Hesai (HSAI) Is Moving Beyond LiDAR. Can Robotics Become a Second Profit Pool?

Hesai Group (NASDAQ:HSAI) reported second-quarter revenue of RMB860.8 million, up 21.9%, as total LiDAR shipments increased 78.4% to 628,275 units. Net income rose 60% to RMB70.6 million, marking a fifth consecutive quarter of GAAP profitability. Yet the shares fell 5.3% on Tuesday, and the segment results exposed the cost of the company’s next ambition. The LiDAR business generated RMB66.2 million of operating profit, while Strategic Growth Initiatives lost RMB64.0 million, leaving consolidated operating income of only RMB2.2 million.

That creates the central question for Hesai Group (NASDAQ:HSAI): can its profitable LiDAR segment finance a robotics platform without eroding consolidated margins?

Strategic Growth Initiatives, or SGI, generated its first revenue of RMB44.9 million, which management said was led by robotic actuation modules. Hesai raised its 2026 SGI revenue guidance from RMB100 million to RMB200 million-RMB300 million. Management also expects the business to approach $100 million of revenue and reach breakeven in 2027. Meeting that target would establish a more credible path toward an eventual second profit pool.

BULL CASE: LiDAR Scale Can Finance a Broader Robotics Platform

Hesai Group (NASDAQ:HSAI) is expanding from a position of operating strength. ADAS LiDAR shipments rose 60.1% to 485,904 units, while robotics LiDAR shipments surged 193.4% to 142,371 units. Even as lower average selling prices partially offset revenue growth, according to the company, the core LiDAR segment remained profitable.

Commercial evidence is also emerging beyond sensors. Hesai Group (NASDAQ:HSAI) delivered more than 10,000 robotic actuation modules by the end of the quarter and is supplying Sharpa, while its Kosmo spatial-intelligence platform secured orders after prototype deliveries in July. Kosmo is expected to begin generating revenue in the third quarter. These orders show customer interest in Hesai’s expansion into actuation and spatial intelligence.

Hesai Group (NASDAQ:HSAI) reported a company-defined liquidity balance of RMB7.05 billion as of June 30, comprising cash and cash equivalents, restricted cash, qualifying short-term investments, and long-term time deposits. Combined with profitable LiDAR operations and third-quarter revenue guidance of RMB1.10 billion-RMB1.15 billion, this provides substantial funding capacity for product development and manufacturing expansion.

BEAR CASE: The New Business Is Consuming Core Profit

Hesai Group (NASDAQ:HSAI) is already paying heavily for that optionality. SGI’s RMB64.0 million operating loss exceeded its revenue and absorbed nearly all the operating profit produced by LiDAR. Research and development expenses increased 16% to RMB231.2 million, which the company said reflected incremental SGI investment.

Gross margin declined to 40.1% from 42.5%, which the company attributed to a larger contribution from lower-margin products. Consolidated operating income fell 90.4% even though net income increased, with interest and investment income supporting results below the operating line. If LiDAR pricing keeps declining while SGI spending rises, Hesai Group (NASDAQ:HSAI) may have a thinner operating-profit cushion than its shipment growth suggests.

The strategy also requires Hesai Group (NASDAQ:HSAI) to execute across sensors, actuation hardware, spatial data and cloud services. The 2027 breakeven target depends on rapid commercialization in markets that are still developing.

INSIDER MONKEY’S HEDGE FUND DATA

Insider Monkey’s hedge fund database shows that 22 hedge funds held positions in Hesai Group (NASDAQ:HSAI) at the end of the first quarter, compared with 24 funds at the end of the preceding quarter. These figures do not capture trades made after that date or investors’ reactions to the August 18 results.

CONCLUSION

Hesai Group (NASDAQ:HSAI) has earned the financial capacity to pursue robotics, but it has not yet demonstrated attractive economics outside LiDAR. Robotics can become a second profit pool if revenue scales toward management’s target and losses narrow without further weakening consolidated margins. Until then, SGI offers strategic upside, but remains an expensive expansion rather than a proven profit engine.

While we acknowledge the potential of HSAI as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: ConocoPhillips (COP): Wall Street Sees More Upside Despite Leadership Shakeup and Here is Why Chevron (CVX) is a Favorite Among Hedge Funds

Disclosure: None. This article is originally published at Insider Monkey.