The Head of IR at ECARX. We have about 30 minutes today, including the Q&A. If you have any questions, please submit them in the Q&A section at the bottom of your screen. With that, I will let you guys take over. Thank you.
Thanks very much, Ashley, and thanks for everyone for joining. We appreciate the opportunity to tell you more about ECARX. Let's flip onto the first slide, please. In summary, ECARX is a leading global automotive intelligence company. Very simply, what we provide is the intelligent brain that powers the next generation of software-defined, and increasingly AI-defined vehicles. We're a business that has its heritage in China, and that will remain an important market for us. Today, we're a global business. Our operations are global, our management team sits globally, we deliver for clients and customers globally, and our supply chain is global. We're proud to supply 28 different automotive brands across 18 different automakers, and this is a business that is road-tested. Our technology is in over 12 million vehicles driving around on the road today. We're fundamentally a technology company, and we have deep technical expertise.
Everything from the silicon layer, through the sensor stack, right up to the software that end users interact with on a daily basis. Last year, we generated $848 million of annual revenue, and we've now been EBITDA profitable for the last four consecutive quarters. We'll talk a bit today about the growth drivers in our business, but very simply, they are expanding our existing footprint. That means winning new platforms within our existing automaker customer base, expanding into new geographies, expanding that list of 28 brands to new nameplates, and there's a very strong structural product growth tailwind behind us. That just means with each generation of product that we produce and each generation of vehicle that our customers produce, we are doing more and more within that vehicle, which allows us to grow our share within that vehicle.
I mentioned that we have our heritage in China, but to be very clear, we are not dual-listed. We are not an ADR. We are NASDAQ-listed common stock trading in New York. I'll spend just a moment on our Q2 update, and then I'll go through, along with Peter, a bit more background on the business. We had a strong Q2, which we announced in August. Despite a challenging backdrop for the Chinese automotive sector, we were able to grow our revenue 45% year-on-year. Despite that strong revenue growth, we kept a very tight candle on costs. We were able to reduce our operating expenses by 11% year-on-year. We were able to close to double our gross margin to 19.8% for the quarter, and we were pleased to deliver our fourth consecutive quarter of EBITDA profitability. Moving on to what does ECARX do.
ECARX was founded in 2017 with the vision that the way that vehicles were produced today is inefficient and will change. That has very much been proved out over the last 10 years, but there's a huge amount of ground still to cover. For those not familiar with the automotive sector and how cars are architected, the typical way that a car was, and for a large extent still is produced, is the ECU paradigm, the Electronic Control Unit paradigm. What that means is that all the technology within the car is on individual printed circuit boards, and there can be anywhere from 100 to 150 different ECUs spread out throughout the car, each doing a specific function through a hard-coded bit of circuitry.
That can be something relatively complex, like controlling the transmission, or it can be something very, very simple, such as making the windows go up and down or controlling the seat. This is embedded hardware. It cannot be ever updated because it's purely printed circuit boards. Each of these components is joined together. There's about a mile and a half of wiring within each passenger vehicle driving around of cars, and they communicate using a protocol that was developed when Ronald Reagan was in the White House and Microsoft Windows didn't exist. The thesis behind ECARX is that that's an inefficient way to develop any piece of technology, and that vehicles would change.
The thesis was, which has been proved out, that the right way to design a vehicle is you put a much more capable computer at the center of the vehicle, and that you define all of those functions increasingly, not through individual printed circuit boards, but through software. ECARX provides that solution, and we provide a full end-to-end solution for our customers. All the way from the silicon, which we'll talk about, whether we partner with names like NVIDIA, Arm, Qualcomm, or use our own incubator technology, SiEngine. We have our own middleware. We have our own user interface, which we use both inside and outside China through different solutions. We have our own autonomous solution, our own sensor stack, all the way up to the AI layer, which is becoming increasingly relevant for us as more and more compute moves into the vehicle.
I'll just talk briefly about our management team, and then I'll hand over to Peter to talk about our operations. Our heritage is in China, but now our entire management team sits outside of China. Our founder and Chief Executive Officer, Ziyu Shen, sits here in London at our headquarters, as does Peter Cirino, who you're going to hear from today, sits in London. Dylan Jeng, as a U.S. citizen, grew up in New York. He's based in Singapore, which is our Asia hub and our Asia headquarters. It's where we run procurement from, it's where we hold our IP, and it's where our finance function is based. Earlier this year, we were pleased to add to the board as Chairperson, Lone Fønss Schrøder. Lone is a highly established European business person. She's Danish.
She is on the board of businesses that you would have heard of, like Volvo and IKEA. With that, I will hand over to Peter to talk about our operations.
Over the past many years, ECARX has put a lot of effort in globalizing our operations, our supply chain, and across the board, our capabilities. We have as a strategic target for the business to generate more than 50% of our revenue outside of China by 2030. I think we are well on the way to doing that. We have clear line of sight to our 2028 target of more than 30%, and given the design cycles of the industry that we work in the automotive space, we have a very good handle on our potential and the booked business that backs up our 2030 target. What you see on the chart is our global footprint.
As we grew up in China, we have got a strong capability in many locations in China, and more and more of that capability is servicing the China market in a kind of China-for-China approach. As you can see, the number of other locations on the chart, we have built out capability in the global footprint that help us service, effectively, customers in South Asia, in Europe, and in South America that we are getting closer and closer to, and continue to serve in a great way. Our brands, as we mentioned, cover 28 different brands that we work with across 18 automakers. We are a proven business since in almost, let us say, the last 10 years, we have put ECARX technology onto little more than 12 million vehicles. We continue to scale that annually.
Today, we are producing technology for somewhere in the range of 2.5 million - 3 million vehicles. You can see we have some great iconic brands that we work with quite closely. We recently announced two different wins with Volkswagen Group that span a few of their individual car brands. We have also worked closely with Volvo over the years and have a number of programs with Renault. Then inside of China, you can see we certainly span many of the brands of the Geely organization, but we also have a tight working relationship with the FAW Group through their Hongqi brand, with China Changan Automobile Group, as well as Dongfeng Motor Group. We service a number of key brands both inside of China and in the global marketplace. As a business.
Yes.
Go ahead.
Just picking up on, what is the need that ECARX addresses for our automaker customers? There are four things that I want to really bring out. The first is that if you put yourselves in the shoes of, for instance, a European automaker, what you really need is state-of-the-art technological solutions that excite customers. If you are a European automaker, you have watched the Chinese automakers go from 1% to 10% market share within just a handful of years. While part of that might be competition on price, what they are also realizing is that a huge driver of purchasing decisions when it comes to vehicles is the technology that goes into it. ECARX meets that need. We compete and win in China, which is the most advanced, the most competitive, the most innovative auto tech environment anywhere in the world.
It is the NFL of auto tech, and sometimes it feels like the UFC of auto tech. What that means, the fact that we are able to be the number two supplier in that market, the fact that day in, day out, we are competing and winning in that market, means that when we bring those capabilities out of China and show it to international OEMs, they are blown away by the capability of what our solutions can deliver. The second point is that we are not an assembler of other people's components. We are a deep technology company that offers a fully integrated high-performance solution. It is full stack, silicon, sensors, software, bottom to top, fully integrated plug-and-play for our OEM customers. The third point is the solutions we offer are redeployable and scalable across programs. This is really important to a European or any international OEM.
We provide a solution that works very well for a $25,000 Volkswagen driving around Latin America. We also have a solution that works for a GBP 140,000 Lotus driving around London. We have a diverse product range, entry level to truly next-gen AI-capable, ludicrous gaming PC in a car solutions for whatever automakers need. The third point, we are global. Our number one competitor in China is Huawei. Clearly, they have no ability to compete internationally. We do, and a large part of that is that we operate globally. We are headquartered here in London. We are listed in the U.S., and we operate across 13 countries.
We mentioned how important technology is to our business. One of our key technology partners is Google. We've worked very closely with Google for many years throughout the development of bringing these technologies into the car. Today, we have a number of vehicles where we have the various suite of Google apps, from Google Maps to the Play Store, to now most recently, Google Gemini, running on the edge in the vehicle, in the native environment. This is not your cellphone projecting itself in the vehicle. This is running on the vehicle computer itself. We've become quite close to Google. They're a key partner for us. They're also a demonstration of our capability. They have a super high quality expectation. To be able to launch these apps in the car, you need to have your software pass more than 5 million test cases with zero deviations.
ECARX has demonstrated the capability to do that in numerous vehicles, and we've done it with super rapid speed. We're able to reduce our time to market by more than 50%. We're a close partner with Google. We've launched a number of unique first to market features in the vehicles that we've launched, and we're also an early access reference partner, so we work closely with all of their early access technology. From an SoC perspective, SoCs or chips are one of the strong capability that ECARX brings to the market. In 2018, our founder, along with Arm, built a joint venture to construct automotive silicon, and bring that to market. The company's name was SiEngine. Today, it's a company that's grown up and now has become an independent organization with ECARX remaining its largest shareholder.
Through this endeavor, we developed a deep silicon knowledge, deep capabilities in how to architect silicon, how to get our software running extremely tight with the hardware, and deliver a high performance out of the system solution. That's enabled us, as we work with great partners like Qualcomm and NVIDIA and others in the market, to truly get the best performance out of their solutions and enables us to differentiate ourselves as we show our systems in the marketplace. Mark mentioned growth drivers earlier, and while we touched on a number of them, we wanted to highlight one relative to really compute capability in the car and complexity of the compute solution.
What you see on the chart here is four different generations of computers that we brought to the vehicle, ranging from what today would be a very simple infotainment solution that we brought to market in 2020, to one that we will bring to market in the next two years that is a very high-performance compute solution that's running infotainment workloads, running AI workloads, vehicle workloads, as well as the driving stack. Along this chart, you see we're continually bringing more and more feature set into our product. That enables the automaker to actually reduce those 100 to 150 electronic control units in their car. It allows them to have more hardware simplification. What it does for our product is increases the complexity of the software, increases the performance of the compute.
It not only, I would say, enables our value proposition to become more real to the car maker as we are able to manage those complex technologies in a very challenging automotive environment. It also has the other effect of raising our content per vehicle and the amount of product, the sales price of the product we supply into the car. It plays into our strengths and also yields a financial performance improvement for the business. When you look at the market, while we are on 12 million+ vehicles , we are increasing that number, as I said, 2.5 million to 3 million a year. There are more than 92 million vehicles made globally across a lot of different regions. We have got a fantastic position already carved out in China.
We continue to engage many of the global automakers, but there is a large white space for us to continue to expand our business throughout the world, and we are very focused on bringing more automakers into our ecosystem to be able to become partners and launch additional products on those customers. Then lastly, we want to talk about Robotaxi. Earlier this year, we signed a strategic partnership with a company named May Mobility. They are one of the significant players in the robotaxi business. Obviously, the business of robotaxis is still somewhat in its infancy, but we are starting to see, let us say, that knee in the curve where the businesses are starting to scale. And we constructed a great partnership with May that fundamentally helps them scale their business.
We bring capabilities from our knowledge in the automotive space, from our volume, where we can provide great solutions at a super cost-effective price point. As May Mobility moves from thousands of vehicles to tens of thousands, and someday hundreds of thousands of vehicles in their fleet, we will work closely with them to help engineer cost-effective solutions that can help them scale around the globe. Fundamentally, May Mobility is focused on the overall robotaxi business and bringing their high-performance AI driving software to the vehicle, and ECARX is helping them engineer a cost-effective solution that as they scale up the volume curve, they can be very cost-effective in that environment.
Thanks, Peter. Look, we will just finish up here to just talk a bit about our guidance for the year. We are reiterating here what we said at Q2. We said at Q2 that we have got strength and confidence going into the second half of the year with shipment and volume and vehicle launch momentum expected to continue in Q3 and Q4. And we have reiterated our revenue guidance at Q2, which is $1 billion - $1.1 billion of revenue in 2026, which is around 20% - 30% growth year-on-year. That concludes the presentation. We are hopefully giving you a summary of what ECARX is about. We are really excited to take your questions.
Thank you so much for presenting, Mark and Peter. We really appreciate it. I would like to remind everybody in the audience if you have any questions, you can submit them at the Q&A section at the bottom of your screen. I would just like to kick off with a few questions of my own. Can you help us understand where ECARX sits in the automotive technology stack, and how does that differentiate you from other competitive computing and software providers?
Yeah. She's thinking for the question. I think when you look at our business, one of the strong capabilities that we presented today and went through is how we've built a full stack solution. ECARX brings silicon knowledge, certainly all elements of the software stack from very base level software up through the application layer. But then also we've got technology in the sensor space, so we really can bring a full stack solution into the vehicle, hardware, software, and sensing capabilities. That enables us to work with our customers to provide that comprehensive view. It's not always that we provide the full solution, but we very much understand the technology at a deep level, and it enables us to work well with partners and also work well with customers that we can deliver high performance solutions in an automotive environment.
Right. You've secured 33 vehicle design wins during the second quarter. Can you help us understand the typical timeline that goes from a design win to start of production and ultimately to revenue?
Yeah. This varies quite differently by market. There are times inside of the China business where we may go 12 -1 5 months from project initiation to launch of the vehicle. In the global market, that tends to be more like two to three and half years, and we definitely see trends that those timelines are becoming compressed, that the marketplace in general is aggressively working on improving time to market and time to volume. We're working closely with our customers to enable that.
Right. Can you talk a little bit about what are the biggest remaining milestones you have from today to getting to profitability and getting a free cash flow on board?
Yeah, sure. When you look across our business, we've continued to see revenue scale, I think, quite impressively. We're on track to achieve our guidance this year of $1 billion - $1.5 billion. That's up from about $850 million last year. So we continue to grow the top- line. As a business, we've had three quarters now of positive EBITDA, so the business is highly focused on making sure the capital we invest, we return it effectively, and we're very optimal in the way we deploy capital and the way we spend money inside of our business. Being an automotive business that's operating at scale, being mindful of the way you spend every dollar is certainly very critical. So I think we will see the progress that we've made in recent years continue to stretch, throughout this year and into next year.
I think you'll start to see us continue down that path of profitability.
Peter, I'm just going to jump in and correct. I think you misspoke. In terms of our guidance, our guidance is $1 billion - $1.1 billion this year.
Okay. You spoke about revenue growth, and in the second quarter, you saw about 45% of revenue growth, even with your shipments being relatively flat. Can you talk about how much of that is coming from revenue mix? Going forward, how do you see revenue mix in the coming years as you expand globally as well?
Yeah, we made a decision about a year ago to, let's say, prune our product portfolio and focus on a few more high-value products. That showed up in our 2025 results, but we're also seeing those decisions have a positive impact as we're going through the 2026 numbers. We mentioned earlier a number of the various impacts in our business that help drive revenue growth up, even though maybe unit growth may be flat. For sure, the China market has experienced some challenges this year. I think overall, the market is down a few million vehicles in terms of production. So our unit growth, despite not as strong as it has been in previous years, I think is quite good in a challenging market. We have a little more of our vehicles, our applications are going into export vehicles, so we're seeing the positive trends there.
We also see that complexity shift that I talked through earlier, where there is just a natural increase in complexity and in turn in selling price of our product, over time. So some of that is rolling through our business. I think the third factor, and we've talked about this in a number of our earnings calls, it's well known in the industry the impact of DDR memory in the overall business. While you see impacts in other consumer device spaces that may affect demand, a few hundred dollars of memory in a $10,000 or $20,000 vehicle may not affect demand of that vehicle, but it does have an impact on our selling price. We've been quite effective in working with customers to ensure that that doesn't hurt our bottom- line substantially.
Right. Volkswagen is obviously an important validation of your ability to win businesses with major global OEMs. Where are you in the industrialization process today, and what does success with Volkswagen potentially unlock with other global automakers?
Yeah. As a leadership team, we are tremendously excited and proud about the relationship we have built with the Volkswagen organization. Over the last two years, we have announced two different wins with their organization to span a pretty large set of vehicles. We are continuing to expand our relationship and having a lot of positive talks about new opportunities that hopefully will come to fruition between ECARX and the group. The first program that we won is about a year away from getting to mass production, so we are well down the development path on that product. The product is reaching a very high level of maturity. It is fundamentally moving through the industrialization stages right now. We should see the revenue for those programs starting to hit in the back end of 2027.
Our second program launches in very early 2028, so we have back-to-back launches. Then we have a nice march to see our market share grow with the Volkswagen organization. The team is working incredibly hard on making sure that we deliver high-quality product, very mature software and hardware into the VW system over the next year or so to be able to deliver a great product and a great user experience to their customers.
Great. As vehicles move towards centralized computing architectures, do you expect OEMs increasingly to consolidate functions onto fewer computing platforms? If so, how does the change ECARX content opportunity per vehicle?
Yeah. This is a trend that we've been leaning into as a business since the founding of the organization. If you kind of rewind to when Ziyu founded the company, Ziyu is our current CEO, the first product he brought to market was an infotainment product based on Android software, but it consolidated three or four different smaller electronic control units from the car into a single box. Fundamentally adding more features, providing a better user experience to the driver and the passenger, and providing a cost savings in the end to the car maker. These were the first stages of the Software-Defined Vehicle, and while SDV is a very common term that everybody in the industry uses today, one of the kind of pillars of ECARX was built around that capability.
For sure, as we look into the future, we see very high performance compute units coming to the vehicle. They will run infotainment workloads on them, they will run body control units on them, they will run ADAS solutions inside those computers and many AI workloads in the car as well. The compute inside the vehicle continues to move every cycle through a trend of increasing complexity. We see that trend for sure continuing through the next few design cycles in the industry. That means more complex software for us, it means more complicated hardware. It fundamentally means less computers in the car for the car maker and hopefully, a vehicle that is not only more cost-effective, but even more adaptable.
Today, we see in many cases, especially with software, that when we launch software on the vehicle, that's the beginning of its life cycle, and there's lots of opportunity to add more features and more capabilities to the car over its span of existence. Where in the old days, you'd put a piece of hardware on the car, and that was it. That's what the car had for the life cycle of the vehicle. We're very excited about that trend, and I think it plays well into our strengths.
No, definitely. Just as a follow-up, you've talked about full stack solutions spanning silicon computer platforms, operating systems. Why is owning more of the stack strategically important, and where do you see the company capture the greatest economic value in that?
Yeah. From us as a business, I think what's important is we truly understand the technology throughout the stack. That's one of the significant value propositions that we bring in the market. There are customers in the automotive space that want to buy a full stack solution, and we thoroughly enjoy engaging with them and helping to build out a solution for their vehicle. There are other customers in the industry that want to select certain partners to work on their stack and build a more ecosystem style approach, and we're excited to work in that environment as well. Those trends have changed over years. I think they will continue to evolve as the marketplace moves. We're positioned as a business that we truly understand the silicon very deeply. We know how to put software in an automotive environment to run cost-effectively on that silicon.
We can bring a sensor stack to the vehicle that helps enable ADAS and parking functions, or we can work as a partner with others in the space to bring those solutions into the car.
Right. It's certainly an exciting time for your company. But with that, we're at time, and I would like to thank you very much for sharing your story with us and answering all our questions. I'd like to thank everybody in the audience for listening and spending time with us today. Thank you.
Okay. Thank you, Everyone.