Rivian Automotive (NASDAQ: RIVN) experienced a sharp selloff on Friday, with shares declining 9.6% to close at $15.22. The drop came even as the electric vehicle maker surpassed second-quarter revenue expectations, as investors focused on the composition of its earnings rather than the headline numbers.
The company reported consolidated gross profit of $179 million, a significant improvement from a $206 million loss in the same period last year. However, a closer look at the segment breakdown reveals a stark contrast: the software and services division generated $215 million in gross profit, while the automotive segment posted a $36 million loss. This means software accounted for 120% of total gross profit, underscoring the company's continued reliance on non-vehicle revenue streams.
Automotive margins remain in the red
Rivian's automotive gross margin stood at negative 3.1% for the quarter, highlighting the persistent challenges in achieving profitability from vehicle production. The company also recognized $108 million in regulatory credit revenue and an unspecified tariff-refund receivable, which helped offset some of the losses.
The segment results are particularly significant for the upcoming R2 launch, as investors had hoped that the more affordable vehicle line would drive improvements in manufacturing economics. Management remains optimistic, with CEO RJ Scaringe noting that conversion rates for the R2 Launch Edition are "meaningfully above our own internal projections." The company anticipates achieving a positive R2 gross margin in the second half of the year.
Revenue and earnings beat estimates
Rivian reported total revenue of $1.658 billion, exceeding analyst consensus by approximately 9.8%. The adjusted loss per share came in at 46 cents, better than the expected 63-cent loss. Year-over-year, revenue grew 27% from $1.303 billion, while the net loss narrowed to $837 million from $1.115 billion.
The software and services segment generated $515 million in revenue, with a substantial portion—$308 million—coming from the partnership with Volkswagen Group (ETR: VOW3). This single source accounted for 60% of software revenue and 18.6% of Rivian's total revenue, highlighting a concentration risk that some analysts have flagged.
Delivery outlook raised, capex trimmed
Management raised its full-year delivery guidance to 65,000–70,000 vehicles, up from the previous range of 62,000–67,000. At the same time, the company reduced its capital expenditure forecast by $250 million at the midpoint, now expecting $1.70–$1.80 billion. The adjusted EBITDA loss guidance was also improved, with the upper end of the range reduced by $50 million to $2.00 billion.
Despite these operational improvements, cash flow remains a concern. Free cash flow outflow widened to $849 million in the quarter, compared to $398 million in the prior year, as the company built up inventory ahead of the R2 ramp-up. The company ended the quarter with $5.846 billion in liquidity, which rises to $7.163 billion on a pro-forma basis after accounting for the July equity raise.
Stock falls below July offering price
Friday's decline pushed the stock below the $15.50 per share price at which Rivian sold 86.25 million Class A shares in July, a deal that raised approximately $1.34 billion. The offering represented about 6.3% of the company's share count as of June. The closing price of $15.22 was 1.8% below the offering price.
Trading volume on Friday reached 54.52 million shares, about 1.56 times the 65-day average, indicating heightened investor interest. The stock has now fallen 3.9% since July 24.
Key risks and outlook
Analysts point to several risks, including execution on the R2 launch, vehicle economics, and the variability of regulatory credits and Volkswagen-related revenue. If margin improvements are slower than expected, the company may need to raise additional capital to fund its cash burn.
Investors will be watching next week to see if shares can recover above the $15.50 offering price. The Nasdaq resumes trading on Monday, August 3, and any further updates on R2 margins will be closely scrutinized. The core issue remains: Rivian reports a gross profit, but its vehicle manufacturing segment has yet to achieve profitability.
