Factorial Energy (NASDAQ:FAC) reported its first commercial revenue in the third quarter of 2026, as the battery developer began shipping cells to a U.S. drone maker ahead of its prior 2027 revenue timeline.
The company recorded approximately $26,000 in revenue from the aerospace order announced in July, Chief Financial Officer Richard Wei said on the earnings call. Factorial expects more meaningful commercial revenue in 2027 as production programs begin, although Wei said revenue will remain modest and vary from quarter to quarter until those programs ramp.
Inventory write-down weighs on results
Factorial reported a $1.8 million gross loss, nearly all of which Wei attributed to an inventory write-down. The company built inventory ahead of orders, but early production volumes and higher material prices mean the cells cost more to produce than Factorial expects to receive when selling them, he said.
Non-GAAP operating expenses were $9 million for the quarter and $24 million for the first nine months of 2026. The quarterly measure excluded $4.1 million related to previously disclosed legal judgments, among other items. Beginning in the third quarter, Factorial no longer excludes non-cash lease expense from its non-GAAP operating expense calculation.
The company reported GAAP income of $8.8 million for the quarter, primarily due to a $24 million non-cash gain from a change in the fair value of its warrant liability. Its nine-month GAAP net loss was $11.1 million. Wei said the legal judgment was paid in the fourth quarter.
Factorial lowered its full-year non-GAAP operating expense outlook to $36 million to $38 million from approximately $40 million. Wei attributed the reduction to spending discipline and, in part, production costs now recorded in inventory and cost of revenue rather than operating expenses. The range implies higher fourth-quarter spending as some costs shifted into the period.
The company also lowered its 2026 capital expenditure outlook to $10 million to $12 million from approximately $13 million, mainly because some milestone-based equipment payments may move into early 2027.
Aerospace and automotive plans
Huang said Factorial has reached an energy density of approximately 450 watt-hours per kilogram in its aerospace program cells, a target the company had previously expected to achieve by year-end. She said the next task is to carry those gains from development cells into production while maintaining consistent quality.
Factorial is prioritizing drones and other high-specification applications before pursuing broader automotive adoption. Huang said the higher-energy drone cell places less emphasis on cycle life than an automotive battery, while targeting the range and power requirements of aerospace customers.
The CEO cited a July flight in which a Titan Dynamics drone powered by Factorial’s lithium-metal FEST cells stayed airborne for 521 minutes, setting a flight-duration world record for Group 1 drones. She also pointed to a strategic partnership with Tulip Tech, following customer tests that showed more than 30% longer range with Factorial batteries.
In automotive, Huang identified a production offtake agreement with a mainstream automaker as the next major milestone, following a supercar order received in January. She said such an agreement would position Factorial to ramp toward volume production by the end of the decade, though the company has not announced one.
Manufacturing expansion
Factorial plans to expand its own FEST production lines by the end of 2027 and Solstice lines by the end of 2028. For larger-scale production, it intends to work with manufacturing partners through contract manufacturing or licensing arrangements.
In July, Factorial and SK On signed a memorandum of understanding to evaluate production of Factorial’s technologies across SK On’s manufacturing network. Huang said the agreement contains milestones but did not disclose them or specify the eventual commercial arrangement.
Huang said Factorial’s Korean pilot line has reached roughly 85% yield for assembly and formation, excluding the coating process. She noted that gigafactories typically target yields of at least 95%, and said maintaining yield as volumes rise is a near-term priority.
About Factorial Energy (NASDAQ:FAC)
Factorial Energy is a U.S.-based battery technology company developing solid-state batteries for electric vehicles and other energy-storage applications. Its technology is designed to improve energy density, safety and charging performance compared with conventional lithium-ion batteries. The company’s core platform, known as FEST (Factorial Electrolyte System Technology), uses a proprietary solid electrolyte and is intended to be compatible with existing lithium-ion battery manufacturing infrastructure.
