Li Auto (NasdaqGS:LI) Net Margin Falls to 3.6%, Undermining Bullish Profitability Expectations

Li Auto (NasdaqGS:LI) just posted its Q3 2025 numbers, reporting revenue of ¥27.4 billion and a basic EPS of -¥0.62. Over recent quarters, the company has seen revenue shift from ¥31.7 billion in Q2 2024 to ¥44.3 billion in Q4 2024, then back to ¥27.4 billion in the most recent period, with corresponding swings in EPS. While overall growth drivers remain in focus, investors are weighing these results against compressed profit margins, which continue to influence sentiment around the stock.

See our full analysis for Li Auto.

Next, we compare Li Auto's financial results to the prevailing narratives in the market to see which views hold up and where the story takes a turn.

See what the community is saying about Li Auto

Profit Margins Halved to 3.6%

• Li Auto’s net profit margin has dropped to 3.6% over the last twelve months, down from 7.2% in the previous period, based on total trailing revenue of ¥127.8 billion and net income of ¥4.6 billion.
• According to the consensus narrative, analysts highlight that despite this margin squeeze, the company remains profitable. There is increased attention on whether investments and rapid spending are effectively translating into sustained profitability.
  • Consensus notes the need for margins to rebound or stabilize, especially as competition intensifies and regulatory costs rise.
  • Analysts also flag that high levels of capex and R&D spending, while strategic for the BEV transition, place additional pressure on bottom-line performance unless future revenue growth re-accelerates.
• For a balanced look at how margin trends fit analyst expectations, read the full consensus breakdown in the narrative. 📊 Read the full Li Auto Consensus Narrative.

Valuation Still at a Premium

• Shares currently trade at a P/E ratio of 28.4x, above both the peer average of 21.8x and the global auto industry’s 18.7x. This is despite the stock price of $18.43 being about 48% below its DCF fair value of $35.50.
• Consensus narrative calls out that investors may be weighing strong forward growth forecasts (with earnings projected to rise 37.87% annually) against these lofty multiples, creating debate over whether Li Auto’s premium is justified.
  • Analysts note that to match the consensus target P/E of 20.2x by 2028, earnings would need to almost double, which is ambitious given current margin pressure.
  • Some see the significant discount to DCF fair value as evidence of upside, provided execution meets long-term growth guides.

Volatility in Net Income

• Net income (excluding extra items) swung from ¥3.5 billion ($0.5 billion) in Q4 2024 to -¥0.6 billion (-$0.1 billion) in Q3 2025. This marks a reversal despite consistent revenue scale.
• The consensus narrative points out this volatility signals operational risk and shows how even with headline revenue stability, cash flow and profitability are exposed to high spending, competitive incentives, and the pace of BEV rollouts.
  • Analysts emphasize that these swings indicate the importance of execution, as negative free cash flow and sharp shifts in profitability make it harder to forecast a steady path to sustained earnings.
  • This underlines why Li Auto’s outlook is still highly sensitive to near-term sales trends and cost control efforts.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Li Auto on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Wondering if the data tells a different story? Share your take and shape your own view in just a few minutes by creating your own narrative: Do it your way.

A great starting point for your Li Auto research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Li Auto’s shrinking profit margins and volatile earnings highlight uncertainties around its ability to deliver consistent financial performance through different market cycles.

If you want greater peace of mind, focus on dependable results by using stable growth stocks screener (2075 results) to find companies that consistently grow revenue and earnings year after year.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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