Hyliion Holdings Corp. (HYLN) | The Buildout — AI Infrastructure
The Verdict
Hyliion builds the KARNO Power Module, described in its 10-K as a modular, fully enclosed, fuel-agnostic and fully integrated power generating solution. It can run on natural gas, diesel, or hydrogen and output 800V DC straight into a rack, and it can be stacked into multi-megawatt systems. The company aims it at on-site power for data centers, where AI-driven demand has made electricity a constraint, and at military applications, positioning it as primary power at smaller sites or as transient-load support at large ones. The company is not yet selling the modules commercially; today its revenue comes from research and development services, overwhelmingly for the U.S. Navy and the Office of Naval Research.
| Market Cap | — |
| Revenue (TTM) | $9M |
| Revenue Growth | +162.9% |
| EBITDA Margin (TTM) | -564.1% |
| Net Cash | $61M |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- The $41.7M U.S. Navy contract is the largest military contract in company history and, management says, meets on its own the 2026 goal of $40M–$50M in new military contracts.
- FY2026 revenue guidance was raised 50%, from about $10M to about $15M, against $3.5M of revenue in 2025.
- Management gave its first capacity and cost figures: up to 15 MW/year of KARNO Core capacity, about $1.5M of equipment per MW, and $2.5M–$3M of annual revenue per MW at current pricing.
- The cash outlook improved: year-end 2026 cash and investments guided to $115M–$120M, up from a prior ~$100M, with net cash spending of $30M–$35M versus a prior ~$50M.
- Buyers of a KARNO Power Module are eligible for a 30% investment tax credit on the purchase and qualifying installation, available through 2036 under current law, per the company.
What We’re Watching
- 200 kW KARNO commercialization moved from year-end 2026 into 2027; the 200 kW design power rating is still targeted for year-end 2026, with the regenerator named as the remaining enabler.
- The data center pipeline is nonbinding — about 750 KARNO Cores of letters of intent worth roughly $400M at current pricing — and no new data center LOIs were announced in the latest quarter.
- A short-seller report and a securities class action center on the VFG Holdings LOI; the lead-plaintiff deadline is October 27, 2026.
- Old Navy and ONR contracts wind down in the second half of 2026 while the new $41.7M contract starts in Q4 2026, with the bulk of its work in 2027–2028.
The thesis is split. On the funded side it is strengthening — a record Navy award, a 50% guidance raise, and a first hard capacity number. On the commercial side it is not yet testable: the AI data center case rests on nonbinding letters of intent, the 200 kW launch moved into 2027, and the largest LOI is contested in litigation. The open question is whether any letter of intent becomes a definitive purchase agreement, and whether the company ever reports product revenue separate from R&D services.
Earnings Beat
Q2 2026 revenue was $4.9M, all from research and development services — up from $1.5M in the year-ago quarter and $2.8M in Q1 2026. Cost of revenue was $4.6M, leaving gross profit of $366K. Operating expenses were $15.7M, and the net loss was $13.9M, slightly wider than the $13.4M loss a year earlier. The quarter included the announcement of a $41.7M U.S. Navy contract, the largest military contract in company history.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $5M | $3M | $2M | +226.7% |
| Gross margin | 7.4% | -67.1% | -76.2% | +8360bps |
| EBITDA | −$13M | −$12M | −$15M | −10.2% |
| EPS | $-0.08 | $-0.07 | $-0.08 | +1.9% |
| Cash spend | $6.9M | $13.1M | $13.5M | -49% |
our 2 largest segments of opportunities are data centers and the military. In that order. Data centers represent our largest area of customer interest.— Thomas J. Healy, CEO, 2026-08-12
Management tone: The Q2 2026 call came across as confident and forward-leaning, carrying a 50% revenue-guidance raise and the largest contract in company history. At the same time, the same call moved the 200 kW commercialization milestone into 2027, reframing the slip as sequencing to seed data center test deployments sooner. Management was direct in Q&A on capacity, the LOI pipeline, and printer lead times, and it did not address the short-seller report or the investigations that were public by the call date.
Management Guidance
For 2026, management guided revenue to approximately $15M — raised from about $10M, a 50% increase — with Q3 revenue just under $5M. It guided second-half capital spending to about $2M, equipment financing of $10M–$15M, net cash spending of $30M–$35M including that financing, and year-end cash and investments of $115M–$120M, improved from a prior ~$100M. Management said the improved cash forecast reflects higher revenue, lower capital spending, and the larger equipment financing. It reaffirmed approximately 10 early adopter KARNO Cores and the 200 kW design power rating for year-end 2026, and said 200 kW commercialization moves into 2027 and printer purchases restart in 2027.
Trajectory
Revenue is accelerating off a very small base. The quarterly series went from $1.5M in Q2 2025 to $2.8M in Q1 2026 and $4.9M in Q2 2026, and full-year 2026 guidance of about $15M compares with $3.5M in 2025. Growth is coming from building components for an 800 kW power module for the Office of Naval Research. Gross margin was negative in Q1 2026 and turned positive in Q2 2026, and the trailing four-quarter average revenue growth rate is +203.3%. Net loss remains large — $25.7M in the first half, a 16% improvement on H1 2025 — and the company still spends far more than it brings in.
The Model
The model projects FY+1 revenue of $15.0M and EBITDA of -$50M, a -333.3% margin, then FY+2 revenue of $26.5M and EBITDA of -$48M, a -179.85% margin. The near-term figure is anchored on the military R&D book, including the $41.7M Navy contract whose bulk work falls in 2027 and 2028. The FY+2 step-up depends on commercial ramp: management schedules 200 kW commercialization in 2027 and the first multi-megawatt KARNO delivery to data center customers in 2028. The model notes a wide FY+2 revenue spread of 38% across its runs, from $22M to $32M.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $4M | $15M | $26M |
| YoY Growth | — | +328.6% | +76.7% |
| EBITDA | −$59M | −$50M | −$48M |
| EBITDA Margin | -1688.6% | -333.3% | -179.8% |
Projections are the median of 4 independent model runs.
For 2026, management guided revenue to approximately $15M — raised from about $10M, a 50% increase — with Q3 revenue just under $5M. It guided second-half capital spending to about $2M, equipment financing of $10M–$15M, net cash spending of $30M–$35M including that financing, and year-end cash and investments of $115M–$120M, improved from a prior ~$100M. Management said the improved cash forecast reflects higher revenue, lower capital spending, and the larger equipment financing. It reaffirmed approximately 10 early adopter KARNO Cores and the 200 kW design power rating for year-end 2026, and said 200 kW commercialization moves into 2027 and printer purchases restart in 2027.
What Could Go Right — and Wrong
- The $41.7M Navy contract and further military awards layer into steady R&D services revenue through 2027–2028.
- One or more of the roughly 750 KARNO Cores of letters of intent convert into definitive purchase agreements, opening a commercial revenue line.
- The 200 kW design power rating is achieved by year-end 2026 and commercialization ramps in 2027.
- The up-to-3x print-speed improvement validates, raising output per printer and lowering capital cost per MW.
- The company reports product revenue distinct from R&D services, shifting gross margin above the thin R&D-services level.
- The 200 kW launch slips again, pushing meaningful product revenue beyond 2027.
- Letters of intent do not convert, leaving the roughly $400M pipeline unrealized and data center revenue at zero.
- The up-to-3x print-speed claim fails to validate, capping capacity at the current 15 MW/year.
- Scaled competitors sign the multi-gigawatt hyperscaler agreements first while Hyliion's capacity stays orders of magnitude smaller.
- The company raises equity through its new at-the-market program on unfavorable terms to fund production growth.
Looking Ahead
Over the next twelve months the company is scheduled to complete its approximately 10 early adopter KARNO Cores, place the first units at a customer site, finish the 800 kW Navy system for the USX-1 Defiant, and start the new $41.7M Navy contract in Q4 2026. It targets the 200 kW design power rating by year-end 2026 and a restart of printer purchases in 2027, with deliveries possibly late 2027 or into 2028. The two overhangs the source leaves open — the securities class action and the nonbinding data center pipeline — are the swing factors.
- Next quarter (from Aug 2026)First customer site — Multiple units; the first is a 200 kW module.
- Q3 2026Q3 revenue print — Guided to just under $5M as old Navy contracts wind down.
- October 27, 2026Class-action deadline — Lead-plaintiff deadline in the securities case.
- Year-end 2026200 kW power rating — The regenerator must clear to reach full power.
- Year-end 2026800 kW Navy build — Build completion for the USX-1 Defiant ship.
- 2027200 kW commercialization — Commercial launch and ramp of 200 kW deliveries.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $2M | $4M | $9M | +133.3% |
| Gross Margin | 6.2% | -196.1% | -55.2% | 20,230bps |
| EBITDA | −$62M | −$59M | −$52M | +4.8% |
| EBITDA Margin | -4140.0% | -1688.6% | -564.1% | +245,143bps |
| Net Income | −$52M | −$57M | −$52M | -9.8% |
| Free Cash Flow | −$73M | −$70M | −$57M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)-55.2%
- EBITDA Margin (TTM)-564.1%
- Net Margin (TTM)-566.3%
- ROIC-43.5%
- SBC / Revenue65.2%
The Company
Hyliion designs and develops power generators for stationary and mobile applications and provides research and development services. Its product is the KARNO Power Module, described in the 10-K as a modular, fully enclosed, fuel-agnostic and fully integrated power generating solution. The company targets data centers, commercial, industrial, and defense customers. It is pre-commercial: the modules are not yet sold as products, and reported revenue comes from R&D services, overwhelmingly tied to the U.S. Navy and the Office of Naval Research. The 10-Q says the ONR contract represented a significant change in business strategy toward providing R&D activities in the ordinary course of business.
Hyliion makes KARNO Cores using additive manufacturing, or industrial 3D printing. Assembly work is being moved from Cincinnati to its Austin, Texas site, which holds the company's largest print capacity, and KARNO Core assembly is the next stage. All facilities are leased: a roughly 152,000 square foot headquarters and administration building in Cedar Park, Texas, an approximately 30,000 square foot design and development site in Milford, Ohio, and the Austin and Cincinnati operations. Management says the Austin space could hold hundreds of additional printers, so space is not the constraint, and the company signed a beta-machine agreement with Colibrium Additive, a GE Aerospace company, to develop next-generation additive systems.
Business Segments
Competitive Landscape
The 10-K names Cummins, Bloom Energy, Generac, Rehlko (formerly Kohler), Caterpillar, Mainspring, and Jenbacher as key generator manufacturing competitors. The intel file's read-through notes that scaled incumbents are signing multi-gigawatt hyperscaler agreements now — Bloom Energy at over $1B a quarter, Caterpillar and Cummins each adding 20 GW of capacity, and Generac with a $1.6B data center backlog — while Hyliion's roughly 15 MW/year of installed capacity is orders of magnitude smaller, and no neighbor in the supply-chain evidence names Hyliion. Hyliion's stated points of difference are fuel-agnostic operation, native 800V DC output, modularity, and additive-manufacturing capital efficiency.
- CumminsNamed in the 10-K's competitor list; the filing does not discuss it.
- Bloom EnergyNamed in the 10-K's competitor list; the filing does not discuss it.
- GeneracNamed in the 10-K's competitor list; the filing does not discuss it.
- Rehlko (formerly Kohler)Named in the 10-K's competitor list; the filing does not discuss it.
- CaterpillarNamed in the 10-K's competitor list; the filing does not discuss it.
Supply Chain
Hyliion buys its additive printers from a single named supplier and turns them into KARNO Cores. No neighbor in the supply-chain evidence names Hyliion, and its scale is far smaller than the incumbents building data center power today.
More on HYLN: Earnings recap