped its first Search-in-a-Box order to a major battery manufacturer. CEO Qichao Hu emphasized the long-term potential:

I do think a lot of investors are underestimating Molecular Universe, especially purely through the lens of near-term monetization.
Qichao Hu, Founder and Chief Executive Officer · 2026-08-11

The platform now targets not just materials discovery but also autonomous labs for full on-premise integration, a feature that could significantly broaden adoption.

Financial Trajectory

The company is still burning cash, but the trend is improving. Operating income for the latest reported quarter was −$18 million, down from −$23 million a year earlier. −$18M vs −$23M a year ago.

CFO Ray Liu noted that the quarter validated commercial momentum: “The improvement was particularly driven by the ESS business, where we saw a higher mix of international sales and continued pricing discipline.” — Yi Liu, Chief Financial Officer · 2026-08-11 He also highlighted that "for the first time, we saw revenue contribution across all product lines — ESS, drone battery cells, materials, and Molecular Universe." On capital allocation, management confirmed a CapEx-light model and $163 million of cash and short-term investments. They are actively evaluating M&A for manufacturing capacity in Korea and Southeast Asia to support drone cell growth.

Stock Context

Despite the operational progress, the stock has been under acute pressure. Over the last 90 days, SES shares have declined 46%, with a deep drawdown from the June high. The market seems to be heavily discounting the potential of the drone and ESS pivot. However, the recent milestones — including the Sol-Ark certification, the Korea capacity scale-up, and the first Molecular Universe order — suggest the company is beginning to execute on its stated strategy.

The transition away from legacy EV OEM programs has been deliberate. As Hu noted in a prior call, “So in terms of next step with the OEMs, we are focusing on selling materials, selling materials that we have developed.” — Qichao Hu, Founder and Chief Executive Officer · 2026-03-04 That repositioning is now bearing fruit across new verticals.

Path Forward

Management reaffirmed full-year revenue guidance of $30–35 million, with a heavier weighting to the second half as drone and materials sales ramp. The company expects net losses to narrow in H2. With $163 million in liquidity, the cash runway appears sufficient to fund the growth initiatives and potential M&A.

The key question is whether the market will reward SES for its execution. The stock's 95% decline from its 2021 peak reflects years of disappointment, but the company is now hitting real commercial milestones. If the drone cell ramp delivers as promised, the current valuation may prove overly pessimistic.