Li Auto Q1 Earnings Decline Y/Y, Revenues Climb on Higher Delivery

Li Auto (LI) reported Q1 2025 EPS of 13 cents, down from 17 cents year-over-year, while revenues increased slightly to $3.57 billion driven by a 15.5% increase in vehicle deliveries to 92,864. Vehicle margin improved to 19.8%, and the company reported income from operations of $37.4 million compared to a loss last year; however, non-GAAP net income fell 20.9%, and net cash from operations decreased 49.4%. Looking ahead to Q2 2025, Li Auto projects vehicle deliveries of 123,000-128,000 and revenues of $4.5-4.7 billion, representing year-over-year growth of 13.3-17.9% and 2.2-6.8%, respectively.

Analysis

Li Auto's first-quarter 2025 financial results presented a mixed performance, with revenues marginally increasing to $3.57 billion from $3.55 million year-over-year, primarily due to a 15.5% growth in vehicle deliveries to 92,864 units. Despite this volume increase, earnings per share (EPS) declined to 13 cents from 17 cents in the prior-year quarter. Vehicle sales, contributing $3.4 billion to revenue, remained flat compared to the year-ago period, though the vehicle margin improved to 19.8% from 19.3%, attributed to cost reduction and revised pricing strategies. Gross profit was stable at $732.9 million, while the gross margin saw a slight contraction to 20.5% from 20.6%. A significant positive development was the 14.4% decrease in operating expenses to $695.5 million, enabling the company to report an income from operations of $37.4 million, a substantial improvement from an operational loss of $81 million in Q1 2024, with the operating margin shifting from negative 2.3% to positive 1%. However, non-GAAP net income experienced a 20.9% year-over-year decline to $139.8 million. The company's cash flow metrics showed deterioration, with net cash provided by operating activities falling 49.4% to $234.4 million. While free cash flow was negative $348.7 million, this was an improvement from negative $700.1 million year-over-year. Li Auto's balance sheet indicates increased financial leverage, with long-term borrowings escalating to $1.12 billion from $249.7 million, while cash and cash equivalents decreased to $687,000. For the second quarter of 2025, Li Auto projects vehicle deliveries between 123,000 and 128,000, representing 13.3-17.9% year-over-year growth, and anticipates total revenues between $4.5 billion and $4.7 billion, an increase of 2.2% to 6.8% year-over-year, with new models i8 and i6 scheduled for launch in July and September respectively.

Key Decisions for Investors

• Investors should carefully evaluate the contrasting financial signals, particularly the growth in vehicle deliveries and improved vehicle margins against the decline in EPS, non-GAAP net income, and a substantial reduction in net cash from operating activities.
• Closely monitor Li Auto's Q2 2025 performance to ascertain if projected delivery growth (13.3-17.9% YoY) can translate into more robust revenue growth (projected at 2.2-6.8% YoY) and enhanced overall profitability.
• The market reception and financial impact of the upcoming i8 and i6 models will be critical catalysts for future growth and margin improvement; their performance post-launch warrants close observation.
• Assess the company's strategy for managing its increased long-term debt, negative free cash flow, and notably low cash reserves, particularly within the competitive EV landscape, taking into account the current Zacks Rank #3 (Hold) and the negative sentiment signals.