Leapmotor: Its profit guidance has shrunk sharply, and can it only break through the current dilemma by relying on overseas expansion?

Leapmotor released its Q2 2026 financial report after the Hong Kong stock market close on August 25, Beijing time. Overall, the performance of this financial report is decent, with both revenue and profit beating market expectations. However, due to factors such as rising raw material prices and product structure changes, the management revised down the full-year net profit guidance from 5 billion yuan to about 3 billion yuan. The details are as follows:

1. Revenue exceeded expectations, and average selling price of vehicles continued to rise quarter-on-quarter: In the second quarter, Leapmotor's total revenue reached 27.3 billion yuan, a year-on-year increase of 92%, exceeding the market expectation of 25.9 billion yuan, which was mainly driven by the higher-than-expected quarter-on-quarter increase in the average selling price of vehicles. The average revenue per vehicle of Leapmotor in this quarter was 111,000 yuan, continuing to rise by 13,000 yuan from 98,000 yuan in the previous quarter. Although the low-priced A10 (priced in the range of about 60,000 to 90,000 yuan) achieved explosive sales, driving the proportion of the A-series in the vehicle model structure to rise by about 22 percentage points quarter-on-quarter to 26.1%, it was offset by the following factors:

a.High-priced D-series drove the vehicle model structure upward: In the second quarter, driven by Leapmotor's hit model D19 (a large SUV priced from 219,800 yuan to 269,800 yuan), the proportion of the highest-priced D-series rose by about 7.8 percentage points quarter-on-quarter to 7.9%.

b.Accelerated overseas expansion continued to drive the growth of carbon credit revenue: In the second quarter, Leapmotor's overseas sales reached about 55,000 units, continuing to increase by about 35% quarter-on-quarter. The accelerated overseas expansion drove the carbon credit revenue to keep rising quarter-on-quarter in this quarter.

2. Gross margin continued to rise quarter-on-quarter, in line with market expectations: In the second quarter, Leapmotor's gross margin was 12.6%, up 3.2 percentage points quarter-on-quarter. The gross profit per vehicle also rose by 5,000 yuan to 14,000 yuan, which was mainly due to:

a.Scale effect was partially released: In the second quarter, Leapmotor's sales reached 246,000 units, up 124% from the low point in the first quarter and 84% year-on-year, which was mainly driven by the explosive sales of new models A10 and D19, and the scale effect was partially released.

b.Revenue from high-margin carbon credits increased: As overseas expansion continued to accelerate, the high-margin carbon credit revenue also rose quarter-on-quarter, and this part of the revenue is almost pure gross profit.

c.The gross margin of high-priced D19/D99 is relatively higher: Their proportion in the vehicle model structure rose quarter-on-quarter in the second quarter, driving the gross margin upward.

d.The cost of upstream raw materials is still rising: In the second quarter, Leapmotor was still affected by the rising prices of upstream raw materials (aluminum, iron, storage, batteries, etc.), but the impact was partially hedged by the above factors, so the final gross margin still achieved a quarter-on-quarter increase.

3. Three types of expenses continued to increase quarter-on-quarter, but the leverage effect of sales volume was released: In the second quarter, the total three expenses of Leapmotor continued to rise quarter-on-quarter, among which:

a.R&D expenses reached 1.28 billion yuan, up 240 million yuan quarter-on-quarter, which was mainly invested in: continuous centralization of architecture — the Leap 4.0 central domain control architecture was first equipped on D19, relying on dual 8797 chips and ultra-large memory, creating the first super synergy of cockpit-driving integration, breaking the barrier of deep synergy between the cockpit and intelligent driving of traditional models, realizing one brain to manage all vehicle intelligence; intelligent driving — urban navigation assisted driving has been opened for all Leapmotor models of series A, B, C and D, and brand new platform technology and assisted driving solutions will be released in September 2026 to upgrade the intelligent driving experience.

b.Sales expenses reached 1.31 billion yuan, a sharp increase of 630 million yuan quarter-on-quarter, exceeding the market expectation of 1.1 billion yuan: the sharp increase in Leapmotor's sales expenses in the second quarter was mainly due to the increased investment in publicity for the intensive launch of new models, and the continuous acceleration of channel deployment. The number of domestic sales outlets increased by a net of 71 to 1,064, and the number of overseas channels also reached 1,010, of which about 90% are located in Europe.

Finally, although the total three expenses increased by about 1 billion yuan quarter-on-quarter, due to the release of the sales leverage effect, the three-expense ratio instead dropped by 8.4 percentage points quarter-on-quarter to 11.6%.

4. Net profit turned positive: In the second quarter, Leapmotor's attributable net profit was about 600 million yuan (turning from loss to profit quarter-on-quarter, with a loss of 390 million yuan in Q1), and the net profit margin was 2.2%, which was mainly due to the better-than-expected revenue and the release of the sales leverage effect.

View from Dolphin Research

Overall, Leapmotor's performance this quarter is decent. Revenue exceeded market expectations due to the continued upward vehicle model structure (driven by high-priced D-series models) and the quarter-on-quarter increase in carbon credit revenue (accelerated overseas expansion). The gross margin finally got out of the low point in the first quarter (rising from 9.4% in Q1 to 12.6% in Q2). Benefiting from the hot sales of high-priced and high-margin D-series, the release of scale effect and the recognition of high-margin carbon credit revenue, it rebounded by 3.2 percentage points quarter-on-quarter to 12.6%, which was in line with the 12%-13% guidance given by Leapmotor in the previous quarter.

However, due to the impact of rising raw material prices, Leapmotor revised down its full-year gross margin and profit guidance:

a. The full-year gross margin guidance was lowered from 14%-15% to 13%-14%, and the gross margin of complete vehicles was lowered to 10%-11%.

b. Based on the lowered gross margin guidance, the 2026 full-year net profit guidance was revised down from 5 billion yuan to 3 billion yuan.

c. But the full-year overseas sales guidance was raised: from January to July 2026, Leapmotor has achieved 114,000 units of overseas sales (corresponding to an annualized volume of about 195,000 units). Leapmotor raised its 2026 overseas sales guidance from 150,000 units to 200,000 units, and raised the 2027 target to 350,000-400,000 units, continuing to achieve doubling growth.

In the short term, Leapmotor revised down its full-year net profit guidance from 5 billion yuan to about 3 billion yuan, the market needs to digest the downward revision of profit expectations, and the stock price will still face pressure in the short term. The downward revision of profit is mainly due to the rising raw material costs (power batteries, storage chips) and the structural impact brought by the increasing proportion of overseas sales (the average price of current export models is relatively low).

According to the current sales progress (cumulative sales of 356,500 units in 1H26, up 60.8% year-on-year), referring to the 1.05-1.1 million unit sales target previously set by Leapmotor, Dolphin Research conservatively estimates that it is not difficult for Leapmotor to achieve 950,000-1,000,000 units of sales in 2026 (up 59%-68% year-on-year, including 750,000-800,000 units in domestic market and 200,000 units in overseas market). The overseas sales volume in 1H26 has reached 96,300 units (up 373% year-on-year), and the 200,000 units full-year overseas target is highly certain.

Upward catalysts cannot be ignored either: The high-end transformation of D19 has achieved initial results (sales exceeded 7,000 units in May, and the target gross margin of D-series is 20%+); The company will release brand new platform technology in September (new generation autonomous driving architecture, battery and electric drive technology upgrades), which is expected to bring premium to intelligent valuation; Q4 will enter the peak sales season, coupled with the volume release of D99 (launched in June, with a higher-than-expected pricing, the entry price is directly 40,000 yuan lower than the pre-sale price), the sales volume has the potential to further exceed expectations.

In the medium and long term, Leapmotor's strong cost reduction capability (full-stack self-research, platform-based procurement) and large-scale overseas expansion (overseas sales in 1H26 exceeded the full-year volume of 2025, and overseas targets have been raised repeatedly) are the core factors to stabilize its gross profit from vehicle sales.

Once the prices of storage and bulk commodities ease, coupled with the cost reduction effect of self-developed cells, the gross margin is expected to rebound to the level of 14%-15% in the long run. In addition, the localized cooperation with Stellantis in Spain is progressing smoothly (the Madrid factory is expected to be sold, and the localized production of 50,000 units is expected in 2027). Technology licensing revenue and parts external supply mode (FAW Hongqi G117 project will be mass produced in Q4, STLA platform cooperation) all provide support for the company's value.

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This article is from WeChat official account"Dolphin Research" (ID: haituntouyan), author: Dolphin Analyst, published by 36Kr with authorization.