Solid State Battery Licensing Will Shape Future Earnings Power And Long Term Optionality

Catalysts

About QuantumScape

QuantumScape develops solid state lithium metal battery technology and licenses its cell designs and manufacturing processes to partners.

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

• Growing global adoption of electric vehicles and interest in solid state batteries positions QuantumScape to use its QSE-5 platform and Eagle Line pilot output to support more customer programs over time, which can influence future revenue as customer billings progress into licensing and royalty streams.
• The capital light development and licensing model, supported by partners like PowerCo, Murata and Corning, shifts QuantumScape away from gigafactory level spending toward R&D and pilot tooling, which can limit future capital expenditure needs and affects the path from current adjusted EBITDA loss toward potential earnings improvement if licensing scales.
• Eagle Line and the Cobra process give a replicable production blueprint that customers can use to reach gigawatt hour scale in their own facilities. If this blueprint gains wider adoption across auto and other battery users, it can influence long term revenue visibility and support better unit economics that feed into net margins.
• Expanding beyond automotive into areas like data centers, drones, aviation and grid applications taps into rising demand for higher energy density and safety focused storage. If QuantumScape converts more of these evaluations into paid development and sampling work, that can broaden revenue sources and help absorb fixed operating costs that currently weigh on earnings.
• Ongoing work to move beyond QSE-5 with regular performance upgrades, while using AI and machine learning to improve yield, uptime and engineering productivity, targets lower cost per cell and higher throughput. This directly affects gross margin potential and can support lower adjusted EBITDA loss and improved net margins over time.

Assumptions

How have these above catalysts been quantified?

• QuantumScape currently has no revenue. Analysts are forecasting revenue to reach $544.5 million by March 2029.
• Analysts are not forecasting that QuantumScape will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate QuantumScape's profit margin will increase from 0.0% to the average US Auto Components industry of 6.1% in 3 years.
• If QuantumScape's profit margin were to converge on the industry average, you could expect earnings to reach $33.3 million (and earnings per share of $0.04) by about March 2029, up from -$435.1 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 224.7x on those 2029 earnings, up from -9.6x today. This future PE is greater than the current PE for the US Auto Components industry at 17.3x.
• 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 8.05%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• QuantumScape is still loss making, with a GAAP net loss of $435.1 million and adjusted EBITDA loss of $252.3 million in 2025, and guidance for a further adjusted EBITDA loss of $250 million to $275 million in 2026. Any delay in scaling Eagle Line or signing additional paid programs could extend the period of heavy cash use and pressure future earnings.
• The business model relies on a capital light licensing and development approach, with customer billings of $19.5 million in 2025 recorded to shareholders' equity and not as revenue. If partners are slow to move from development work to full licensing and royalty phases, future revenue visibility and net margins could be weaker than hoped for a longer period.
• Long term electrification and solid state interest are central to the thesis, yet management itself points to turbulence in the U.S. EV market and lumpy customer activity. If auto OEMs continue to retrench or defer EV investments, that could limit near term customer billings and slow the path to meaningful revenue and earnings.
• The company is making sizable ongoing investments in R&D, Eagle Line and next generation technology, with 2026 CapEx expected at $40 million to $60 million and continued use of AI and new equipment, which carries execution risk. Any technical setbacks with Cobra, Eagle Line or post QSE-5 platforms could raise costs, keep gross margins low and postpone any improvement in net margins.
• The model depends heavily on a few large ecosystem and licensing partners such as PowerCo, Murata and Corning, and management describes these relationships as strong. Any change in partner priorities, funding or willingness to industrialize QuantumScape designs at gigawatt hour scale could reduce future licensing opportunities and constrain long term revenue and earnings potential.

Valuation

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

• The analysts have a consensus price target of $7.91 for QuantumScape based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.0, and the most bearish reporting a price target of just $2.5.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $544.5 million, earnings will come to $33.3 million, and it would be trading on a PE ratio of 224.7x, assuming you use a discount rate of 8.0%.
• Given the current share price of $6.85, the analyst price target of $7.91 is 13.4% 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.