XPeng Motors reported revenue of RMB 13.03 billion in the first quarter of 2026, a year-on-year decrease of 17.6%, with net losses widening to RMB 1.78 billion. Deliveries declined by 33.3% year-on-year to 62,700 vehicles, but gross margin improved by 5 percentage points to 20.6%. R&D investment surged by 46.8% year-on-year to RMB 2.91 billion, primarily for intelligent driving iteration and humanoid robot development. The company is shifting from a multi-model "Frankenstein's monster" architecture to a unified, universal "physical AI" system. It plans to launch Robotaxi demonstration operations in Guangzhou in the second half of the year, and IRON humanoid robots will enter stores as sales guides in the first quarter of 2027, with exports expected in the second quarter.
Article author and source: Wall Street News
Recently, XPeng Group officially released its financial data for the first quarter of 2026. In the first three months of 2026, XPeng Group recorded revenue of RMB 13.03 billion, a year-on-year decrease of 17.6%. Although the overall gross profit margin increased by 5.0 percentage points to 20.6% year-on-year, it still suffered a net loss of RMB 1.78 billion, which is significantly larger than the loss of RMB 660 million in the same period of 2025.
Besides the decline in deliveries in the first quarter compared to the same period last year, the main reason for the widening losses was the increase in R&D expenses – XPeng Group's R&D investment alone reached 2.91 billion yuan in the quarter, showing significant growth both year-on-year and quarter-on-quarter.
In the earnings call and podcast released on May 28, XPeng Group Chairman He Xiaopeng gave a directional explanation for the increase in R&D investment in the first three months of 2026: the company is shifting from the "Frankenstein's monster" architecture of multiple AI models to a new "physical AI" system driven by a general large model.
In line with this shift, he made a series of time-bound promises, such as a significant increase in delivery guidance in the second quarter; Robotaxi has been mass-produced and will start demonstration operation in Guangzhou in the second half of the year; IRON, a humanoid robot, will be mass-produced in the fourth quarter of this year, enter XPeng stores as sales guides in the first quarter of 2027, and be exported overseas in the second quarter.
With the upcoming L03 and G9 facelifts, XPeng is using a short-term financial report under pressure to gain entry into the commercialization cycle of physical AI.
Whether this is strategic foresight or over-investment depends on how well these commitments are fulfilled in the next four quarters.
01 Behind the widening losses
Looking at the financial report, the core contradiction in XPeng's first-quarter report is: why did the overall loss expand despite the improvement in gross profit per vehicle? The answer lies in the expense structure.
Looking at the revenue structure, total revenue in the first quarter was 13.03 billion yuan, of which automobile sales revenue was approximately 11 billion yuan, a decrease of 23.5% compared to the same period in 2025. This decrease was mainly due to a drop in deliveries in the first quarter. Specifically, in the first quarter of 2026, XPeng Motors delivered 62,682 vehicles, a 33.3% decrease compared to 94,008 vehicles in the same period of 2025.
However, the overall gross profit margin remained at 20.6%, an increase of 5 percentage points compared to the same period in 2025.
Despite a year-on-year decline in deliveries, the gross margin for the automotive business rose to 12.1% from 10.5% in the same period last year.
This indicates that XPeng's sales structure has improved, with a higher proportion of high-priced models, resulting in improved profitability per vehicle. Cost reduction through technology and platform sharing are taking effect, with the profit margin per vehicle sold being higher than a year ago.
Looking at the expense side, sales and administrative expenses were 1.88 billion yuan, a year-on-year decrease of 3.2% and a quarter-on-quarter decrease of 32.5%. Given the sharp drop in deliveries and the need for marketing investment for new car launches, the fact that these expenses are still shrinking indicates that management is still controlling costs.
Another factor eroding profits is the increase in R&D investment. R&D expenses in the first quarter reached 2.91 billion yuan, an increase of more than 46.8% compared with 1.98 billion yuan in the same period of 2025, and also increased compared with the fourth quarter of 2025.
This incremental funding was primarily invested in three areas: intelligent driving research and development, the development of the humanoid robot IRON, and the software and hardware adaptation for the Robotaxi fleet. In an interview on May 28th, He Xiaopeng also stated that the company is in a critical investment period of "migrating from an AI Frankenstein's monster to a unified physical AI architecture," and such structural costs are unavoidable.
So, where is the short-term financial turnaround? That depends on the pace of new car launches.
XPeng's Q2 delivery guidance, given in its earnings call, points to a significant sequential increase of approximately 100,000 to 106,000 vehicles.
Supporting this expectation is the flurry of new car launches. The GX was launched in May, and according to research by the Zhongtai Auto team, its orders far exceeded expectations, with nearly 25,000 units placed in 12 hours. Monthly sales are expected to stabilize at around 7,000 units, while the market had previously generally expected only 2,000 to 3,000 units.
The more crucial volume-selling model, the L03, is positioned as a pure electric SUV priced under 150,000 yuan and will be launched in the third quarter.
This model shares a large amount of underlying architecture with the M03, which has long held the top spot in the sales charts for pure electric sedans priced between 100,000 and 150,000 yuan. The market expects monthly sales to exceed 15,000 units.
In addition, the facelifted G9 and the L05 models are expected to be launched and delivered in the second half of the year, with a total of 7 "one car, two functions" models planned for the whole year.
If the sales targets for the L03 and GX are met as expected, XPeng will enter a period of steep ramp-up in delivery volume in the third quarter.
The reduced manufacturing costs resulting from increased sales volume, coupled with the positive trend in gross profit margins of existing models, are expected to drive a continued increase in the gross profit margin of the automotive business throughout the year.
Service and other revenue, which mainly includes technology licensing and intelligent driving subscriptions, reached RMB 2.03 billion in the first quarter. As the VLA Distilled Edition is gradually put into vehicles this year and technology solutions are provided to more automakers, this high-margin revenue item will become an important buffer for adjusting overall profitability.
The new car cycle that begins in the second quarter will be the first window to test whether XPeng's investment can be converted into scale and profit.
02 The "Physical AI" Trilogy
Beyond financial reports, He Xiaopeng is betting XPeng's future on three things: intelligent driving technology output, Robotaxi operation, and mass production of humanoid robots.
During the earnings call on May 28, he clarified three core business lines: advanced autonomous driving, Robotaxi, and humanoid robots IRON, all of which point to a qualitative leap from "digital AI" to "physical AI" capable of interacting with the real world.
Intelligent driving remains the foundation.
He Xiaopeng believes that his VLA 2.0 capabilities have reached the absolute top in China, and he has begun to gradually put the distillation version of the model into vehicles this year, with plans to achieve the global rollout of VLA 2.0 in 2027.
However, Huawei's Qiankun ADS is also rapidly expanding its reach in the "Inquiry and Intelligence" fields, while Tesla's FSD is accelerating its local testing in China. Whether XPeng can maintain its intelligent driving advantage depends on the speed of technological iteration and costs.
Using a unified, large model to understand, plan, and control vehicles completely departs from the rule-driven "Frankenstein's monster" model of the past. Prior to this, the data showing that the intelligent driving mileage ratio of XPeng VLA2.0 exceeded 50% in its first month of operation is a key proof of the correctness of this technical approach.
This indicates that users' reliance on and trust in the new intelligent driving system is bridging a gap, which also lays a commercial foundation for XPeng to provide technology licensing to other automakers and expand service revenue.
The countdown to mass production of Robotaxi and the humanoid robot IRON has pushed XPeng's valuation ceiling from an automaker to a broader physical AI service provider.
Regarding Robotaxi, based on its closed-loop intelligent driving technology, the vehicles have already rolled off the production line, and demonstration operations are planned to begin in Guangzhou in the second half of the year. Furthermore, He Xiaopeng revealed that Robotaxi will launch lower-priced models in the future and will also be deployed overseas.
The advanced humanoid robot IRON is an even bolder step.
Its commercialization path is exceptionally clear and pragmatic: production will be measured in the fourth quarter of this year, and in the first quarter of 2027, employees will first enter their own stores as sales guides.
This "use it first" strategy allows for the accumulation of data and the iteration of technology in real-world scenarios, while also enabling the exploration of commercial value at a relatively controllable cost.
Meanwhile, IRON, a humanoid robot, also has overseas plans, with exports expected to begin in the second quarter of 2027.
XPeng is telling a story of "one fish, multiple uses," with its core AI capabilities acting as the brain, simultaneously driving intelligent vehicles, a fleet of Robotaxi vehicles, and humanoid robots. If the market accepts this narrative, XPeng's valuation anchor may shift from the price-to-sales ratio of automakers to the logic of a technology company. However, currently, revenue from licensing its intelligent driving technology fluctuates greatly, and both Robotaxi and robots are still in the investment phase; no single line can independently contribute profits.
What the market needs to see is tangible large-scale implementation and the realization of financial data, not just a perfect technical architecture and business plan.
Can IRON truly replace human labor in stores? What will the unit economic model look like after Robotaxi is scaled up? Until these questions are answered, "physical AI" remains just a narrative.
Currently, XPeng has already secured its ticket to the next track; the competition has only just begun.
