Microvast (MVST) Q3 2025: Gross Margin Jumps 4.4 Points as EMEA Drives 64% of Revenue

2025-11-10 | By EarningsIQ Research

Microvast delivered record revenue and a sharp margin expansion in Q3, with EMEA now contributing nearly two-thirds of sales and new capacity coming online to meet robust demand. The company’s vertically integrated battery model is translating innovation into profitable growth, with a focus on advanced technology and operational scale. Management raised full-year margin guidance as cost discipline and geographic mix further strengthen the outlook.

Summary

• Margin Expansion Accelerates: Gross margin rose sharply as operational discipline and mix improvements took hold.
• EMEA Outpaces Other Regions: EMEA now accounts for 64% of revenue, underscoring Microvast’s global reach and market focus.
• Capacity and Innovation Pipeline: New production lines and solid-state battery advances position Microvast for future growth.

Performance Analysis

Microvast posted record quarterly revenue of $123.3 million, up 21.6% year-over-year, with gross profit rising even faster at 38% over the prior period. The company’s gross margin improved by 4.4 percentage points to 37.6%, highlighting the impact of higher-margin sales, operational efficiencies, and cost control. EMEA, which now represents 64% of quarterly revenue, was the primary growth engine, with the region up 31% year-to-date. APAC and US regions also contributed, but at a more modest pace.

Operating profit reached $13 million, and adjusted EBITDA was $21.9 million, reflecting the business’s ability to scale profitably. Year-to-date, Microvast generated positive operating cash flow of $59.5 million and ended the quarter with $142.6 million in cash and equivalents. Operating expenses rose 22% this quarter, mostly due to currency losses and litigation, but were offset by reductions in non-cash share-based compensation and lower R&D headcount. The company reported a GAAP net loss of $1.5 million, but after adjustments, net profit was $11.9 million, and the year-to-date non-GAAP profit swung sharply positive from last year’s loss.

• EMEA Share Climbs: EMEA revenue jumped to 64% of total, up from 59% a year ago, showing strategic market penetration.
• Operating Leverage Evident: Gross profit outpaced revenue growth, with margin expansion driven by higher utilization and cost controls.
• Cash Generation Improves: Positive cash flow and a strengthened balance sheet provide flexibility for capacity and R&D investment.

Microvast’s financial profile is transitioning from high-growth to profitable scale, with strong regional momentum and a disciplined approach to cost and capital allocation.

Executive Commentary

Strategic Positioning

1. Vertical Integration as Competitive Moat

Microvast’s vertically integrated model, which means controlling the entire battery value chain from materials to finished product, underpins its ability to innovate and scale profitably. This structure enables rapid commercialization of new technologies and cost advantages that are now evident in margin expansion and operational leverage.

2. Geographic Diversification and EMEA Focus

EMEA’s rise to 64% of revenue reflects strategic targeting of high-growth, high-margin international markets, particularly in transportation and public infrastructure. The recently announced partnership with Skoda Group, a major European transport manufacturer, further validates Microvast’s traction in demanding applications and should support continued share gains in the region.

3. Capacity Expansion and Technology Pipeline

The Huzhou phase 3.2 line, set to add up to 2GWh of annual capacity, is on track for completion by year-end, with production ramp beginning in Q1 2026. This investment is timed to meet robust customer demand and align with new product launches. Meanwhile, the company’s solid-state battery development is progressing, with proprietary separator technology enhancing safety, durability, and manufacturability—a key differentiator for next-generation applications.

4. Margin Discipline and Cost Management

Gross margin improvements stem from both operational execution and a strategic focus on higher-margin segments and geographies. Management’s willingness to absorb litigation and currency costs, while reducing non-core expenses and headcount, signals a disciplined approach to sustaining profitability.

Key Considerations

This quarter marks a decisive pivot for Microvast from pure growth to profitable scale, driven by operational discipline and market diversification. Investors should weigh the following strategic considerations:

• EMEA Growth Sustainability: Continued EMEA outperformance is critical, as it now anchors overall revenue mix and margin profile.
• Capacity Ramp Execution: Timely commissioning of the new Huzhou line will be essential to capture demand and avoid bottlenecks in 2026.
• Solid-State Battery Commercialization: Success in bringing proprietary solid-state technology to market could provide a long-term competitive edge, but remains in early prototype stage.
• Cash and Capital Allocation: Strong cash flow and balance sheet flexibility support ongoing R&D and expansion, but will be tested if macro or litigation pressures intensify.

Risks

Microvast faces several risks, including execution on new capacity expansion, potential delays or setbacks in solid-state battery commercialization, and continued exposure to currency and litigation costs. EMEA concentration, while currently a strength, could become a vulnerability if regional demand or regulatory dynamics shift. Management’s margin guidance and profitability targets depend on sustaining favorable mix and operational discipline.

Forward Outlook

For Q4 and full-year 2025, Microvast guided to:

• Annual revenue of $450 to $475 million (unchanged from prior guidance)
• Raised full-year gross margin target to 32% to 35% (up from 32%)

Management highlighted several factors that will shape results:

• Completion and ramp of Huzhou phase 3.2 capacity by year-end
• Continued EMEA momentum and new strategic partnerships (e.g., Skoda Group)
• Ongoing focus on cash flow, margin discipline, and innovation pipeline

Takeaways

Microvast’s Q3 results confirm a transition to profitable scale, with EMEA as the growth engine and margin discipline driving financial improvement. The company’s vertical integration, new capacity, and technology pipeline strengthen its competitive position in global electrification.

• Margin Expansion: Operational discipline and higher-margin mix are translating into sustained profitability, with upside to guidance.
• Strategic Partnerships and EMEA Focus: Skoda Group and other partnerships validate technology and support further geographic expansion.
• 2026 Growth Anchors: Investors should watch for execution on new capacity, solid-state commercialization, and continued cash generation as keys to next year’s outlook.

Conclusion

Microvast’s Q3 performance signals a new phase of profitable growth, anchored by EMEA strength, operational leverage, and a robust innovation pipeline. Sustaining margin gains and delivering on capacity and technology milestones will be critical to maintaining momentum into 2026.

Industry Read-Through

Microvast’s results highlight the growing importance of vertical integration and regional diversification in the advanced battery sector. EMEA’s dominance as a revenue driver may signal similar opportunities for peers targeting electrification in transportation and infrastructure. Margin expansion through operational discipline and technology differentiation is increasingly separating leaders from laggards in the battery industry. The company’s focus on solid-state innovation and capacity scaling underscores the capital intensity and execution risk that all advanced battery players must navigate as global electrification accelerates.

MVST Industrials Batteries Electrification Vertical integration EMEA Solid-state Capacity expansion