Key Takeaways
- Third-quarter revenue outlook of approximately $5 billion fell short of the $5.3 billion Wall Street consensus
- Second-quarter results showed revenue of $4.7 billion, representing 69% year-over-year growth, with adjusted earnings at breakeven
- J.P. Morgan shifted its rating from Overweight to Neutral while reducing the price target from $7.00 down to $4.50
- Gross margin on vehicles reached 18.5% during Q2, though analysts warn rising battery and chip costs will create headwinds
- The investment bank dramatically reduced its 2027 adjusted earnings outlook by 52%, now forecasting a net loss of 975 million yuan
The Chinese electric vehicle manufacturer posted second-quarter revenue of $4.7 billion, marking a 69% increase compared to the same period last year, while achieving breakeven on an adjusted profit basis. This performance slightly exceeded analyst predictions, which had called for a loss of 4 cents per share on revenue of $4.8 billion.
However, the positive earnings report wasn’t enough to lift sentiment. NIO’s American Depositary Receipts dropped 6.4% during overseas trading sessions and continued declining approximately 1.4% to $4.17 in Tuesday’s U.S. trading. Prior to the earnings release, shares had already tumbled 17% year-to-date and 34% over the trailing twelve months.
The primary concern for investors centered on third-quarter projections. Management provided guidance calling for roughly $5 billion in revenue, significantly trailing the $5.3 billion consensus among analysts. This substantial shortfall triggered the selloff.
The company projects vehicle deliveries of approximately 109,500 units during Q3, suggesting around 37,500 deliveries for September alone. Year-to-date through August, NIO has delivered 262,893 vehicles in 2026, representing 58% growth versus the prior year.
Chief Executive William Bin Li emphasized positive traction across the company’s product portfolio. The refreshed ES8 model achieved its 140,000th unit delivery milestone within just 335 days. Meanwhile, the ES9, which launched in May 2026, has generated solid demand.
Li also spotlighted the ONVO brand’s leadership position in China’s large SUV segment priced between $30,000 and $45,000, while noting that Firefly has maintained the number one market share position in China’s premium small-car category for 15 consecutive months.
Investment Bank Reduces Recommendation and Price Objective
J.P. Morgan moved its rating on NIO shares to Neutral from Overweight on Tuesday, simultaneously lowering its price objective from $7.00 to $4.50. The firm pointed to sluggish consumer demand in China’s passenger vehicle market, intensifying price competition, and minimal international market presence as reasons for the downgrade.
While the firm recognized NIO’s Q2 vehicle gross margin of 18.5% as encouraging, particularly considering approximately 4 billion yuan in per-vehicle cost inflation versus late 2025 levels, analysts cautioned that additional cost pressures loom on the horizon.
Company leadership itself warned of an additional 2,000 to 3,000 yuan per vehicle cost increase expected during the second half of 2026, primarily attributed to batteries and memory chip components. Given the competitive landscape, transferring these increased costs to consumers will prove challenging.
J.P. Morgan reduced its 2026 revenue projection by 5% and its 2027 estimate by 9%. The firm’s adjusted net income forecast underwent a dramatic revision, now anticipating a 975 million yuan loss in 2027, a stark contrast to its previous prediction of 2.52 billion yuan in profit.
Updated Financial Projections
The investment bank also scaled back its delivery expectations, now forecasting 430,000 vehicles in 2026 and 480,000 in 2027, translating to growth rates of 32% and 12% respectively. Analysts anticipate China’s overall passenger vehicle demand will remain flat or decline by as much as 5% in 2027.
Against this challenging backdrop, NIO’s ambitious long-term objective of achieving 40% to 50% volume growth appears increasingly difficult to attain. J.P. Morgan indicated a preference for BYD and Geely among Chinese automotive manufacturers, citing their superior earnings stability and international expansion prospects.
NIO recorded combined deliveries of 71,770 vehicles during July and August. The company’s full-year delivery ambitions now face steeper obstacles given the competitive intensity and demand challenges characterizing the Chinese market.
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