Ouster's BlueCity Deployment in Utah: A Blueprint for Lidar's Role in Smart Cities and Recurring Revenue

In the race to build smarter cities, the intersection of technology and infrastructure has become a battleground for innovation. Ouster (OUST), a leader in lidar technology, has taken a significant step forward with its BlueCity deployment in Utah—a project that not only validates the scalability of lidar in intelligent transportation systems but also underscores the company's potential to generate recurring revenue through software-driven solutions. For investors, this marks a pivotal moment in assessing Ouster's transition from a hardware-focused startup to a recurring-revenue engine in the smart infrastructure sector.

The Utah BlueCity Project: A Case Study in Scalability

The Utah Department of Transportation (UDOT) has partnered with Econolite, a long-time traffic management solutions provider, to expand Ouster's BlueCity system to over 100 intersections across cities like Salt Lake City, Ogden, and Cedar City. This follows an initial deployment at a dozen intersections in 2025, demonstrating the system's ability to integrate with existing infrastructure, including Econolite's Cobalt controllers and EOS firmware. The project's success hinges on Ouster's lidar-based Physical AI, which combines 3D digital lidar with deep learning algorithms trained on 4 million labeled objects. This technology enables real-time traffic signal actuation, congestion reduction, and safety improvements while preserving privacy—a critical differentiator in an era of heightened data sensitivity.

The five-year contract with UDOT is more than a technical achievement; it's a strategic win. By securing a long-term partnership with a state agency, Ouster has demonstrated its ability to move beyond pilot projects and into production-scale deployments. This is a critical milestone for lidar, a technology long associated with niche applications like autonomous vehicles. The Utah project shows that lidar can deliver measurable value in mainstream infrastructure, opening the door for similar contracts in other states and countries.

From Hardware to Recurring Revenue: Ouster's Software-Attached Model

Ouster's revenue model is evolving. While the company initially relied on hardware sales—shipping over 5,500 sensors in Q2 2025—it is now emphasizing a “software-attached” approach. BlueCity's AI-powered analytics, cloud-based management tools, and subscription-based services create recurring revenue streams. For example, the Ouster Gemini portal allows customers to monitor and configure lidar deployments remotely, generating ongoing value through data insights and software updates.

This shift is evident in Ouster's financial strategy. The company projects $335.6 million in revenue by 2028, driven by a 38.7% annual growth rate. While the exact financial terms of the Utah contract remain undisclosed, the five-year duration and integration with existing infrastructure suggest a mix of upfront hardware sales and recurring software revenue. Moreover, Ouster's partnerships with distributors and integrators—now covering 39 U.S. states—position it to scale BlueCity across 300,000 signalized intersections nationwide.

Competitive Advantages and Market Position

Ouster's success in Utah is underpinned by several competitive advantages. First, its lidar technology is NEMA TS2 certified and NDAA compliant, meeting stringent U.S. infrastructure standards. This certification is a barrier to entry for competitors and a key reason UDOT chose Ouster over camera-based solutions. Second, the company's AI models, trained on diverse traffic environments, offer superior detection accuracy and adaptability. Third, the partnership with Econolite—a firm with 160,000 traffic controllers deployed globally—provides a proven distribution network and technical expertise.

The market for intelligent transportation systems is vast. With urban populations growing and governments prioritizing safety and efficiency, the global smart traffic management market is projected to exceed $20 billion by 2030. Ouster's BlueCity is well-positioned to capture a significant share, particularly as it expands into other verticals like retail (e.g., the Fortune 500 deployment mentioned in Q2 2025) and security.

Risks and Considerations

Despite the optimism, risks remain. Lidar adoption in infrastructure is still nascent, and Ouster faces competition from camera-based systems and other lidar providers like Velodyne and Luminar. Additionally, the company's path to profitability is not guaranteed. While Ouster projects a transition from a $92 million loss in 2025 to a $30 million profit by 2028, this hinges on sustained contract wins and cost discipline. Investors should also monitor the impact of tariffs and supply chain dynamics on hardware margins.

Investment Thesis: A High-Growth Play on Smart Cities

For investors, Ouster's Utah deployment is a validation of its business model. The project demonstrates that lidar can scale in real-world infrastructure, generate recurring revenue through software, and meet regulatory standards. With a growing installed base, a strong partnership ecosystem, and a clear path to profitability, Ouster is positioned to benefit from the long-term trend of urban digitization.

However, patience is required. The company is still in the early stages of its growth trajectory, and its success will depend on replicating the Utah model in other markets. For those willing to bet on the future of smart cities, Ouster offers a compelling case: a technology that is not only transformative but also increasingly profitable.

In the end, the Utah project is more than a contract—it's a blueprint. And for Ouster, it's a sign that the road to mass-market adoption is paved with lidar.