--- title: "XPeng achieves its first quarterly profit, planning to invest another 7 billion in physical AI by 2026" type: "News" locale: "en" url: "https://longbridge.com/en/news/280013251.md" description: "Entering the deep water zone" datetime: "2026-03-21T07:16:28.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/280013251.md) - [en](https://longbridge.com/en/news/280013251.md) - [zh-HK](https://longbridge.com/zh-HK/news/280013251.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/280013251.md) | [繁體中文](https://longbridge.com/zh-HK/news/280013251.md) # XPeng achieves its first quarterly profit, planning to invest another 7 billion in physical AI by 2026 "Expanding our scale will allow us to survive in competition, and our absolute leading position in physical AI technology and commercialization will create our core competitiveness," said He Xiaopeng, Chairman and CEO of XPeng, during the earnings call. He also revealed that XPeng's investment in physical AI will reach 7 billion yuan by 2026. Just a day earlier, XPeng had announced its first single-quarter profit since its establishment. On March 20, XPeng disclosed its unaudited financial results for the fourth quarter and the full year of 2025, reporting a net profit of 380 million yuan for the fourth quarter. In the new car-making forces with revenue fluctuations often reaching tens of billions, the absolute figure of 380 million yuan is not large, but it marks the first time XPeng has achieved a single-quarter profit since its inception. Sources close to XPeng told Wall Street Insight that the company has been focusing on cost reduction since 2023, while also opening a second revenue line by providing intelligent driving technology to automakers like Volkswagen. These two strategies are key to XPeng's single-quarter profitability. In the context of the Chinese new energy vehicle market, which is deeply mired in stock game and normalized price wars, this report provides a valuable perspective on business observation. A company that once suffered market setbacks due to its obsession with pure electric and intelligent driving technology has managed to pull itself out of the mire through extremely pragmatic strategic corrections, stringent technical cost reductions, and commercialization aimed at the B-end. Achieving profitability for the first time is just the surface; what is more noteworthy in this financial report is the change in XPeng's profit structure and business model. However, the cash-burning investments are still ongoing, and XPeng is far from the moment to pop the champagne. ## Profits Beyond Car Sales In the fourth quarter of 2025, XPeng delivered 116,249 vehicles, setting a new single-quarter historical high; revenue reached 22.25 billion yuan, a year-on-year increase of 38.2%; gross margin was 21.3%, up 6.9 percentage points year-on-year; and net profit was 380 million yuan, achieving single-quarter profitability for the first time. For the full year, XPeng's total revenue in 2025 was 76.72 billion yuan, a year-on-year increase of 87.7%; total deliveries were 429,445 vehicles, a year-on-year increase of 125.9%; and net loss narrowed significantly from 5.79 billion yuan in 2024 to 1.14 billion yuan. However, in the fiercely competitive mass market priced between 150,000 and 250,000 yuan, achieving profitability while maintaining a high level of intelligent driving features and increasing gross margin by 6.9 percentage points year-on-year cannot be accomplished solely through the scale dilution of vehicle sales. XPeng's Vice Chairman and Co-President Gu Hongdi stated in the financial report, "We have achieved a profit path that is distinctly different from traditional automakers through a technology-driven business model." This brings attention to the "service and other income" in XPeng's financial report. According to the financial report, in the fourth quarter of 2025, XPeng's service and other income was 3.18 billion yuan, a year-on-year increase of 121.9% and a quarter-on-quarter increase of 36.7%; for the full year, service and other income was 8.34 billion yuan, a year-on-year increase of 65.6%. This portion of income mainly comes from three aspects: revenue from technology research and development services provided to automakers (such as cooperation with Volkswagen), revenue from parts and accessories sales, and carbon credit business revenue This means that there is an important technology output sector playing a role in XPeng's profit structure. While other new forces are still relying on car sales profits to cover R&D expenses, XPeng has already begun to create additional revenue through technology licensing. At the same time, cost reduction through technology and economies of scale have also played a certain role. Data shows that in 2025, XPeng's gross margin for the whole year was 12.8%, an increase of 4.5 percentage points from 8.3% in 2024. Considering that the starting price of XPeng's main model MONA M03 is only 119,800 yuan, and the starting price of P7+ is 186,800 yuan, maintaining a 12.8% gross margin at this price level indicates that the cost reduction strategy through technology has indeed produced results. However, compared to the overall gross margin of 18.9%, the automotive gross margin is 6.1 percentage points lower. This gap comes precisely from "service and other income" such as technology R&D services. In other words, without the income brought by technological cooperation with companies like Volkswagen, XPeng's overall gross margin would significantly decline. Despite achieving profitability in the fourth quarter, XPeng's net loss for the entire year of 2025 still reached 1.14 billion yuan. Looking ahead, the management has given a calm forecast for the market. XPeng's delivery guidance for the first quarter of 2026 is set at 61,000 to 66,000 units, with revenue expectations between 12.2 billion and 13.28 billion yuan. Considering that the first quarter overlaps with traditional off-season factors such as the Spring Festival, this guidance appears quite prudent. This also means that a single quarter of profitability does not indicate that XPeng has completely turned the corner; maintaining high-intensity R&D investment (with R&D expenditure of 2.87 billion yuan in the fourth quarter) remains a rigid expense for coping with the subsequent technological arms race. ## A 7 Billion Gamble The current automotive market has a more complex competitive landscape. Huawei's HarmonyOS is building strong brand momentum in the high-end intelligent driving market through a light-asset technology empowerment model; Xiaomi's automotive venture is showcasing a terrifying siphoning effect, relying on its irreplaceable traffic advantages and ecosystem conversion capabilities. Traditional car manufacturers are thriving in the new energy sector, capturing significant market share. Faced with these technology giants that have large ecological systems, XPeng finds it difficult to build a true long-term barrier by solely relying on minor hardware innovations and temporary cost-performance ratios. This also forces XPeng to swim into deeper waters—stepping out of the single dimension of vehicle manufacturing and initiating a fundamental leap in business models towards underlying computing power, software ecosystems, and even general physical AI fields. From the statements of XPeng's Chairman and CEO He Xiaopeng during the earnings call, it is clear that XPeng is systematically shifting its business narrative towards "physical AI." He Xiaopeng revealed that the company's R&D investment for 2025 is 9.5 billion yuan, of which 4.5 billion yuan is related to AI. This year, XPeng will continue to increase its R&D investment related to AI, with physical AI-related R&D investment expected to rise to 7 billion yuan. In addition to plans related to automobiles, two strategically significant moves were presented during the conference call: one is the large-scale deployment and external supply intention of the self-developed "Turing" AI chip; the other is the commercialization trial of Robotaxi and advanced software. In past industry perceptions, car manufacturers developed their own chips mainly to ensure supply and profit, in order to break free from the high hardware premiums of general computing power suppliers. XPeng's application of the Turing chip in its own models indeed validates this cost reduction logic He Xiaopeng clearly stated in the conference call that he welcomes other car manufacturers and robotics companies to use the Turing chip. The essence of this move is that XPeng is trying to penetrate the ecosystem of underlying computing power providers. In this winner-takes-all semiconductor and computing power market, once XPeng can output computing power infrastructure to the industry as a Tier 1 or even lower-level entity, its role will no longer be just a player at the table, but it will begin to participate in setting the rules of the table. Accompanying the external supply of computing power is the reconstruction of the automotive software revenue model. XPeng plans to advance its Robotaxi business in the second half of 2026, which is not a gamble on heavy asset mobility services. Unlike traditional ride-hailing platforms, XPeng is more inclined to act as a provider of technology and hardware. With the support of end-to-end large models, the smart cars sold to consumers and the Robotaxi operated in the B-end will essentially transform into massive data collectors and computing power terminals. Industry insiders told Wall Street Insight that this transformation means that XPeng's revenue will gradually break free from the limitations of one-off hardware deliveries. Advanced driving capabilities will no longer be a selling point included with the vehicle, but rather a service that can continuously charge through high-level software subscriptions and Robotaxi operational revenue sharing per kilometer. This extremely low marginal cost and extremely high gross margin long-tail revenue model is a standard SaaS business scenario. From "selling iron" to "selling code" and then to "selling services," the Volkswagen cooperation project is just the prologue to this model being realized. In the earnings call, He Xiaopeng also disclosed the latest progress on humanoid robots: IRON is expected to go into mass production by the end of 2026, with a monthly production capacity target of over a thousand units; it will be equipped with three Turing AI chips, and the second-generation VLA technology stack has been successfully implemented on the robot. IRON will be primarily applied in commercial scenarios such as guidance and sales in XPeng stores and parks, with future expansion into industrial and home scenarios. He Xiaopeng stated that in the next 5 to 10 years, the market space for physical AI applications will be broader than that of the automotive industry, "the global Robotaxi and humanoid robots will be a trillion-dollar market." Looking back at the fourth quarter financial report of 2025, a single-quarter profit of 380 million yuan proves that XPeng has emerged from the most dangerous phase. However, the other side of this report is equally clear; a net loss of 140 million yuan for the year means there is still a distance to sustainable profitability; the decline in the first-quarter delivery guidance hints at the growing pains during the transition between old and new models; the 7 billion yuan investment in physical AI will test cash flow management capabilities. He Xiaopeng stated in the conference call that expanding scale will allow us to survive in competition, and the absolute lead in physical AI technology and commercialization will create our core competitiveness. Industry insiders told Wall Street Insight that XPeng's current strategy is very clear: use short-term profits to exchange for a technology window, and then leverage technology to drive new business models. 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