Ouster - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $35.049M, up 30% YoY and 7% QoQ, above the high end of guidance ($32–$35M). GAAP gross margin expanded to 45% (up 1,100 bps YoY), aided by higher revenue, mix, and a ~5-point employment tax refund; non-GAAP gross margin reached 52%.
• Shipped a record ~5,500 sensors; adjusted EBITDA loss improved to $5.5M vs. $10.5M in Q2’24 and $7.8M in Q1’25. Net loss was $20.6M; EPS was $(0.38) vs. $(0.42) in Q1’25 and $(0.48) in Q4’24.
• Cash, cash equivalents, restricted cash, and short-term investments rose to $229M (includes ~$58.8M ATM proceeds), with no debt outstanding; Q3 2025 revenue guidance: $35–$38M.
• Catalysts: record shipments, defense tailwinds (Blue UAS approval of OS1), expanding smart infrastructure deployments (BlueCity to 100+ Utah intersections), and product roadmap (L4 and Cronos silicon) supporting Physical AI adoption.

What Went Well and What Went Wrong

What Went Well

• Record sensor shipments (~5,500) drove revenue above high-end guidance; CEO: “shipped a record 5,500 sensors… well positioned for continued growth as customers move to commercial production”.
• Material margin expansion: GAAP gross margin 45% (+11 pts YoY), with CFO noting ~5-point positive impact from an employment tax refund; non-GAAP gross margin 52% (+12 pts YoY).
• Strategic wins and positioning: OS1 first 3D lidar approved for Blue UAS (DoD); expanding BlueCity distribution (39 states) and large-scale deployments (FIFA host city, Utah DOT); “breakthrough multisensor AI model” in Gemini improving tracking accuracy.

What Went Wrong

• Operating expenses elevated: GAAP OpEx was ~$42.7M in Q2 (up vs. Q1/Q4), driven by higher stock-based compensation and litigation costs; CFO highlighted vigilance but acknowledged quarterly fluctuations.
• Profitability remains negative: net loss $(20.6)M and adjusted EBITDA loss $(5.5)M, though improving YoY/QoQ; litigation expenses remained a notable adjustment in non-GAAP reconciliation.
• Supply chain and tariff uncertainty: management flagged a fluid geopolitical/macro environment; gross margin target remains 35–40% annual inclusive of potential tariff impacts, implying variability risk in quarterly margins.

Transcript

Speaker 2

Hello and welcome to Ouster's second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After today's presentation and remarks, there will be an opportunity to ask questions. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad, and if you would like to withdraw your question, press the pound key. The call today is being recorded, and a replay of the call will be available on the Ouster Investor Relations website an hour after the completion of this call. I would now like to turn the conference over to Chen Geng, Senior Vice President of Strategic Finance and Treasurer. Please go ahead.

Speaker 0

Thank you, Operator, and good afternoon, everyone. Thank you for joining our second quarter 2025 earnings call. Today on the call, we have Chief Executive Officer Angus Pacala and Chief Financial Officer Ken Gianella. As a reminder, after the market closed today, Ouster issued its financial news release, which was also furnished on a Form 8-K and is posted in the Investor Relations section of the Ouster website. Today's conference call will be available for webcast replay in the Investor Relations section of our website. Before I pass the call over to Angus for his opening remarks, I want to remind everyone that on this call, we will make certain forward-looking statements. These include all statements about our competitive position, anticipated industry trends, our business and strategic priorities, and our revenue guidance for the third quarter of 2025. Actual results may differ materially from those contemplated by these forward-looking statements.

Factors that could cause actual results and trends to differ materially from those contained in or implied by these forward-looking statements are set forth in the second quarter 2025 financial results release and in the annual and quarterly reports we file with the Securities and Exchange Commission. Any forward-looking statements that we make on this call are based on assumptions as of today and, other than as may be required by law, Ouster assumes no obligation to update any forward-looking statements, which speak only as of their respective date. In today's conference call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the financial results release that was issued today. I would now like to turn the call over to Angus.

Speaker 3

Hello, everyone, and thank you for joining us today. I'll start with a brief recap of the quarter, an overview of the market, and an update on our strategic priorities. Ken will cover our financial results in more detail before I close with some final thoughts. Ouster delivered strong second quarter results with revenue just over $35 million, above the high end of guidance, with a solid gross margin of 45%. This performance was driven by record sensor shipments, which surpassed 5,500 units in the quarter, bringing physical AI to life across logistics, industrial, and smart infrastructure sites around the world. We finished the second quarter with a robust balance sheet of $229 million of cash and equivalents and no debt, underscoring our continued financial strength. Proven in the field, our Lidar solutions are enabling intelligent real-world autonomy across industries and driving tangible improvements in safety, efficiency, and sustainability.

Our strategic investments in AI algorithms and data training infrastructure are enabling new capabilities to unlock significant commercial opportunities. One of our long-time customers has deployed Ouster Gemini at hundreds of facilities, and driven by performance improvements from new Gemini AI algorithms, this customer is now testing new high-value use cases, which require more than quadruple the number of sensors per site. Our ability to land and expand deals was a highlight during the quarter, as we continued to convert customer pilots into large volume orders as they roll out deployments or move into production. In smart infrastructure, we successfully converted a pilot program with a Fortune 500 technology company into a multimillion-dollar global deployment. We are installing OS Dome sensors in their retail locations worldwide to provide powerful analytics while ensuring personal privacy.

With over 500 locations in more than two dozen countries, we see tremendous potential for future growth. In our industrial vertical, we are partnering with an ag tech company to power autonomous mowing and precision application of crop protectants. We have worked with this customer for multiple years, helping them transition from prototypes equipped with Velodyne sensors to larger volumes powered by the OS Zero. In Asia, we are installing our OS One sensors on smart cranes to increase throughput at one of the continent's busiest container terminals. We also continue to solidify our competitive moat. During the quarter, Ouster's OS One became the first and only 3D Lidar sensor to be approved for Blue UAS and certified by the U.S. Department of Defense for use in unmanned aerial systems. This sets Ouster apart as a trusted solution for government applications and positions us well to benefit from the U.S.

government's efforts to strengthen the domestic industrial base for critical technologies and promote trustworthy supply chains. For example, we recently won a pilot program for the OS One, OS Dome, and Ouster Gemini to provide perimeter security for a U.S. Army base, and our technology is already deployed in systems used by the United States Navy, NASA, and national labs. Looking ahead, we anticipate continued momentum driven by powerful secular tailwinds. Recent legislation has unlocked billions in federal funding dedicated to accelerating the deployment of autonomous and intelligent systems across defense, transportation, and industrial sectors. We are uniquely positioned to capture this demand to enhance critical systems for government, defense, and civil infrastructure institutions worldwide. We are seeing similar trends play out in Europe and Indo-Pacific with increased adoption of our technology for U.S. allied defense and infrastructure applications.

Turning to our 2025 strategic priorities, we progressed across all three key focus areas: scaling the software-attached business, transforming the product portfolio, and executing towards profitability. Starting with software-attached business. In 2026, the world's most watched sporting event is coming to the United States, the FIFA World Cup. We won an award to deploy Ouster Rev 7 and Blue City across dozens of sites at a World Cup host city to bring real-time, on-demand traffic data to reduce congestion and improve safety for visiting fans. We also recently expanded an agreement to meet demand from the Utah Department of Transportation to bring Ouster Blue City to nearly 100 intersections across the state to enhance traffic flow, safety, and operational efficiencies. A key focus this quarter was to expand our distribution channels, and we made significant progress for both our smart infrastructure and security solutions.

We signed three exclusive partnerships to bring Blue City to major markets such as Texas, Michigan, New York, and Pennsylvania. With these key additions, our Blue City partnership network now spans 39 states and gives us a direct line of sight to capture the vast nationwide market of over 300,000 signalized intersections. For Ouster Gemini, we formalized a partnership with one of the world's largest security integrators. This agreement will support deployments into some of the world's most critical and high-value security sites, where the global market for end-system security cameras is already in the tens of billions. Moving to product development, Ouster Gemini and Blue City are delivering AI solutions to solve our customers' most complex challenges through powerful new software features and major performance improvements.

We implemented advanced actuation for Ouster Blue City that enables filtering for additional subclasses and objects, allowing our customers to control their traffic systems with additional rule-based nuances. We also added 3D event recording, which allows customers to automatically record and review safety incidents without disclosing personally identifiable information. These features leverage Blue City's proprietary deep neural network that has been trained on more than 4 million labeled objects collected from 800 sites and runs on NVIDIA Jetson and Orin System-on modules for real-time inference at the edge. Turning to our Gemini platform, we made significant improvements in core perception and ease of deployment. One of the most complex challenges in perception is maintaining stable object tracking over long periods of time. To solve this, Ouster Gemini now features a breakthrough multi-sensor AI model that fuses point clouds together in the early stages of the perception pipeline for improved accuracy.

Ouster Gemini now delivers significantly improved long-term object identity persistence, a critical requirement for many customer applications. We also launched the Gemini Event Server to accelerate customer adoption and reduce deployment time and cost. This is a powerful no-code environment with built-in logic modules, enabling our customers to easily build and deploy their own automated solutions for applications like intrusion detection, proximity monitoring, and zone occupancy tailored to their business needs. During the quarter, we progressed on engineering bring-up of our next-generation L4 and Kronos custom silicon. These investments will unlock a new era for our products, including major performance, security, and reliability gains for the OS product family and the introduction of the solid-state digital flash, or DF, line. Early customer feedback reinforces our belief that these innovations will more than double our current addressable market and represent the most significant product cycle in Ouster's history.

Finally, our excellent second quarter results keep us on path to meet our long-term framework of 30 to 50% annual revenue growth, maintaining gross margin of 35 to 40%, and operating expenses at or below third quarter 2023 levels. Before turning to our financial results, I'm delighted to welcome Ken Gianella as our new Chief Financial Officer. Ken brings a wealth of experience and a proven track record of financial leadership to Ouster and is already instrumental in driving our financial strategy and supporting our growth initiatives. Ken, welcome, and please go ahead.

Speaker 0

Thank you, Angus, and good afternoon, everyone. I'm thrilled to join Ouster at an exciting moment in the company's journey, and I look forward to working with Angus and the team towards Ouster's continued success. Turning to slide nine in the presentation, I will now give an overview of our second quarter 2025 results. First, we shipped a record 5,500 sensors in Q2 and generated just over $35 million in revenue. These results are right at the high end of our guidance range. Revenue growth was 30% year over year and 7% sequentially. Adjusting for the impact of patent royalty in the first quarter, sequential revenue growth was 13%. The industrial vertical was the largest contributor to second quarter revenue, followed by automotive. We shipped large volume deals to support applications in warehouse autonomy, robotaxi, yard logistics, and defense.

GAAP gross margin in the second quarter increased by 11 points year over year to 45%. Gross margin strength reflects the benefit of higher revenue, product mix, and favorable employment tax refund. The refund had a positive impact of approximately five points on GAAP gross margin. While we are pleased with our operational execution this quarter, we continue to view 35 to 40% as an appropriate annual gross margin target for the business. Next, GAAP operating expenses were $43 million in the second quarter, up 24% over the prior year. The increase was primarily driven by higher stock-based compensation and litigation expenses. We remain vigilant on managing our operating expenses as we execute the business. While we do anticipate expenses fluctuating on a quarterly basis, these are largely driven by investment in our innovation, our go-to-market execution, and other one-time investment and costs.

Ouster is committed to our growth strategy and maintaining a disciplined path towards profitability. Next, turning to our balance sheet, cash, cash equivalents, restricted cash, and short-term investments were $229 million at June 30th, which includes approximately $59 million of net proceeds from our ATM. While we retain access to capital markets, we are comfortable with our current cash position within the context of our execution of our business plan. Finally, we continue to actively manage the challenges of the current geopolitical and macroeconomic environment, specifically around our supply chain and tariffs. The landscape remains fluid, but we are fortunate to have close relationships with our customers and our partners as we navigate the potential impacts. As I stated earlier, we continue to view 35% to 40%, including the impact of any tariffs we may have, as an appropriate annual gross margin target for the business.

We will continue to work diligently to manage the situation as we assess potential near and long-term impacts on our operations and our margins. Moving to guidance on slide 10, for the third quarter, we expect to achieve revenue between $35 million and $38 million. Before I hand the call back to Angus, I just want to reiterate how excited I am about the opportunity for Ouster and how pleased I am to be able to contribute to the company's success. I look forward to getting out this quarter and meeting our stakeholders. Thank you for your time, and I'll now turn the call back to Angus for his closing remarks.

Speaker 3

Thanks, Ken. I'm proud of our team for delivering a record quarter as Ouster continues to drive the accelerating adoption of physical AI. We have now delivered 10 straight quarters of revenue growth and meeting or beating our guidance. This is particularly fitting as we recently celebrated Ouster's 10-year anniversary. We have transformed from a Lidar manufacturer to a physical AI company, adding software solutions to our industry-leading hardware portfolio to enable intelligent real-world autonomy across industries. I am proud of our performance and achievements to date, but our most exciting chapter is just beginning. Our technology roadmap will bring the largest transformation to Ouster's product portfolio in our history, taking us into larger markets and more use cases than we've ever had.

We are at the forefront of a monumental market transformation driven by Lidar, and as our customers scale from prototype testing to commercial production, we are well positioned for continued growth. Our story is just getting started, and we have the team, customers, and strategy to be a leader in physical AI. With that, I'd like to open the call for Q&A.

Speaker 2

Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, in order to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your questions, simply press star one again. As a friendly reminder, please limit yourself to one question and one follow-up. Our first question comes from the line of Colin Rusch with Oppenheimer. Please go ahead.

Thanks so much. Guys, congratulations on all the progress. As you get into the latter part of the year and start getting ready to ship commercial volumes of the L4 chip, can you talk about that?

Speaker 0

Apologies, sound cut out on the question.

Sorry for the trouble, guys. I just want to get a sense of how quickly, as you move to start ramping the L4 platform, that you're going to be able to start moving customers onto that platform and really transitioning to the lower-cost modules.

Yeah, absolutely. The good thing is, Colin, that we've been through this before many times. The L4 is the fourth generation of our silicon, and there's a huge opportunity behind it. We want to make sure that it's both the future for new opportunities and doubling the TAM of the company with its release, but also that we provide a smooth transition, like you said, for existing customers to move into greater scale, more applications, kind of land and expand opportunities with existing customers. Historically, we have many customers, probably, well, roughly half our customer base that takes a year to transition from one iteration to the next, and we're generally complete with a product transition, let's say, from Rev 6 to Rev 7 being the most recent, in about two years. It's going to be a little different with Rev 7 to Rev 8.

We've provided more heads-up for our customer base and more long-term commitments around how we manufacture this technology. We have many more customers in production with Rev 7 than we've ever had with Rev 6 to Rev 7. We're making sure that we're working with every single customer to not leave anyone behind on a previous generation platform. That work started long before we ever talked about a future product release. I think we're going to make this a graceful transition for everyone while we're also just expanding the overall opportunity for addressable markets with the L4 chips.

That's super helpful. You've talked about upwards of a thousand customers and, call it 10% that are looking at production volumes, and then really a limited number that are in production. Can you talk about some of the prototypes that are out there and how quickly some of these machinery or off-road vehicles or some of the other products might end up moving into volume production? It seems like a limited number of customers could start really leveraging some of their revenue and growth here pretty meaningfully for you guys.

Yeah, I mean, it doesn't take, this is a great question because what we've said is Ouster is at the very early innings of physical AI automation propagating into every moving machine on Earth. At the scale that we're operating, you know, four to five thousand units plus a quarter, it doesn't take many customers each quarter to significantly expand our volumes and their shipments. We had almost a thousand unit delta between Q1 and Q2 shipments, and a thousand units of an automated industrial platform is a big expansion for a single customer. That's all to say we don't need a hundred different customers to reach production to keep growing at the pace we're growing. We need single digits to continue on this really solid 10 quarters in a row of revenue expansion and keeping that going for the next couple of years.

Obviously, we want to move as many customers as quickly into production as possible. Once in production, production also scales significantly from quarter to quarter. There's a lot, the vast majority of our customer base and our customers that will move into production have not yet, and that's just going to fuel our growth to come.

Thank you so much, guys.

Speaker 2

Your next question comes from the line of Andre Shepard with Cantor Fitzgerald. Please go ahead.

Hey guys, congrats on the quarter and thanks for taking our question. This is Anand on for Andre. It looks like you've really cemented market leadership with this quarter, especially with the Blue UAS certification, and that seems to be a huge part of the story this quarter. I was wondering what opportunities you're looking at there and how that could really translate for the company. I know you touched on that on the earnings call and maybe potentially where could this go besides the first thing that comes to mind, the drones?

Speaker 0

Yeah, this is a great question. Thank you, Anna. The Blue UAS milestone for the OS One was a big deal for us. We are the first 3D Lidar sensor that got this certification, and that means that now we can be deployed on U.S. Department of Defense aerial platforms as a sensor payload. It's a big deal. We're the first company, and I think that's a trend for Ouster. We are a first mover in many different markets because we have the products and we have the strategy and we have the commercial team to get all of that done ahead of our competitors. Blue UAS is part of a bigger expansion in kind of defense focus for the United States, for our Western allies. I mentioned on the script, there's a lot of good progress here behind the scenes.

We're already working with the United States Navy, for instance. We are deployed now at a U.S. military base and army base for perimeter security with not just our Lidars, but with our full Gemini physical AI solution. There's a lot going on in the background. It's ultimately fueled by an investment from the U.S. government and from Western allies, and I think that's playing into our favor. I don't think there's any company better positioned to serve that demand than Ouster right now.

Fantastic. That's very helpful. I guess switching to another vertical, I was wondering, you know, since autonomous vehicles are coming into play more nowadays and they're getting more popular here in the United States, how you're seeing that opportunity play out for you guys and if there is potentially anything that you're pursuing in that vertical or with an OEM?

Yeah, it's good to see that there's been an upsurge in an uptick in interest on autonomous vehicles. I think that's fueled by Waymo's proof points in the market showing that the technology is reaching a level of maturity where it becomes a business and not an R&D effort. I think that's good for Ouster and the Lidar sector at large. For a long time, Ouster has, you know, our strategy has been to be at the right place at the right time for this industry to emerge as viable. I think that's starting to happen. We have great products for these autonomous vehicle and automotive customers. Actually, this last quarter in Q2, automotive was our second largest vertical. We're a big player in this space. We've had great positive announcements from long-time customers like May Mobility making big announcements and customers like the Rideshare company.

It's not just that the technology is ready, but there's an ecosystem of players that are interested enough to make, you know, make major commercial and business strategy shifts. Again, you know, Ouster is really well positioned with products to play in this space. I'm glad this is happening finally.

Excellent. Thanks for the call, Angus. I'll pass it on.

Speaker 2

Once again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. The next question comes from the line of Kevin Garrigan with Rosenblatt Securities. Please go ahead.

Yeah, hey Angus, hey Ken, thanks for taking my questions and congrats on the strong results. Hey Angus, you spoke about several design wins, using the FIFA World Cup as an example. Can you give us a sense of who you kind of beat out with that contract? Was it more camera-based solutions or other Lidar suppliers? With AI everywhere now, is the competition getting any more competitive?

Speaker 0

Yeah, that's interesting because with the case of FIFA, there's typically some sort of competitive situation on all of these projects. What Ouster has shown in the last year or so with Blue City, as it's reached a level of maturity we haven't really seen before, is head-to-head on the core performance metrics of things like object perception accuracy. Like, are you counting the right number of cars, pedestrians, motorcyclists, and trucks at your intersections, your traffic corridors? There's nothing that comes close to Blue City and its accuracy. It's for one very good reason, and this gets to your next question about AI. All of the advancements that you hear about in AI for cameras can apply to Lidar if you take proper advantage of them.

We actually put out a press release on this subject just the last quarter around Ouster's massive investment in AI data training, data collection, annotation, and training for our Blue City product. This product that's being deployed at the FIFA sites around the country and now being deployed at large in the Utah DOT and Chattanooga and all these other intersections. Ouster is leading the way on investing in true physical AI at the edge, running deep neural networks that we've trained on over 4 million annotated objects that we've pulled and extracted from a diverse geographic set of our deployed systems. We're doing this constantly. We're constantly improving our AI algorithms to make sure that we maintain this kind of best-in-class performance of perception accuracy, which is the foundation of all of these products that are doing traffic control and analytics in the field.

Yes, your insight that AI is improving everyone's capabilities, whether it's cameras or radar systems or Lidar, is correct. We're making sure that we're not left behind. We're actually leading the way with a lot of these investments. We're applying it to a far more capable sensor data stream with a Lidar than a camera.

Got it. Okay, that makes sense. As a follow-up, can you just talk a little bit more about your distributor strategy? Are you looking to eventually have maybe a majority portion of your sales through the distribution channel, or is your main focus still on dealing with the direct end customers?

Yeah, here the distribution strategy varies by vertical and even by sub-vertical. We have our four major verticals: automotive, industrial, smart infrastructure, and robotics. What I talked about on the call is really a focus on the sub-vertical within smart infrastructure in traffic. This is the Blue City product. There we think it's an integrator-distributor heavy play. We embarked on a new strategy there a couple of years ago, and we now have 39 states where we have a selected exclusive distributor integrator for Blue City. We're well on our way to fully blanketing the United States in these regional distributors. They're really value-add integrators of traffic technology with long-term established relationships with state, local, and federal clients. Security is also a Gemini-like solutions product for us. The security industry mirrors in many ways the traffic vertical in that there's a major set of technology integrators and established distribution chains.

We're taking advantage of that as well. It probably will skew again towards leveraging those partners versus a direct sales force. Outside of those two verticals or sub-verticals right now, Ouster has succeeded in identifying enterprise partners, having a direct sales force, and just being a great direct partner, given how critical typically Lidar is to a customer like Komatsu or a major industrial OEM or automaker. They want a direct relationship and a direct kind of sales and commercial and support and technical support relationship with Ouster directly.

Okay, great. I appreciate all the congrats on all the progress.

Speaker 2

Your next question comes from the line of Richard Shannon with Craig-Hallum Capital Group. Please go ahead.

Thank you for letting me ask a couple of questions here. My first one is on the defense market. If I caught the language right, you mentioned defense as one of the key verticals or top verticals, and I did a quick search. I didn't find any mention of that in past conference calls about that being a leading contributor. Was the Blue UAS certification a driver of that or drones, or can you help us tie those things or not tie them together?

Speaker 0

Yeah, Richard, I think what we said is we didn't say that defense wasn't one of the top two verticals for us this quarter, but it was actually industrials and automotive that were the top two for this last quarter. We haven't specifically talked that much about defense in prior earnings calls as well, so you're picking up on that, that this is kind of some new, this is a new development for us. Like I said before, it's kind of a combination of both the federal and international interest in defense and new investments there, in combination with advancements on our commercial side and our products. Getting things like the UAS certification, I think that this is an opportunity for the future more than it had an outsized impact on our earnings this Q2.

Okay, fair enough. Thanks for clearing that one up. Second question, Angus, is really as we ramp up the new products with the L4 and Kronos chips, I assume they're going to the same set of next products here. Can you talk about your pricing strategy here? I guess I would assume given you've talked about your gross margin profile as being very long-term, that I would assume it stretched beyond this product introduction year. You're probably going to take down pricing in a kind of commensurate with cost, but maybe you could just talk about your pricing strategy as that new product line comes out.

Sure, yeah. The pricing strategy is because Ouster is diversified, it's hard to, you know, there are many different strategies and it's a case by case by industry and sub-industry. We have a lot, I think we have a lot of flexibility here. What I'm looking at in pricing strategy is, one, that we are maintaining strong gross margins. I think that we are committed to the 35 to 40% gross margins as we approach profitability in the next couple of years. That's very important. We're doing that by, A, expanding our volumes and lowering our costs over time. That gives us some ability to drop pricing where needed to enable customer business models.

This is an important dynamic that when we drop price, many times it's because we have assessed a customer business model and identified that there needs to be a lower cost for them to enter the market into production. It's a very measured, you know, there's a lot of control on the Ouster side in how that happens and a lot of working with a customer. This is not a commoditized market where we have to drop price just to stay in competitive situations. It's much more a dynamic where we're working with customers to give them a path to good commercial viability in the long term as they're going from R&D into production. That being said, there's always lower priced applications for any technology.

There is also just a core focus internally on dropping our costs so that we can enter some fundamentally new markets with lower pricing and just lower pricing overall. Things like some of the emerging robotics opportunities that could hit really high volumes but may need a fundamentally different price point.

Okay, that's helpful perspective, Angus. That's all for me.

Speaker 2

Your next question comes from the line of Tim Savage with Northland Capital Markets. Please go ahead.

Hey, good afternoon and congrats on the results. My first question, going back to the defense opportunity and understanding this is something that's emerging for you guys, is there anything you can share with us about total addressable market in that kind of drone defense area, as it relates to your targeted TAMs across other verticals? I'll follow up from there.

Speaker 0

Yeah, thanks for the question. Traditionally, we have included our defense market in our, it's absorbed into our robotics vertical. When we've provided the TAM for robotics, defense has been just a sub-vertical within there and it's absorbed and never broken out. That's really because defense is an emerging market and it's rapidly evolving. Even in the last year, there's been a huge shift in technology companies entering that space, new approaches being taken to old problems in defense. There may be a point where we start breaking it out because there's enough of an ecosystem and the autonomy technology that has been developed in adjacent markets is now really starting to play in defense. I don't think we're quite there yet. It's a great opportunity overall.

There is an established market for things like drone payloads and just sensor payloads on drones, and that's where the Blue UAS certification is a leading indicator of some of the early opportunities in defense. I think it will be a little while longer before some of the ground and other autonomous systems come to market and come to technology maturity and start building a TAM around those.

Great. I'm sorry. In shorter term, as you look at your guidance for Q3, are there any kind of particular verticals driving that expectation for sequential growth that you can call out?

I think overall the diversification at Ouster is what's leading to robust growth, robust and consistent growth for 10 quarters straight now and hopefully going on 11 with our guidance. Ultimately, I think industrial has been bread and butter for Ouster, and it's important that that continues to grow. We see a lot of tailwinds with the industrial sector embracing physical AI, embracing AI solutions and new sensor technologies. That I expect to continue to drive our growth. We have a lot of long-term industrial customers that are now entering production. Overall, we just have a huge amount of visibility into the demand for our technology across our verticals, just given the long-term relationships that we've built with our customer set. I'm very pleased to be able to guide up again confidently $35 to $38 million next quarter.

That's just built on the momentum from many, many years of playing in a diverse set of industries with high-quality customers.

Great. Thanks very much.

Speaker 2

Your next question comes from the line of Richard Shannon with Craig-Hallum Capital Group. Please go ahead.

Thank you for letting me ask a follow-on. I just have one, Angus, here. I just want to touch on the automotive space here. I guess clarifying to the degree to which this past quarter and kind of recent past year has been mostly related to robotaxis. As we look forward to your next-gen products, you called out the solid-state digital flash products enabled by the L4 chip here. How do we think about your go-forward strategy and kind of timeframes you're expecting for broader volumes in the automotive space?

Speaker 0

Thanks. Just one clarification. The L4 chip or the solid-state digital flash products are using the Kronos chip. There are two pieces of silicon that we're working on right now, L4 and then Kronos. Kronos is the one that's going into the digital flash units. That's why we actually have an immense amount of activity going on in our product roadmap and development. That's why I've said we've 2X'ed our TAM with the roadmap that we have under development right now. It's the most compelling roadmap Ouster has ever had at the company. I'm still incredibly bullish about what we're working on internally. That goes to where will we be when ultimately the automotive ADAS or consumer ADAS market is ready. My goal there, this is set apart from robotaxis and the comments around robotaxis being an interesting market that may come in the next couple of years.

Consumer ADAS is still a very difficult market for us to predict, but we've been working for years on products that will be relevant in that market when OEMs are ready to adopt this technology set en masse. That adoption looks like L2 plus and L3 ADAS systems in consumer vehicles. We're going to have the right products at the right time for them, but it's very difficult to predict exactly when the volumes are going to hit in the United States or in the Western world for that market. It's why it's not built into really our long-term financial framework. We're confident we can hit our financial metrics, our 30% to 50% revenue growth without needing a silver bullet like consumer ADAS.

Okay, appreciate that update. That's helpful, Angus.

Speaker 2

It seems that we have no further questions for today. I would now like to turn the call back over to Angus Pacala for closing remarks.

Speaker 0

Thank you all for joining the call, and I look forward to speaking with you again on the third quarter. Thanks all.

Speaker 2

This concludes the meeting. You may now disconnect.