Enovix Corp (ENVX) (Q2 2026) Earnings Call Highlights: Smart Eyewear Ramp and Drone Pipeline Surge

• Revenue: $9 million, up 21% year-over-year, marking the fifth consecutive quarter of revenue growth.
• Gross Profit: GAAP gross profit of $1.3 million; non-GAAP gross profit of $1.8 million.
• Gross Margin: GAAP gross margin of 14%; non-GAAP gross margin of 18.9%.
• Operating Expenses: Non-GAAP operating expenses of $30.6 million, up from $28.8 million a year ago.
• Operating Loss: Non-GAAP loss from operations of $28.8 million, better than the guidance range of a loss of $29 million to $32 million.
• Net Loss Per Share: Non-GAAP net loss per share of $0.13, at the favorable end of the guidance range of a loss of $0.13 to $0.17.
• Adjusted EBITDA: Negative $18.9 million, compared with negative $20.1 million in the second quarter of 2025.
• Cash Flow: Net cash used in operating activities of $21.8 million, down from $25.9 million in the second quarter of 2025; free cash flow outflow of $1.4 million versus $3.8 million a year ago.
• Capital Expenditures: $9.6 million, principally supporting Fab 2 readiness and capacity expansion.
• Cash Position: Ended the quarter with approximately $552.1 million in cash, cash equivalents, and marketable securities including restricted cash.
• Smart Eyewear Revenue: First product revenue recognized from a Tier 1 customer; shipped approximately 2,100 AI1 batteries in Q2.
• Smart Eyewear Deliveries: Delivery orders in hand for approximately 19,000 packs planned for Q3 delivery, a roughly nine-fold increase from Q2.
• Drone and Defense Pipeline: Pipeline for products manufactured in Korea increased to approximately $180 million from $30 million at the end of the first quarter; drone pipeline exceeds $100 million.
• Third Quarter Guidance: Revenue expected between $9 million and $10 million, up approximately 13% to 25% year-over-year; non-GAAP loss from operations between $29 million and $32 million; non-GAAP net loss per share between $0.13 and $0.17; capital expenditures between $8 million and $12 million.

Release Date: August 12, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Smartphone qualification milestone: Lead customer confirmed cells passed 1,000 cycles on the 0.2C discharge test, with final accelerated cycle life test expected to complete by end of 2026.
• Smart Eyewear commercial ramp: Shipped 2,100 batteries to a Tier 1 customer in Q2, with orders for ~19,000 packs in Q3 (9x increase) and a 50,000-unit order to be fulfilled by Q4.
• Drone/defense pipeline growth: Pipeline increased 41% QoQ to ~$180 million, with drone opportunities exceeding $100 million; over $40 million in active customer testing.
• Manufacturing yield improvements: Cumulative yield improved for three consecutive quarters; Zone 1 yield rose to 84% from 80%, with most process steps at 95%+ yields.
• Strong financial position: Ended Q2 with over $550 million in cash, enabling continued investment in qualification and capacity expansion.
• New COO Michael Vivoda (ex-Apple) hired to drive manufacturing, supply chain, and delivery improvements, enhancing operational execution.
• AI-driven cycle life prediction models in development to accelerate design iterations, potentially creating a durable competitive advantage.
• MX-B01 drone cell achieves ~360 Wh/kg, with UN 38.3 certification completed and customer sampling commencing in Q3.
• South Korea facility is TAA compliant and on track for NDAA compliance, a key advantage for defense contracts.
• Second smartphone OEM progressing toward qualification, with sample deliveries expected in Q4 2026.

Negative Points

• Smartphone qualification still incomplete: Final accelerated cycle life test (hybrid protocol) remains a gating item, with completion expected only by end of 2026.
• Smart Eyewear margins negative: Early ramp costs and low volumes will drag gross margins for the balance of 2026, with no clear breakeven point provided.
• Zone 1 dicing remains a bottleneck: Despite yield improvement to 84%, it is still a primary throughput constraint, with key mechanical dicing steps not online until year-end.
• Gross margin declined YoY in Q2: GAAP gross margin fell to 14% and non-GAAP to 18.9% due to product mix from South Korea, though first-half margins improved.
• Revenue growth modest: Q2 revenue of $9 million was only 21% YoY, and Q3 guidance of $9-10 million implies a sequential decline or flat growth.
• Dependence on a single lead customer for smartphone and Smart Eyewear ramps, creating concentration risk.
• Drone/defense revenue conversion timeline uncertain: While pipeline is large, revenue ramp is not expected until mid-2027, with defense primes taking up to 18 months.
• Operating losses persist: Non-GAAP loss from operations was $28.8 million in Q2, with Q3 guidance of $29-32 million loss, indicating continued cash burn.
• No share repurchases during the quarter, as capital deployment priorities shifted to qualification and manufacturing investments.
• Memory availability tightness (DRAM) could impact customer SKU strategies, though not yet affecting Enovix directly.

Q & A Highlights

Q: Can you walk us through what the last smartphone qualification test is trying to prove, given that the 1,000-cycle milestone was passed?
A: Raj Talluri (President and CEO) explained that the final test is an accelerated cycle life test. Since a standard 0.2C test takes too long, they have developed a hybrid protocol with the customer that combines faster and slower discharge rates to better simulate real-world phone usage. Multiple protocol variants are currently being tested, with results expected by the fourth quarter of 2026. Ryan Benton (CFO) added that this replaces the traditional 0.7C graphite test, and they expect one or more of the variants to pass by year-end.

Q: What is the timeline for converting the $100 million drone pipeline into actual revenue, and how long do customer engagements typically take?
A: Raj Talluri noted that defense qualification cycles are shorter than smartphones, with revenue scaling aligning with new Korea capacity coming online in mid-2027. Ryan Benton added that drone companies are moving fast, with a 6-9 month timeline, while defense primes have a longer runway of around 18 months. The company is prioritizing samples and expects the pipeline to convert as new capacity comes online.

Q: How should we think about the volume needed for the Smart Eyewear business to reach optimal margins?
A: Raj Talluri highlighted strong manufacturing progress, scaling from 2,100 packs in Q2 to roughly 19,000 in Q3, on the way to fulfilling a 50,000-unit order. Ryan Benton stated that while the 50,000-unit level will absorb overhead, the business will still have negative margins for the balance of the year. He declined to give a specific breakeven point but expects healthy gross margins as the market scales and customer adoption pulls through.

Q: Can you provide more color on the gross margin decline in Q2 and the expected trajectory?
A: Ryan Benton cautioned against reading one quarter as a trend, noting that first-half non-GAAP gross margin was actually up year-over-year to 22.8% from 21.3%. The Q2 decline was due to product mix in the Korea-based business, which can be lumpy. Looking forward, the Smart Eyewear ramp will be a drag on margins as overhead moves into gross margins, but this is largely a geography shift from a cash flow perspective, and margins should rationalize as they scale into 2027.

Q: What is the current manufacturing capacity at the South Korea facility, and what is the cost of the planned expansion?
A: Ryan Benton stated they are not operating at full capacity and have headroom, though some equipment lines are at capacity. For the drone business, they have placed orders for new equipment that will provide capacity for roughly one million units, coming online in mid-2027. The expansion is capital-efficient, using existing land and buildings, and is embedded in the current CapEx forecast of $8-12 million for Q3.

Q: How standardized is the smartphone qualification framework becoming, and does the second OEM have the same allocation as the lead customer?
A: Raj Talluri explained that they have convinced customers that 100% silicon anodes behave differently than graphite, leading to the adoption of new test protocols like the 0.2C cycle test. The lead customer has confirmed passing 1,000 cycles, and the final accelerated test is underway. The second OEM is moving toward a similar framework, with sample deliveries expected in Q4. He expects the market to adapt to these new protocols over time, making each subsequent customer qualification faster.

Q: What is driving the progress in the drone market, and which applications are you competing well in?
A: Raj Talluri cited the extremely competitive cell with high watt-hours per kilogram, manufactured in their own TAA-compliant South Korea factory with a path to NDAA compliance. The main markets are public safety, interceptor drones, and ISR, where customers need a few hundred cycles and high reliability. He expects demand to outstrip supply quickly, and the company is adding capacity to meet this demand.

Q: How will the new COO, Michael Vivoda, impact manufacturing improvements, and where will he focus?
A: Raj Talluri stated that Michael has a full-scope mandate across manufacturing, supply chain, quality, and customer delivery for both the Malaysia and South Korea factories. His immediate priorities are increasing Smart Eyewear output, preparing manufacturing for smartphone field test builds, and driving cost and yield improvements. The company is benefiting from cross-pollination between the two factories, with Korea contributing battery manufacturing know-how and Malaysia contributing silicon expertise.

Q: What is the impact of memory availability and SKU mix on your smartphone qualification efforts?
A: Raj Talluri noted that memory tightness has not impacted them yet since they are in the qualification stage, not high volume. He emphasized that they are being qualified for leadership products where their technology provides the most differentiation, and the SKU mix is not currently a factor. He expects the technology to eventually waterfall down to more mainstream products over time.

Q: How should we envision the revenue mix across product segments three to five years out?
A: Ryan Benton declined to give specific numbers but noted that the drone and defense market has developed faster than expected and has the opportunity to be a really big business quickly. Raj Talluri added that Smart Eyewear could also take off and become huge, making it hard to call the mix. He emphasized that all three markets are attractive where their technology provides clear benefits, and "everybody wants better batteries."

For the complete transcript of the earnings call, please refer to the full earnings call transcript.