Autonomous Trucking And Defense Logistics Will Drive Massive Long Term Upside Potential

Catalysts

About Kodiak AI

Kodiak AI develops and deploys autonomous driving technology for long haul, industrial and defense trucking applications.

What are the underlying business or industry changes driving this perspective?

• Rapid expansion of Driver as a Service deployments with Atlas and an expected transition of long haul customers to this recurring fee model as driverless launches in 2026, supporting accelerating revenue growth and higher visibility on future earnings.
• A large and growing global trucking and industrial logistics market, combined with structural driver shortages and wage inflation, increases customer urgency to adopt autonomy, expanding Kodiak's addressable revenue opportunity and supporting long term margin expansion.
• A demonstrated ability to operate driverless 24/7 in harsh industrial environments, including severe weather and complex edge cases, positions Kodiak to scale utilization per truck well above human driven benchmarks, improving revenue per vehicle and operating leverage.
• Government and defense prioritization of autonomous logistics, underscored by completed multimillion dollar Army programs and supportive policy signals, creates a high value, long duration pipeline that can diversify revenue and enhance gross margins.
• A capital light upfitting strategy with partners like Roush, NXP and ZF allows Kodiak to scale fleets without heavy manufacturing capex, driving better free cash flow conversion and a faster path to positive net margins as units grow.

Assumptions

This narrative explores a more optimistic perspective on Kodiak AI compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Kodiak AI's revenue will grow by 101.8% annually over the next 3 years.
• The bullish analysts are not forecasting that Kodiak AI will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Kodiak AI's profit margin will increase from -3198.8% to the average US Auto Components industry of 5.3% in 3 years.
• If Kodiak AI's profit margin were to converge on the industry average, you could expect earnings to reach $7.1 million (and earnings per share of $0.03) by about December 2028, up from $-526.2 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 835.7x on those 2028 earnings, up from -3.1x today. This future PE is greater than the current PE for the US Auto Components industry at 19.8x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.17%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company remains deeply loss making with a GAAP operating loss of $30 million and negative free cash flow of $40 million in Q3 2025 while holding only $146.2 million of cash. If additional financing over the next 12 months is delayed or dilutive, long term shareholders could face value erosion and pressure on earnings and net margins.
• The business model and growth thesis depend heavily on a single major industrial customer, Atlas, and a 100 unit contract. Any slowdown in Atlas deployments, operational issues in the Permian or failure to add new industrial or long haul customers could limit scale and stall recurring DaaS revenue growth.
• The launch of long haul driverless operations is contingent on completing the safety case from the current 78 percent ARM to 100 percent by the second half of 2026. Delays in validation, edge case handling or regulatory approvals could push out commercialization, prolong high R&D spend and depress earnings and free cash flow.
• The long term industrial and defense opportunities are exposed to policy and budget uncertainty, including government shutdowns and shifting Pentagon priorities, which could slow or reduce contract awards. This could constrain the high margin revenue mix that management is counting on to improve gross margins and overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Kodiak AI is $22.0, which represents up to two standard deviations above the consensus price target of $15.9. This valuation is based on what can be assumed as the expectations of Kodiak AI's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $22.0, and the most bearish reporting a price target of just $13.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $135.1 million, earnings will come to $7.1 million, and it would be trading on a PE ratio of 835.7x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of $9.33, the analyst price target of $22.0 is 57.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.