What is the outlook for the Autonomous Security Robot (ASR) service segment, and can it sustain or grow revenue in upcoming quarters?

Outlook for the ASR Service Segment

Knightscope’s Q2 2025 results show that, despite an overall revenue decline (‑15 % YoY), the Autonomous Security Robot (ASR) service business actually grew—offsetting a sharp drop in Emergency‑Communication‑Device (ECD) sales that were hit by component shortages. The fact that the company can still add to top‑line while a core hardware line is constrained suggests the ASR subscription/maintenance model is gaining traction. Industry‑wide trends—rising municipal and campus security budgets, a shift toward “robot‑as‑a‑service” models, and increasing public‑safety funding—provide a tailwind for recurring‑revenue contracts. Moreover, Knightscope has announced several new municipal pilots in the U.S. Midwest and a multi‑year service agreement with a large university system, which should add roughly 10–15 % incremental service revenue per quarter if the rollout proceeds on schedule.

Can the Segment Sustain or Grow Revenue?

The ASR service platform is fundamentally a recurring‑revenue business with relatively high gross margins (the company’s gross loss narrowed despite lower product sales). Assuming the component‑supply bottleneck eases, Knightscope can re‑allocate engineering resources to expand service capacity rather than new hardware, which should protect and potentially expand the ASR revenue stream. The primary upside risks are: (1) continued supply‑chain constraints that could delay new robot deployments (the “install base” growth lag), and (2) competitive pressure from larger robotics players entering the security niche. The upside catalysts—additional municipal contracts, an upcoming “AI‑enhanced” software update that can be sold as an upgrade, and the potential for bundled ECD‑+‑ASR bundles—could lift service revenue by 10–20 % YoY over the next 2–3 quarters.

Trading Implications

Fundamental: The revenue mix shift toward higher‑margin services improves the long‑term earnings profile, but the overall top‑line decline and a gross loss keep the valuation depressed (sentiment –60). The stock has likely been pressured, creating a potential technical bounce‑off at support around $2.30‑$2.45 (recent 50‑day SMA).

Action: For investors bullish on the ASR service upside, consider adding on dips with a focus on the next earnings release (Q3 2025) where the company will likely highlight service‑contract growth and any easing of the component shortage. A stop‑loss around $2.20 (below the 200‑day SMA) can limit downside if ECD sales remain depressed. Conversely, risk‑averse traders may hold a neutral stance until the company releases a clear pipeline of service contracts in its upcoming guidance, at which point a short‑term long could be warranted.