XPEV: Record Quarter, Margin Traction Continues — BUY and $28 PT Reaffirmed

Capital_Insights
11-18

$XPeng Inc.(XPEV)$ 3Q25 Update: Strong Execution, Clearer Margin Path, and Physical AI Strategy Scaling Up

The Tiger Research team maintains a BUY rating and $28 price target following XPeng’s strong 3Q25 results, which delivered record revenue, record deliveries, and the first consolidated gross margin above 20%. The company reaffirmed its goal of reaching breakeven and positive free cash flow in 4Q, while its broader Physical AI strategy is beginning to take clearer commercial shape across SOCs, VLA world models, Robotaxi, and humanoid robots.

XPeng’s operational momentum strengthened further in the quarter. Deliveries reached 116,007 units, up 149% YoY, supported by strong demand for the new P7. Total revenue rose 102% YoY to RMB 20.38B, and consolidated gross margin exceeded 20% for the first time. Vehicle margin dipped slightly QoQ to 13.1% due to model transitions and inventory clearing—particularly the higher MONA mix and promotions on older models—but management expects 4Q consolidated margin to remain close to 20%.

Management reiterated confidence in achieving 4Q breakeven and positive full-year free cash flow, supported by strong volume, stable margins, capital discipline, and the scaling of technical-service revenue. Full-year capex was revised down to RMB 3.0–3.5B (from RMB 3.5–4.0B), while full-year R&D is maintained at roughly RMB 9B as XPeng continues to hire top-tier AI talent and invest in Physical AI, VLA models, the Touring SOC, robotics, and new platforms. SG&A is expected to decline as a percentage of revenue in 2026 as scale efficiency improves.

On product strategy, XPeng emphasized its “one chassis, dual energy” cycle as its key growth lever for 2026. The X9 Super Extended Range model launched on November 20 with immediate deliveries, and December volumes are expected to set another new high. While 1Q is typically seasonally soft, XPeng plans to launch Super Extended Range variants across existing lines early in the quarter to support sales stability. The seven new models planned for 2026—three EREVs and four new BEVs—are set to meaningfully expand XPeng’s addressable market. Management expects 2026 volume growth to exceed the broader NEV industry, supporting continued share gains.

XPeng also reaffirmed its roadmap toward mass production of the IRON humanoid robot by end-2026, with near-term efforts focused on hardware–software integration, manufacturing readiness, and quality validation. The company expects to deploy IRON robots across stores, campuses, and factories by late 2026. Touring SOC commercialization will begin at a modest scale in 4Q25 and expand through 2026 as jointly developed Volkswagen models enter SOP, shifting billing from milestone-based to volume-linked. Technical-service revenue in 4Q should be similar to 3Q, and full-year 2026 technical-service revenue is expected to be broadly comparable to 2025, with upside potential from new partnerships.

Overall, XPeng’s 3Q25 performance reinforces the company’s improving execution, clearer margin trajectory, and expanding strategic narrative. Near term, the focus remains on breakeven and navigating model transitions. Medium term, XPeng’s robust 2026–27 product cycle, overseas growth, and cost-down benefits from internal technologies provide visibility for outsized volume and margin expansion relative to peers. Long term, XPeng’s Physical AI roadmap—anchored in VLA 2.0, the Touring SOC, Robotaxi, and humanoid robots—has the potential to reposition the company as a multi-layer intelligent-systems platform rather than a pure-play EV manufacturer.

💰Estimate revisions: 4Q revenue cut 8%, gross profit reduced 3%, and non-GAAP EBIT loss widened by RMB 130M.

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Comments

  • OwenBess
    11-18
    OwenBess
    Solid numbers! Margins hitting 20%+ is a game changer. Physical AI roadmap looks promising 🚀
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