Ouster's Q3 2025 Earnings Call: Contradictions Emerge on Defense Market Impact, Production Timelines, and Strategic Priorities

Date of Call: None provided

Financials Results

• Revenue: $39.5M, up 41% YOY and 13% sequentially
• Gross Margin: 42% GAAP, up 4 percentage points YOY (company cites long-term target of 35%–40%)

Guidance:

• Q4 2025 revenue expected to be $39.5M to $42.5M.
• Company reiterates long-term GAAP gross margin target of 35%–40%.
• Company targets long-term revenue growth framework of ~30%–50% (company long‑term financial framework).

Business Commentary:

• Revenue Growth and Product Demand:
• Ouster reported revenue of $39.5 million for Q3, representing the 11th straight quarter of revenue growth, with over 7,200 sensors shipped.

• The growth was driven by strong demand across multiple applications, including yard logistics and traffic intersections, along with the expansion of its product portfolio.

• Product and Market Expansion:

• Ouster expanded its product portfolio with investments in AI algorithms, improving detection accuracy and releasing real-time localization in its Ouster SDK.

• The company signed seven new exclusive partnerships to bring Ouster Blue City to additional states, covering a majority of the North American signalized intersection market.

• Profitability and Financial Performance:

• Ouster ended Q3 with $247 million in cash and equivalents, maintaining a strong gross margin of 42%.
• The financial performance reflects the company's strategic focus on operational capacity and innovation, positioning it for continued growth.

• Customer and Strategic Partnerships:
• Ouster secured a substantial order to supply REV7 to a large European industrial equipment manufacturer, indicating the conversion of pilot programs into large volume orders.
• The company formed a strategic partnership with Constellus, offering a unified security solution that positions Ouster Gemini and Ouster Digital Flash for large-scale security operations.

  Sentiment Analysis:

  Overall Tone: Positive

  • Company reported record revenue of $39.5M (11th straight quarter of growth), record shipments (>7,200 sensors), GAAP gross margin of 42% (up 4 pts YOY), cash and equivalents of $247M with no debt, and reiterated product investments and growth targets, while providing Q4 revenue guidance of $39.5M–$42.5M.

Q&A:

• Question from Colin Rusch (Oppenheimer): Can you update where you are in testing REV8 and Kronos, any concerns or accelerations? Also, how is the cadence of customer design cycles evolving and can you quantify win/adoption rates as customers move from pilots to production?
  Response: Management declined to give specific REV8/Kronos timing but reiterated strong commitment to the digital LiDAR roadmap (products expected to materially expand TAM); noted ~1,000 end customers with under 10% in full production today, implying substantial upside as pilots convert to volume (Serve Robotics cited as an example).

• Question from Anandan (Cantor Fitzgerald): Will you pursue self-driving (passenger/commercial) more aggressively and seek OEM agreements? Also, any update on the Blue UAS certification and related sensor shipment granularity or competitive landscape?
  Response: Company is interested in AV/OEM but views direct OEM integration as a longer‑term opportunity (already partnered with robotaxi players like Motional and May Mobility); Blue UAS certification is a first‑mover DOD benefit that drives customer interest, but no shipment details were provided.

• Question from Madison DiPaola (Rosenblatt Securities): With customers moving from prototype to production, what steps are you taking to mitigate supply‑chain constraints? And what's the long‑term target for Blue City attach rate?
  Response: Ouster is investing in capacity and financial flexibility to meet rising customer demand and stated recent record shipment growth; it will not disclose a long‑term Blue City attach rate target, noting Blue City is sold as a turnkey solution with 100% LiDAR+software attach per sale.

• Question from Tyler Anderson (Craig‑Hallum Capital Group): Could Amazon's robot and humanoid initiatives (and similar trends) benefit Ouster; how would that show up in bookings and timing? Also, you referenced ~300,000 intersections — is that the TAM and what is Blue City's attach rate?
  Response: Humanoid and warehouse robotics represent a positive long‑term opportunity (LiDAR is needed), some customers already use Ouster sensors; near‑term impact is limited, scaling over years. Blue City TAM is large (≈300k signalized intersections in North America), Ouster has distribution partnerships covering a majority of the market and sells Blue City as a turnkey product (100% attach for sensors/software).

• Question from Casey Ryan (WestPark Capital): How do you view the defense vertical — is it service‑wide with retrofit opportunity, or focused on new platforms? And could DJI restrictions benefit domestic suppliers like Ouster?
  Response: Ouster is focused on non‑retrofit defense opportunities (working with traditional contractors and new players); large‑scale defensive automation has an unclear multi‑year timeline, though Blue UAS certification enables current surveying/surveillance use cases; scrutiny of suppliers like DJI may yield modest supply‑chain benefits for Ouster.

• Question from Tim Savageau (Northland Capital Markets): Serve Robotics scaled rapidly — how significant is last‑mile deployment (or Serve specifically) as a growth driver, and what are implications if more customers move from pilot to production (you said <10% are in full production)?
  Response: Serve is a proof point that last‑mile can scale commercially; company remains in early innings with <10% of customers in full production, supporting confidence in sustained 30%–50% revenue growth as more customers scale into volume.

• Question from Tyler Anderson (Craig‑Hallum Capital Group) (follow‑up): Can customers use other sensors with your software (is Gemini sensor‑agnostic)? And are your ML models traditional deep learning or moving toward LLM/transformer approaches?
  Response: Software is 'software‑attached' to Ouster hardware (you cannot use other sensors with Ouster software); some customers add Gemini onto existing Ouster LiDARs. Perception models use cutting‑edge deep learning trained on large annotated LiDAR datasets (not text LLMs), though future integrations/architectural shifts are possible.

Contradiction Point 1

Blue UAS Certification Impact on Defense Market

It pertains to the impact and significance of the Blue UAS certification on the defense market, which could influence strategic investments and expansion plans.

Can you provide updates on Blue UAS certification and sensor shipment details? Do you still see a competitive moat in this segment, or are more competitors entering the market now? - Anandan (Cantor Fitzgerald)

2025Q3: The Blue UAS certification is a boost for our defense business, making us the first DOD Blue UAS certified company. We're not breaking down specific sensor volumes but see benefits from certified payloads for defense use and increased customer interest in American-made technology. - Angus Pacala(CEO)

How do you see the defense market, and was the Blue UAS certification a key driver? - Richard Cutts Shannon (Craig-Hallum Capital Group LLC, Research Division)

2025Q2: Defense is an emerging market for Ouster, combining federal and international interest with advancements in commercial products. The Blue UAS certification is a leading indicator of future opportunities, though it did not significantly impact Q2 earnings. This market is evolving rapidly, with potential for future impact on growth. - Charles Angus Pacala(Co-Founder, CEO & Director)

Contradiction Point 2

Customer Production Scale and Timeline

It involves the timeline and scale of customer transition from development to full production, which directly impacts Ouster's revenue growth expectations and market penetration.

Can you outline the cadence of customer programs moving forward, including insights on transitioning from smaller volumes to full production, design cycle timelines, adoption rates, and any win rate data available? - Colin Rusch (Oppenheimer)

2025Q3: We have over 1,000 customers, with only a small minority having reached full-scale commercial production. There's immense opportunity in our existing latent customer base to convert from development to commercial release. - Angus Pacala(CEO)

Can you discuss new products and potential TAM expansion in the automotive and industrial markets? - Richard Shannon (Craig-Hallum Capital Group LLC)

2025Q1: We continue to have strong adoption. We have 43% of our new design wins in Q1 were from new customers versus historical average of 30%. - Angus Pacala(CEO)

Contradiction Point 3

Functional Safety Certifications and Market Expansion

It affects Ouster's ability to tap into new markets, such as warehouse automation, and the timeline for functional safety certifications, which are crucial for market expansion and revenue growth.

What's the status of functional safety validation in warehouse automation, and could it drive new orders? - Colin Rusch (Oppenheimer)

2025Q3: Functional safety certifications are important and are coming with future products. This is a major focus to tap into new markets. The timing is uncertain, but there's a huge focus and opportunity in this area. - Angus Pacala(CEO)

How do new customer testing processes lead to new awards, and are faster production orders expected? - Colin Rusch (Oppenheimer)

2025Q1: Functional safety certifications are important and are coming with future products. This is a major focus to tap into new markets. The timing is uncertain, but there's a huge focus and opportunity in this area. - Angus Pacala(CEO)

Contradiction Point 4

Defense Market and Competitive Landscape

It involves Ouster's positioning within the defense market and their response to potential competitive threats, which are crucial for understanding their strategy and market share.

Do you define defense as covering all services and vehicles through automation? Are there significant retrofit opportunities beyond new vehicle platforms? - Casey Ryan (WestPark Capital)

2025Q3: The defense market is diverse, with non-retrofit opportunities being our focus. Retrofit is unclear in terms of scale and timeline for deployment. Automation is beneficial, but widespread adoption will take time. - [Angus Pacala](CEO)

Has the competitive landscape with Chinese suppliers changed, and what is Ouster's strategy in smart infrastructure and robotics markets? - Timothy Savageaux (Northland Capital Markets)

2024Q4: Ouster's supply chain is secured with onshore manufacturing. Smart infrastructure is a $19 billion market, and Ouster leads with superior performance and competitive pricing. The competitive landscape hasn't changed significantly, and Ouster is maintaining market share. - [Angus Pacala](CEO)

Contradiction Point 5

Self-Driving Vertical and Partnerships

It highlights Ouster's commitment and strategy in the self-driving vertical, which impacts their market penetration and future growth plans.

Will you pursue the self-driving vertical more aggressively? Are you seeking major OEM agreements? - Anandan (Cantor Fitzgerald)

2025Q3: We already have strong partnerships in self-driving vehicles like Motional and May Mobility. The integration of self-driving technology into cars you can buy is a long-term opportunity, but our products and investment in future products are well-positioned for this space. - [Angus Pacala](CEO)

How are sensors being used in robotaxi and last-mile delivery, and what is their market impact? - Andres Sheppard (Cantor Fitzgerald)

2024Q4: Ouster is benefiting from mind share and commercial opportunities in this [last-mile delivery robotics] segment. - [Angus Pacala](CEO)