CBAK Energy (CBAT) Q2 2025: Profit Turns to Loss Amid Strategic Pivot

Today, we're diving into the second-quarter 2025 financial results for CBAK Energy Technology, Inc. (CBAT), a developer and manufacturer of high-power lithium and sodium batteries. Based in China, CBAK serves rapidly growing markets like light electric vehicles, electric cars, and energy storage systems. Their latest quarterly report reveals a company in a challenging but pivotal transition, shifting from profit to loss as it navigates a major product overhaul.

For the three months ending June 30, 2025, CBAK reported a net loss of $3.4 million, a stark reversal from the $6.0 million net income in the same period last year. This downturn was driven by a 15% year-over-year decrease in total revenue, which fell to $40.5 million from $47.8 million.

The flow of revenue to net loss for the quarter is visualized in the chart below.

A Tale of Two Segments

A closer look at the company's two main business divisions reveals a split performance:

• CBAT (Batteries): This core segment, which produces high-power battery cells, saw its revenue plummet 41% to $21.1 million. More concerning, an operating profit of $8.1 million in Q2 2024 turned into a $2.0 million operating loss this quarter.
• Hitrans (Battery Materials): This division, which manufactures essential materials like NCM precursors and cathodes, was a bright spot for revenue, growing 59% year-over-year to $19.4 million. However, it still posted an operating loss of $1.3 million, though this was an improvement from the $1.9 million loss a year prior.

The primary driver behind the battery segment's decline was a 45% drop in sales for residential energy storage and uninterruptible power supplies, which fell from $33.6 million to $18.5 million. According to the filing, this was due to a strategic upgrade at its Dalian facilities. The company is transitioning from its older "Model 26650" battery to the larger, more modern "Model 40135" to meet current market demand. This production shift appears to be causing significant short-term disruption.

Squeezed Margins and Rising Costs

The impact of this transition is clearly visible in the company's margins. Gross profit fell dramatically to $4.5 million from $12.7 million a year ago, with the gross margin compressing from a healthy 26.6% to just 11.0%.

Simultaneously, the company is increasing its investment in the future. Operating expenses rose 18% to nearly $8.0 million, led by a 22% increase in Research and Development (R&D) spending, which hit $3.6 million. This indicates that while current sales are suffering, CBAK is investing heavily in new battery technologies to stay competitive. The combination of falling revenue, shrinking margins, and rising expenses was the perfect storm that pushed the company into an operating loss of $3.5 million for the quarter.

A Shift in Geographic Focus

Geographically, the results were also mixed. Revenue from Mainland China grew an impressive 30% to $31.9 million. However, this growth was completely overshadowed by a collapse in the European market, where sales plunged from $21.2 million in Q2 2024 to just $4.7 million this quarter. This sharp decline in Europe is likely tied to the downturn in the residential energy storage segment.

Looking Ahead

CBAK Energy is navigating a difficult but necessary strategic pivot. The shift to newer battery models has hit short-term revenue and profitability hard, particularly in the European market. However, the growth in its Hitrans materials segment and light electric vehicle battery sales provides some positive momentum. The key challenge for CBAK will be to complete its product transition successfully and ramp up sales of its new models to regain its footing and restore profitability in the highly competitive global battery market.