New Facility And ASR Expansion Will Improve Production Efficiency

Key Takeaways

• Knightscope's revenue growth and focus on cost control indicate potential future profitability and expanded market reach.
• Operational efficiency improvements and automation strategies suggest Knightscope is positioned for sustained long-term earnings growth.
• Macroeconomic uncertainties and operational challenges could hinder Knightscope's short-term revenue growth and increase operational expenses, affecting its financial performance.

Catalysts

About Knightscope

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

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

• Knightscope is seeing accelerating revenue growth, driven by increased adoption of its recurring subscription-based security services and product sales; continued expansion in ASR deployments across industries reflects rising demand for automated security due to persistent public safety concerns and labor shortages, pointing to ongoing top-line growth.
• Operational changes-cost reductions, process automation, consolidation of facilities, and improvements in manufacturing efficiency-have reduced operating expenses and gross losses. Continued focus on automation and cost control is expected to drive higher gross margins and improve earnings as scale increases.
• The company's focus on ongoing, disciplined investment in AI-driven product innovation and hardware upgrades (with free upgrades for existing clients) strengthens competitive positioning and enables Knightscope to address a widening range of use cases, supporting higher contract values and reinforcing customer retention for future revenue stability.
• Strategic partnerships, expanding U.S. federal government relationships, and the recent achievement of FedRAMP authorization create a gateway to large-scale deployments in government, infrastructure, and new client verticals-broadening the addressable market and supporting long-term revenue diversification.
• Knightscope's U.S.-centric supply chain and "Buy American" tailwinds reduce exposure to global tariff risks and regulatory uncertainty, positioning the company to benefit from increasing domestic public safety spending, which should positively impact order volumes, recurring revenues, and ultimately net margins as the business scales.

Knightscope Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Knightscope's revenue will grow by 22.2% annually over the next 3 years.
• 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 $1.5 million (and earnings per share of $0.12) 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 analysts price target, the company would need to trade at a PE ratio of 191.9x on those 2028 earnings, up from -1.9x 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. /li>

Knightscope Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

• Persistent unprofitability continues to be a core risk, with Knightscope still reporting net operating losses ($6.8M loss this quarter), high ongoing R&D costs, and no clear timeframe for achieving positive EBITDA or earnings, indicating that margins and net income may remain under pressure for the foreseeable future.
• The company's growth strategy is heavily reliant on significant increases in funding and headcount-having faced chronic undercapitalization historically and currently aiming to double or triple the sales team, which, if not executed well or if market conditions tighten, could result in dilution or difficulties scaling revenue as planned.
• There is intense and rapidly growing competition in robotics, security, and adjacent AI/automation from well-capitalized tech firms (e.g., Tesla, Figure, Axon, Motorola) and incumbent security players; technological leapfrogging or new entrants could erode Knightscope's already tenuous competitive position, impacting both revenue growth and potential margin compression.
• Knightscope has a high dependency on recurring revenue from existing clients, with annual hardware and software refreshes at the company's expense, raising concerns about renewal risk, cost sustainability, and whether the current business model will sufficiently scale to support higher top-line growth without eroding profitability.
• Despite governmental and infrastructure opportunities, the company faces regulatory headwinds and slow sales cycles (especially in federal/municipal contracts), as well as risks from privacy regulations, supply chain tariffs, facility relocation disruptions, and lack of clear market peers-all of which introduce uncertainty and potential negative effects on both revenue trajectory and cost structure.

Valuation

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

• The analysts have a consensus price target of $19.0 for Knightscope 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 $26.0, and the most bearish reporting a price target of just $12.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $20.1 million, earnings will come to $1.5 million, and it would be trading on a PE ratio of 191.9x, assuming you use a discount rate of 7.1%.
• Given the current share price of $5.65, the analyst price target of $19.0 is 70.3% 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.