Hello! I'm your financial analyst friend. Today, we're going to talk about a company called Horizon Robotics.
If you follow the news in the new energy vehicle sector, you might have heard of them. They're one of the leading players in the development of "intelligent driving chips," which, simply put, are the "brains" that power cars. Recently, they released their financial results for the first half of 2026, and on the surface, they look quite impressive: they made a profit of 3.7 billion yuan and turned from a loss to a profit. However, if you dig deeper, you'll find some concerning issues.
It's like a restaurant owner telling you that business is booming this year and they've made a lot of money. But when you look at the accounts, you realize that most of the profit came from selling materials for restaurant renovations or from fluctuations in real estate prices. In contrast, the actual food sales didn't increase much, and due to discounted menu prices and customers delaying payments, the cash on hand is getting smaller and smaller.
Below, I'll break down the logic behind these financial results into five key points to show you the challenges Horizon Robotics is facing.
1. "Turning Losses into Profits" is a Misleading Appearance: The Core Business Is Still Losing Money
First, we need to dispel a major misconception: Is Horizon Robotics really making money?
The financial report shows a net profit of 3.784 billion yuan, which looks impressive. But please note that this money did not come from selling chips. The huge profit came from a financial maneuver: Horizon Robotics granted a type of loan called "convertible debt" to a department of Volkswagen called CARIAD. Due to stock price fluctuations, this loan resulted in a significant "fair value change gain" on the books. It's like lending money to a friend with the agreement to convert it into stocks later. If the stock price fluctuates greatly, it might seem like you've made a lot of money on paper, but that's just nominal wealth and doesn't actually put any cash in your pocket. It has nothing to do with how many chips they sold or how much they sold them for.
If we remove this " inflated" figure and look at the adjusted net loss, which truly reflects the company's operational performance, the situation is much more dire:
- 2023: Loss of 1.635 billion yuan
- 2024: Loss of 1.681 billion yuan
- 2025: Loss of 2.812 billion yuan (an increase in losses)
- First half of 2026: Still a loss of 1.671 billion yuan, a 25.4% increase from the same period last year
Conclusion: Horizon Robotics' core business (chip sales and solution development) is not only not profitable but is losing more money. The so-called "profit" is just an illusion created by financial tricks.
2. The Pace of Money Burn is Alarming: Cash Reserves Are Dwindling Quickly
Since the core business isn't profitable, where is the money coming from? From financing and previous accumulations. However, the current rate of money burn is concerning for how long their "fuel tank" will last.
- R&D Is a Bottomless Pit: The chip industry is known for its high costs. Horizon Robotics spent 2.755 billion yuan on R&D in the first half of the year, which is 700 million yuan more than their total revenue for that period (2.055 billion yuan). In other words, for every 1 yuan in sales, they spent 1.34 yuan on R&D. While investment in technology is necessary, such high R&D costs become a significant strain on cash flow when revenue growth slows down.
- Cash Is Losing Speed: As of the end of June 2026, Horizon Robotics had 14.9 billion yuan in cash and cash equivalents. Compared to 20.2 billion yuan at the end of 2025, this represents a decrease of 5.3 billion yuan, a decline of over 26%.
- Slow Payment Collection: Even worse, the money from sales isn't coming back. Accounts receivable (money owed by customers) increased from 1.76 billion yuan to 2.43 billion yuan, a growth rate of 37.9%, which outpaced revenue growth of 32.9%. This means that a significant portion of the sales revenue hasn't been collected, and the balance of accounts receivable is 1.2 times their half-year revenue, a dangerous sign in business terms, indicating that their bargaining power with customers may be weakening, or they might be agreeing to longer payment terms to secure orders.
Conclusion: Horizon Robotics is in a tough situation with high investment, low returns, and slow payment collection. If they can't start generating more cash soon, they could face financial difficulties.
3. The Cost of "Making Intelligent Driving More Accessible": Discounting Prices to Gain Market Share Has Drained Profits
Horizon Robotics' core strategy in recent years has been to make advanced driving chips more affordable, starting with luxury cars and then expanding to cheaper models. This strategy was very successful, helping them gain a huge market share (from 2.9 million units sold to 4.01 million units). However, there's a price to pay:
1. Limited Room for Price Cuts: They could rely on price cuts to boost sales, but with prices already low, there's little room for further reductions. As a result, the growth rate of shipments in the first half of 2026 dropped from 38.8% last year to 12.1%.
2. Sharp Drop in Gross Profit Margin: To gain market share, their gross profit margin on hardware (chips) dropped from 46.4% in 2024 to 34.5% in 2025. Although the overall gross profit margin rebounded to 66% in the first half of 2026, this was mainly due to the higher-profit "licensing business." Their main chip sales business hasn't seen a recovery in profitability.
3. Payment Terms as Part of the Price War: Car manufacturers are now demanding cheaper chips and payment after delivery, forcing Horizon Robotics to accept longer payment terms, which further strains their cash flow.
Conclusion: By sacrificing profits, Horizon Robotics gained market share. Now they have more market share, but they've lost profits, and there's little room for further price cuts. This situation of increasing revenue without increasing profits is exactly what the capital market dislikes.
4. The Biggest Concern: Customers Starting to Develop Their Own Chips, Eroding Their Competitive Advantage
In addition to financial issues, Horizon Robotics faces a strategic risk: their customers are becoming their competitors.
- The Case of BYD: BYD is one of their largest customers, using Horizon Robotics' chips in many of their vehicles. However, BYD has released its own 4nm intelligent driving chip, "Xuanji A3," and has started mass production. This means BYD may no longer rely on Horizon Robotics in the future.
- Industry Trend: Leading car manufacturers like NIO and Li Auto are also developing their own chips. For car companies, intelligent driving is a key selling point, and they don't want to depend on external chip suppliers for this critical technology.
It's like you own a business that supplies exclusive sauces to restaurants. Suddenly, several major restaurants say, "We can make our own sauces, so we don't need yours anymore."
Furthermore, in the high-end market (such as urban navigation assistance), Horizon Robotics has a 22.82% market share, second only to NVIDIA's 39.43% and Huawei's 16.89% (with rapid growth). In this segment, the competition focuses on computing power, algorithms, and ecosystems. Horizon Robotics is under pressure from NVIDIA, Huawei, and other car manufacturers developing their own chips.
Conclusion: Horizon Robotics' strategy of lowering prices worked well in the mid-to-low-end market, but they lack a competitive advantage in the high-end market. Moreover, as car manufacturers' technical capabilities improve, their reliance on external chip suppliers is decreasing, eroding their competitive advantage.
5. Future Paths: Three New Approaches to Survive
Facing these challenges, Horizon Robotics is exploring new growth areas through three main strategies: licensing, HSD (high-level driving solutions), and expanding overseas:
1. Licensing:
- Advantages: High margins and no need to produce chips themselves.
- Disadvantages: Few car companies can afford or understand this advanced technology, limiting the market potential. If most of the revenue comes from one-time licensing fees, future growth will be unstable. The key is whether Horizon Robotics can create an ecosystem that makes it difficult for developers to switch to other suppliers, similar to ARM's success.
2. HSD Solutions:
- Advantages: Higher value per vehicle, moving from selling chips to selling a complete "chip + algorithm + system" solution.
- Disadvantages: Potential conflicts of interest, as Horizon Robotics both sells chips and provides solutions, which could lead to competition with their customers.
3. Expanding Overseas:
- Advantages: Access to larger markets, such as those served by Chinese car companies or global players like Volkswagen and Toyota.
- Disadvantages: Fierce competition from established players like NVIDIA and Mobileye, and a long certification process with high entry barriers.
Summary and Outlook:
Horizon Robotics is a company with strong technical capabilities and a good strategic vision. They've successfully made advanced driving chips more affordable, driving industry adoption. However, it's easier to lower prices than to protect profits or prevent competitors from developing their own chips. Currently, they're like a racing car on a highway: fast (revenue growth), but with a rapidly dwindling fuel tank (cash) and severely worn tires (declining gross profit margins), and a narrowing road ahead (increasing competition from customers developing their own chips).
The market's focus now shifts from whether Horizon Robotics can continue to grow to whether they can find a more profitable, sustainable business model that customers cannot do without. If they can't establish a scale and profit from these new strategies soon, they may face a cycle of losing more money and having difficulty raising funds.
For investors and observers, two key indicators to watch are:
1. Whether operating cash flow turns positive.
2. How quickly leading car companies (like BYD) are developing their own chips.
These two indicators will determine whether Horizon Robotics can stay ahead or fall behind.