AI And IoT Integration Will Expand Autonomous Security Markets

Key Takeaways

• Scaling subscription models, operational leverage, and unique government positioning enable Knightscope to drive outsized, recurring revenue growth and margin expansion across both commercial and public sectors.
  
• Accelerated manufacturing, AI-driven automation, and data services position Knightscope as an indispensable partner in labor-strained, smart city security markets with durable pricing power and profitability.
  
• Ongoing losses, dilution risks, intense competition, rising regulatory costs, and macroeconomic headwinds all threaten Knightscope's ability to achieve sustained profitability and market share growth.

Catalysts

Designs, develops, manufactures, markets, deploys, and supports autonomous security robots (ASR) in the United States.

• While analyst consensus highlights revenue growth and efficiency, the current numbers could be vastly understating future potential; Knightscope's rapidly scaling Machine-as-a-Service and subscription models offer intrinsic compounding effects, which, when combined with operational leverage and a sticky installed base, can drive exponential recurring revenue growth and significant gross margin expansion over the next several years.
  
• Analysts broadly agree that the new facility should reduce costs and improve margins, but this move is creating a transformative platform: with more than double the previous space at substantially lower incremental cost, Knightscope is positioned to dramatically accelerate both production and R&D cycles, unlocking unit economics and manufacturing scale not previously achievable-this will drive gross margin inflection and support a step-change in both revenue and earnings.
  
• Knightscope is uniquely positioned to capitalize on permanent shifts in labor markets; as security guard shortages and wage inflation persist, demand for automated security solutions could rise nonlinearly, placing Knightscope at the forefront of a multi-year market transformation that boosts its addressable market and pricing power-supporting outsized, durable revenue growth and sustained operating leverage.
  
• With its deep government relationships, proven FedRAMP authorization, and active engagement on federal AI and robotics policy, Knightscope has a strategic "first-mover" advantage to win large-scale government contracts and tap into federal budgets for critical infrastructure and public safety, which can drive outsized top-line growth and potentially create a new, highly profitable public sector revenue stream.
  
• The explosion of AI and IoT integration in smart cities and critical infrastructure projects, combined with Knightscope's proprietary data analytics and multi-modal platform, positions the company as a go-to partner for value-added, high-margin data services-supporting the emergence of an additional, scalable software and data monetization model that will expand EBITDA and net margins as urban automation accelerates.

Knightscope Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Knightscope compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Knightscope's revenue will grow by 29.8% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Knightscope will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Knightscope's profit margin will increase from -282.3% to the average US Commercial Services industry of 7.2% in 3 years.
• If Knightscope's profit margin were to converge on the industry average, you could expect earnings to reach $1.7 million (and earnings per share of $0.15) by about September 2028, up from $-31.1 million today. The analysts are largely in agreement about this estimate.
• 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 219.1x on those 2028 earnings, up from -1.8x today. This future PE is greater than the current PE for the US Commercial Services industry at 26.9x.
• 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 7.06%, as per the Simply Wall St company report.

Knightscope Future Earnings Per Share Growth

Risks

• Knightscope continues to generate persistent net losses each quarter despite improving gross loss and reducing operating expenses, posing an ongoing risk to future earnings as the company remains unable to project a timeline to profitability.
  
• The company's history of capital raises, reliance on ATM offerings, and explicit discussion about funding gaps highlight a high risk of shareholder dilution, which may suppress future earnings per share even if revenue grows.
  
• Knightscope faces significant threats from larger technology conglomerates with greater AI and robotics resources, as companies like Tesla and Figure develop more advanced or cost-efficient solutions, potentially resulting in long-term margin erosion and loss of market share.
  
• Increasing regulatory scrutiny and costly ongoing requirements like maintaining FedRAMP authorization, coupled with growing societal privacy concerns, could raise Knightscope's compliance burden and operating costs, negatively impacting net margins.
  
• The business remains exposed to macroeconomic uncertainty and supply chain risks, such as tariffs and elongated component lead times, which can disrupt production cycles and constrain customer capital expenditures, directly affecting revenue growth and scalability.

Valuation

• The assumed bullish price target for Knightscope is $26.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Knightscope'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 $26.0, and the most bearish reporting a price target of just $12.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $24.1 million, earnings will come to $1.7 million, and it would be trading on a PE ratio of 219.1x, assuming you use a discount rate of 7.1%.
• Given the current share price of $5.51, the bullish analyst price target of $26.0 is 78.8% 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.