Rivian Stock Soared After Earnings. Is It a Buy Now?

Shares of Rivian Automotive (NASDAQ: RIVN) ripped higher after the company posted better-than-expected quarterly results this week. The stock rose more than 23% on Wednesday. With shares still down massively from levels five years ago (even after Wednesday's rise), it is fair to ask whether the move signals something more durable -- or if it's just noise.

Sure, the electric vehicle company did give investors some things to be excited about. For instance, revenue growth accelerated sharply, and gross profit turned positive for the quarter. In addition, it was good to hear that the company's upcoming lower-priced model, the R2, is slated to hit the market in the first half of 2026. Overall, however, significant concerns remain.

Here are three reasons I'd stay on the sidelines for now -- despite the strong results.

Image source: Rivian.

Profit is still a long way off

Rivian reported third-quarter revenue of about $1.56 billion, up 78% year over year, and generated $24 million of gross profit -- a welcome milestone after a long stretch of losses.

While the improvement is notable, gross profit isn't a bottom-line figure. Move down to the lowest line on the income statement, after all the expenses are accounted for, and you'll see a staggering loss of $1.17 billion -- worse than the $1.1 billion loss in the year-ago quarter.

Additionally, management still expects a full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of roughly $2.0 billion to $2.25 billion.

Negative cash flow

The company's cash flow statement isn't pretty either. While Rivian generated $26 million in cash from operations in the quarter, capital expenditures were $447 million, up from $227 million in the year-ago period -- an increase management attributed to investments in expanding production capacity. This means free cash flow for the quarter was negative $421 million.

While the company does boast more than $7 billion of cash, cash equivalents, and short-term investments, Rivian is clearly far from being cash generative -- so it's either going to need to burn through this cash in the coming years or raise more cash by taking on debt or diluting shareholders by selling equity.

In 2025 alone, Rivian expects capital expenditures to total between $1.8 billion and $1.9 billion.

A demand air pocket

Rivian's quarterly strength was helped by U.S. buyers rushing to capture federal EV tax credits before they expired on Sept. 30. In other words, there was a significant pull-forward in demand. To this end, management expects a huge step down in deliveries for the final quarter of the year; the mid-point of the company's full-year vehicle delivery guidance range implies about 10,000 deliveries in Q4, down from just over 13,200 in Q3 and about even with the year-ago period -- not the sort of growth profile you want from a company operating with massive losses.

So, is the stock's big gain the beginning of a longer-term upward move? While there's no way to know what a stock will do in the future, I personally wouldn't bet on good returns from here. The stock's nearly $19 billion market cap, even as Rivian burns through cash, just isn't a compelling investment thesis. Indeed, given the capital intensity of its business, it wouldn't be surprising to see losses accelerate as production of a lower-priced model ramps up next year.

With all of this said, I would consider changing my mind if sales growth begins accelerating on a more consistent basis next year. But I'd need to see signs of significant improvement in profitability, too. Additionally, I might consider the stock if it were cheaper; to convince me to invest in a risky, capital-intensive operation, I'm going to need a really good deal.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.