Horizon Robotics: In Autonomous Driving, Selling Software Is Starting to Earn More Than Selling Chips

Horizon Robotics: In Autonomous Driving, Selling Software Is Starting to Earn More Than Selling Chips

Volkswagen partnered with Horizon Robotics not to buy a chip, but to buy an entire underlying autonomous driving technology stack. The two even set up a joint venture, CARIZON, to jointly develop intelligent driving solutions for the Chinese market. The significance of this got a numerical footnote in Horizon Robotics' 2026 interim report disclosed on August 31: licensing and service revenue reached 1.129 billion yuan, surpassing the chip hardware business's 926 million yuan for the first time.

Horizon Robotics HSD intelligent driving test vehicle during road testing (Image source: Horizon Robotics HSD public road test footage)

The "licensing and service revenue" mentioned here is a different business from selling chips. Chip hardware is a sell-one-earn-one business; licensing revenue is the technology licensing fee automakers pay when using Horizon Robotics' BPU architecture, AI models, and toolchain. BPU is Horizon Robotics' self-developed computing architecture, essentially the chip's "brain design blueprint" — automakers take this blueprint and develop their own intelligent driving features on top of it. Horizon Robotics calls this model "ARM+Android," meaning it opens up the underlying technology just as ARM licenses chip designs and Google licenses the Android system.

Comparison of Horizon Robotics' revenue structure in H1 2025 and H1 2026 (Data source: Company's 2026 interim results announcement)

On the chip-selling side, the Journey series shipped 2.218 million units in the first half of the year, with nearly 500 vehicle models designated cumulatively, and Journey chips surpassing 15 million units in mass production. But hardware gross margin fell from 44.2% last year to 36.2% — every chip requires wafer fabrication and packaging/testing, and automakers keep pressing prices down. The licensing business, by contrast, has a gross margin of 90.4%, because once the software and toolchain are written, the cost of licensing them to different automakers is almost zero. The company's overall gross margin is 66%.

Horizon Robotics Journey series intelligent driving chips (Image source: Horizon Robotics official product images)

Comparison of gross margins across Horizon Robotics' three business segments (Data source: Company's 2026 interim results announcement)

But note that the largest customer in the financial report contributed 23.6% of total revenue, about 485 million yuan — this mainly comes from the joint venture CARIZON, the joint venture between Horizon Robotics and Volkswagen. In other words, the high growth in licensing revenue is largely driven by this one major customer, Volkswagen. Apart from Volkswagen, it's still unclear how many other automakers are actually using this licensing model. This is the biggest question mark in the report.

Why did Volkswagen choose Horizon Robotics instead of directly buying a ready-made intelligent driving solution? Because Volkswagen wants to master intelligent driving capabilities itself and doesn't want to hand technology entirely to a supplier. Huawei's Qiankun takes a full-stack approach, directly providing automakers with a complete solution, but many automakers worry about being deeply locked in. Horizon Robotics' position sits right in the middle: automakers with in-house capabilities can use its underlying technology to develop their own; those needing a complete solution can also purchase its HSD urban intelligent driving solution.

There's another data point that can't be ignored: R&D investment in the first half of the year was 2.755 billion yuan, higher than operating revenue of 2.055 billion yuan over the same period; adjusted operating loss was 1.276 billion yuan. This high-investment phase is something Nvidia also went through when building the CUDA ecosystem — before the developer tool platform is built, the money has to be spent first.

So it's still too early to say Horizon Robotics has become the "Chinese Nvidia." It has only just reached this crossroads. Next, watch two things: whether major customers other than Volkswagen come in with real money, and when the cash burn stops.