Nio Earnings: First-Ever Operating Profit Driven by Strong Vehicle Volume and Operating Leverage

Key Morningstar Metrics for Nio

• Fair Value Estimate
  : $6.10
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of Nio’s Earnings

Nio’s NIO fourth-quarter revenue grew 76% year on year, beating the high end of its previous guidance. Despite price competition, product mix optimization led to a 5% gain in vehicle pricing, which also led to vehicle margin improvement.

Why it matters: Nio’s share price jumped 15% overnight on the firm’s first-ever profitable quarter. With a 72% growth in vehicle volume driven by the ramp-up of the new ES8 large sport utility vehicle, vehicle margin further recovered to the high teens after three years, beating our expectations.

• While acknowledging industry demand uncertainty this year, management remains confident of lifting vehicle sales by 40%-50% in 2026 with the three large SUVs—the ES9, Onvo L80, and new ES8—in the pipeline. This compares with our 29% forecast, given cannibalization between the Nio and Onvo brands.
• We raise 2026-30 revenue estimates, reduce 2026 net loss, and lift 2027-30 net profit on higher vehicle prices and gross margin, and lower expense ratio assumptions. Despite cost pressure from recent lithium price movements, we expect vehicle margin to improve on larger volume and better mix.

The bottom line: We raise our fair value estimate to $6.10 per ADS, which implies 0.9 times 2026 price/sales. Shares are fairly valued, in 3-star territory. We stay cautious about reading too much into the single-quarter profit turnaround.

Between the lines: For the first quarter, management guided vehicle delivery to grow 90%-97% year on year to 80,000-83,000 units. The midpoint of guidance implies March delivery of about 33,500 units, which indicates the decent sales momentum for the ES8 continuing into the new year.

• With the ramp-up of ES8 sales as scale effect kicks in and expenses taper off, Nio expects first-quarter vehicle margin to be similar to the fourth quarter’s. With new model launches to drive volume growth, management guided for full-year non-GAAP operating profit turnaround in 2026.