SolarEdge Technologies Q2 Earnings Call Highlights

Key Points

• SolarEdge returned to profitability: Second-quarter revenue rose 19.6% year over year to $346.2 million, while non-GAAP operating income reached $10.2 million and non-GAAP net income turned positive for the first time since Q2 2023. Gross margins also improved substantially, helped by cost controls, product mix and $13.3 million in IEEPA-related refunds.
• Europe offset U.S. residential weakness: European revenue increased 36% sequentially, while U.S. revenue fell 2% as installers faced tax-equity funding constraints and FEOC uncertainty. Management expects U.S. residential softness and no typical seasonal recovery in Q3, but sees potential for market-share gains when demand improves.
• Nexis and data-center initiatives are advancing: European Nexis shipments exceeded $60 million in Q2, with broader U.S. rollout planned, while storage demand and retrofit upsells are growing. SolarEdge is also developing solid-state transformers for data centers, targeting pilot installations in 2027 and volume shipments in 2028.

SolarEdge Technologies NASDAQ: SEDG reported second-quarter results that marked a return to non-GAAP operating profitability, as higher revenue, improving margins and cost controls offset continued softness in the U.S. residential solar market.

Revenue for the quarter ended June 30 was $346.2 million on a GAAP basis, up 11.5% sequentially and 19.6% from a year earlier. Non-GAAP revenue was $345.5 million, exceeding the midpoint of the company’s guidance range, according to Chief Financial Officer Maoz Sigron. Management said the quarter did not include significant revenue pulled forward from safe-harbor transactions.

“We returned to non-GAAP operating profitability and made progress in all four priorities,” Chief Executive Officer Shuki Nir said, referring to the company’s focus on profitable growth, market-share expansion, scaling its Nexis platform and developing power infrastructure for data centers.

Margins Improve as Revenue Rises

GAAP gross margin rose to 27.5% from 22% in the first quarter and 11.1% a year earlier. Non-GAAP gross margin reached 28.6%, compared with 23.5% in the prior quarter and 13.1% in the second quarter of 2025.

The margin result included a gross benefit of $13.3 million related to refunds under the International Emergency Economic Powers Act, or IEEPA. Sigron said margin improvement also reflected cost discipline, favorable product mix and better absorption of fixed costs as volume increased.

GAAP operating expenses declined to $111.2 million from $123.3 million in the first quarter and $147.6 million a year earlier. Non-GAAP operating expenses were $88.5 million, down from $97.7 million sequentially.

The company reported a GAAP operating loss of $16 million, narrowing from a $55 million loss in the first quarter. Non-GAAP operating income was $10.2 million, compared with a non-GAAP operating loss of $24.8 million in the prior quarter and a $48.3 million loss a year earlier.

• GAAP net loss was $30.8 million, or $0.50 per share.
• Non-GAAP net income was $3.6 million, or $0.05 per diluted share.
• SolarEdge said non-GAAP net income was positive for the first time since the second quarter of 2023.
• Cash, cash equivalents and marketable securities totaled $601.6 million at June 30, up from $581.1 million at the end of 2025.
• Free cash flow was $3.1 million during the quarter.

Europe Growth Offsets U.S. Residential Weakness

U.S. revenue totaled $154.9 million, down 2% sequentially and representing 44.7% of revenue. European revenue was $154.4 million, up 36% from the first quarter and accounting for 44.6% of sales. Revenue from other international markets was $36.9 million, down 5% sequentially.

Nir said U.S. residential demand remained soft as customers navigated a slower tax-equity funding environment and uncertainty around foreign entity of concern, or FEOC, rules. He said funding constraints have pressured installers’ cash flows and reduced distributor purchases and inventory levels.

Management expects U.S. residential softness to continue in the third quarter and said it does not anticipate the typical seasonal pickup in the U.S. market. However, Nir said the company believes it is positioned to gain share when the market recovers, citing its fit with third-party ownership financing models, safe-harbor agreements and the rollout of Nexis products.

In U.S. commercial and industrial solar, SolarEdge said its market share exceeded 50% of rooftop installations in the most recent report. Nir also said SolarEdge systems are installed on the rooftops of more than 60% of Fortune 100 companies. The company expects continued support for the C&I market from higher electricity prices and data center-driven electricity demand.

Management said SolarEdge has been the only major C&I inverter vendor delivering U.S.-manufactured products at scale designed to meet domestic-content, non-FEOC and FCC Covered List requirements. Nir said the company does not expect FCC requirements to delay the U.S. Nexis rollout and stated that Nexis is made in the United States by SolarEdge.

Nexis Shipments and Storage Demand

SolarEdge said it more than doubled European revenue year over year, aided by demand for solar ahead of anticipated higher electricity prices and rising storage demand as net-metering programs are phased out in several markets.

The company began meaningful European shipments of its three-phase Nexis platform during the second quarter, with shipments exceeding $60 million. Nir said installer feedback at the Intersolar trade event in Germany was favorable and that the company expects momentum in the DACH region to continue. SolarEdge plans to roll out single-phase Nexis in Europe in the first quarter of 2027.

In the U.S., Nexis has been approved on financing platforms spanning third-party ownership, prepaid power-purchase agreements and loan products, according to the company. SolarEdge expects installations to grow as it begins rolling out the platform in volume.

SolarEdge also cited an installed base of more than 1 million homes in the Netherlands and DACH region, where it has launched retrofit campaigns. The company generated more than $20 million in upsell activity during the second quarter.

On storage pricing, Nir said prices have remained stable by product, with quarter-to-quarter differences primarily driven by mix. He said storage is expected to become a larger portion of the company’s revenue over time as attachment rates rise and homeowners add batteries to existing solar systems.

Third-Quarter Outlook and Data Center Plans

For the third quarter, SolarEdge projected revenue of $310 million to $340 million. Management said the expected sequential decline is primarily tied to Europe, where revenue is expected to decline by about $15 million at the midpoint due largely to seasonality.

The company expects non-GAAP gross margin of approximately 22% to 26%, excluding potential IEEPA refunds, and non-GAAP operating expenses of $86 million to $91 million. Sigron said the lower gross-margin outlook primarily reflects lower business scale and associated fixed costs in cost of goods sold. Including $11.5 million in IEEPA refunds received in July, the midpoint of the outlook implies non-GAAP operating profit, he said.

SolarEdge maintained its expectation for positive free cash flow for the full year and projected 2026 capital expenditures of $60 million to $80 million, including investments in U.S. PV and battery capacity, Israeli research and development facilities, its AI factory offering and maintenance spending.

Separately, the company said it is advancing its solid-state transformer, or SST, offering for data centers. Management said live lab demonstrations validated 99% efficiency across power levels and direct conversion from medium-voltage alternating current to a regulated direct-current bus. SolarEdge plans to have a working full three-phase 34.5-kilovolt system in its lab by year-end, followed by pilot installations in 2027 and volume shipments in 2028.

About SolarEdge Technologies (NASDAQ:SEDG)

SolarEdge Technologies NASDAQ: SEDG is a global provider of solar energy solutions focused on optimizing photovoltaic (PV) power generation. The company's core offerings include power optimizers, inverters and cloud-based monitoring platforms designed to maximize energy output and improve safety across residential, commercial and utility-scale installations. By coupling module-level electronics with centralized inverters, SolarEdge's technology enables real-time performance monitoring and rapid fault detection to enhance system reliability.

In recent years, SolarEdge has expanded its product portfolio beyond solar PV to include energy storage systems, electric vehicle (EV) charging solutions and smart energy management tools.

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