NIO's 1Q26 results beat expectations, and J.P. Morgan maintains an Overweight rating

Overview

This is a J.P. Morgan earnings review report on NIO Inc. The core conclusion is that NIO's 1Q26 results were significantly better than expected, and non-GAAP profitability turned positive for the second consecutive quarter. The improved product mix from the premium ES8 model was the main driver. The analyst maintains an Overweight rating and sets a Dec-26 target price of US$7.00.

Core views

J.P. Morgan is positive on NIO's earnings improvement in 2026 and beyond. The main logic includes: ES8, ES9, and ONVO L80 will be key models for sales and profitability; a higher share of premium models should help offset rising raw material costs; supply-chain management is expected to deliver 5-10% savings; the self-developed 5nm NX9031 chip and the ADAS subscription model could become long-term revenue drivers. The report expects FY26 sales of about 451,000 units, up 38% year over year.

Analysis framework

The report evaluates NIO from the perspectives of 1Q26 results, the new model cycle, product mix, gross margin, expense ratio, ADAS technology progress, sales guidance, and relative valuation. Valuation uses a blended average of FY26E P/S and FY26E EV/sales, and compares NIO with peers such as XPeng and Li Auto.

Methodology notes

• Valuation methodsblended relative valuation

  Blended P/S and EV/sales valuation

  The Dec-26 target price of US$7 is based on a blended average of 0.9x FY26E P/S and 0.6x FY26E EV/sales, and also reflects NIO's similarities and differences versus XPeng and Li Auto in business characteristics, operating opportunities, and new product pipelines.

• earnings_reviewproduct mix and operating leverage analysis

  Product mix and operating leverage analysis

  The report attributes gross margin improvement, lower expense ratios, and the return to non-GAAP profitability to a higher share of premium models, sales growth, organizational optimization, and cost discipline.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NIO.US

  Core coverage name

  Strengths

  1Q26 results beat expectations, gross margin improved, non-GAAP profitability was positive for two consecutive quarters, and the new model cycle and ADAS roadmap provide growth support.

  Weaknesses

  Still faces rising raw material costs, intensifying competition, and delivery execution pressure.

  Comparison

  Valuation references XPeng and Li Auto; the report believes the multiples used for NIO are still below the average for EV newcomers and are not aggressive.

  Risks

  Delivery execution falls short of expectations, the overall auto market or EV demand weakens, and competition intensifies among similarly priced rivals.

• XPeng / Li Auto

  Valuation peers

  Strengths

  Used to compare business similarity, operating opportunities, and new product pipelines.

  Weaknesses

  The report does not provide a line-by-line financial comparison.

  Comparison

  The 0.9x FY26E P/S and 0.6x FY26E EV/sales used in the target price reference peer valuations.

  Risks

  Peer competition may compress NIO's pricing, sales, and profit margins.

Key data

• Current share priceUS$5.59Price as of 2026-05-20.
• Target priceUS$7.00Dec-26 target price, rating maintained at Overweight.
• 1Q26 revenueRMB 25.5 billionUp 112% year over year and down 26% quarter over quarter.
• 1Q26 deliveries83,000 unitsUp 98% year over year.
• 2Q26 delivery guidance110,000-115,000 unitsUp 32-37% quarter over quarter, above J.P. Morgan's expectations.
• 1Q26 gross margin19.0%Up 11.4 percentage points year over year and 1.5 percentage points quarter over quarter.
• 1Q26 non-GAAP net profitRMB 43 millionSecond consecutive quarter of adjusted profitability.
• FY26 sales forecastAbout 451,000 unitsUp 38% year over year; J.P. Morgan raised its FY26 sales forecast by 4%.
• Performance driverIdiosyncratic factors 75%The chart shows that among the drivers of stock performance, idiosyncratic factors account for 75%, style 10%, region 7%, macro 7%, and market 1%.

Impact & implications

The report sends a moderately positive signal: if NIO can deliver on ES9, ES8, and ONVO L80 orders and deliveries while maintaining a high-end model mix and cost discipline, profitability could continue to improve in the remaining quarters of 2026. For investors, the key is not just a single quarter of profit, but whether the product-mix improvement and scale growth are sustainable.

Risks

• Vehicle execution and deliveries may be better or worse than expected.
• Overall auto market sales or EV demand may fluctuate.
• Competition among similarly priced rivals intensifies.
• From 2Q onward, rising industry raw material costs are expected to add about RMB 10,000 of cost pressure per vehicle.
• J.P. Morgan and NIO or related entities have disclosed conflicts of interest such as market making, client relationships, and potential investment banking compensation.

What to watch

• Order performance after the ES9 launch on May 27.
• ES8 orders, the launch of the five-seat ES8 in the second half, and changes in the premium model mix.
• Sales ramp after the ONVO L80 five-seat SUV launch.
• Whether 2Q26 deliveries can reach the 110,000-115,000 unit guidance.
• Whether gross margin can remain stable despite rising raw material costs.
• The in-vehicle installation rate of the self-developed NX9031 chip and progress in monetizing ADAS subscriptions.
• Whether expense ratios and non-GAAP profitability can continue to improve.