WeRide (NASDAQ:WRD) shares dropped 6.4% on Thursday after the autonomous driving company’s second-quarter results fell short of investor expectations, despite delivering substantial revenue growth.
Strong revenue growth fails to lift sentiment
WeRide reported an 82% year-over-year increase in revenue, while sales more than doubled compared with the previous quarter. Growth was supported by the company’s international expansion, its asset-light robotaxi strategy and the beginning of mass production for its advanced driver-assistance systems.
However, the strong top-line performance was not enough to offset concerns surrounding profitability. WeRide continued to report a loss per share, prompting a negative response from investors following the earnings release.
The reaction suggests that markets are placing increasing emphasis on the company’s path towards sustainable profitability rather than revenue expansion alone.
Analysts lower expectations following results
Pressure on WeRide shares was compounded by a reassessment of the stock’s near-term prospects following the quarterly update.
Analysts lowered their consensus price target after the results, adding to concerns that expectations surrounding the autonomous driving company may previously have been too optimistic.
The U.S.-listed ADR also experienced considerable volatility on earnings day. Shares initially jumped during pre-market trading before reversing direction and weakening steadily throughout the regular session, a trading pattern consistent with investors using the early strength to reduce positions.
Autonomous driving concerns weigh on the sector
Broader concerns surrounding autonomous vehicle safety and increasing regulatory scrutiny have also affected investor sentiment towards companies operating in the sector.
Questions over how regulators will oversee autonomous driving services as deployment expands have created additional uncertainty for companies such as WeRide.
Against this backdrop, the company underperformed several other North Asian technology stocks during Thursday’s trading.
Robotaxi competition continues to intensify
Competitive pressures are also becoming an increasingly important consideration for investors evaluating autonomous driving companies.
Reports that a Japanese autonomous driving startup is seeking a valuation of roughly $10 billion while planning an expansion into the United States have reinforced expectations of growing competition across the international robotaxi market.
The prospect of additional well-funded competitors entering key markets could make investors more cautious about assigning premium valuations to autonomous driving companies that have yet to achieve profitability.
Meanwhile, the Hang Seng Index provided little support to sentiment surrounding WeRide, recording only a modest gain on Thursday.
With revenue expanding rapidly but losses continuing, investors are likely to remain focused on whether WeRide can convert its growing international presence and expanding autonomous driving operations into a clearer path towards profitability.