Ouster's Margin Continues to Improve: Can It Retain the Momentum?

Ouster Inc. OUST, a physical AI company, offers solutions powered by digital LiDAR combined with AI software that have contributed to significant improvements in its net margin. Net margin showed an improvement over the last two years, which continued into the first half of 2025. Net margin improved 2716 basis points in the first half of 2025. 

The company is still operating at a loss and expects to continue burning cash through at least 2026. Nonetheless, it is focused on improving its net margin and moving toward sustainable profitability. The company is focusing on a combination of revenue growth, cost optimization, and operational efficiency to enhance both gross and net margins.

For 2025, the company is prioritizing scaling up its software-attached offerings, revamping its product lineup and driving toward profitability, with management projecting third-quarter revenues between $35 million and $38 million. Ouster is transitioning from a primarily hardware-driven business model to one centered on software-enabled solutions that generate recurring revenue streams. Ouster remains focused on achieving 30-50% annual revenue growth and maintaining gross margin in the range of 35-40% while aiming for profitability in the next couple of years.  The company expects to do this by expanding volumes and lowering costs over time.

The company believes its digital lidar sensors are one of the highest-performing, lowest-cost solutions available today that position it at the center of a global revolution in autonomy. OUST targets a total addressable market that is projected to reach $19 billion by 2030.

What About OUST’s Competitors?

OUST competes with Aeva Technologies AEVA, and Luminar Technologies LAZR, both of which have been showing margin improvement over the years. Both Aeva and Luminar are improving their net margin through cost control and automotive as well as industrial partnerships. 

Aeva is advancing its 4D LiDAR technology to lower production costs and enhance scalability, while Luminar is focused on innovation in its advanced LiDAR sensors and software. Through consistent R&D investment, Luminar and Aeva continue to improve their product range.

OUST’s Price Performance

Shares of OUST have gained 201.4% year to date, underperforming the industry.

OUST’s Expensive Valuation

OUST trades at a price-to-sales multiple of 10.94, higher than the industry average of 2.07.

Estimates for OUST Witness Northward Movement

The Zacks Consensus Estimate for OUST’s third-quarter and fourth-quarter 2025 EPS has witnessed no movement over the past 30 days. The same holds true for 2025 and 2026 estimates.

The consensus estimates for OUST’s 2025 and 2026 revenues and EPS indicate year-over-year increases. 

OUST currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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