Hyliion Q2 2026 Earnings: Navy Work More Than Triples Revenue

Hyliion Holdings (NYSE American: HYLN) reported Q2 2026 revenue of $4.9 million, up from $1.5 million a year earlier, while basic and diluted loss per share remained at $0.08. Accelerated work under Office of Naval Research contracts drove the revenue increase, but gross profit was only $0.4 million and the net loss widened slightly to $13.9 million.

Core financial results

Quarterly revenue increased approximately 226%, with all revenue coming from research and development services. The increase primarily reflected accelerated work on Office of Naval Research contracts, including components for an 800-kilowatt KARNO Power Module.

Cost of revenue rose to $4.6 million and absorbed most of the additional sales. Operating expenses were nearly flat as lower R&D expense was offset by higher selling, general and administrative expense.

R&D expense declined 6% to $9.5 million, primarily because activity shifted toward revenue-generating Navy work. SG&A expense increased approximately 8% to $6.4 million.

Business and program progress

Hyliion received a $41.7 million U.S. Navy contract to develop two multi-megawatt KARNO systems—one rated above 2 megawatts and another above 3 megawatts—using the same modular 800-kilowatt architecture currently under development. Most of the work under this contract is expected to occur in 2027 and 2028, so the award does not represent immediate quarterly revenue.

The Navy’s USX-1 Defiant vessel will be used for sea trials of a KARNO Core system supporting propulsion and auxiliary power. The related 800-kilowatt module is in assembly and is expected to be completed in 2026.

For commercial deployment, Hyliion remains on track to complete approximately 10 early-adopter customer units during 2026 and expects to begin delivering units to customer sites over the next quarter. Commercialization of the 200-kilowatt KARNO Power Module is now expected in 2027 as the company prioritizes military deliveries and additional demonstrations with commercial customers.

Hyliion has signed non-binding letters of intent covering approximately 750 KARNO Cores, with more than half associated with data center providers. It also demonstrated that multiple KARNO modules can operate together as one larger power unit, a required capability for potential multi-megawatt installations.

Navy-funded revenue grew, but low gross margin limited earnings leverage

The additional $3.4 million of quarterly revenue produced only approximately $0.2 million of incremental gross profit. Gross margin consequently declined to about 7.4% from 8.6%, showing that the current research-services revenue carries substantial corresponding costs.

The operating loss improved by approximately $0.3 million because operating expenses stayed nearly flat. However, interest income fell to $1.4 million from $2.2 million, more than offsetting the operating improvement and causing the net loss to widen by approximately $0.5 million.

This distinction is important because current revenue is generated by funded development work rather than broad commercial sales of KARNO Power Modules. The quarter showed better contract activity, but not yet meaningful operating leverage.

Cash flow and balance sheet

Net cash spending declined to $6.9 million during the quarter from $13.5 million a year earlier. For the first six months of 2026, net cash used in operating activities improved to $19.8 million from $24.0 million, while capital spending fell to $2.1 million from $11.6 million.

Hyliion ended June with $132.4 million in cash and short- and long-term investments. The company plans to finance future manufacturing capacity through equipment financing, potential customer financing and existing balance-sheet cash.

Manufacturing plans currently assume that approximately $1.5 million of one-time capital investment can support one megawatt of annual production capacity, corresponding to $2.5 million to $3.0 million of annual revenue at current pricing. Hyliion cautioned that these estimates remain subject to further testing and validation.

Guidance

Hyliion raised its full-year 2026 revenue guidance by 50% after the second-quarter increase in Navy-related work. It also improved its expected year-end liquidity position, citing higher revenue, lower capital spending and planned equipment financing.

The company now expects 2026 net cash use of $30 million to $35 million. The year-end liquidity outlook incorporates the planned equipment financing transaction, which had not yet been completed when the results were released.

Recent insider transactions

The supplied insider data shows no insider purchases or sales during the past six months, leaving net shares purchased or sold at zero. Total insider holdings were reported at approximately 50.07 million shares; the latest reported transactions were stock gifts and equity grants rather than open-market purchases or sales.

These records do not, by themselves, indicate insiders’ views on Hyliion’s future performance.

Risks investors should watch

• Commercialization execution: Commercialization of the 200-kilowatt KARNO module is now expected in 2027. Hyliion must still complete its early-adopter units and move from testing to customer-site operation.
• Limited profitability from current revenue: Despite revenue more than tripling, gross profit was only $0.4 million and the company continued to report a substantial operating and net loss.
• Contract and customer commitment risk: Current revenue growth depends heavily on Navy-funded development work. Most work under the new $41.7 million contract is scheduled for 2027 and 2028, while the data center letters of intent are non-binding.
• Manufacturing and financing assumptions: The potential threefold improvement in printing throughput and the estimated capital required per megawatt remain subject to validation. The year-end cash outlook also assumes completion of planned equipment financing.

Summary

Hyliion’s second-quarter revenue increased sharply as Navy-funded development work accelerated, leading management to raise its full-year revenue and liquidity guidance. However, the low gross margin and slightly wider net loss show that higher research-services revenue has not yet translated into meaningful profitability. The next milestones are early-adopter deliveries, completion of the 800-kilowatt Navy module, validation of manufacturing improvements and execution of the planned financing and 2027 commercialization schedule.