Lucid (LCID)

Luxury electric car manufacturer Lucid (NASDAQ:LCID) announced better-than-expected revenue in Q4 CY2025, with sales up 123% year on year to $522.7 million. Its non-GAAP loss of $3.08 per share was 15.2% below analysts’ consensus estimates.

Company Overview

Founded by a former Tesla Vice President, Lucid Group (NASDAQ:LCID) designs, manufactures, and sells luxury electric vehicles with long-range capabilities.

Much capital investment and technical know-how are needed to manufacture functional, safe, and aesthetically pleasing automobiles for the mass market. Barriers to entry are therefore high, and auto manufacturers with economies of scale can boast strong economic moats. However, this doesn’t insulate them from new entrants, as electric vehicles (EVs) have entered the market and are upending it. This has forced established manufacturers to not only contend with emerging EV-first competitors but also decide how much they want to invest in these disruptive technologies, which will likely cannibalize their legacy offerings.

Lucid's competitors in the electric vehicle market include Tesla (NASDAQ:TSLA), Rivian (NASDAQ:RIVN), Porsche's Electric Division (XETRA:PAH3), and Mercedes-Benz Group's EV Division (OTC:MBGAF).

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Lucid’s 208% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Lucid’s annualized revenue growth of 50.8% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

We can dig further into the company’s revenue dynamics by analyzing its number of units sold, which reached 5,345 in the latest quarter. Over the last two years, Lucid’s units sold grew by 47.2% annually. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, Lucid reported magnificent year-on-year revenue growth of 123%, and its $522.7 million of revenue beat Wall Street’s estimates by 17.3%.

Looking ahead, sell-side analysts expect revenue to grow 89.2% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will spur better top-line performance.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

Lucid has bad unit economics for an industrials business, signaling it operates in a competitive market. This is also because it’s an automobile manufacturer.

Automobile manufacturers have structurally lower profitability as they often break even on the initial sale of vehicles and instead make money on parts and servicing, which come many years later - this explains why new entrants whose fleets are too young to generate substantial aftermarket revenues have negative gross margins. As you can see below, these dynamics culminated in an average negative 138% gross margin for Lucid over the last five years.

This quarter, Lucid’s gross profit margin was negative 80.7%. The company’s full-year margin was also negative, suggesting it needs to change its business model quickly.

Lucid’s high expenses have contributed to an average operating margin of negative 405% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, Lucid’s operating margin rose over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.

In Q4, Lucid generated a negative 204% operating margin.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Lucid’s full-year earnings are still negative, it reduced its losses and improved its EPS by 5.1% annually over the last four years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Lucid, its two-year annual EPS growth of 13.7% was higher than its four-year trend. Its improving earnings is an encouraging data point, but a caveat is that its EPS is still in the red.

In Q4, Lucid reported adjusted EPS of negative $3.08, down from negative $2.20 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Lucid to improve its earnings losses. Analysts forecast its full-year EPS of negative $10.13 will advance to negative $7.55.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Lucid’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 439%, meaning it lit $438.79 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Lucid’s margin expanded during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

Lucid burned through $1.24 billion of cash in Q4, equivalent to a negative 238% margin. The company’s cash burn increased from $824.8 million of lost cash in the same quarter last year.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Lucid burned through $3.8 billion of cash over the last year, and its $2.91 billion of debt exceeds the $997.8 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Lucid’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Lucid until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were impressed by how significantly Lucid blew past analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 6.4% to $9.33 immediately after reporting.

Updated: February 24, 2026 at 5:04 PM EST

Before deciding whether to buy Lucid or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Lucid is a pretty good company if you ignore its balance sheet. For starters, its revenue growth was exceptional over the last five years. And while its operating margins reveal poor profitability compared to other industrials companies, its rising cash profitability gives it more optionality. Additionally, Lucid’s expanding operating margin shows the business has become more efficient.

Lucid’s forward price-to-sales ratio is 1.3x. Certain aspects of its fundamentals are attractive, but we aren’t investing at the moment because its balance sheet makes us uneasy. Interested in this company and its prospects? We recommend you wait until its debt load falls or its profits increase.

Wall Street analysts have a consensus one-year price target of $16.67 on the company (compared to the current share price of $9.33).