Vuzix's Q3 2025 Earnings Call: Contradictions Emerge on Quanta Capacity, Defense Program Timelines, and Volume Growth

Date of Call: November 13, 2025

Financials Results

• Revenue: $1.2M, down 16% YOY
• EPS: $0.09 loss per share, versus $0.14 loss per share in prior year
• Gross Margin: Gross loss of $0.4M for the quarter, compared to gross loss of $0.3M in the prior year

Guidance:

• Quarter-to-date revenue and purchase orders have exceeded Q3; OEM waveguide and product businesses performing well.
• Production deliveries of waveguides/display engines for a military heads-up display begin in Q4; related revenue expected to contribute in Q4.
• Amazon program entering commercial rollout in U.S. and Canada and is expected to grow materially.
• In discussions with Quanta to scale capacity beyond current ~1M/year toward multi-million; visibility expected over the next few quarters (initial steps by Q1, ramp into Q3).
• Cash $22.6M and disciplined cost structure provide runway through 2026.
• Product mix (LX1, defense) should drive higher product margins in 2026.

Business Commentary:

* Waveguide Demand and Strategic Partnerships: - Vuzix experienced a significant increase in demand for high-quality color waveguides, driven by partnerships with companies like Quanta Computer, TCL, and Saphlux. - The company received multiple investments from Quanta Computer, totaling $20 million, to support a long-term waveguide design and supply partnership.

• Defense Business Growth:
• Vuzix's OEM and defense business is accelerating with active programs, engagements, and revenue contributions, including the transition into production deliveries of lightweight heads-up displays for military personnel.

• The increase in defense business is attributed to deepening ties with prime contractors and successful completion of development orders.

• AI Smart Glasses and Enterprise Solutions:

• AI-enabled smart glasses are driving new waves of interest and custom projects in the enterprise sector, with notable deployments by clients such as Amazon.

• The shift from push to pull in customer engagement has led to increased demand for specific workflow solutions and ROI-driven projects.

• Financial Performance and Cash Position:

• Vuzix reported a net loss of $7.4 million or $0.09 per share for Q3 2025, compared to a net loss of $9.2 million or $0.14 per share in the same period last year.
• The company maintained a strong cash position of $22.6 million and positive working capital of $24.3 million, supported by funding activities like the sale of Series B preferred stock and common stock.
  
  

Sentiment Analysis:

Overall Tone: Positive

• CEO: "demand for high-quality color waveguides continues to rise"; "quarter-to-date revenue and purchase order obligations have already exceeded Q3". CFO: cash and cash equivalents $22.6M and "sufficient runway to execute on our current operating plan through 2026." CEO: "the train is leaving the station."

Q&A:

• Question from Christian Schwab (Craig-Hallum Capital Group): I just wanted to start with Quanta and potential -- your conversation about having conversations with them to ramp capacity even further. I think previously, you've said you had capacity for 1 million waveguides a year. Should we assume that when CES comes and some people introduce their products that there's high hopes for substantial volume? I'm just trying to understand that statement a little bit better.
  Response: Vuzix is in active discussions with Quanta to scale beyond the current ~1M/year capacity toward multi‑million volumes; Rochester can be expanded but supply‑chain and tariff issues must be addressed.

• Question from Christian Schwab (Craig-Hallum Capital Group): How long are these discussions in the early stages? Or do you think you're down the path to -- is that something that we're going to hear about in the next 1 to 2 quarters, how those discussions end? Or is it yet to be determined how long that may take?
  Response: Timeline uncertain but management expects visibility soon—initial progress in Q1 with more meaningful ramp by Q3 as new lines are brought up.

• Question from Christian Schwab (Craig-Hallum Capital Group): Regarding the defense industry and the 6-figure development order—when do you think you'll be able to give greater clarity on volume ramping in a more measurable pace?
  Response: Some defense programs are moving into production with waveguides being shipped in Q4; clearer volume trajectory expected early in 2026 as production unfolds.

• Question from Christian Schwab (Craig-Hallum Capital Group): As 2026 unfolds, how do you potentially see the defense contractor customer base expanding? Will we see other customers go into production in calendar '26 in your expectation?
  Response: Expect possibly two programs entering production in 2026; one requires a display‑engine design change and others are contracted but timing depends on engineering and U.S. government funding cadence—more announcements likely in Q1.

• Question from Christian Schwab (Craig-Hallum Capital Group): Can you provide an update on the Amazon program and its scope/expansion?
  Response: The Amazon program has expanded from Europe into commercial rollout in the U.S. and Canada across maintenance and data‑center use cases; AWS AI integration is being explored and management expects the program to be materially significant.

• Question from Christian Schwab (Craig-Hallum Capital Group): Any color on gross margins and how product mix may evolve?
  Response: Margins will be mix‑dependent: LX1 and defense programs carry higher margins and management expects product margins to improve in 2026 as mix shifts.

Contradiction Point 1

Capacity Ramping with Quanta Computer

It involves the timeline and expectations for expanding production capacity, which directly impacts the company's ability to meet demand and growth targets.

Can you clarify your capacity expansion plans with Quanta Computer and when we can expect updates? - Christian Schwab (Craig-Hallum Capital Group)

20251114-2025 Q3: Vuzix is engaged in discussions with Quanta to significantly ramp up production capacity beyond the current 1 million waveguides per year. The Rochester plant can be expanded, but supply chain issues and tariffs need to be addressed. More details will emerge in the coming quarters. - Paul Travers(CEO)

Can you provide an update on your comfort with the multiple product design partnerships with Quanta, which are expected to begin in the second half of '25 and scale materially in '26? - Christian Schwab (Craig-Hallum)

2025Q1: It's every bit as enthusiastic, Christian. The relationship with Quanta and Vuzix is very good, and we have an amazing team of people over there. There are multiple programs, at least two of which should be rolling before the end of this year. - Paul Travers(CEO)

Contradiction Point 2

Defense Industry Program Status

It involves changes in the status and timeline of defense programs, which are critical for revenue projections and strategic planning.

When can we expect more clarity on defense industry volume growth? - Christian Schwab (Craig-Hallum Capital Group)

20251114-2025 Q3: Vuzix is currently shipping production waveguides for defense programs in Q4. These programs are transitioning from development to production. 2026 should provide more clarity on production volumes. - Paul Travers(CEO)

Can you update us on the defense contractor customer base expansion in 2026? - Christian Schwab (Craig-Hallum)

2025Q1: We're at, we have a program that is going to start seriously shipping next year. - Paul Travers(CEO)

Contradiction Point 3

Defense Industry Volume Growth

It affects the company's revenue projections and market presence in the defense industry, which is a significant growth area for Vuzix.

How soon can we expect clarity on defense industry volume growth? - Christian Schwab(Craig-Hallum Capital Group)

20251114-2025 Q3: Vuzix is currently shipping production waveguides for defense programs in Q4. These programs are transitioning from development to production. 2026 should provide more clarity on production volumes. - Paul Travers(CEO)

How are defense opportunities progressing? - Tyler Leroy Burmeister(Craig-Hallum, Research Division)

2025Q2: Production orders are expected in the second half of this year, with multiple programs in motion. - Paul J. Travers(Founder, Chairman, CEO & President)

Contradiction Point 4

Expansion of Defense Contractor Customer Base

It involves the expected growth in the defense contractor customer base, which can impact future revenue and market penetration.

Are there plans to expand the defense contractor customer base in 2026? - Christian Schwab (Craig-Hallum Capital Group)

20251114-2025 Q3: Vuzix is working on a development program that is expected to ramp up quickly in 2026. Another program needs an engine modification, but it's expected to progress. Additional announcements may follow after government sequestration or continuing resolution. - Paul Travers(CEO)

How will the defense contractor customer base expand in 2026? - Tyler Leroy Burmeister (Craig-Hallum, Research Division)

2025Q2: Vuzix may have two defense programs in production in 2026. Additional programs with prime contractors will become clearer after Q4, although some announcements may be impacted by government work resumption. - Paul J. Travers(Founder, Chairman, CEO & President)

Contradiction Point 5

Volume Ramping with Quanta and Production Capacity

It directly impacts expectations regarding the production timeline and delivery capabilities of key components, potentially influencing company revenue and investor expectations.

Can you detail the capacity ramping plans with Quanta Computer and when these developments will be announced? - Christian Schwab (Craig-Hallum Capital Group)

20251114-2025 Q3: Vuzix is engaged in discussions with Quanta to significantly ramp up production capacity beyond the current 1 million waveguides per year. The Rochester plant can be expanded, but supply chain issues and tariffs need to be addressed. More details will emerge in the coming quarters. - Paul Travers(CEO)

Are there updates on your confidence in the product design partnerships with Quanta expected to accelerate in H2 2025 and gain significant traction by 2026? - Christian Schwab (Craig-Hallum)

2025Q1: We are definitely ramping our production volume here at Quanta. We're going to start seeing it in 2026. - Paul Travers(CEO)