Annual Report for Fiscal Year Ending December 31, 2025 (Form 20-F)

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in "Item 3.D. Risk Factors" and "Forward-looking Information" included elsewhere in this annual report.

5.A. Operating Results

Key Factors Affecting Our Results of Operations

Our business and results of operations are affected by a number of general factors that impact our ability to capitalize on the growth of our total addressable market, including overall economic growth in China and globally, technological advancement, public perception towards our technology, geopolitical relations, regulatory oversight and competitive landscape within our industry. Changes in any of these general factors could affect our business and results of operations.

In addition, in light of the current stage of our development (particularly our large-scale commercialization efforts), we believe that our future financial position and results of operations depend to a significant extent on (i) our ability to execute our go-to-market strategies to commercialize our technology at scale, (ii) our R&D efforts and investments, (iii) our strategic partnerships, and (iv) our operational efficiency, as elaborated below:

Our Ability to Execute Our Go-to-Market Strategies to Commercialize Our Autonomous Driving Technology at Scale

Our ability to generate sustainable revenues and become financially profitable in the long term depends largely upon the progression of the large-scale commercial deployment of our autonomous driving technology. To date, we have achieved milestones in developing our Virtual Driver that enables safe, reliable autonomous driving experience, and we are transitioning from technology development to mass deployment across different commercial use cases, primarily robotaxi and robotruck services:

While we have started generating revenues from these initial commercialization attempts, we expect both the scale and composition of our revenues to vary significantly once we achieve large-scale commercial deployment of our autonomous driving technology through executing our go-to-market strategies. Specifically, we will focus on generating revenues for our robotaxi and robotruck services in the near future. However, should our assumptions about our go-to-market strategies prove overly optimistic, or if we fail to execute our go-to-market strategies cost-effectively and achieve significant milestones along the way towards commercialization, we may fail to generate revenues and operating cash flow and may experience delays to our ability to achieve profitability. This may also result in changes in our go-to-market strategies, which could lead to unanticipated cost overruns. See "Item 3. Key Information-3.D. Risk Factors-Risks Related to Our Business and Industry-Autonomous driving is an emerging and rapidly evolving technology and involves significant risks and uncertainties."

Continued Investments in Technology Development and Innovation

We believe our leadership in the autonomous driving industry is underpinned by our robust technological capabilities. We have historically dedicated significant resources towards research and development. In 2023, 2024 and 2025, we recorded research and development expenses of US$122.7 million, US$240.2 million and US$217.4 million, respectively, among which 61.6%, 76.9% and 60.2% were employee compensation for our research and development staff. Specifically, we have invested heavily in recruiting and retaining talent, especially engineers and scientists with expertise and experience in machine learning, software algorithms, and vehicle engineering. As we believe our market success and financial performance will significantly depend on our ability to maintain our technological leadership, we will continue to invest in technology development and innovation to grow our competitive strengths against our peers. As our business expands, we also seek to consolidate our internal research and development functions to optimize resource allocation and improve efficiency in technology development.

Our Ability to Deepen and Expand Strategic Partnerships

We have historically benefited from our strategic relationships with business partners, including leading OEMs, TNCs, logistics platforms, hardware component companies and other industry stakeholders. These strategic partnerships have allowed us to focus our endeavors on technology development while improving our ability to scale and monetize our technology globally in the long run. To achieve large-scale commercial deployment of our autonomous driving technology, we plan to deepen our relationships with existing partners and explore new collaboration opportunities across different areas. For example, we will continue to collaborate with leading OEMs on the one hand, to rapidly scale our autonomous vehicle fleets, and with TNCs and logistics platforms on the other hand to accelerate the commercial deployment of our robotaxi and robotruck services. Guided by our established go-to-market strategies, we will also seek to expand our collaborative ecosystem along the industry value chain.

Our Ability to Improve Operating Efficiency

We aim to improve operating efficiency in every aspect of our business, such as research and development, supply chain, collaboration with business partners, sales and marketing, as well as service offerings. As we continue to scale our autonomous driving technology, we also intend to improve our operational efficiency with a view towards achieving long-term profitability. For example, we operate our autonomous vehicle fleets both by ourselves and through collaboration with third-party "fleet companies" funded by third-party fleet owners. Under such business model, these third-party fleet owners bear substantially all of capital expenditure related to fleet acquisition and other fleet operating costs and expenses. Additionally, we have sought to enhance the management of our operating expenses by implementing various expense control measures. As a result, our cost mix and operating expenses may vary significantly in the future as our revenue models continue to evolve and as our operating efficiency continues to improve through economies of scale.

Key Components of Results of Operations

Revenues

We are at a relatively early stage of generating revenues and diversifying our customer base. In the past, we have generated our revenues from (i) robotaxi services, (ii) robotruck services, and (iii) licensing and applications and have experienced significant changes in our revenue mix. We expect the scale and composition of our revenues to continue to vary significantly in the future as we continue to execute our go-to-market strategies.

The following table sets forth a breakdown of our revenues by business activities, in absolute amounts and as percentages of total revenues, for the periods indicated.

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Robotaxi services. We generate robotaxi revenues primarily by (a) providing a comprehensive suite of AV engineering solutions, including AV software deployment and maintenance, vehicle integration and engineering and road testing, to leading OEMs and TNCs, helping them seamlessly integrate our autonomous driving technology with their vehicle platforms, and to a much lesser extent; (b) charging passengers fare for their rides with our robotaxis; and (c) entering into technology licensing arrangements with strategic partners for our proprietary virtual driver systems, from which we recognize licensing revenues. We currently offer fare-charging robotaxi services across all four Tier-1 cities in China, namely Beijing, Shanghai, Guangzhou and Shenzhen, and we intend to introduce such services to broader geographies in China in the future through self-owned fleets and/or fleets owned and operated by third-party fleet companies. We have advanced our presence in Hangzhou and Changsha, two emerging new tier-one cities in China in March 2026.

As the commercial deployment of our robotaxi services accelerates, we expect our robotaxi revenues to continue to grow both in absolute amount and by percentage of our total revenues in the future. In particular, revenues generated from passenger fare, as well as fees generated from operating robotaxis for TNCs and fleet companies, where applicable, are expected to increase alongside the growth of our own and/or third-party owned robotaxi fleets as we approach large-scale commercialization in the long run. Additionally, we will continue to adapt our revenue model based on market conditions and explore additional monetization opportunities for our robotaxi services.

Robotruck services. We generate robotruck revenues mainly by using our robotruck fleets to provide paid transportation services to logistics platforms. We charge them service fees by mileage depending on specific transport routes and/or by tonnage. As we continue to scale our robotruck fleets, we expect such revenues to grow in the near future.

Currently, we also generate a limited portion of our robotruck revenues from offering our full-stack Virtual Driver to truck OEMs, which integrate our technology into their vehicle platforms to enable autonomous driving functionality. We expect such revenues to continue to increase in the near future. As the customer base for our Virtual Driver continues to grow, we may develop new robotruck revenue streams including charging these customers recurring licensing fees for using our Virtual Driver technology. To a much lesser extent, we also generate robotruck revenues through providing AV engineering solutions, including customized software development, vehicle integration, engineering, and road testing, to customers. This assists in enhancing autonomous driving capabilities and overall performance of their intelligent trucks.

Licensing and applications. We generate licensing and applications revenues primarily through (a) offering POV intelligent solutions, including intelligent driving software solutions, proprietary vehicle domain controller products and data analytics tools to OEMs and other industry participants to empower vehicles to achieve higher levels of driving automation; (b) providing certain value-added technological services, such as vehicle integration services, and software development and licensing services, primarily to sensor and hardware component suppliers, helping them better adapt their products and solutions to autonomous driving use cases; and (c) offering V2X (vehicle-to-everything) products and services to enhance road safety, and improve transportation efficiency and experience.

While we have historically generated a significant portion of our revenues from licensing and applications, we expect our licensing and applications revenues, as a percentage of our total revenues, to decrease in the long term as we continue to grow our robotaxi and robotruck revenues.

By the nature of services based on the revenue recognition policies applicable to such services, our revenue streams can also be categorized into (i) engineering solution services, representing primarily the services and software solutions we offer to OEMs and other industry participants, (ii) virtual driver operation and other related services, consisting of fare we collect from passengers for their rides with our robotaxis, and transportation service fees we charge logistics platforms and software licensing, and (iii) sales of products, including AV hardware kit used in our Virtual Driver and our vehicle domain controller products. In 2023, revenues generated from engineering solution services, virtual driver operation and other related services and sales of products were US$40.6 million, US$23.9 million and US$7.4 million, respectively. In 2024, revenues generated from engineering solution services, virtual driver operation and other related services and sales of products were US$28.0 million, US$39.4 million and US$7.6 million, respectively. In 2025, revenues generated from engineering solution services, virtual driver operation and other related services and sales of products were US$16.5 million, US$40.2 million and US$33.3 million, respectively. For details, see Note 2(l) to our audited consolidated financial statements included elsewhere in this annual report.

Cost of revenues

Our cost of revenues consists primarily of (i) fleet operation expenses, primarily representing tolls and fuel costs incurred by our self-owned robotaxi and robotruck fleets, third-party transportation expenses and other expenses relating to fleet operations and maintenance, (ii) direct operating and materials costs, consisting primarily of expenses relating to materials and supplies and R&D support and other third-party professional services in relation to the provision of our services and solutions to customers, (iii) employee compensation representing salaries, welfare and bonuses for our engineers, safety drivers and other personnel in relation to the provision of our services and solutions to customers, and (iv) others, mainly including traveling expenses, depreciation and amortization, and other office and utility expenses.

Similar to our revenues in 2023, 2024 and 2025, our cost mix experienced changes in the historical periods as we remained in relatively early stages of commercialization and diversifying our revenue streams. As a result, we expect the amounts and composition of our cost of revenues to continue to evolve in the near future.

The following table sets forth a breakdown of our cost of revenues, both in absolute amounts and as percentages of total cost of revenues, for the periods indicated.

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Operating expenses

The following table sets forth a breakdown of our operating expenses, both in absolute amounts and as percentages of our total operating expenses, for the periods indicated.

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Research and development expenses

Our research and development expenses consist primarily of (i) employee compensation, representing salaries, welfare and bonuses as well as share-based compensation for our research and development staff, which include engineers and other personnel responsible for the design, development and testing of our autonomous driving technology, (ii) development and testing expenses, consisting primarily of expenses relating to materials and supplies, third-party research and development and other professional services, and vehicle operations, testing and maintenance for research and development purpose, (iii) depreciation and amortization in relation to our vehicles for research and development purposes, server and network equipment, (iv) others, mainly including rental and office administrative expenses in relation to our research and development activities.

The following table sets forth a breakdown of our research and development expenses, both in absolute amounts and as percentages of our total research and development expenses, for the periods indicated.

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Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist primarily of (i) employee compensation, representing salaries, welfare and bonuses as well as share-based compensation for our selling, general and administrative employees, (ii) professional service expenses, which consist primarily of outsourcing fees relating to human resources and IT functions and fees paid to auditors and external legal counsels, (iii) rental and office administrative expenses, and (iv) others, mainly including depreciation and amortization.

The following table sets forth a breakdown of our selling, general and administrative expenses, both in absolute amounts and as percentages of our total selling, general and administrative expenses, for the periods indicated.

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Investment income

Our investment income consists primarily of interest on time and structured deposits, gains from investments and gain from disposal of certain equity investments.

Changes in fair value of warrants liability

Our changes in fair value of warrants liability arise from changes in the carrying amount of the warrants that we issued to some of our Series D investors, which allowed the investors to acquire our Series D preferred shares after the investors obtain the requisite outbound direct investment approval from relevant regulatory authorities in China. For further information, see Note 12 to our audited consolidated financial statements included elsewhere in this annual report.

Changes in fair value of trading securities

Our changes in fair value of trading securities arise from changes in the carrying amount of investments in trading securities.

Other income, net

Our other income includes primarily government grants, fair value change of equity securities and foreign exchange gains. Our other expenses include primarily foreign exchange losses.

Taxation

Cayman Islands

We are incorporated in the Cayman Islands. Under the current tax laws of the Cayman Islands, we are not subject to tax on our income or capital gains. In addition, payments of dividends and capital in respect of our shares are not subject to taxation, and no withholding will be required in the Cayman Islands on the payment of any dividend or capital to any holder of our shares, nor will gains derived from the disposal of our shares be subject to the Cayman Islands income or corporation tax.

United States

Our subsidiary incorporated in the United States, namely Pony. AI, Inc., is subject to federal income tax in the United States at the rate of 21% (in addition to any state and local taxes, as applicable) for each of the years ended December 31, 2023, 2024 and 2025.

Hong Kong

Under the current Hong Kong Inland Revenue Ordinance, from the year of assessment in 2018 and 2019 onwards, our subsidiaries in Hong Kong are subject to profits tax at the rate of 8.25% on assessable profits up to HK$2 million; and 16.5% on any part of assessable profits over HK$2 million. The payments of dividends by our Hong Kong subsidiaries to their shareholders are not subject to any Hong Kong withholding tax.

PRC

Under the PRC Enterprise Income Tax Law effective from January 1, 2008, which was most recently amended December 29, 2018, our PRC subsidiaries are subject to the statutory rate of 25%, except for preferential tax treatments available to qualified enterprises in certain encouraged sectors of the economy.

For example, enterprises that qualify as "high and new technology enterprises" are entitled to a preferential rate of 15% subject to renewal every three years. Certain of our PRC subsidiaries, namely Beijing (HX) Pony, Beijing (ZX) Pony, Guangzhou (ZX) Pony, Guangzhou (HX) Pony, Jiangsu Rye Data Technology Co., Ltd., Shenzhen (YX) Pony, Beijing (YX) Pony and Shanghai (YX) Pony were recognized as "high and new technology enterprises", and therefore enjoyed a preferential tax rate of 15% for three years starting from 2018, 2018, 2019, 2020, 2021, 2022, 2022 and 2023, respectively. In 2021, Beijing (HX) Pony and Beijing (ZX) Pony reevaluated their "high and new technology enterprises" status, securing the 15% preferential tax rate for 2021 to 2023. In 2023, Guangzhou (HX) Pony reevaluated its "high and new technology enterprise" status, securing the 15% preferential tax rate for 2023 to 2025. In 2024, Beijing (HX) Pony, Beijing (ZX) Pony, Guangzhou (ZX) Pony and Jiangsu Rye Data Technology Co., Ltd. reevaluated their "high and new technology enterprises" status, securing the 15% preferential tax rate for 2024 to 2026. In 2025, Beijing (YX) Pony and Shenzhen (YX) Pony reevaluated their "high and new technology enterprises" status, securing the 15% preferential tax rate for 2025 to 2027.

As a Cayman Islands holding company, we may receive dividends from our PRC subsidiaries through Hongkong Pony AI Limited. The PRC EIT Law and its implementing rules provide that dividends paid by a PRC entity to a non-resident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, and may be subject to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise (i) directly holds at least 25% of the PRC enterprise, (ii) is a tax resident in Hong Kong and (iii) could be recognized as a Beneficial Owner of the dividend from PRC tax perspective. We did not record any dividend withholding tax, as our WFOE, which is a foreign investment enterprise, did not have any retained earnings in any of the periods presented.

If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a "resident enterprise" under the PRC EIT Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See "Item 3. Key Information-3.D. Risk Factors-Risks related to Doing Business in China-We may be classified as a 'PRC resident enterprise' for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and non-PRC holders of the ADSs or ordinary shares and have a material adverse effect on our results of operations and the value of your investment."

Critical Accounting Estimate

An accounting estimate is considered critical if it requires to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur periodically, could have materially impact to the consolidated financial statements.

We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.

The following descriptions of the critical accounting estimate should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report. For further information, see Note 2 to our consolidated financial statements in this this annual report.

Income Taxes

Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. We follow the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statements carrying amounts and tax bases of existing assets and liabilities by applying enacted statutory tax rates that will be in effect in the period in which the temporary differences are expected to reverse. We record a valuation allowance to reduce the amount of deferred tax assets if based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in our consolidated statements of operations and comprehensive loss in the period of change. Deferred tax assets and liabilities are classified as non-current in the consolidated balance sheets.

We recognize in our consolidated financial statements the benefit of a tax position if the tax position is "more likely than not" to prevail based on the facts and technical merits of the position. Tax positions that meet the "more likely than not" recognition threshold are measured at the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement. We estimate our liability for unrecognized tax benefits which are periodically assessed and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from our estimates. As each audit is concluded, adjustments, if any, are recorded in our consolidated financial statements in the period in which the audit is concluded. Additionally, in future periods, changes in facts, circumstances and new information may require us to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. As of December 31, 2023, 2024 and 2025, we did not have any significant unrecognized uncertain tax positions.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this annual report. Due to the early stage of our commercialization efforts and our significant investments in R&D in the past, our historical results may not be indicative of our future results of operations. The following table sets forth our consolidated results of operations data both in absolute amounts and as percentages of our total revenue for the periods indicated:

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Note:

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Non-GAAP Financial Measures

We use non-GAAP financial measures, such as non-GAAP net loss, in evaluating our operating results and for financial and operational decision-making purposes. We define non-GAAP financial measures by excluding the impact of share-based compensation expenses, changes in fair value of warrants liability and changes in fair value of trading securities. We believe that non-GAAP financial measures help identify the underlying trends in our business, provides useful information about our results of operations, and enhances the overall understanding of our past performance and future prospects.

The non-GAAP financial measures are not presented in accordance with U.S. GAAP and may be different from non-GAAP methods of accounting and reporting used by other companies. The non-GAAP financial measures have limitations as analytical tools and when assessing our operating performance, investors should not consider them in isolation, or as a substitute for the financial information prepared in accordance with U.S. GAAP. We encourage investors and others to review its financial information in its entirety and not rely on a single financial measure.

We mitigate these limitations by reconciling the non-GAAP financial measures to the most comparable U.S. GAAP performance measures, all of which should be considered when evaluating our performance.

The following table sets forth unaudited reconciliation of U.S. GAAP and non-GAAP results for the periods indicated.

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Note:

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Year Ended December 31, 2024 Compared to Year Ended December 31, 2025

Revenues

Our total revenues increased by 20.0% from US$75.0 million in 2024 to US$90.0 million in 2025, primarily driven by the growth of our robotaxi services and revenue generated from licensing and applications businesses.

Robotaxi services. Our revenues generated from robotaxi services increased by 128.6% from US$7.3 million in 2024 to US$16.6 million in 2025. Specifically, fare-charging revenues grew by close to 400%, driven by growing user demand in Tier-1 cities, optimization of fleet operations, as well as robust order growth since launch of our Gen-7 fleet.

Robotruck services. Our revenues generated from robotruck services increased slightly by 0.6% from US$40.4 million in 2024 to US$40.6 million in 2025, mainly contributed by our deepened collaboration with Sinotrans to continuously enhance fleet operations.

Licensing and applications. Our revenues generated from licensing and applications increased by 19.7% from US$27.3 million in 2024 to US$32.8 million in 2025, mainly attributable to growing demand for our autonomous domain controllers mainly from customers in the low-speed robot delivery, robosweepers, logistics, and humanoid robotics sectors as the delivery volume of our autonomous domain controllers surged by more than five times as compared to that of 2024.

Cost of revenues

Our cost of revenues increased by 19.2% from US$63.6 million in 2024 to US$75.8 million in 2025. Specifically, the increase in our cost of revenues was primarily due to the increase in direct operation and material cost of US$20.3 million as we incurred significant material costs for specific licensing and applications projects in 2025. Such increase was partially offset by the decrease in employee compensation of US$7.8 million.

Gross profit and gross margin

As a result of the foregoing, our gross profit increased from US$11.4 million in 2024 to US$14.2 million in 2025. Our gross margin increased from 15.2% in 2024 to 15.7% in 2025, mainly driven by an optimized revenue mix, characterized by a higher contribution from robotaxi services, which carry a relatively higher gross margin.

Operating expenses

Our operating expenses decreased by 7.4% from US$296.9 million in 2024 to US$275.0 million in 2025.

Research and development expenses

Our research and development expenses decreased by 9.5% from US$240.2 million in 2024 to US$217.4 million in 2025, primarily associated with the share-based compensation expenses recognized related to our initial public offering in the United States in the fourth quarter of 2024, partially offset by increased expenses in 2025 from (i) the expansion of our R&D personnel to enhance our capacity for large-scale deployment and (ii) research and development expenses for our Gen-7 vehicle.

Selling, general and administrative expenses

Our selling, general and administrative expenses increased slightly by 1.5% from US$56.7 million in 2024 to US$57.6 million in 2025, attributable primarily to higher personnel expenses incurred to support the accelerated deployment of large-scale commercial operations and increased professional service fees.

Investment income

Our investment income increased from US$20.4 million in 2024 to US$43.0 million in 2025, primarily due to our increased interest on bank time deposit and gains from investments in wealth management products.

Changes in fair value of warrants liability

We did not record any changes in fair value of warrants liability in 2025, as compared to gain in fair value of warrants liability of US$5.6 million recorded in 2024. The changes were primarily due to the expiration of the warrants we granted to an investor.

Changes in fair value of trading securities

We recorded changes in fair value of trading securities of US$128.0 million in 2025, as compared to changes in fair value of trading securities of negative US$21.3 million in 2024. The changes were primarily due to fair value changes of our securities investments.

Other income, net

We recorded other income, net, of US$13.1 million in 2025, as compared to other income, net of US$5.8 million in 2024, primarily attributable to fluctuations in foreign exchange rates.

Income tax benefits (expenses)

Our income tax expenses were US$1 thousand in 2024. We did not record any income tax benefits or expenses in 2025.

Net loss

As a result of the foregoing, we recorded net loss of US$275.0 million and US$76.8 million in 2024 and 2025, respectively.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2024

Revenues

Our total revenues increased by 4.3% from US$71.9 million in 2023 to US$75.0 million in 2024, primarily driven by the growth of our robotruck services.

Robotaxi services. Our revenues generated from robotaxi services decreased by 5.3% from US$7.7 million in 2023 to US$7.3 million in 2024, mainly due to reduced service fees from providing AV engineering solutions based on our collaboration projects' progression schedule. The decrease was partially offset by an increase in passenger fares driven by the expansion of our public-facing fare-charging robotaxi operations in Tier-1 cities in China.

Robotruck services. Our revenues generated from robotruck services increased by 61.3% from US$25.0 million in 2023 to US$40.4 million in 2024, which was mainly attributable to the increase in transportation service fees collected by Cyantron, an entity founded by us (as the controlling shareholder) and Sinotrans in 2022, to explore commercialization opportunities in the robotruck services markets. Cyantron offers paid transportation services to Sinotrans to fulfill its freight orders across China with a fleet of robotrucks, consisting of both Level 2++ intelligent trucks and Level 4 autonomous trucks with safety drivers. In 2024, Cyantron continued to broaden its geographical footprints in China with a total of over 160 robotrucks, resulting in rising transportation service fees. Specifically, the mileage covered by the Cyantron robotruck fleet increased to approximately 21 million kilometers in 2024 from more than 17 million kilometers in 2023.

Licensing and applications. Our revenues generated from licensing and applications decreased by 30.1% from US$39.2 million in 2023 to US$27.3 million in 2024, mainly attributable to the decrease in revenues generated from our V2X (vehicle-to-everything) business from US$18.0 million in 2023 to US$0.7 million in 2024. This was because fewer projects reached milestone stages in 2024 for the purposes of revenue recognition in connection with various projects for our V2X business. The decrease was partially offset by the increase in revenues generated from our POV products and services from US$10.2 million in 2023 to US$16.1 million in 2024.

Cost of revenues

Our cost of revenues increased by 15.6% from US$55.0 million in 2023 to US$63.6 million in 2024. Specifically, the increase in our cost of revenues was primarily due to the increases in (i) fleet operation expenses of US$14.1 million, driven by the increased robotaxi orders and expanding geographical footprints and fleet for Cyantron's robotruck services, which mainly comprised of vehicle maintenance expenses, fuel costs and tolls in 2024, compared to 2023, and (ii) employee compensation of US$3.5 million as a result of a growing number of engineers and other personnel being assigned to support the accelerated commercial deployment of our technology. Such increase was partially offset by the decrease in direct operating and material costs of US$8.9 million as we did not incur significant material costs for specific licensing and applications projects in 2024, in contrast to 2023.

Gross profit and gross margin

As a result of the foregoing, our gross profit decreased from US$16.9 million in 2023 to US$11.4 million in 2024. Our gross margin decreased from 23.5% in 2023 to 15.2% in 2024, mainly due to services with relatively lower gross margin contributed an increasing amount to our revenues in 2024 compared to 2023.

Operating expenses

Our operating expenses increased by 85.4% from US$160.1 million in 2023 to US$296.9 million in 2024.

Research and development expenses

Our research and development expenses increased by 95.7% from US$122.7 million in 2023 to US$240.2 million in 2024, attributable primarily to the increase in employee compensation of US$109.1 million, which was mainly due to (i) the expenses incurred in connection with the vesting of share-based compensation awards upon our initial public offering in November 2024 of US$98.8 million and (ii) the increases in both the headcount and compensation for our research and development staff. To a lesser extent, the increase in our research and development expenses was also attributable to the increase in development and testing expenses of US$13.5 million as a result of our increased investment in product and technology development.

Selling, general and administrative expenses

Our selling, general and administrative expenses increased by 51.7% from US$37.4 million in 2023 to US$56.7 million in 2024, attributable primarily to the increase in employee compensation of US$25.0 million, which was mainly due to (i) the expenses incurred in connection with the vesting of share-based compensation awards upon our initial public offering in November 2024 of US$21.9 million, and (ii) the increases in both the headcount and compensation for our selling personnel and general and administrative staff. The increase in our selling, general and administrative expenses was partially offset by the decrease in professional services expenses of US$5.0 million. Professional services expenses associated with our initial public offering have been capitalized in 2024, while they are expensed as incurred in prior years.

Investment income

Our investment income increased from US$19.4 million in 2023 to US$20.4 million in 2024, primarily due to our increased interest on bank time deposit and gains from our investments in wealth management products.

Changes in fair value of warrants liability

We recorded gains in fair value of warrants liability of US$5.6 million in 2024, as compared to loss in fair value of warrants liability of US$3.0 million in 2023. The changes in fair value of warrants liability were primarily due to the expiration of the warrants we granted to an investor.

Changes in fair value of trading securities

We recorded changes in fair value of trading securities of negative US$21.3 million in 2024, as compared to changes in fair value of trading securities of negative US$4.7 million in 2023. The changes were primarily due to fair value changes of our securities investments.

Other income, net

We recorded other income, net, of US$5.8 million in 2024, as compared to other income, net of US$6.2 million in 2023, primarily attributable to fluctuations in foreign exchange rates.

Income tax benefits (expenses)

We recorded income tax benefits of US$0.1 million and income tax expenses of US$1 thousand in 2023 and 2024, respectively.

Net loss

As a result of the foregoing, we recorded net loss of US$125.3 million and US$275.0 million in 2023 and 2024, respectively.

Recent Accounting Pronouncements

For information on recently issued accounting pronouncements, refer to Note 2 to our consolidated financial statements included elsewhere in this annual report.

5.B. Liquidity and Capital Resources

Our principal sources of liquidity have been cash raised from the issuance of equity securities. As of December 31, 2025, we had a total of US$1,165.6 million in cash and cash equivalents and short-term investments, of which 21.2% were denominated in Renminbi and held by our PRC subsidiaries. The remaining cash and cash equivalents and short-term investments were denominated in U.S. dollars and held by our company and our subsidiaries in Hong Kong or the United States. Our cash and cash equivalents and short-term investments consist primarily of cash on hand, bank time deposit and highly liquid investments placed with multiple banks or other financial institutions across geographic locations, which are unrestricted for withdrawal or use and have original maturities of 12 months or less. We manage these liquid assets in a prudent manner to mitigate cash management risks.

Based on our current operating plan, we believe that our existing cash and cash equivalents and short-term investments will be sufficient to meet our anticipated working capital requirements and capital expenditures for at least the next 12 months following the date of this annual report. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain credit facilities. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. Issuance of additional equity securities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer. See "Item 3. Key Information-3.D. Risk Factors-Risks Related to Our Business and Industry-We require a significant amount of capital to fund our operations and growth. If we cannot obtain sufficient capital on acceptable terms, our business, financial condition and prospects may be materially and adversely affected."

Cash Flows

The following table summarizes our cash flows for the periods indicated:

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Operating Activities

Net cash used in operating activities was US$115.4 million for the year ended December 31, 2023, attributable primarily to net loss of US$125.3 million, adjusted for (i) a net increase of non-cash items of US$29.6 million, which consisted primarily of depreciation and amortization, non-cash lease expense, changes in fair value of equity investment and share-based compensation, and (ii) a net decrease of US$19.7 million in changes in operating assets and liabilities. The net decrease in changes in operating assets and liabilities was attributable primarily to (a) the increase in accounts receivable of US$16.4 million as the commercialization of our technology continued to progress, and (b) the increase in prepaid expenses and other current assets of US$5.0 million, generally in line with our business expansion, partially offset by the decrease in amounts due from related parties of US$5.6 million.

Net cash used in operating activities was US$110.8 million for the year ended December 31, 2024, attributable primarily to net loss of US$275.0 million, adjusted for (i) a net increase of non-cash items of US$152.1 million, which consisted primarily of share-based compensation, changes in fair value of equity investment and realized losses from investments, depreciation and amortization and non-cash lease expense, and (ii) a net increase of US$12.2 million in changes in operating assets and liabilities. The net increase in changes in operating assets and liabilities was attributable primarily to the increases in (a) accounts payable and other current liabilities of US$23.2 million, generally in line with our business expansion, and (b) operating lease liabilities of US$7.2 million relating to the new office spaces in Beijing leased in 2024, partially offset by the increases in (a) right-of-assets of US$11.4 million from new leased properties and (b) prepaid expenses and other current assets of US$9.9 million, generally in line with our business expansion.

Net cash used in operating activities was US$165.0 million for the year ended December 31, 2025, attributable primarily to net loss of US$76.8 million, adjusted for (i) a net decrease of non-cash items of US$108.6 million, which consisted primarily of changes in fair value of equity investments, share-based compensation and realized losses from investments, and (ii) a net increase of US$20.4 million in changes in operating assets and liabilities. The net increase in changes in operating assets and liabilities was attributable primarily to (a) the increase in accounts payable and other current liabilities of US$14.2 million, generally in line with our business expansion, and (b) the decrease in prepapid expenses and other current assets of US$11.1 million, partially offset by the increase in right-of-assets of US$6.2 million from new leased properties.

Investing Activities

Net cash provided by investing activities was US$136.5 million for the year ended December 31, 2023. This was attributable primarily to proceeds from the sales and maturities of investments of US$221.8 million, partially offset by purchases of short-term investments of US$66.1 million and purchases of long-term investments of US$15.0 million.

Net cash used in investing activities was US$181.3 million for the year ended December 31, 2024. This was attributable primarily to purchases of short-term investments of US$513.6 million and purchases of long-term investments of US$113.8 million, partially offset by proceeds from the sales and maturities of investments of US$510.3 million.

Net cash used in investing activities was US$889.2 million for the year ended December 31, 2025. This was attributable primarily to purchases of short-term investments of US$816.7 million and purchases of long-term investments of US$414.3 million, partially offset by proceeds from the sales and maturities of investments of US$385.6 million.

Short-term investments represent primarily our investments in wealth management products. The underlying assets of these wealth management products include corporate bonds, asset-backed securities and commercial papers, all of which have low-risk profiles. Long-term investments consist primarily of our investments in marketable debt securities, term deposits and certificate of deposits, and equity investments in certain private companies and funds.

Financing Activities

Net cash provided by financing activities was US$89.8 million for the year ended December 31, 2023. This was attributable primarily to net proceeds from issuance of Series D convertible redeemable preferred shares of US$104.0 million.

Net cash provided by financing activities was US$407.4 million for the year ended December 31, 2024. This was attributable primarily to net proceeds from our initial public offering and the concurrent private placement of US$408.4 million.

Net cash provided by financing activities was US$814.8 million for the year ended December 31, 2025. This was attributable primarily to proceeds from issuance of Class A ordinary shares upon the completion of our Listing of US$829.4 million, partially offset by payments made in relation to settlement of RSUs of US$12.6 million.

Capital Expenditures

We made capital expenditures of US$5.1 million, US$11.4 million and US$43.9 million in 2023, 2024 and 2025, respectively. Historically, our capital expenditures were primarily made in connection with the purchases of (i) vehicle and equipment for technology development, production and commercial operations, (ii) computer and equipment, including servers, computers and other network equipment, (iii) leasehold improvement, (iv) software necessary for our technology development and (v) furniture and fixtures. Historically, as our business continued to grow rapidly, our capital expenditures increased over time. We intend to continue to invest in capital expenditures to bolster business expansion, especially with the acceleration of large-scale commercialization.

Holding Company Structure

Pony AI Inc. is a holding company with no material operations of its own. We conduct our operations mainly through our subsidiaries. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with the PRC accounting standards and regulations. Under the PRC law, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, each of our PRC subsidiaries may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.

We are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries in China through capital contributions or loans, subject to the approval of regulatory authorities and limits on the amount of capital contributions and loans. See "Item 3. Key Information-3.D. Risk Factors-Risks Related to Doing Business in China-PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may restrict or delay us from using the proceeds of our initial public offering and the concurrent private placements as well as the proceeds from issuance of Class A ordinary shares upon the completion of our Listing to make loans or additional capital contributions to our PRC subsidiaries, which could adversely affect our liquidity and our ability to fund and expand our business" and "Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds-14.E. Use of Proceeds." The ability of our subsidiaries in China to make dividends or other cash payments to us is subject to various restrictions under PRC laws and regulations. See "Item 3. Key Information-3.D. Risk Factors-Risks Related to Doing Business in China-We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business" and "Item 3. Key Information-3.D. Risk Factors-Risks Related to Doing Business in China-We may be classified as a "PRC resident enterprise" for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and non-PRC holders of the ADSs or ordinary shares and have a material adverse effect on our results of operations and the value of your investment."

5.C. Research and Development

We have invested a significant amount of time and effort into research and development of proprietary artificial intelligence, algorithms and software and hardware components to constantly enhance the capability of our Virtual Driver and solidify our technology leadership in the market. As the commercial deployment of our autonomous driving technology progresses, we are also devoted to adapting and optimizing our technology to different commercial use cases. As of December 31, 2025, we had 811 engineers, researchers and scientists whose expertise spans a broad range of disciplines such as vehicle engineering, industry design, AI and machine learning and data analytics. Our research and development teams are responsible for the design, development and testing of our autonomous driving technology.

Our research and development presence across multiple locations has enabled us to develop, test and refine our autonomous driving technology based on diverse road, and weather, resulting in more reliable, resilient and scalable autonomous driving solutions. Our multi-center approach, combined with our leadership in the industry, also allows us to attract and retain top talents across the world, which contributes to our long-term business growth.

5.D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition.

5.E. Off-Balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

5.F. Tabular Disclosure of Contractual Obligations

Our contractual obligations as of December 31, 2025 included lease commitments.

The following table sets out our lease commitments as of December 31, 2025.

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5.G. Safe Harbor

See "Forward-Looking Information."