Third Quarter 2026 Earnings Call, November 12, 2026
Strategic Shift: Korea and Smart Eyewear Take Priority Over Smartphones
Enovix used its third quarter call to announce a significant reallocation of resources. The company is concentrating on its Korean subsidiary's defense and drone battery business and on small-format silicon anode cells for smart eyewear, and it is deferring smartphone cells even as its lead smartphone customer, Honor, appears close to completing a long-running qualification. Interim CEO Ryan Benton said management found out on Monday that the company is on track to pass the last hybrid qualification test, with confirmation expected "today or tomorrow." Executive Chairman TJ Rodgers described the logic as simple: "I got a choice, revenue, no revenue. It's a real simple choice for me to make."
Rodgers explained that the smartphone qualification took nearly six months and was completed only on the 900 watt-hour-per-liter AI-1 cell. Honor has since raised its requirement to 1,000 watt-hours per liter, which is the AI-2 cell, and the company would have to re-qualify it. Enovix does not want to ship AI-1 phone cells that have a limited commercial life. Management does not expect meaningful smartphone revenue in 2027, and re-starting qualification is typically a 6- to 8-month process. A second smartphone customer is waiting to adopt the same test protocol. Rodgers said Honor wants 20,000 units to sample, while Enovix can currently sample thousands of AI-2 units and promise tens of thousands in production in 2027. He said the shift has "nothing to do with our good customer that's helped us a lot."
Rodgers also pointed to the economics of the Malaysia line. The machine, which he said is the length of a football field, has an output of about 7 million units a year and does not generate gross margin until it is loaded to more than 5 million units. A smartphone cell is the size of a pack of cigarettes, while an eyewear cell is the size of a little finger, so the same machine can make five eyewear cells in place of one phone cell. He said smartphone profitability arrives "when your fourth machine is up and running, we've got one." Asked about breakeven for Malaysia, Benton said it would require "material volumes" given the significant cost structure there, which the company has already moved to reduce.
Drone Orders Convert, and Korea Capacity Is Doubling
The central new development was the conversion of drone pipeline into orders. Enovix has a 100,000-unit battery order from a drone maker, based on the conventional "MX" technology from its Korean subsidiary Routejade, shipping in January 2027. The customer is undisclosed. Rodgers said the order came because the Korean operation has shipped military products for 20 years and is one of only six countries' worth of sources able to supply this kind of order, calling it "a surprise for us, and we'll take it."
The company also booked a first order for MX-1 B01, a hybrid cell that combines Korean manufacturing with Enovix silicon anode technology, which will begin shipping in early 2027. The cell has been sampled to more than 30 companies. Chief Revenue Officer Steve Bakos said the "B" stands for balance across energy density, cycle life and discharge. The pipeline grew to $216 million, dominated by drones, and Bakos said it is dominated by the silicon blend cell, with the conventional 100% graphite cell also drawing interest. Backlog entering 2027 stands at $37 million. An MX-2 family is already defined.
Enovix is spending $19 million to double drone battery capacity in Nonsan, Korea, with part of the spending falling in 2027. Benton described this as the first automated high-volume line and the first of what the company hopes will be many, with later additions being "copy exact." He estimated that the existing land and buildings could support close to $200 million in revenue with the right equipment. Management said it expects to be capacity constrained in 2027. Benton said the company is already deciding which customers to allocate product to, and Bakos said demand could exceed supply through the end of the decade.
Why Non-China Supply Is the Differentiator
Management stressed that where the cells are built matters as much as the cell itself. Benton said the U.S. and allied countries are "in a frenzy for non-China produced batteries." Bakos said customers have changed course and doubled down on Enovix because of its TAA-compliant factory and its NDAA road map, adding that "the fact that we can build it at scale outside of China is becoming almost as important, sometimes more important than the actual cell itself." He expects that window to last the next couple of years.
At Rodgers' request, the team defined the terms. TAA, the Trade Agreements Act, requires production in an approved ally country such as South Korea. NDAA, the National Defense Authorization Act, requires that components be sourced from non-Foreign Entity of Concern countries, with Rodgers citing 95% of components. The NDAA rule does not take effect until the end of next year, but customers are acting now. Rodgers said such qualifications are "sticky," taking several years, and that competitors cannot simply jump in. He said his experience at Cypress Semiconductor, where military design wins helped turn a start-up into a real company, shows that this kind of qualification "wires in long-term high-margin business." Bakos said defense, industrial and medical programs typically last 7 to 10 years, versus the fight for each generation in smartphones. Rodgers also said the largest design win is an underwater vehicle. Asked about competitive moats, management also cited testing, characterization and binning know-how and the Korean team's 20 years of military shipping experience.
Guidance: 2027 Revenue Roughly Double 2026
Enovix guided 2027 revenue to $65 million to $85 million, against implied 2026 revenue at the midpoint of $37.2 million. Rodgers said management had originally proposed a higher number and that he asked them to lower it. About half of the 2027 target is already booked. Benton said the company need not add anything to the pipeline to reach the number. Third quarter revenue was $11 million, up 38% year on year and 22% sequentially, the sixth consecutive quarter of annual growth. Rodgers called the current quarter the last "middling" one and said next quarter's orders ship in early 2027.
Gross margin was 34.5%, helped by a rich mix of smart eyewear and drone and defense products, which carry premiums. Rodgers offered a vision, which he said was not a forecast, of $100 million in annual revenue at a 40% gross margin, which would produce $40 million of gross profit against OpEx under $40 million. He said breakeven is "not in 2027, but it's shortly after that." Colin Rusch of Oppenheimer noted that the guidance still implies roughly 4x growth to reach breakeven. Management said the pipeline is large enough for 2027 and the sales force is still scaling, and Bakos said the market for TAA-compliant cells is roughly an order of magnitude larger than what suppliers can produce. Benton expects gross margin to improve near term because the Malaysia ramp will have a more frugal cost structure and because the company can command value pricing in a tight market. Blended cells carry higher margins than conventional graphite, though Benton said the company expects healthy margins on both.
Restructuring: 23% Headcount Cut and Fewer R&D Projects
Enovix cut about 23% of positions, which Rodgers described as roughly 20%, saying the company "was, shall we say, porky." The cuts included R&D staff in the U.S. from a base of 157 people in six groups. R&D projects were reduced to 8 from 19. Rodgers was blunt about the pace of research: "smart but slow, slow, slow." He said the answer is more people on fewer projects. He said the cuts followed a pairwise-comparison ranking process he used previously at AMD, and that there was little blowback.
The annualized savings are $8.5 million, after funding a slight increase in Korea. Moving from Fremont to a smaller Sunnyvale facility adds another $1.5 million to $2 million a year. Benton said OpEx will be "materially lower" in 2027, as some costs also migrate into cost of goods sold during the production ramp, but he did not give a specific figure. He said CapEx should be smaller than in recent years. Rodgers said the company is in annual planning and declined to give detailed full-year figures.
Balance Sheet: Debt Retired at a Discount, Warrant Dividend Targets 2028 Notes
Enovix repurchased $128 million of convertible notes, mostly the discounted 2030 issue, for $81 million. Rodgers said this creates a GAAP profit of approximately $40 million, which will be excluded from non-GAAP results as a one-time item. Benton put the captured discount at $46.6 million and noted that the interest coupon is eliminated. Cash fell to $415 million from $512 million at the end of the prior quarter. Rodgers said the company is done spending on the debt, and that net debt is much better.
The company declared a warrant dividend on October 28, issuing one warrant for every four shares held by shareholders of record at the close on November 13, with distribution around November 18. The warrants expire early if the stock reaches $3.30, or on April 28, 2028 at the latest. Holders of the 2028 convertible notes can tender the notes to pay the exercise price. Benton said he hopes the warrant transaction takes care of the 2028 notes, and that the balance sheet would then be ample. Rodgers said the company has enough cash to repay the 2028 notes but that the 2030 notes had been less clear.
Smart Eyewear: 50,000-Unit Reference Order and AI-2 Sampling
Enovix is shipping a 50,000-unit order to a large global company whose name Rodgers said investors would recognize instantly. Benton described it as a reference design and Rodgers noted that it is an order for samples, with the question of what follows still open. The AI-2 cell, over 1,000 watt-hours per liter and about 20% higher in energy density than AI-1, has been sampled to 24 smart eyewear customers. Rodgers said the company has learned "about depending on too few customers and getting bad surprises." Bakos said the Korean technology offers a second approach, as it can produce curved and custom shapes that fit the space in the glasses, so total capacity and run time can match or exceed the energy-dense but rectangular AI cells. Rodgers said he tried a pair of glasses that identified a person on screen.
Rodgers said Enovix says it knows of no one shipping a 60% silicon anode, with the highest figure he has heard being 20%, while Enovix itself uses 100% in its AI cells.