Aurora Innovation, Inc. (AUR) Earnings

Management highlights

- Commercial Milestones and Customer Momentum * Officially entered the commercial scaling phase with the launch of Aurora Driver 2, a new end-to-end autonomy system combining updated software, second-generation commercial hardware, and a driverless International LT series truck platform * Secured new TAS agreements with Charger Logistics (Dallas-Laredo route) and Value Truck (Dallas-Laredo, Fort Worth-Phoenix routes); expanded partnership with Volvo Autonomous Solutions to launch commercial freight service for DSV and AVI SPL * Launched fully driverless operations for Detmar Logistics between Midland, Texas and Monahans, Texas, validating integration with frac sand trailers and demonstrating the modularity of the Aurora Driver system * Completed nearly 440,000 cumulative driverless miles through the end of Q2 2026, maintaining a 100% on-time delivery record and zero Aurora driver-attributed collisions * Began supervised pilots of way station navigation and third-party fueling at existing truck stops, leveraging the pre-built freight ecosystem to avoid large new infrastructure investments - Hardware and Manufacturing Progress * Launched commercial deployment of second-generation hardware kits, engineered for 1 million miles of operation, with improved performance: more efficient on-board computing, extended 1-kilometer range for the proprietary First Light FMCW LiDAR, providing 34 seconds of reaction time at highway speeds for enhanced safety * The second-generation hardware kit delivers a 50%+ reduction in Aurora Driver hardware costs, a key enabler for meeting the company's break-even gross margin target * Upfitter Roush has commenced manufacturing at a dedicated Aurora facility, with initial builds completed; the ramp to an annual run rate of 1,000 trucks is on track for October 2026 * Volvo Group plans to launch Aurora Driver-powered autonomous Volvo trucks in Q1 2027, targeting over 300 driverless trucks in operation by end of 2027, with projected $3 billion in autonomous revenue within five years; development of third-generation hardware from partner Amovio is underway, with production planned for H2 2027 to support tens of thousands of trucks * PACCAR and Aurora are jointly developing a scalable path to integrate Aurora's third-generation hardware into PACCAR's future autonomous truck assembly lines - Regulatory Progress * California approved the deployment of driverless trucks, joining most other U.S. states; Aurora has submitted its application to begin required testing in the state * The U.S. House Transportation Infrastructure Committee passed the bipartisan Build America 250 Act, which includes a dedicated national framework for autonomous truck deployment to harmonize inconsistent state regulations and includes policy changes Aurora has supported; management continues to engage closely with lawmakers to advance the legislation - Safety Leadership * Management shared a real-world incident example: a manually driven Aurora truck was hit by a red-light running vehicle, and post-incident simulation confirmed the Aurora Driver would have detected the hazard 6 seconds early and avoided the collision, highlighting the technology's safety advantage

Guidance

- Full year 2026 revenue guidance is maintained at $14 to $16 million, representing 400% year-over-year growth at the midpoint; revenue is expected to be back-loaded, with over 50% of full-year revenue coming in Q4 2026 as fleet scaling accelerates after the Aurora Driver 2 launch - The target of over 200 driverless trucks in operation by the end of 2026 is maintained; management notes there is flexibility to exceed this target if supply and demand allow, and guidance wording changes from prior quarters do not reflect a downward revision - Management maintains 2026 average quarterly cash use guidance of $190 to $220 million; full-year 2026 capital expenditure guidance of ~$150 million (primarily for capacity expansion) is maintained - By end of 2026, the 200+ truck fleet is expected to generate an $80 million annual revenue run rate for the TAS business, establishing a foundation for the launch of core Driver-as-a-Service (DAS) business in 2027 - 20 to 25 second-generation driverless trucks are expected to be in operation by the end of Q3 2026 - Management projects the transition from primarily TAS to primarily DAS will occur over the course of 2027, with no full-year 2027 guidance provided at this time; the company has planned liquidity to support up to 500 TAS trucks during the transition if needed

Segment performance

Aurora operates a single core segment focused on autonomous long-haul trucking technology and transportation-as-a-service (TAS). For Q2 2026, the segment generated total revenue of $2 million from driverless and human-supervised commercial freight loads. Total operating loss for the segment (including stock-based compensation) was $266 million; excluding $60 million in stock-based compensation, R&D expense was $164 million, SG&A expense was $37 million, and cost of revenue was $7 million. Operating cash burn for the quarter was $225 million, and capital expenditures totaled $31 million. Excluding one-time $63 million cash bonus and employee tax liability payments funded via the At the Market equity program, quarterly cash spend was within management's previously communicated target range.

Risks & headwinds

- Inflationary and component cost headwinds could impact hardware cost reduction targets, though management notes that minor cost increases are spread over the 1-million-mile design life of second-generation hardware, and are not expected to materially impact long-term gross margin projections - Manufacturing ramp-up for new truck production carries inherent execution risk; management has guided to a conservative 200 truck full-year target to account for potential ramp delays, even though production capacity will be higher - Scaling autonomous operations requires ongoing expansion of operational conditions (e.g., cold weather and light snow capability) and trailer integration, which requires deliberate safety validation that could slow expansion if issues arise - The bipartisan Build America 250 Act national autonomous truck framework has not yet been passed into law, and delayed or weakened legislation could leave the patchwork of state regulations in place, slowing nationwide deployment - While the company has a strong safety record to date, any future safety incident involving Aurora driver-powered trucks could damage the company's reputation and slow regulatory and customer adoption - Customer adoption of the new DAS model may progress slower than currently expected, requiring the company to maintain a higher share of lower-margin TAS operations longer than planned

Analyst Q&A

• Q: What catalysts will drive the next inflection in commercial adoption, and is Aurora partnered with TFI following their recent autonomous expansion announcement? /

  A: Management declined to comment on any potential unannounced partnerships with TFI. Management stated that the core catalyst for accelerating adoption is continued building of trust and credibility through successful on-road operations, creating a flywheel effect where growing customer adoption drives additional interest. More second-generation trucks on the road will further accelerate this momentum, as success begets success in autonomous trucking. (178 characters)

• Q: Can you share current fleet size and the Gen 1/Gen 2 unit mix, and how will Gen 2's 50% hardware cost reduction change your path to profitability? /

  A: Currently ~25 total trucks are in operation, with a handful being new Gen 2 International trucks. By end of Q3, 20-25 Gen 2 trucks are expected, and by end of 2026, nearly all 200+ operating trucks will be Gen 2 International or Volvo trucks, with Gen 1 Peterbilt trucks phased out completely. Gen 2's 50% cost reduction puts the company on track to achieve unit economic profitability, and the next-generation Gen 3 hardware will deliver an additional step function cost reduction to hit long-term margin targets. (283 characters)

• Q: What is the current status of 2027 DAS customer negotiations, and how does the DAS model work alongside OEM partner Volvo's autonomous business? /

  A: Negotiations for 2027 DAS contracts are described as enthusiastic, with the previously announced Hirschbach MOU progressing as planned to set a framework for future DAS agreements. All current TAS customers are expected to transition to DAS starting in 2027. Aurora views Volvo Autonomous Solutions as a DAS customer similar to other fleet operators; the partnership focuses on Aurora building the autonomy system while Volvo builds and operates their own truck business, with clear mutually agreed economic terms already in place. (304 characters)

• Q: Why is the 2027 end-of-year truck target 200, when Roush will have 1,000 units of annual production capacity by October? /

  A: The 200 unit target reflects a realistic ramp schedule for new manufacturing, as ramping a new production line takes time and the full 1,000 unit annual rate will only be reached in Q4 2026. Management has opted to provide conservative guidance that accounts for potential unforeseen ramp challenges, and if production and demand are stronger than expected, the company will exceed the 200 unit target. Development trucks also take up some production capacity, so not all built units are allocated to commercial service. (311 characters)

• Q: Why have customer onboarding times improved, and what customer motivations are driving adoption right now? /

  A: Onboarding has gotten faster for two key reasons: operating driverless trucks for months has built real-world credibility and experience integrating with customer operations, and the company now has enough available fleet capacity to respond to customer requests quickly, with new route deployment dropping from months to weeks. Customers are primarily motivated by adding freight capacity to grow their business and increasing asset utilization, rather than just cutting driver costs; management believes adoption will accelerate as fleets recognize that early adopters will gain competitive share over slower-moving peers. (332 characters)