SES AI Corp

Previous wording

The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with the accompanying unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2026 and the related notes included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year endedDecember 31, 2025 and the related notes contained in the 2025 Annual Report on Form 10-K. This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements within the meaning of the federal securities law are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are not statements of historical fact and may include statements regarding possible or assumed future results of operations. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Factors that might cause or contribute to such forward-looking statements include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Item 1A. Risk Factors in the 2025 Annual Report on 10-K. Unless the context otherwise requires, references in this section to “the Company,” “we,” “us” and “our” refer to the business and operations of SES Holdings Pte. Ltd. (“Old SES”) and its consolidated subsidiaries prior to the Business Combination and to SES AI Corporation and its consolidated subsidiaries following the Closing. References in this section to our future plans that indicate the timing of when we expect such plans to be completed by a certain year mean at any point during that year.

Current wording

The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements as of and for the three and six months ended June 30, 2026 and the related notes included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2025 and the related notes contained in the 2025 Annual Report on Form 10-K. This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements within the meaning of the federal securities law are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are not statements of historical fact and may include statements regarding possible or assumed future results of operations. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Factors that might cause or contribute to such forward-looking statements include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Item 1A. Risk Factors in the 2025 Annual Report on 10-K. References in this section to our future plans that indicate the timing of when we expect such plans to be completed by a certain year mean at any point during that year.

Previous wording

We are a leading developer and manufacturer of high-performance, AI-enhanced Lithium-Metal (“Li-Metal”) and Lithium-ion (“Li-ion”) rechargeable battery technologies for electric vehicles (“EVs”), Urban Air Mobility (“UAM”), drones, robotics, Energy Storage Systems (“ESS”) and other applications. The Company’s mission is to accelerate the world’s energy transition through material discovery and battery management. SES accelerates its pace of innovation by utilizing superintelligent AI across the spectrum of our business, from research and development, materials sourcing, cell design, engineering and manufacturing, to battery health and safety monitoring.

Current wording

We are a leading developer and manufacturer of high-performance, AI-enhanced Lithium-Metal (“Li-Metal”) and Lithium-ion (“Li-ion”) rechargeable battery technologies for electric vehicles (“EVs”), Urban Air Mobility (“UAM”), drones, robotics, Energy Storage Systems (“ESS”) and other applications. The Company’s mission is to accelerate the world’s energy transition through AI-enhanced material discovery and battery management. SES accelerates its pace of innovation by utilizing superintelligent AI across the spectrum of our business, from research and development, materials sourcing, cell design, engineering and manufacturing, to battery health and safety monitoring.

Previous wording

We are an early-stage growth company. We incurred net losses of $12.1 million and $12.4 million for the three months ended March 31, 2026 and 2025, respectively, and had an accumulated deficit of $384.0 million and $311.3 million from our inception through March 31, 2026 and 2025, respectively. We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a few more years. Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate and our ability to generate revenue in the future that is sufficient enough to achieve profitability will depend largely on the successful development of our products and services. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations.

Current wording

We are an early-stage growth company. We incurred net losses of $17.9 million and $22.7 million for the three months ended June 30, 2026 and 2025, respectively, and $30.0 million and $35.1 million for the six months ended June 30, 2026 and 2025, respectively, and had an accumulated deficit of $401.9 million and $334.0 million from our inception through June 30, 2026 and 2025, respectively. We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for several years. Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate and our ability to generate revenue in the future

Previous wording

Our strategic shift away from in-house manufacturing of certain battery materials, and the announcement of a joint venture with Hisun to produce novel materials at commercial scale, is expected to reduce capital intensity and accelerate time-to-market for new products. We anticipate that this approach will allow us to scale more efficiently and address a broader customer base, which could positively impact future revenues. However, the transition introduces new uncertainties, including the risk of production delays, quality control challenges, and dependence on third-party manufacturing partners. These factors could result in variability in cost of goods sold, potential supply chain disruptions, and fluctuations in cash flows.

Current wording

Our strategic shift away from in-house manufacturing of certain battery materials, and the announcement of a fully consolidated variable interest entity with Hisun to produce novel materials at commercial scale, is expected to reduce capital intensity and accelerate time-to-market for new products. We anticipate that this approach will allow us to scale more efficiently and address a broader customer base, which could positively impact future revenues. However, the transition introduces new uncertainties, including the risk of production delays, quality control challenges, and dependence on third-party manufacturing partners. These factors could result in variability in cost of goods sold, potential supply chain disruptions, and fluctuations in cash flows. See “Note 14 – Variable Interest Entities” of our accompanying consolidated financial statements for further discussion.

Previous wording

Our plan to develop NDAA-compliant manufacturing capacity for drone cells is intended to position us to capture new business from U.S. government and defense-related customers, which we believe could be a driver of future revenue growth. Achieving NDAA compliance may also enhance our competitive positioning and open additional market opportunities. However, this initiative will require substantial capital investment and ongoing compliance costs, and there is uncertainty regarding the timing and magnitude of customer demand. If we are unable to achieve commercial-scale production or if demand for NDAA-compliant drone cells does not materialize as expected, we could experience underutilization of assets and negative impacts on cash flows.

Current wording

Our plan to develop NDAA-compliant manufacturing capacity for drone cells is intended to position us to capture new business from U.S. government and defense-related customers, which we believe could be a driver of future revenue growth. NDAA compliance may also enhance our competitive positioning and open additional market opportunities. However, this initiative will require substantial capital investment and ongoing compliance costs, and there is uncertainty regarding the timing and magnitude of customer demand. If we are unable to achieve commercial-scale production or if demand for NDAA-compliant drone cells does not materialize as expected, we could experience underutilization of assets and negative impacts on cash flows.

Previous wording

For the three months ended March 31, 2026 and 2025, we generated revenue from two primary sources:

Current wording

For the three and six months ended June 30, 2026 and 2025, we generate revenue from two primary sources:

Previous wording

Gross profit margin for the three months ended March 31, 2026 and March 31, 2025 were 18.1% and 78.7%, respectively. The fluctuation was primarily due to the effect of changing revenue mix between product and service offerings as explained above.

Current wording

Gross margin for the three and six months ended June 30, 2026 and 2025 were 22.6% and 20.0% as well as 73.7% and 76.8%, respectively. The decrease was primarily due to the effect of changing revenue mix between product and service offerings.

Previous wording

We are an early-stage growth company conducting business activities through one operating segment. Research and development expenses include personnel-related expenses, such as salaries, benefits, and stock-based compensation, for scientists, experienced engineers and technicians. These expenses also cover materials and supplies used in product research and development, process engineering efforts and testing, payments made to consultants, and patent related legal costs. Furthermore, they encompass depreciation, allocated facilities expenses, and information technology costs, including costs incurred for renting graphic processing units (“GPUs”) to train AI models.

Current wording

We are an early-stage growth company conducting business activities through one operating segment. Research and development expenses include personnel-related expenses, such as salaries, benefits, and stock-based compensation, for scientists, experienced engineers and technicians. These expenses also cover materials and supplies used in product research and development, process engineering efforts and

Previous wording

Research and development expenses for the three months ended March 31, 2026 decreased $9.5 million, or 46.2%, to $11.0 million, compared with $20.5 million for the three months ended March 31, 2025. This decrease primarily resulted from a $5.4 million decrease in automotive OEM JDA related lab equipment expenses, a $3.4 million decrease in AI infrastructure costs incurred from renting Graphic Processing Unit (“GPU”) computing resources, and a $0.5 million decrease in stock-based compensation expense attributable to reduced headcount resulting from the company’s strategic shift to an AI-based focus.

Current wording

Research and development expenses for the three months ended June 30, 2026 decreased $7.7 million, or 40.5%, to $11.4 million, compared with $19.1 million for the three months ended June 30, 2025. This decrease was primarily driven by a $4.0 million decrease in AI infrastructure costs incurred from renting Graphic Processing Unit (“GPU”) computing resources, a $2.6 million decreasein automotive OEM JDA related lab equipment expenses, and a $1.1 million decrease in personnel costs and stock-based compensation mainly attributable to headcount reductions resulting from the company’s focus on commercial activities.

Previous wording

During the three months ended March 31, 2026, we incurred a gain of $4.2 million associated with the change in fair value of the Sponsor Earn-Out liabilities compared with a gain of $7.9 million for the three months ended March 31, 2025. This gain on the change in fair value

Current wording

During the three and six months ended June 30, 2026, we incurred a gain of less than $0.1 million and a gain of $4.2 million, respectively, associated with the change in fair value of the Sponsor Earn-Out liabilities compared with a loss of $1.4 million and a gain of $6.4 million, respectively, for the three and six months ended June 30, 2025. With the fair value of the Sponsor Earn-Out liabilities tied to the Company’s stock price, continued volatility in the stock price or changes in the expected term could result in further gains or losses resulting from the change in fair value. Refer to “Note 9 – Sponsor Earn-Out Liabilities” to the condensed consolidated financial statements for additional information.

Previous wording

As of March 31, 2026, we had total cash and cash equivalents of $46.9 million and investments in marketable debt and equity securities of $130.7 million. As an early-stage growth company, the net operating losses we have incurred since inception are consistent with our strategy and budget.

Current wording

As of June 30, 2026, we had total cash and cash equivalents of $64.1 million and investments in marketable debt and equity securities of $98.9 million. As an early-stage growth company, the net operating losses we have incurred since inception are consistent with our strategy and budget.

Previous wording

We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a few more years. Our ability to successfully develop our products and services, scale up our commercial operations and expand our business will depend on many factors, including our working capital needs, the availability of equity and/or debt financing and, over time, our ability to generate positive cash flows from operations. We believe that our cash on hand and marketable securities will be sufficient to meet our principal working capital and capital expenditure requirements and ongoing research and development costs, operational and commercial activities, including expenditures fordeferred cash payments of an estimated approximately RMB 55.5 million ($8.0 million) related to the acquisition of UZ Energy as well asactivities related to the recently acquired ESS business, our plans for NDAA-compliant manufacturing capacity to develop drone cells and development and commercialization of Molecular Universe material discoveries, for a period of at least 12 months from the date of this Quarterly Report. However, additional funding may be required during or after this period to finance certain needs beyond our principal working capital and capital expenditure requirements and ongoing costs, including additional opportunities to purchase data and equipment, develop and train our AI models, and/or develop commercial operations in the United States and abroad, acquisitions or other strategic transactions, and unexpected delays in the development of our battery cells. See “Note 3 – Acquisition” of our accompanying consolidated financial statements for further discussion of the estimated deferred cash payments related to the acquisition of UZ Energy.

Current wording

We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a few more years. Our ability to successfully develop our products and services, scale up our commercial operations and expand our business will depend on many factors, including our working capital needs, the availability of equity and/or debt financing and, over time, our ability to generate positive cash flows from operations. We believe that our cash on hand and marketable securities will be sufficient to meet our principal working capital and capital expenditure requirements and ongoing research and development costs, operational and commercial activities, including expenditures fordeferred cash payments of an estimated approximately RMB 55.5 million ($8.0 million) related to the acquisition of UZ Energy as well asactivities related to the ESS business, our plans for NDAA-compliant manufacturing capacity to develop drone cells and development and commercialization of Molecular Universe material discoveries, for a period of at least 12 months from the date of this Quarterly Report. However, additional funding may be required during or after this period to finance certain needs beyond our principal working capital and capital expenditure requirements and ongoing costs, including additional opportunities to purchase data and equipment, develop and train our AI models, and/or develop commercial operations in the United States and abroad, acquisitions or other strategic transactions, and unexpected delays in the development of our battery cells. See “Note 3 – Acquisition” of our accompanying consolidated financial statements for further discussion of the estimated deferred cash payments related to the acquisition of UZ Energy.

Previous wording

Our cash flows used in operating activities to date have primarily comprised research and development and general and administrative activities as discussed above. As we continue to hire research and development personnel to accelerate our Molecular Universe AI-enhanced materials discovery and battery management, we expect our cash used in operating activities to increase before we start to generate any material cash inflows from our operations.

Current wording

Our cash flows used in operating activities to date have primarily comprised research and development and general and administrative activities as discussed above.

Previous wording

Net cash used in operating activities of $22.8 million for the three months ended March 31, 2025 was primarily attributable to net loss of $12.4 million, as adjusted for a gain on change in fair value of Sponsor Earn-Out liabilities of $7.9 million, accretion income from marketable securities of $0.8 million, stock-based compensation expense of $4.0 million, depreciation and amortization of $2.5 million, and a $8.0 million working capital outflow. The working capital outflow was driven primarily by a $5.3 million decrease in accrued expenses and other liabilities, a $1.7 million increase in prepaid and other assets, a $1.0 million decrease in operating lease liabilities, a $0.5 million increase in trade accounts receivables, and a $0.1 million decrease in accounts payable. These working capital outflows were partially offset by working capital inflows of a $0.7 million increase in right of use assets. The decrease in accrued expenses and other liabilities was primarily due to accruals for purchases of equipment for a JDA, accrued income taxes payable, and payroll related accruals. The increase in prepaids and other assets was primarily due to accrued receivables for services rendered to customers. The changes to operating lease liabilities and right of use assets were primarily driven by lease modifications. The changes in receivables and payables were driven by timing of receipts.

Current wording

Net cash used in operating activities of $33.6 million for the six months ended June 30, 2026 was primarily attributable to net loss of $30.0 million, as adjusted for stock-based compensation expense of $4.1 million, a gain on change in fair value of Sponsor Earn-Out liabilities of $4.2 million, depreciation and amortization of $5.4 million, a loss on change in fair value of contingent consideration of $1.0 million, accretion income from marketable securities of $0.8 million, and$0.7 million of other items. These non-cash operating items were combined with a $7.7 million working capital outflow. The working capital outflow was primarily driven by a $3.1 million increase in inventories, a $2.9 million increase in receivables from customers, and a $1.7 million decrease in accrued expenses and other current liabilities. The increase in inventories was primarily due to purchases for ESS commercial operations. The decrease in accrued expenses and other liabilities was primarily due to decreases in accruals for compensation and contract liabilities. The changes in account receivables were driven by timing of receipts.

Previous wording

Net cash used in operating activities of $19.8 million for the three months ended March 31, 2026 was primarily attributable to net loss of $12.1 million, as adjusted for a gain on change in fair value of Sponsor Earn-Out liabilities of $4.2 million, gain on change in fair value of deferred consideration of $0.8 million, accretion income from marketable securities of $0.5 million, stock-based compensation expense of $2.1 million, depreciation and amortization of $2.7 million, and $0.4 million of other items. These non-cash operating items were combined with a $7.4 million working capital outflow. The working capital outflow was driven primarily by a $3.4 million increase in trade accounts receivables, a $1.7 million increase in inventories, a $1.3 million decrease in accrued expenses and other liabilities, a $0.9 million increase in prepaid and other assets, and a $0.4 million decrease in net lease activity. These working capital outflows were partially offset by a working capital inflow of a $0.4 million increase in accounts payable. The increase in inventories was primarily due to purchases for ESS commercial operations as a result of the acquisition of UZ Energy in the third quarter of 2025. The decrease in accrued expenses and other liabilities was primarily due to decreases in accruals for purchases of equipment for a JDA, accrued income taxes payable, and payroll related accruals. The increase in prepaids and other assets was primarily due to payments for licenses or hosting software data. The changes to operating lease liabilities and right of use assets was primarily driven by lease modifications. The changes in trade account receivables and accounts payables were driven by timing of receipts.

Current wording

Net cash used in operating activities of $33.7 million for the six months ended June 30, 2025 was primarily attributable to net loss of $35.1 million, as adjusted for stock-based compensation expense of $6.7 million, a gain on change in fair value of Sponsor Earn-Out liabilities of $6.4 million, depreciation and amortization of $5.0 million, accretion income from marketable securities of $1.7 million, and a $2.2 million working capital outflow. The working capital outflow was primarily driven by a $2.5 million decrease in accrued expenses and other current liabilities due to accruals for purchases of equipment for a JDA, changes in deferred revenue balances, accrued income taxes payable, and payroll related accruals and a $2.1 million increase in receivables from customers. The working capital outflow was partially offset by a $2.3 million increase in prepaids and other assets primarily due to advance payments made for software related service costs due to AI infrastructure spend.

Previous wording

Net cash provided by investing activities was $39.1 million for the three months ended March 31, 2026 compared to net cash used in investing activities of $49.8 million for the three months ended March 31, 2025. This increase in cash provided was primarily attributable to an $88.4 million increase in cash provided by the maturities of short-term investments, net of purchases in the current year period compared to the prior year period and $0.6 million of lower capital expenditures

Current wording

Net cash provided by investing activities was $70.6 million for the six months ended June 30, 2026, compared to net cash used in investing activities of $83.2 million for the six months ended June 30, 2025. This increase in cash provided was primarily attributable to a $153.8 million increase in cash provided by the maturities of short-term investments, net of purchases in the current year period compared to the prior year period and $0.7 million of lower capital expenditures.

Previous wording

See “Note 2 – Basis of Presentation” of our accompanying unaudited interim condensed consolidated financial statements for the three months ended March 31, 2026 included in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and their potential impact on our financial condition, results of operations and cash flows.

Current wording

See “Note 2 – Basis of Presentation” of our accompanying condensed consolidated financial statements for the three and six months ended June 30, 2026 included in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and their potential impact on our financial condition, results of operations and cash flows.

Previous wording

Our financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these unaudited interim condensed consolidated financial statements, we are required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the unaudited interim condensed financial statements, as well as the reported expenses incurred during the reporting periods.

Current wording

Our financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these condensed consolidated financial statements, we are required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities