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Can QuantumScape's Business Model Reduce Losses & Boost Stability?
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Key Takeaways
QuantumScape earns from development services and long-term royalties with partners.
Near-term inflows come from customer development work, while royalties offer recurring gains.
QS expects over $10M from PowerCo in Q3, set to ease net loss and bolster cash resources.
QuantumScape Corporation (QS - Free Report) , a battery developer for electric vehicle use, operates with a capital-light model that focuses on two primary revenue streams. Initially, the company generates income by providing development services to its customers. These activities involve customizing QuantumScape’s solid-state battery technology to meet the unique requirements of each partner to ensure that the solutions align with their production needs. Once customers transition into large-scale manufacturing, QuantumScape benefits through royalties, which continue for the entire duration of the project. These royalties may come in various forms, including licensing fees or upfront royalty payments reflected in the agreement with PowerCo.
This approach is designed to balance short-term and long-term revenue opportunities. Payments tied to development work provide immediate financial inflows and support nearer-term operations. On the other hand, royalties represent a more substantial share of the company’s value by offering recurring, high-margin revenue streams over many years. By maintaining both income sources, QuantumScape aims to secure consistent cash inflows while advancing successive generations of its technology platform.
The strength of this business model stems from the uniqueness of QuantumScape’s battery innovations, which differentiate it from competitors and make such financial structures possible. The company expects tangible benefits from the given model in the near term. In the third quarter, QuantumScape plans to bill PowerCo more than $10 million for development work already completed by the joint team. These payments are anticipated to lower the company’s GAAP net loss, enhance bottom-line performance and extend available cash resources to strengthen overall financial stability. QS carries a Zacks Rank #2 (Buy) at present.
Ultium Cells LLC, a joint venture between General Motors Company (GM - Free Report) and LG Energy Solution, produces lithium-ion battery cells at large-scale gigafactories specifically for GM’s electric vehicles. While its current operations focus on General Motors, the Ultium technology could potentially be offered to other automakers in the future through licensing or supply agreements.
SES AI (SES - Free Report) generates income by partnering with automotive manufacturers to develop lithium-metal and lithium-ion batteries enhanced by artificial intelligence for use in electric vehicles. The company also aims to commercialize its AI capabilities through licensing deals and royalty-based models. A key part of this strategy is its “Molecular Universe” platform, an AI-powered tool for discovering new battery materials. This platform is expected to become SES AI’s most significant and lucrative revenue source.
QS’ Price Performance, Estimates and Broker Recommendation
QuantumScape has outperformed the Zacks Automotive-Original Equipment industry year to date. Its shares have gained 54.9% compared with the industry’s 10.2% growth.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for QS’ 2025 and 2026 bottom-line loss has narrowed by 2 cents and a penny, respectively, in the past 30 days.
Image Source: Zacks Investment Research
QuantumScape currently has an average brokerage recommendation of 3.40 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 10 brokerage firms.
Image Source: Zacks Investment Research
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Can QuantumScape's Business Model Reduce Losses & Boost Stability?
Key Takeaways
QuantumScape Corporation (QS - Free Report) , a battery developer for electric vehicle use, operates with a capital-light model that focuses on two primary revenue streams. Initially, the company generates income by providing development services to its customers. These activities involve customizing QuantumScape’s solid-state battery technology to meet the unique requirements of each partner to ensure that the solutions align with their production needs. Once customers transition into large-scale manufacturing, QuantumScape benefits through royalties, which continue for the entire duration of the project. These royalties may come in various forms, including licensing fees or upfront royalty payments reflected in the agreement with PowerCo.
This approach is designed to balance short-term and long-term revenue opportunities. Payments tied to development work provide immediate financial inflows and support nearer-term operations. On the other hand, royalties represent a more substantial share of the company’s value by offering recurring, high-margin revenue streams over many years. By maintaining both income sources, QuantumScape aims to secure consistent cash inflows while advancing successive generations of its technology platform.
The strength of this business model stems from the uniqueness of QuantumScape’s battery innovations, which differentiate it from competitors and make such financial structures possible. The company expects tangible benefits from the given model in the near term. In the third quarter, QuantumScape plans to bill PowerCo more than $10 million for development work already completed by the joint team. These payments are anticipated to lower the company’s GAAP net loss, enhance bottom-line performance and extend available cash resources to strengthen overall financial stability. QS carries a Zacks Rank #2 (Buy) at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Revenue Streams of Other Battery Manufacturers
Ultium Cells LLC, a joint venture between General Motors Company (GM - Free Report) and LG Energy Solution, produces lithium-ion battery cells at large-scale gigafactories specifically for GM’s electric vehicles. While its current operations focus on General Motors, the Ultium technology could potentially be offered to other automakers in the future through licensing or supply agreements.
SES AI (SES - Free Report) generates income by partnering with automotive manufacturers to develop lithium-metal and lithium-ion batteries enhanced by artificial intelligence for use in electric vehicles. The company also aims to commercialize its AI capabilities through licensing deals and royalty-based models. A key part of this strategy is its “Molecular Universe” platform, an AI-powered tool for discovering new battery materials. This platform is expected to become SES AI’s most significant and lucrative revenue source.
QS’ Price Performance, Estimates and Broker Recommendation
QuantumScape has outperformed the Zacks Automotive-Original Equipment industry year to date. Its shares have gained 54.9% compared with the industry’s 10.2% growth.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for QS’ 2025 and 2026 bottom-line loss has narrowed by 2 cents and a penny, respectively, in the past 30 days.
Image Source: Zacks Investment Research
QuantumScape currently has an average brokerage recommendation of 3.40 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 10 brokerage firms.
Image Source: Zacks Investment Research