XPeng Inc. (XPEV) had a rough Monday. The Chinese electric vehicle maker reported a second-quarter loss that was wider than Wall Street had braced for, and its third-quarter revenue outlook came in soft. Investors responded by knocking the stock down more than 4% in premarket trading.

Here's the thing about XPeng's quarter: it wasn't all bad. Revenue actually grew, margins improved, and the company's robotics side just pulled in a massive funding round. But the market is forward-looking, and the guidance suggests the road ahead might be bumpier than hoped.

Revenue Rises, Deliveries Stay Flat

Let's start with the numbers. XPeng reported second-quarter revenue of 19.74 billion Chinese yuan ($2.91 billion), up 8% year over year and a solid 51.5% jump from the previous quarter. That's growth, no question. But analysts were looking for $2.95 billion, so the company came up a bit short.

Deliveries were essentially flat. XPeng handed over 103,295 vehicles during the quarter, up just 0.1% from a year earlier. Not exactly a barnburner, but the sequential momentum (up 51.5% in revenue) suggests the second half of the quarter picked up steam.

As of June 30, XPeng had 740 sales stores spread across 257 cities. Its self-operated charging network included 3,780 stations, with 2,720 of those being ultra-fast chargers. That's the kind of infrastructure that matters in the EV game.

Margins Improve, But Loss Widens

Vehicle sales revenue rose 1% year over year to 17.05 billion yuan ($2.51 billion), and jumped 55% sequentially, mostly thanks to higher deliveries. Gross margin improved to 20.7% from 17.3% a year earlier. That's a nice bump. But vehicle margin actually fell to 12.1% from 14.3%, which the company attributes to its product-generation transition. In other words, they're spending money to bring new models to market, and that's squeezing margins.

The operating loss widened to 1.14 billion yuan ($168.39 million) from 934.65 million yuan a year earlier. And the adjusted loss per American depositary share was 1.29 yuan, or 19 cents, which was wider than the analyst consensus estimate of a 0.76 yuan loss. Ouch.

On the bright side, XPeng had $5.97 billion in cash as of June 30. That's a decent cushion, especially with the robotics unit bringing in fresh capital.

Robotics Unit Raises Big Bucks

Speaking of which, XPeng's robotics business just raised more than $900 million at a post-money valuation above $6.3 billion. That's a serious chunk of change. IDG Capital led the round, with Gaorong Ventures participating. Tencent Holdings Ltd. (TCEHY) and Alibaba Group Holding Ltd. (BABA) also joined as strategic investors. That's a pretty impressive list of backers.

XPeng will retain control and continue consolidating the robotics unit in its financial statements. The proceeds are earmarked for robotics hardware and software, physical AI model training, data generation, mass-production facilities, and global expansion.

The company says its next-generation IRON humanoid robot is on track to enter mass production by the end of 2026, with commercial launches and deliveries in China and overseas markets expected in 2027. So we're still a ways off, but the pieces are moving.

Executives Bet On Physical AI

XPeng's chairman and CEO, Xiaopeng He, sounded optimistic about the company's trajectory. He said the strong performance of the GX and MONA L03 models boosted management's confidence in upcoming models and strengthened brand momentum. He also said XPeng has reached key milestones in developing the mass-production version of its humanoid robot and aims to become a global leader in physical AI, humanoid robotics, and autonomous driving.

Vice Chairman and Co-President Hongdi Brian Gu echoed that sentiment, noting that XPeng remained resilient despite industrywide cost pressures. He said gains from premiumization and global expansion helped keep gross margin above 20%. Gu expects physical AI production and commercialization to accelerate over the next year, which should support meaningful gross profit growth and further R&D investment.

Third-Quarter Outlook Falls Short

Now for the part that spooked investors. XPeng expects third-quarter deliveries of 115,000 to 121,000 vehicles. That's a year-over-year change ranging from a 0.87% decline to 4.30% growth. Not exactly a blowout.

The company forecast revenue of 21.70 billion yuan to 23.40 billion yuan, representing growth of 6.47% to 14.81%. But the analyst consensus was looking for 25.88 billion yuan. So the midpoint of XPeng's guidance is well below what Wall Street had penciled in.

That's the kind of miss that gets traders reaching for the sell button.

XPEV Price Action

XPeng shares were down 4.27% at $11.67 during premarket trading on Monday, according to market data. The stock is feeling the weight of the guidance miss, even with the robotics news providing some counterweight.

So what's the takeaway? XPeng is making progress on multiple fronts, but the EV market is brutally competitive, and the company's core auto business is still struggling to turn a profit. The robotics unit could be a game-changer down the road, but for now, investors are focused on the near-term numbers. And those numbers, at least for Q3, aren't quite what they hoped to see.