Rivian (RIVN)

Electric vehicle manufacturer Rivian (NASDAQ:RIVN) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 3% year on year to $1.24 billion. Its non-GAAP loss of $0.41 per share was 44.4% above analysts’ consensus estimates.

Company Overview

The manufacturer of Amazon’s delivery trucks, Rivian (NASDAQ:RIVN) designs, manufactures, and sells electric vehicles and commercial delivery vans.

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.

Competitors in the electric vehicle industry include Tesla (NASDAQ:TSLA), Ford (NYSE:F), General Motors (NYSE:GM), and Lucid Motors (NASDAQ:LCID).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Rivian’s 195% annualized revenue growth over the last three 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 stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Rivian’s annualized revenue growth of 50% over the last two years is below its three-year trend, but we still think the results suggest healthy demand.

We can better understand the company’s revenue dynamics by analyzing its number of vehicles delivered, which reached 8,640 in the latest quarter. Over the last two years, Rivian’s vehicles delivered grew by 31.3% annually. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, Rivian reported modest year-on-year revenue growth of 3% but beat Wall Street’s estimates by 24.3%.

Looking ahead, sell-side analysts expect revenue to grow 16.4% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and implies the market is baking in success for its products and services.

Rivian 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 52.8% gross margin for Rivian over the last four years.

Rivian produced a 16.6% gross profit margin in Q1, marking a 60.4 percentage point increase from -43.8% in the same quarter last year. However, company was unprofitable on a full-year basis, suggesting it needs to make changes.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Rivian’s high expenses have contributed to an average operating margin of negative 170% over the last four 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, Rivian’s operating margin rose over the last four years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.

Rivian’s operating margin was negative 52.8% this quarter. The company's consistent lack of profits raise a flag.

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 Rivian’s full-year earnings are still negative, it reduced its losses and improved its EPS by 15.1% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon, especially since it recently diluted shareholders by forming a $5.8 billion joint venture with Volkswagen in November 2024.

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 Rivian, its two-year annual EPS growth of 30.4% was higher than its five-year trend. We love it when earnings improve, but a caveat is that its EPS is still in the red.

In Q1, Rivian reported EPS at negative $0.41, up from negative $1.06 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Rivian to improve its earnings losses. Analysts forecast its full-year EPS of negative $2.99 will advance to negative $2.57.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Rivian’s demanding reinvestments have drained its resources over the last four years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 149%, meaning it lit $148.82 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Rivian’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.

Rivian burned through $526 million of cash in Q1, equivalent to a negative 42.4% margin. The company’s cash burn slowed from $1.52 billion 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.

Rivian burned through $1.86 billion of cash over the last year. With $7.18 billion of cash on its balance sheet, the company has around 46 months of runway left (assuming its $6.00 billion of debt isn’t due right away).

Unless the Rivian’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 Rivian 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 Rivian blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also excited its full-year EBITDA guidance topped Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock remained flat at $13.43 immediately following the results.

Updated: June 14, 2025 at 11:28 PM EDT

Are you wondering whether to buy Rivian or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

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

Rivian’s forward price-to-sales ratio is 2.8x. Certain aspects of its fundamentals are attractive, but we aren’t investing at the moment because its balance sheet makes us uneasy. We think a potential buyer of the stock should wait until the company’s debt falls or its profits increase.

Wall Street analysts have a consensus one-year price target of $14.87 on the company (compared to the current share price of $13.44).