Prepared remarks
Hello, welcome to Ouster's second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After today's presentation and remarks, there will be an opportunity to ask questions. If you would like to ask a question during this time, simply press star followed by 11 on your telephone keypad. If you would like to withdraw your question, press star one one again. The call today is being recorded, and a replay of the call will be available on the Ouster investor relations website an hour after the completion of this call. I'd now like to turn the conference over to Chen Geng, Senior Vice President, Strategic Finance & Treasurer. Please go ahead.
Thank you, operator, good afternoon, everyone. Thank you for joining our second quarter 2026 earnings call. Today on the call, we have Chief Executive Officer Angus Pacala, and Chief Financial Officer Ken Gianella. As a reminder, after the market closed today, Ouster issued its financial news release, which was also furnished on a Form 8-K and is posted in the investor relations section of the Ouster website. Today's conference call will be available for webcast replay in the investor relations section of our website. I want to remind everyone that on this call, we will make certain forward-looking statements. These include all statements about our competitive position, product advantages and growth opportunities, anticipated industry trends, our business and strategic priorities, our operating expense targets, the impact of our recent acquisition, the development and expansion of our products, our products' capabilities and performance, and our revenue guidance for the third quarter of 2026 and long-term financial targets. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause actual results and trends to differ materially from those contained in or implied by these forward-looking statements are set forth in the second quarter 2026 financial results release and in the quarterly and annual reports we filed with the Securities and Exchange Commission. Any forward-looking statements that we make on this call are based on assumptions as of today. Other than as may be required by law, Ouster assumes no obligation to update any forward-looking statements, which speak only as of their respective dates. In today's conference call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures discussed today is included in the financial results release. I would now like to turn the call over to Angus.
Hello, everyone, and thank you for joining us today. I'll start with a brief recap of the quarter and an update on our strategic priorities before Ken covers our financial results in more detail. We delivered exceptional results for the second quarter, generating $55 million in revenue and shipping over 17,000 sensors. This marks our 14th straight quarter of product revenue growth and is a testament to the strength of our unified sensing and perception platform. We had strong contributions from our industrial and smart infrastructure verticals for use cases in warehouse automation, yard logistics, port automation, mining, and ITS. Across the world, customers have continued to scale their investment in Physical AI. Our smart infrastructure business continues to scale, with major deployments in New Jersey and Georgia to support the 2026 FIFA World Cup. The New Jersey DOT deployed Ouster BlueCity to create a digital traffic twin across 42 highway locations around MetLife Stadium. In Georgia, we deployed BlueCity at an additional 30 intersections across the Atlanta area, including around Mercedes-Benz Stadium. Upon the conclusion of the World Cup, BlueCity will continue to provide high-fidelity traffic monitoring, automated data analytics, and real-time safety alerts designed to optimize traffic and enhance the safety of everyday residents in these locations. Ouster sensors are helping industrial customers like AIM Intelligent Machines improve safety and productivity for autonomous operations in complex, unstructured environments. AIM's autonomy kits retrofit heavy machinery into AI-powered fleets that maximize safety and productivity. We expanded our footprint in the defense industry with a strategic agreement with ARGUS Interception and announced a collaboration with FieldAI to leverage Rev8 to power the next generation of robotic autonomy in markets like construction, mining, and security. The second quarter was also a period of strategic execution and expansion for Ouster. We brought the world's first native color lidar sensors to customers with Rev8 and set a new standard for wrist-mount stereo vision with the ZED X Nano. We also deepened our partnership with NVIDIA, bringing Rev8 to the NVIDIA DRIVE and Jetson platforms. With dedicated NVIDIA toolkits supporting direct data ingestion and drivers designed to leverage Jetson Orin and Thor, Ouster is providing customers with a production-ready ecosystem that is critical to solve the most complex challenges in Physical AI. We are actively scaling our Rev8 production lines and anticipate reaching production volumes by the end of the quarter. As previously announced, we expanded our partnership with Benchmark to support Rev8, establishing manufacturing capacity that ultimately exceeds 100,000 units per year. We also achieved Build America, Buy America compliance for Rev8, which makes Rev8 and BlueCity eligible for deployment in U.S. government-funded infrastructure upgrades. Finally, we continue to bolster our strong operational execution with disciplined financial management. Building upon an already resilient balance sheet, the additional capital we raised provides us with the ability to fully fund our current business plan while providing immense strategic flexibility. This strength gives our customers ultimate confidence in our ability to serve their needs and serve as their foundational Physical AI partner. Turning to our 2026 strategic priorities, we progressed across all three key focus areas, revolutionizing our lidar camera and AI compute products, extending our leadership in Physical AI solutions, and executing towards profitability. The launch of Rev8 was the most important product release in Ouster's history and a pivotal moment for Physical AI. Featuring the world's first native color lidar, Rev8 has set a new industry benchmark and delivers the holy grail for 3D spatial perception. Feedback from customers has been electric, calling Rev8 a massive leap in sensing capability that provides unprecedented situational awareness to scale next-generation Physical AI solutions where it matters most. Engineered for functional safety and built for scale, Rev8 is driving commercial momentum across all of our verticals. From the harsh, demanding environments of mining and construction sites to the dynamic, complex worlds of robotaxi fleets and statewide traffic networks across the country, Rev8 is cementing Ouster as a core perception partner for market leaders scaling real-world autonomy. Customer response has been immediate, highlighted by multiple million-dollar-plus orders, including the world's largest manufacturer of heavy machinery, a leading developer of autonomous agriculture equipment, and a top autonomous vehicle provider. During the quarter, we secured a significant order to provide the Utah Department of Transportation with its largest lidar deployment to date, covering several 100 intersections across the state. With native color and industry-leading performance, Rev8 is solidifying our market leadership and deepening relationships across these and other key accounts. Our acquisition of Stereolabs is already proving strategic and financial value. The ZED X Nano was the most successful launch in Stereolabs' history and expanded our reach into industrial and robotics markets, winning new sockets requiring smaller form factors. By delivering high resolution and ultra-low latency capture pipeline and millimeter accuracy, we're giving roboticists a major upgrade to their vision systems, enabling machines to sense, think, act, and learn with unprecedented precision. With a unified lidar camera and AI compute stack, Ouster is providing customers with the world's most capable perception platform. We also upgraded our Gemini and BlueCity software solutions with Rev8, opening up a new level of spatial intelligence. This breakthrough introduces the industry's first native color lidar detection system, simultaneously capturing both color and 3D depth information without the need for complex calibration. Powered by the Rev8 OS1 Max, we released advanced detection for BlueCity, delivering double the range and resolution of previous generations and achieving multimodal detection and classification up to 500 ft. By providing unmatched situational awareness and delivering precise, high-fidelity digital traffic twins, Rev8 opens up higher speed markets and allows transportation departments to further optimize signal timing based on real-time data to improve traffic flow while reducing their total cost of ownership. Privacy is paramount for this market, and we designed BlueCity with system-level privacy features at the edge to reduce the collection of identifying features. Ouster BlueCity has quickly become a premier traffic management solution, including the three largest lidar-based deployments in the U.S., and our goal is to be the number one provider of smart infrastructure solutions. Since its launch in 2023, we have established Gemini as a standard for sensing and perception, providing the real-time digital traffic twin necessary for our smart infrastructure customers to increase their efficiency and safety. We see an enormous opportunity in our other verticals to provide software solutions for everything that moves in the physical world. Similar to smart infrastructure, these customers need a less technical, turnkey solution that is easy to deploy. We will continue to invest in products and solutions that broaden our market opportunity and help accelerate our customers' development. Finally, our strong results are aligned with our long-term financial framework. We are making strategic investments to expand our addressable market while maintaining our path to profitability. With that, let me now turn the call over to Ken, who will provide more context on our second quarter financial results.
Thank you, Angus. Hello, everyone. In the second quarter, we delivered a record quarter of revenue and number of sensors sold and introduced multiple new products to the market. These are important proof points in our continued execution against both our financial and operational goals. These results reinforce our confidence in the long-term financial model, supported by continued operating leverage and strong customer demand across our served markets. Turning to the second quarter financial performance. Operating results were again strong, with revenue of $55 million. This represents an increase of approximately 56% compared with the second quarter last year. The industrial vertical was the largest contributor to the second quarter revenue, followed by smart infrastructure. We shipped over 17,000 sensors, a new quarterly record, which included over 9,000 lidar and over 8,000 camera sensors. Royalty revenue in Q2 was approximately $1.9 million. For the first half of the year, royalty revenue was approximately $2.2 million. We continue to estimate total royalty revenue in 2026 to be around $5 million for the full year. GAAP gross margin was 49%, up from 45% in the same quarter last year. A one-time refund was included in our cost of goods sold, which positively impacted gross margin by approximately 1,000 basis points. As a reminder, in the second quarter of 2025, we had a one-time refund, which positively impacted us by approximately 500 basis points. We do not expect these one-time benefits to reoccur in our ongoing normal operations. GAAP operating expenses were $47 million, an increase of approximately 10% from the second quarter last year. The increase was primarily due to the addition and integration of Stereolabs for a full quarter, new product introductions with the Rev8 and ZED X Nano, and recent investments in expanding our Physical AI solution portfolio. We are closely monitoring our operating expenses and anticipate the third quarter expenses to be 5%-8% higher year-over-year. Our Adjusted EBITDA in Q2 was a -$4 million, which was an improvement of approximately $1 million from the second quarter last year. Turning to our balance sheet, we ended the quarter with cash equivalents, restricted cash, and short-term investments of $263 million and no debt. This figure includes approximately $98 million raised in the second quarter through our previously discussed ATM program. At the beginning of the third quarter, we further strengthened our cash position through a successful offering of common stock, which closed on July 6th. Given the favorable market conditions at the time and corresponding strong investor demand, we closed a common stock offering that generated approximately $191 million in net proceeds. Upon completion, we had approximately 72 million shares outstanding. This strategic financing decision gives us additional capital to support our growth objectives, invest in opportunities we see across our markets, and further strengthen what is already one of the industry's strongest balance sheets. After this most recent financing, we do not expect to need additional capital to fund our current operating plan on our path to profitability. Turning to our guidance. Total revenue for the third quarter of 2026 is expected to be in the range of $54.5 million-$57.5 million, with the ramp of Rev8 to production volumes expected to occur throughout and into the latter part of the third quarter. Our full-year revenue expectations remain unchanged. The acquisition of Stereolabs, introduction of Rev8 and ZX Nano, and our expanding software and AI solutions are great proof points towards our continued investment to be a leader in sensing and perception for Physical AI. Our execution continues to build confidence in our long-term financial model. I'll now turn the call back to Angus for his closing remarks.
The second quarter continued the momentum of the most transformative year in Ouster's history. With the landmark launch of Rev8 and the ZX Nano, the integration of Stereolabs, a strengthened partnership with NVIDIA, and significant strategic flexibility provided by our capital raises, Ouster is further extending its leadership as the foundational end-to-end sensing and perception platform for Physical AI. Our focus remains on providing the industry's most performant products and solutions, dramatically simplifying system integration, and accelerating time to market for the world's most innovative companies. The resounding customer feedback we received enforces our strategic path. I'd like to open the call up for Q&A.
Questions and answers
Thank you. We will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Colin Rusch of Oppenheimer. Your line is now open.
Thanks so much, guys. Can you give us a sense? You mentioned some of these orders that you're talking about. The bookings and kind of backlog that you guys are looking at, some order of magnitude or quantification of what you're looking at that's already been kind of put into your expectations for revenue ramp over the next couple of years.
Hi, Colin. Good question. We gave a bit of color as it pertains to this year, Q3 and Q4. Our revenue expectation remains on track, given the really strong reception to Rev8. It's been one quarter with Rev8 out being sold, and we've already racked up very significant wins with Fortune 500 companies, millions of dollars worth of orders. Now we're ramping production to ship the product at volume scale this quarter. Rev8 will fuel the core of our business for, in my expectation, the next five years. We have very strong signal on that being the case, given the reaction that we've already had and how much better the Rev8 platform is and how expanded the Rev8 platform is with the long-range Max sensors and RGB sensing versus Rev7, which has been the core of our business for so long. Adding on top of that, Stereolabs is having an exceptional year. We're sitting on 50%+ year-over-year product revenue growth as a company and feeling very bullish about both this year and the future of Ouster. Not giving exact bookings numbers on the full year quite yet, but feeling really great about the business.
Thanks. Can you just talk about the competitive landscape a little bit? Now that you've got a couple of very differentiated capabilities in the sensors, coupled with the software capability, can you talk about how competitive some of these bidding efforts are and how you're thinking about pricing on a relative basis?
I view lidar as not an easy business. Physical AI is not an easy business. These are new technologies that require significant investment, and I visualize this as a flywheel of investment that gains momentum slowly but considerably year in and year out for any company that's able to be consistent and focused in their strategy and investment over the long term. NVIDIA is a great example of this, sticking to their guns and investing in edge compute and seeing the results. That was a strategy compounded over decades, and I view Ouster the same way. We are sticking to what we do best: cutting-edge technology and sensing perception, whether it's a camera, a lidar, the compute, and the algorithms that run on them. This is a virtuous cycle that has an immense amount of institutional inertia that gives us an edge today and accelerates our momentum for the next five years. In terms of competitors catching up, given the amount of investment needed, I don't see anyone jumping into the mix and being able to build what Ouster has built in a year or a couple of years, given I've been at this for 11 years straight. I think Ouster has yet to have any major misstep on strategy, technology, product mix, or M&A, and that can't be said for a lot of our competitors. I'm feeling very good about how we position Ouster across all of our markets for the foreseeable future.
Just the only thing I'll add on to that is the software piece Angus discussed: taking all that infrastructure and having products like BlueCity that go end-to-end into the marketplace and expanding that software component with the investments we're making. It's very hard for any company to match the investment that Ouster's done in that area. We are one of the few companies, if not the only companies out there, that have that end-to-end game plan in play.
Perfect. Thanks, guys.
As a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from the line of Kevin Cassidy of Rosenblatt Securities. Your line is now open.
Thanks for taking my question, congratulations on the ramp of Rev8. Maybe along those lines with Rev8, were there any orders that you couldn't ship for the quarter because Rev8 wasn't available, or for this quarter in the guidance, is there potential that if you could make more, you could guide for a higher revenue? Do you have more orders than product?
We always carry a backlog in our business. We maintain inventory and a healthy backlog for the lidar business and increasingly for the Stereolabs camera business. Technically, there could be more revenue to ship, but it would be at the sacrifice of backlog, which we wouldn't want to do; we also want to uphold our lead time obligations and shipment schedules with our customers. What we're guiding to is what we think we can ship realistically in revenue each quarter. There's not that much wiggle room within that guide.
Okay. Maybe on BlueCity, it seems Utah is starting to release more orders. What is the timeframe, or can we expect that in Atlanta or Stamford, Connecticut or even Northern Jersey that your foothold will expand? Is there a timeframe expected for that, or do you just sit and wait?
I see the expansion happening all the time. While I don't know exactly what will happen in Atlanta or New Jersey specifically, the trend is customers get their hands on BlueCity, they deploy POCs, then they deploy citywide or statewide scale. It works, and then they order more. Utah is one of the earliest adopters and has been a really strong customer. They're furthest along in adopting BlueCity. When they saw the advanced detection capability we released—500-foot sensing with full RGB OS1 Max sensors—they were first in line because they knew how well it would work on Utah's big, wide-open roadways. That indicates where this market is going and the competitiveness we bring with the new OS1 Max Rev8 sensors. There's a huge part of the market we now have broader access to because of the longer range, which is critical for bigger, wider roads with higher speed traffic. There's a lot of momentum in BlueCity; the trend is customers get their hands on it and they order more. Very few customers are stagnant in this industry for us, given how good the product is.
We gave a number at the beginning of the year that about 15% of our sales were based on BlueCity and Gemini-based products. We expect and would like to see that continue to grow as the years go on, making BlueCity a larger portion of our revenue in the coming years.
Okay, great. Thanks. I'll get back in the queue.
Our next question comes from the line of Suji Desilva of Roth. Your line is now open.
Hi, Angus. Hi, Ken. Congratulations on the progress here.
Thank you.
I want to follow up on ITS, intelligent transport. I'm curious, you have a bunch of customers already, but in the deal pipeline, are you seeing any external factors that are causing an inflection in inbound interest or activity in terms of layering on deals and growing this functionality beyond the initial customers you have?
There's a lot going on. We've invested a huge amount into BlueCity this year and the go-to-market, and we're starting to see the payoff. Rev8—the OS1 Max advanced detection and long-range detection—opens up about half the market. In North America there are 300,000 signalized intersections. We have deployed in the hundreds and are rapidly moving to thousands of intersections. It's still a very small fraction of the total market we can capture. We're not going to be gated by market size in the foreseeable future, and we have the best product in the market. The first six months of this year have been a huge inflection point for our BlueCity business, given the investments in go-to-market and product development on the software side, and integrating Rev8 RGB OS1 Max capability.
Okay, great. Thanks, Angus. Then on robotics, what are you seeing in initial discussions and are we early in this or is there contribution already or coming soon? Just an update where robotics is as an end market for you.
Robotics has been an incredible business for us. Q2 was the first full quarter with Stereolabs under Ouster. Stereolabs produces stereo and monocular camera products, including the ZED X Nano, a stereo camera for wrist-mounted manipulation on humanoid and robotic arms. They have a competitive set of products for the humanoid and robotic manipulation market. We've seen tremendous interest and uptake from that customer set. We are pushing every camera we can through our manufacturing supply chain to get them to customers because of strong demand for Physical AI systems in that category.
Okay. Appreciate the color. Thanks, Angus. Thanks, Ken.
Our next question comes from the line of Tim Savageaux of Northland Capital. Your line is now open.
Hey, good afternoon, and congrats on the revenue growth in the quarter. I'll start with capacity. You mentioned the announcement with Benchmark and the 100,000+ capacity. Running where you are, which is below 40,000 currently annualized, what prompted that announcement? How long do you think till you get to that type of capacity metric from where you are? That's from a lidar perspective. Given your comments about Stereolabs, are there similar capacity dynamics there regarding what you have currently relative to what you're shipping and where you'd like to be from a capacity standpoint?
We need to invest in the capacity plan for lidar because our lidar unit volumes are up 70% year-over-year. Adoption of Physical AI systems has driven strong demand and compounds quickly from a 40,000 unit annual run rate up to 100,000. We'll have to expand beyond 100,000 because we want excess capacity to meet last-minute SKU changes from customers. We have a good handle on it due to our long-term relationship with Benchmark. Part of their rationale for the merger was finding a partner like Ouster that knew how to scale production, and that's playing out. We are focused on maturing their manufacturing strategy and capacity because of the explosion in demand. This integration with the Ouster operations team and our COO, Darien Spencer, is hyper-focused on scaling. There is also significant work to meet demand on the Stereolabs side.
On Stereolabs, it looked like a sharp uptick in sensor unit shipments that goes beyond the inclusion of a full quarter. Was that ahead of your expectations, and is it fair to tie that to humanoid robotics demand, or are there other drivers?
That ramp is within the plan we have for the full year. We anticipated the ramp once we brought them into Ouster heading into the back half of the year. In this hot robotics market, you have to have capacity to serve demand as it comes in; you don't want orders slipping to another provider. We are investing this quarter and will continue to invest over the next couple of quarters to build their capacity to meet ramp expectations, not just what we've already laid out for this calendar year.
We guided at the beginning of the year that we expect growth at the midpoint on a year-over-year basis, and we see this progressing as a multiyear trend. Having capacity into 2027 and beyond is important, and we're starting that work now.
Last question: you talked about humanoid robotics being camera-first, but some humanoid platforms have a couple of lidar sensors. Is there a lidar sensor opportunity in humanoid robotics, or should we think of that as more focused on cameras?
In humanoid platforms I've seen, many have six to 12 cameras and a smaller subset use lidar. There is an opportunity for lidar as we build different form factors better suited to humanoid use. Right now it's a camera-first market. We've also seen cross-selling: customers already buying a Stereolabs camera are asking to add lidar or safety lidar from Ouster, and lidar customers are asking to source cameras from us. That cross-selling has emerged organically and validates the thesis that customers prefer sourcing from a combined Stereolabs and Ouster.
Thanks very much.
Our next question comes from the line of Andres Sheppard of Cantor Fitzgerald. Your line is now open.
Hi, everyone. Good afternoon. Congratulations on the quarter and all the great progress. I have a two-part question. Angus, how should we think about cadence and unit mix going forward between lidars and cameras? Not looking for a specific number, but percentage-wise or how you think about the split. Second, what do you see as the key upcoming catalysts that investors should be aware of?
The unit mix follows the ASP differences. Cameras have much lower ASPs than lidars and are directional, so you need more cameras per robot to cover field of view. Stereolabs was smaller and is becoming a mid-size entity within Ouster; I expect their unit volumes to increase and outpace lidar unit volume increases because of these dynamics. That doesn't mean fewer lidars; lidar unit demand is accelerating but at a slightly slower pace than cameras. As for catalysts, Rev8's native color is a major development and has been widely adopted by our customers. The ZED X Nano and future camera roadmap further enhance our offering. The unified sensing and perception stack—bundling cameras, lidars, compute, and software to speed customers' time to market and deliver practical, safe, and capable Physical AI—will be a major catalyst over the next several years. Transitioning from a parts supplier to a solutions provider delivering full-stack software is a core company mission and will be a significant catalyst.
Thanks. As a quick follow-up, regarding drones and your previous certification, can you give color on near-term or medium-term opportunities in drones and how material that segment might become?
Drones are interesting for us. Rev8's native color, improved accuracy, precision, and range are valuable for drone surveying and navigation. We've talked with many drone customers recently and the reaction to Rev8 as a surveying or navigation payload has been very positive. Build America, Buy America certification helps in that market. We previously had Blue UAS certification on REV7 products, and Rev8 could be the next investment focus for that. Customer reaction in the drone market has been very good and I see it as a growth area through the end of the year.
Thank you very much, and congrats again on the quarter.
Our next question comes from the line of Richard Shannon of Craig-Hallum. Your line is now open.
Thanks, Angus and Ken. I wanted to follow up on Rev8. The reaction seems strong. Can you talk about the pace of adoption? For example, how much of your revenue base was Rev8 in the second quarter? Do you have a timeframe for when Rev8 crosses over Rev7?
We've transitioned customers across revisions several times at Ouster, and we have good information on how quickly transitions occur. REV7 has been in market for three years and is homologated into many customer designs. Some customers will stick with REV7 for reasons unrelated to Rev8's benefits; it's core to our strategy to remain a dependable source of REV7 sensors for years to come. New customers are adopting Rev8 rapidly because it solves problems they couldn't solve before. My expectation is a two-year transition for the entire customer base, but Rev8 will rapidly become a critical part of our revenue. We're entering volume production in the back half of this year. It's less important to track exact Rev7-to-Rev8 mix over the next 18 months than to see adoption move toward Rev8, which I'm confident will happen. Managing customers' transitions is critical and we are working to ensure Rev8 is backward compatible with many Rev7 capabilities for customers that need that.
To add, there were minor prototype sales in Q2 included in our numbers, but with production ramp we expect Rev8 sales to increase quarter-over-quarter into the back half.
Second question on gross margins. How should we think about product gross margins this quarter compared with recent quarters? Do you still think 35%-40% is the right range or can it be consistently above that?
We think the 35%-40% range is the right near-term expectation. Recent quarters have been higher due to aggressive revisions and cost reductions plus a couple of one-time items. On a normalized basis, the recent quarters had one-time elements that pushed gross margin into the high 40s. We want to keep expectations reasonable as we get into more production orders in future years. This quarter would have been in the high 30s on a normalized basis. As our software strategy and solutions like BlueCity grow, those higher-margin products will help bolster and potentially raise overall gross margins over time.
Appreciate the detail. Congratulations on the results.
This does conclude the question-and-answer session. I would now like to turn it back to Angus for closing remarks.
All right. Thank you all for joining the call. We look forward to speaking with you again during the third quarter, and have a good day.
For your participation in today's conference, this does conclude the program. You may now disconnect.