Serve Robotics Inc. /DE/ (SERV)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included in Part I, Item 1. “Financial Statements,” of this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the sections titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and Part II, Item 1A. “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are engaged in developing and operating autonomous robotic systems designed to navigate and perform work in complex, human-centered environments. Serve has developed an advanced platform that combines proprietary hardware, artificial intelligence, computer vision, and cloud-based fleet management software to enable safe, reliable, and scalable autonomous operations across multiple physical domains. We design, engineer, deploy, and operate low-emission robotic systems built on this platform.

Serve operates autonomy systems across multiple domains spanning both outdoor and indoor environments. Our sidewalk delivery operations provide autonomous last-mile delivery services for restaurant and retail partners, while our healthcare operations, enabled through the acquisition of Diligent Robotics in 2026, deploy robots in hospital settings to support clinical staff through logistics and workflow automation.

Serve is shaping the future of physical AI in real world environments. We are expanding our platform into adjacent markets, customer segments, and operating environments where autonomous mobility can address labor constraints, improve service levels, and reduce emissions. We intend to leverage our core autonomy stack, fleet management infrastructure, and operational expertise to support additional use cases across both outdoor and indoor settings.

Financial Highlights

For the three months ended June 30, 2026 and 2025, we generated revenues of $3.2 million and $0.6 million, respectively, and reported net losses of $64.1 million and $20.9 million, respectively. For the six months ended June 30, 2026 and 2025, we generated revenues of $6.2 million and $1.1 million, respectively, and reported net losses of $113.1 million and $34.1 million, respectively.

As noted in our unaudited condensed consolidated financial statements, as of June 30, 2026, we had an accumulated deficit of $322.0 million.

Recent Developments

Acquisition of Vebu, Inc.

On February 17, 2026, the Company acquired all of the issued and outstanding equity of Vebu, which was accounted for under the acquisition method of accounting. Refer to the “Liquidity and Capital Resources” section for discussion of the purchase price and the acquisition’s impact on the Company’s liquidity.

Acquisition of Diligent Robotics, Inc.

On January 27, 2026, the Company acquired all of the issued and outstanding equity of Diligent, which was accounted for under the acquisition method of accounting. Refer to the “Liquidity and Capital Resources” section for discussion of the purchase price and the acquisition’s impact on the Company’s liquidity.

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Outlook and Challenges Facing Our Business

There are a number of factors that affect our business which include, among others:

Overall Demand for Last-Mile Delivery and Hospital-Based Automation

Our potential for growth depends significantly on continued demand for last-mile delivery of food and other items on our partner platforms and for automation solutions from our hospital customers. The demand for last-mile delivery can fluctuate based on various market cycles, weather and local community health conditions, as well as evolving competitive dynamics. The demand for hospital-based automation solutions can fluctuate based on budget cycles, staffing levels, operational priorities, and broader healthcare industry conditions.

Our largest stream of projected revenue comes from maximizing utilization of our outdoor delivery robot fleet to perform deliveries on our partner platforms. Matching algorithms on these platforms as well as the extent of their merchant and end-customer participation in robotic delivery directly impacts the utilization rate of our robots, both of which can be challenging to predict. Our ability to gain additional partners and to generate revenue with such additional partners is dependent on numerous factors, including, among others, the partner’s consumer base and desire to use robotic delivery, along with normal-course onboarding for new partners. These uncertainties make demand difficult to forecast for us and our partners.

Our healthcare-related revenue depends on the continued utilization of robots within hospital workflows. The extent to which hospitals are able to support, operate, and scale robotic deployments directly impacts utilization rates, all of which can be challenging to predict. In addition, hospitals may face limitations in infrastructure, staffing, or internal support required to sustain robotic fleets. These uncertainties make demand difficult to forecast for us and our customers.

Customer Concentration

A significant portion of our revenue is concentrated with a limited number of customers. The following table represents the concentration of revenue for all customers that accounted for more than 10% of our revenues:

A significant portion of our accounts receivable is concentrated with a limited number of customers. The following table represents the concentration of accounts receivable for all customers that account for more than 10% of our total accounts receivable as of June 30, 2026 and December 31, 2025:

There are inherent risks whenever a large percentage of total revenues and accounts receivable are concentrated with a limited number of customers. The loss of any or all of these customers could have a negative impact on our planned operations.

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Inflation and Market Considerations; Availability of Materials, Labor & Services

We consider most on-demand purchases as discretionary spending for consumers, and we are therefore susceptible to changes in discretionary spending patterns and economic slowdowns in the geographic areas in which merchants on our partners’ platforms operate and in the economy at large. Discretionary consumer spending can be impacted by general economic conditions, unemployment, consumer debt, inflation, gasoline prices, interest rates, consumer confidence and other macroeconomic factors. Inflation can lead to increased cost of material and labor for restaurants and merchants who may in turn raise prices on the items they sell and result in a reduction in demand for those items. To the extent inflation reduces economic activity and consumer demand for items we deliver, it could negatively impact our financial results. Continued uncertainty in or a worsening of the economy, generally or in a number of our markets, and consumers’ reactions to these trends could adversely affect our business and cause us to, among other things, reduce the number and frequency of new market openings or cease operations in existing markets. However, inflation can also serve as a tailwind that may accelerate the adoption of automated robotic last-mile delivery, as labor becomes more expensive and drives up the cost of delivery by humans.

Intellectual Property

We rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities, and other core competencies of our business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality, and non-disclosure agreements, as well as other security measures are important. While we believe we have a strong patent portfolio and there is, to our knowledge, no actual or threatened litigation against us for patent-related matters, litigation or threatened litigation is a common method to enforce or protect intellectual property rights. Such action may be initiated by or against us and would require significant management time and expense.

Supply Chain Constraints

We cannot be sure whether global supply chain shortages will affect our future robot build plans. In order to mitigate supply chain risks, we may need to incur higher costs to secure available inventory and place non-cancelable purchase commitments with our suppliers, which could introduce inventory risk if our forecasts and assumptions prove inaccurate. Higher costs of components would affect our cash runway and delays in the manufacturing of our robots would push out our revenue forecasts.

Governmental and Regulatory Conditions

Our potential for growth depends on continued permission and acceptance by local governments and municipalities where our robots perform deliveries. Changes in regulations such as the imposition of a cap on the number of robots or technical requirements such as robot size and weight restrictions or limitations on autonomy within a certain geographic area could reduce or limit our ability to generate revenues or impact our unit economics in those markets.

Components of Results of Operations

Revenue

Our revenue consists of fleet services, which includes revenue generated from delivery services, branding services, and data monetization; and software services, which includes revenue generated from licensing software to customers, and engineering and development projects.

Cost of Revenue

Cost of revenue consists primarily of allocation of personnel time related to revenue activities, allocations of depreciation on robot assets used for revenue producing activities, allocation of amortization expense of developed technology, allocations of network costs, and costs related to data, software and similar costs that allow the robots to function as intended and for the Company to communicate with its robots while in service.

Research and Development Expenses

Research and development expenses primarily consist of costs incurred by research and development functions. These costs are expensed as incurred.

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General and Administrative Expenses

General and administrative expenses p

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included in Part II, Item 8. “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.

In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled “Cautionary Statement Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors,” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this Annual Report on Form 10-K.

Overview

We are engaged in developing technologies intended to enable sustainable, autonomous robotic solutions for public spaces. Serve has developed an advanced, AI-powered robotics mobility platform that integrates proprietary hardware, AI, computer vision, and cloud-based fleet management software to enable autonomous operation in complex, real-world environments. We design, engineer, deploy, and operate low-emission robotic systems built on this platform.

Serve is shaping the future of sustainable, self-driving delivery. While food delivery remains our primary commercial application, we are expanding our platform into adjacent markets, customer segments, and operating environments where autonomous mobility can address labor constraints, improve service levels, and reduce emissions. We intend to leverage our core autonomy stack, fleet management infrastructure, and operational expertise to support additional use cases across both outdoor and indoor settings.

Our core technology originated in 2017 as a specialized project within Postmates, one of the pioneering food delivery startups in the United States. As of December 31, 2025, our fleet consisted of over 2,000 sidewalk delivery robots. We maintain platform-level integrations with major food delivery platforms, including Uber Eats and DoorDash, enabling real-time order dispatch, robot status updates, and operational coordination.

In addition to delivery revenue, we are developing supplementary revenue streams, including on-robot advertising and branding, fleet data monetization, and software licensing opportunities.

We plan to extend our autonomous mobility platform into indoor environments, including healthcare and other commercial settings. These initiatives are intended to broaden our addressable market beyond outdoor food delivery and reflect our strategy to deploy our AI-enabled robotics platform across multiple verticals. We expect to leverage complementary

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technologies, domain expertise, and commercial relationships to enhance product capabilities, accelerate deployment opportunities, and support scalable, recurring revenue growth over time.

Financial Overview

For the year ended December 31, 2025 and 2024, we generated revenues of $2.7 million and $1.8 million, respectively, and reported net loss of $101.4 million and $39.2 million, respectively.

As noted in our consolidated financial statements, as of December 31, 2025, we had an accumulated deficit of $208.9 million.

Recent Developments

Securities Purchase Agreement (October 2025)

On October 10, 2025, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of 6,250,000 shares of the Company’s common stock, $0.0001 par value per share at a price of $16.00 per share. The gross proceeds to the Company from the registered direct offering were approximately $100.0 million, before deducting the placement agents’ fees and other offering expenses payable by the Company.

Acquisition of Vayu Robotics, Inc.

On August 15, 2025, the Company acquired all of the issued and outstanding equity of Vayu, which was accounted for under the acquisition method of accounting. Refer to the “Liquidity and Capital Resources” section for discussion of the purchase price and the acquisition’s impact on the Company’s liquidity.

Acquisition of Voysys AB

On April 1, 2025, the Company acquired from Phantom Auto Inc. all of the issued and outstanding equity of Voysys AB (“Voysys”), which was accounted for under the acquisition method of accounting. Refer to the “Liquidity and Capital Resources” section for discussion of the purchase price and the acquisition’s impact on the Company’s liquidity.

Securities Purchase Agreement (January 2025)

On January 7, 2025, the Company entered into a securities purchase agreement with a certain institutional investor pursuant to which the Company agreed to issue and sell, in a registered direct offering an aggregate of 4,210,525 shares of the Company’s common stock, $0.0001 par value per share at a price of $19.00 per share. The gross proceeds to the Company from the Registered Direct Offering were approximately $80.0 million, before deducting the placement agents’ fees and other offering expenses payable by the Company.

Outlook And Challenges Facing Our Business

There are a number of industry factors that affect our business which include, among others:

Overall Demand for Last-mile Delivery on Partner Platforms

Our potential for growth depends significantly on continued demand for last-mile delivery of food and other items on our partner platforms. This demand can fluctuate based on various market cycles and weather and local community health conditions, as well as evolving competitive dynamics. Our largest stream of projected revenue comes from maximizing utilization of our robots to perform deliveries on our partner platforms. Matching algorithms on these platforms as well as the extent of their merchant and end-customer participation in robotic delivery directly impacts the utilization rate of our robots, both of which can be challenging to predict. These uncertainties make demand difficult to forecast for us and our partners.

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Customer Concentration

A significant portion of our revenue is concentrated with a limited number of customers. The following table represents the concentration of revenue for all customers that accounted for more than 10% of our revenues for the years ended December 31, 2025 and 2024:

A significant portion of our accounts receivable is concentrated with a limited number of customers. The following table represents the concentration of accounts receivable for all customers that account for more than 10% of our total accounts receivable as of December 31, 2025 and 2024:

There are inherent risks whenever a large percentage of total revenues and accounts receivable are concentrated with a limited number of customers. The loss of any or all of these customers could have a negative impact on our planned operations.

Inflation and Market Considerations; Availability of Materials, Labor & Services

We consider most on-demand purchases as discretionary spending for consumers, and we are therefore susceptible to changes in discretionary spending patterns and economic slowdowns in the geographic areas in which merchants on our partners’ platforms operate and in the economy at large. Discretionary consumer spending can be impacted by general economic conditions, unemployment, consumer debt, inflation, gasoline prices, interest rates, consumer confidence and other macroeconomic factors. Inflation can lead to increased cost of material and labor for restaurants and merchants who may in turn raise prices on the items they sell and result in a reduction in demand for those items. To the extent inflation reduces economic activity and consumer demand for items we deliver, it could negatively impact our financial results. Continued uncertainty in or a worsening of the economy, generally or in a number of our markets, and consumers’ reactions to these trends could adversely affect our business and cause us to, among other things, reduce the number and frequency of new market openings or cease operations in existing markets. However, inflation can also serve as a tailwind that may accelerate the adoption of automated robotic last-mile delivery, as labor becomes more expensive and drives up the cost of delivery by humans.

Intellectual Property

We rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities, and other core competencies of our business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality, and non-disclosure agreements, as well as other security measures are important. While we believe we have a strong patent portfolio and there is, to our knowledge, no actual or threatened litigation against us for patent-related matters, litigation or threatened litigation is a common method to enforce or protect intellectual property rights. Such action may be initiated by or against us and would require significant management time and expense.

Supply Chain Constraints

We cannot be sure whether global supply chain shortages will affect our future robot build plans. In order to mitigate supply chain risks, we may need to incur higher costs to secure available inventory and place non-cancelable purchase

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commitments with our suppliers, which could introduce inventory risk if our forecasts and assumptions prove inaccurate. Higher costs of components would affect our cash runway and delays in the manufacturing of our robots would push out our revenue forecasts.

Governmental and Regulatory Conditions

Our potential for growth depends on continued permission and acceptance by local governments and municipalities where our robots perform deliveries. Changes in regulations such as the imposition of a cap on the number of robots or technical requirements such as robot size and weight restrictions or limitations on autonomy within a certain geographic area could reduce or limit our ability to generate revenues or impact our unit economics in those markets.

Components of Results of Operations

Revenue

Our revenue consists of fleet services, which includes revenue generated from delivery services, branding services, and data monetization; and software services, which includes revenue generated from licensing software to customers, and engineering and development projects.

Cost of Revenue

Cost of revenue consists primarily of allocations of depreciation on robot assets used for revenue producing activities, allocations of network costs, allocation of personnel time related to revenue activities, and costs related to data, software and similar costs that allow the robots to function as intended and for the Company to communicate with its robots while in service.

Research and Development Expenses

Research and development expenses primarily consis

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