SES (SES) Q3 2025: ESS Revenue Jumps to 45% of Total as Molecular Universe Drives AI-Enabled Growth
SES delivered a record quarter as its all-in AI strategy and ESS acquisition sharply accelerated revenue mix diversification. The launch of Molecular Universe 1.0 and integration of UZ Energy mark a pivot to multi-pronged, AI-powered growth, with ESS now representing a major revenue stream. Management’s guidance signals further upside as SaaS, materials, and hardware converge, but margin variability and execution across segments remain key watchpoints.
Summary
- ESS Integration Transforms Revenue Mix: Energy storage systems now comprise nearly half of total revenue, highlighting rapid business model expansion.
- Molecular Universe Monetization Broadens: AI-driven SaaS and materials supply are unlocking new enterprise and JV opportunities.
- 2026 Set for Multi-Stream Upside: Management targets doubling or tripling revenue as new verticals and partnerships scale.
Performance Analysis
SES posted its highest-ever quarterly revenue, more than doubling sequentially, fueled by the first full-quarter contribution from UZ Energy, the company’s newly acquired energy storage systems (ESS) platform. The business is now split roughly 55% services—driven by AI-enhanced battery development for automotive OEMs—and 45% product sales, primarily from ESS. This shift marks a sharp departure from SES’s legacy service-heavy model and demonstrates the impact of strategic M&A and platform integration.
Gross margin landed at 51%, but this blended figure masks significant mix effects: service revenue delivered a robust 78% margin, while ESS product sales came in much lower at 15%. The company remains unprofitable, but net loss narrowed as revenue scaled. Liquidity remains strong, with $214 million in cash and a share repurchase signaling capital discipline. Management updated full-year revenue guidance to $20–25 million, reflecting confidence in ESS momentum and new AI-powered revenue streams.
- ESS Revenue Surge: UZ Energy now generates 45% of total revenue, validating the acquisition and expanding addressable markets.
- Margin Volatility: Product-service mix shift drives quarter-to-quarter gross margin changes, requiring close monitoring as scale builds.
- Capital Deployment: Share repurchases and CapEx-lite JV structures preserve balance sheet strength for future growth.
While top-line growth is robust, the evolving business mix introduces margin variability and operational complexity, underscoring the challenge of scaling multiple revenue streams simultaneously.
Executive Commentary
"We reached a major milestone this quarter that we expect to have far-reaching consequences across the revenue machine we described in detail during our last call. That milestone was the release of our latest version of molecular universe. MU 1.0. MU 1.0 is a powerful and complete end-to-end AI for science workflow that includes five features."
Qi Chaohu, Founder and Chief Executive Officer
"Revenue for the third quarter was $7.1 million, representing a $3.6 million, or 102% increase from the previous quarter. Our Q3 revenue was approximately a 55-45 split between our service revenue from our automotive OEM customers to develop AI-enhanced lithium metal and lithium ion battery materials for EV applications and product revenue, primarily from using energy storage system sales."
Jing Nilas, Chief Financial Officer
Strategic Positioning
1. AI-Enabled Platform Expansion
Molecular Universe 1.0, SES’s proprietary AI for science SaaS platform, is now the engine behind both software and physical product innovation. Its five-feature workflow, including ASK (agentic LLM, large language model), SEARCH, and FORMULA, enables rapid discovery and commercialization of new battery materials. The company is layering on-premise deployments to address enterprise security needs, unlocking new customer segments and deepening enterprise stickiness.
2. ESS Acquisition and Vertical Integration
The acquisition of UZ Energy has pivoted SES into the high-growth ESS market, providing both immediate revenue and a channel for integrating AI-driven predictive maintenance. Each deployed ESS pack now acts as a “Molecular Universe in a box,” collecting real-world data to refine AI models, improve reliability, and reduce customer complaints. This feedback loop enhances product differentiation and supports recurring revenue from both hardware and software.
3. Materials JV Monetization
SES’s joint venture with Heisen New Energy Materials leverages discoveries from Molecular Universe to supply novel electrolytes and materials at scale, without heavy CapEx. This CapEx-lite model allows SES to monetize AI-discovered materials directly, serving customer requests for new formulations that cannot be sourced elsewhere. Early traction includes improved lithium iron phosphate and silicon lithium ion chemistries for ESS, EV, and drone applications.
4. Multi-Vertical Revenue Streams
The company now operates across SaaS, hardware (ESS), and materials supply, each with distinct margin and growth profiles. Management highlighted growth potential in drones—where non-China cell capacity is scarce—and EVs, with B-sample acceptance and commercial supply agreements in the pipeline. The business model shift is toward a hardware-software integrated platform, with recurring and transactional revenue from multiple verticals.
Key Considerations
SES is executing a high-velocity transformation, layering AI, hardware, and materials supply into a cohesive but complex platform. The quarter’s results and commentary reveal several decision-useful considerations for investors:
Key Considerations:
- AI-Driven Commercialization: Rapid customer adoption of Molecular Universe is generating both SaaS and materials orders, expanding TAM (total addressable market) and deepening customer integration.
- ESS as Growth Engine: UZ Energy’s integration is already delivering outsized revenue impact, but low product margins and operational scale-up will pressure near-term profitability.
- CapEx Discipline: The Heisen JV structure enables material supply growth without heavy balance sheet risk, supporting scalability and margin flexibility.
- Segment Margin Volatility: As revenue streams diversify, blended margins will fluctuate quarter-to-quarter, complicating near-term forecasting and requiring close monitoring of mix changes.
Risks
Margin variability is a core risk as SES shifts from high-margin services to lower-margin hardware and materials sales, with product mix and scaling costs driving unpredictable quarterly swings. Execution risk is elevated as the company scales multiple verticals, integrates acquisitions, and manages complex enterprise deployments. Customer concentration, especially among large OEMs and battery makers, could amplify volatility if adoption lags or competitive offerings emerge. The long-term success of the AI-driven platform depends on continued innovation and customer willingness to adopt new workflows and supply arrangements.
Forward Outlook
For Q4 2025, SES guided to:
- Continued ESS revenue growth from UZ Energy integration
- Expansion of Molecular Universe SaaS and materials supply contracts
For full-year 2025, management updated guidance to:
- $20 million to $25 million in total revenue
Management highlighted several factors that will shape 2026:
- Potential doubling or tripling of total revenue as new verticals scale
- ESS, drones, and materials JVs expected to drive outsized growth
Takeaways
SES’s transformation is gathering momentum, with AI at the core of both product and business model innovation. The company is leveraging platform effects—using SaaS to drive materials sales, and hardware deployments to collect data for AI improvement. While ESS is now a major revenue driver, low margins and operational complexity require disciplined execution. Investors should watch for evidence of sustained SaaS and materials growth, margin stabilization, and successful scaling across new verticals.
- Platform Synergy: The integration of AI, hardware, and materials is creating new monetization pathways and defensible customer relationships, but also increases operational risk.
- Margin and Mix Management: Near-term results will be shaped by the evolving split between high-margin SaaS/services and lower-margin product/materials sales.
- 2026 Inflection: The next year will test SES’s ability to scale its multi-stream model, with drones, ESS, and JV supply as key growth levers.
Conclusion
SES’s Q3 2025 results confirm a decisive shift from single-stream services to a diversified, AI-centric growth engine. The company’s ability to execute on ESS integration, SaaS expansion, and JV commercialization will determine whether it can sustain its rapid top-line gains and deliver operating leverage as new segments mature.
Industry Read-Through
SES’s quarter underscores the accelerating convergence of AI, materials science, and energy storage, with platform-based approaches gaining traction across the battery value chain. The move to on-premise AI deployment and CapEx-light JVs offers a playbook for other advanced materials and energy tech companies seeking to monetize discovery at scale. The rapid rise of ESS as a revenue driver highlights surging demand for grid-scale storage, while drone and EV verticals signal new battlegrounds for cell supply and innovation. Investors in adjacent sectors should monitor how AI-enabled discovery and integrated hardware-software models reshape competitive dynamics and margin structures.