Hyliion's Q2 2025: Key Contradictions on LEM Production, Navy Contracts, and Tax Credit Impacts

LEM production and supply chain challenges, Navy contract and KARNO technology usage, tax credit for KARNO technology, product development and scaling, and customer interest and deployment are the key contradictions discussed in Hyliion's latest 2025Q2 earnings call.



Product Development and Deployment Progress:
- Hyliion delivered its second Early Adopter unit to the U.S. Navy, with plans to complete assembly of two additional KARNO Power Modules by the end of the quarter.
- This progress is attributed to overcoming key manufacturing challenges, including the successful transition of Linear Electric Motor (LEM) production in-house and improvements in the regen design and depowdering process.

New Tax Credit for Clean Power Generation:
- A 30% investment tax credit has been established for customers deploying linear generators or fuel cells through the One Big Beautiful Bill Act, effective for projects starting in 2026.
- This credit will help offset the upfront cost of adopting Hyliion's KARNO technology and is expected to increase customer interest and adoption.

Military Contract and Partnership Expansion:
- Hyliion received a Phase II small business innovation research contract worth up to $1.5 million and was designated as an awardable technology by the U.S. Air Force and the Department of Defense's Chief Digital and Artificial Intelligence Office.
- These developments are part of Hyliion's growing relationship with the military, which includes plans to install multiple KARNO Cores on a prototype Navy vessel and deploy full KARNO Power Modules at multiple testing sites.

Financial Performance and Cash Position:
- Hyliion recorded $1.5 million in revenue from research and development services, with a gross profit of $131,000 in Q2 2025.
- The company finished Q2 with $185.3 million in cash and short- and long-term investments, reflecting a slowdown in cash usage partly due to lower capital spending, despite an increase in operating expenses related to research and development costs.