Hesai Profits on Lidar Dominance, Bets Future on 'Physical AI'

SHANGHAI, China – May 19, 2026 – Lidar technology leader Hesai Group (NASDAQ: HSAI; HKEX: 2525) today announced strong first-quarter financial results, marking its fourth consecutive quarter of GAAP profitability and revealing a landmark partnership with Mercedes-Benz. While solidifying its dominance in the automotive sensor market, the company also unveiled an ambitious strategic pivot, aiming to transform from a hardware supplier into an architect of 'Physical AI' and 'Spatial Intelligence.'

Reporting net revenues of RMB 680.6 million (US$98.7 million), a nearly 30% increase year-over-year, Hesai demonstrated robust growth in a competitive field. The results were underpinned by a massive 140.9% surge in total lidar shipments, which reached 471,723 units for the quarter. This performance delivered a GAAP net income of RMB 18.3 million (US$2.7 million), a significant reversal from the RMB 17.5 million loss reported in the same period last year.

“We are incredibly honored and excited to announce that Hesai serves as strategic lidar partner and confirmed supplier for Mercedes-Benz models enabling L3 autonomy,” said Dr. Yifan “David” Li, Hesai’s Co-Founder and CEO, in the company's official statement. He framed the quarter as a “transformative chapter” as the company evolves from ‘Spatial Perception’ to ‘Spatial Intelligence.’

Solidifying Automotive Dominance

The most significant validation of Hesai's core business came with the announcement of its new role as a strategic lidar partner for Mercedes-Benz. The agreement will see Hesai supply lidar for the German automaker's L3 autonomous driving programs in Europe and China. Production will be supported by Hesai's new Galileo manufacturing center in Thailand, a strategic move to build a more resilient global supply chain. This deal follows other key design wins, including a selection by GAC Toyota for its 2026 bZ3X model, marking Hesai’s first major entry into the Japanese automotive ecosystem.

These partnerships are built on a foundation of significant market penetration. According to the company, citing Yole Group data, it held a 43% global market share in long-range ADAS lidar in 2025. In its critical home market, Hesai claims to have held the number one position in China’s long-range automotive lidar market for 14 consecutive months, reaching a 55% share in March 2026. However, broader industry data paints a picture of intense competition. Q1 2026 data on the overall China LiDAR market from Gasgoo Automotive Research Institute indicates a tight race, with Hesai and Huawei Technologies together commanding over two-thirds of the market, suggesting a duopoly is forming at the top.

At the recent Beijing Auto Show, Hesai's technology was featured in 56 different vehicle models from 24 brands, including Li Auto, Xiaomi, Geely, and Cadillac, reinforcing its deep integration within the world's largest electric vehicle market.

A Pivot to 'Physical AI'

While the lidar business thrives, Hesai is already looking toward its next frontier. The company is strategically evolving beyond being just a sensor manufacturer. Its new vision is to provide the foundational infrastructure for 'Physical AI'—the intersection of artificial intelligence and the physical world, enabling robots and autonomous machines to perceive and interact with their environments.

To that end, Hesai has refined its reporting structure into two segments: the profitable 'Lidar Business' and the forward-looking 'Strategic Growth Initiatives' (SGI). The first product under SGI is Kosmo, a spatial intelligence device that integrates lidar, multi-sensor inputs, and AI algorithms to seamlessly capture and reconstruct high-fidelity 3D environments. The goal is to transform complex spatial data capture into a standardized, scalable service, creating new recurring revenue streams.

“Our ambition is to digitize the real world and redefine how humans and robots perceive and act,” Dr. Li stated. He positioned Kosmo as the entry point to a new business model with opportunities in robotics simulation, immersive media, and 4D entertainment.

Powering this new generation of products is a breakthrough at the chip level. Hesai introduced Picasso, which it bills as the world's first 6D full-color SPAD-SoC. This custom-designed chip natively fuses RGB color data from a camera with the precise XYZ depth data from a lidar at the hardware level. This allows for the direct generation of colorized 3D point clouds, dramatically enriching the data available to an AI system. The first lidar to feature the Picasso chip, the high-end ETX series, is scheduled for mass production in the second half of 2026.

Balancing Profitability with Ambition

Hesai's financial report highlights a delicate balancing act: leveraging a profitable core business to fund ambitious, and potentially costly, future growth. The company’s ability to achieve sustained GAAP profitability sets it apart from many competitors in the historically cash-intensive autonomous technology sector. The core Lidar Business segment generated an operating profit of approximately RMB 42 million in the first quarter.

However, this strategic expansion comes at a cost. Gross margin dipped slightly to 39.1% from 41.7% a year ago, which the company attributed to a product mix with lower-margin items. Furthermore, research and development expenses rose 11.7% to RMB 204.7 million, reflecting the significant investment in SGI and technologies like Picasso.

“To enhance transparency and better reflect our strategic evolution, we have refined our reporting structure into two segments: ‘Lidar Business’ and ‘Strategic Growth Initiatives,’” explained CFO Andrew Fan. He noted that the company expects SGI to begin contributing meaningfully to the top line this year, forecasting approximately RMB 100 million in net revenues from the new segment, with contributions starting in the second quarter.

For the second quarter of 2026, the company projects continued growth, with net revenues expected to be between RMB 850 million and RMB 900 million. This outlook suggests confidence that Hesai can continue to execute on its core automotive business while simultaneously building the technological and commercial foundations for its ambitious future in spatial intelligence.