Serve Robotics Grew Its Second-Quarter Revenue by 400%, but This Shocking News Sent Its Stock Plunging

Serve Robotics (NASDAQ: SERV) believes robots and drones are ideal for delivering food, retail products, and other small commercial loads because they are more efficient and far less expensive than existing human-driven solutions.

Serve has already deployed over 2,000 of its latest Gen 3 robots across America, where they are making deliveries through platforms like DoorDash and Uber Eats. The company's revenue soared by 400% year over year in the second quarter of 2026 (ended June 30), suggesting business is booming.

However, management just significantly lowered its 2026 revenue forecast, sending Serve stock tumbling by around 15%. The stock is now down almost 80% from its 2024 peak. Here's why more downside might be ahead for shareholders.

Image source: Getty Images.

A potential $450 billion opportunity

Serve says the median distance traveled for a food delivery order in the U.S. is about 2.5 miles, and it currently costs between $8 and $10 to deliver by car with a human driver. The company believes it can reduce that cost to just $1 per order by using its Gen 3 robots, because they can eliminate driver wages and operate for 14 hours straight on a single charge.

The Gen 3 robots are powered by Nvidia's Jeston Orin platform, which provides all of the hardware and software necessary to achieve Level 4 autonomy. That means Serve's robots can safely drive on sidewalks within designated areas without any human assistance, and they are now successfully doing so in at least eight major U.S. cities, including Los Angeles, Miami, and Chicago, where they boast an impressive 99.8% order completion rate.

Serve plans to grow its domestic and international presence to capture what it believes will be a $450 billion market for robotic and drone delivery. The company will have to expand beyond just food and retail delivery to build a formidable market share, which is why it acquired another robotics enterprise, Diligent, in January.

Diligent developed its own Nvidia-powered robot for the healthcare sector called Moxi. It operates within hospitals, transporting medication, lab samples, and equipment across departments so nurses and doctors can spend less time running around and more time with their patients. So far, the move into healthcare has broadened Serve's footprint to 44 U.S. cities across 14 states.

Serve just cut its 2026 revenue guidance by more than half

Serve generated $3.2 million in revenue during the second quarter of 2026, which was a 404% increase from the year-ago period. The company benefited from the inclusion of Diligent's revenue, which was absent in the same quarter last year because it pre-dated the acquisition.

Serve came into 2026 expecting to generate $26 million in total revenue for the year, but management drastically reduced that forecast to $9 million to $10 million after the second quarter due to concerns about lower Uber Eats delivery volume than initially anticipated. Given that the company generated $6.2 million in revenue during the first half of 2026, that means it could bring in as little as $2.8 million in the second half -- a dramatic decline.

That also has implications for Serve's bottom line. The company already lost over $113 million on a generally accepted accounting principles (GAAP) basis during the first half of this year, so unless management significantly cuts costs to offset its lower revenue forecast, there could be an even steeper loss in the second half.

Serve only had $240 million in cash, cash equivalents, and marketable securities on hand as of June 30, so it simply can't afford to continue losing money at the current pace for much longer. If its bottom line doesn't improve soon, it might have to take on debt or raise money from investors, which would dilute every existing shareholder.

More downside might be ahead for Serve stock

Despite already plunging by 80% from its 2024 record high, Serve stock is still very expensive. It's trading at a price-to-sales (P/S) ratio of 46, a whopping seven times higher than the P/S ratio of the Nasdaq-100 index, which is 6.3. In other words, it looks heavily overvalued compared to a basket of America's best technology stocks.

SERV PS Ratio data by YCharts

To make matters worse, investors who were willing to pay a premium for Serve stock because of its growth prospects just had their thesis shattered by management's reduced revenue forecast. If we assume Serve does bring in $10 million during 2026, its forward P/S ratio remains at a sky-high level of 42.

Simply put, it might be a good idea to avoid Serve stock for the foreseeable future because its rich valuation opens the door to even more downside.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash, Nvidia, and Serve Robotics. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.