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The next evolution XPENG’s physical AI is beginning to emerge. Announcements over the past week indicate major developments for IRON humanoid robot, VLA 2.0 intelligent driving and the business overall. Many of these developments have not yet been realized in revenue and profits, but are poised to drive the rapidly expanding technology company to the next level in their development.
Earlier last week, XPENG released their 2Q financial results. Revenue was $2.91 billion, up 8.0% YoY and 51.5% over 1Q. Gross margin hit 20.7%, up from 17.3% in 2025. For comparison, Tesla had a gross margin of 16.8%. However, a large portion of XPENG’s gross margin came from services, with vehicle margin falling to 12.1%, down from 14% last year. Part of that fall comes from costs associated with launching new models, but the services profitability that drove up overall gross margin is perhaps more interesting. The bulk of the services revenue comes from “technical R&D services” supplied to Volkswagen Group. In terms of profits, XPENG truly seems to be becoming a technology company, rather than just an automobile manufacturer.
