Fluence Energy, Inc. (FLNC) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows strong financial performance with significant order intake and a robust pipeline, especially in the U.S. market. The company is addressing supply chain risks and expanding its domestic supplier base. The Q&A section highlights a positive outlook with new customer acquisitions and international market growth. Despite some vague responses, the overall sentiment is positive, supported by strategic partnerships and a growing market demand, leading to a prediction of a positive stock price movement in the short term.
Key Financial Performance
Revenue $465 million for Q2 2026, up 8% year-over-year. Approximately $80 million of revenue was pushed into Q3 due to a customs issue in Vietnam and a shortage of loading equipment in Spain, both of which have been resolved.
Adjusted Gross Margin 11.1% for Q2 2026, within the full-year expectation of 11% to 13%. This reflects a meaningful improvement from Q1 and the comparable quarter in fiscal 2025, driven by consistent execution and operational discipline.
Adjusted EBITDA Negative $9 million for Q2 2026, an improvement of $21 million compared to the second quarter of last year. The improvement was due to higher gross margin, lower operating costs, and a $6 million gain from unwinding an FX derivative.
Backlog $5.6 billion at the end of Q2 2026, a record high, expected to grow further based on execution so far this year.
Liquidity Approximately $900 million at the end of Q2 2026, including $413 million in total cash. Liquidity is expected to return to $900 million levels by fiscal year-end, driven by execution on backlog and new orders.
Annual Recurring Revenue (ARR) Expected to reach approximately $180 million by the end of fiscal 2026, up from $148 million in fiscal 2025.
Rolling 12-Month Adjusted Gross Margin 12.4%, marking two full years of consistent double-digit returns, reflecting product, commercial, and supply chain actions taken across the portfolio.
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Operating Highlights
Smartstack: Sets the industry standard for energy density, enabling customers to fit more than 500-megawatt hours of storage per acre. Designed to lower total cost of ownership through modular architecture, easier maintenance access, and more than 98% reliability. Flexible design supports a broad range of cell types across multiple manufacturers.
Proprietary solution for data centers: Developed a proprietary solution to handle extreme power usage fluctuations in data centers, leveraging advanced controls and fast response systems.
Order intake: Signed approximately $2 billion of orders this year, double the amount signed through the same period last year. Record backlog of $5.6 billion at the end of Q2, with expectations for further growth.
New customer segments: Executed master supply agreements with 2 major hyperscalers, positioning Fluence as a qualified supplier for data center projects. Data center pipeline increased by over 30% since the last call.
Geographic market focus: Opportunities in the U.S. market are outpacing other markets, with projects concentrated in California, Arizona, and the Midwest (MISO market).
U.S. domestic supply chain: Established U.S. production for all major components, including battery cells from a supplier in Smyrna, Tennessee. Signed a new supply agreement with a new owner of the facility to ensure continued production.
Revenue and liquidity: Generated Q2 2026 revenue of $465 million, up 8% year-over-year. Ended the quarter with approximately $900 million in total liquidity.
Customer-centric business model: Focused on staying close to customers to anticipate needs early and respond quickly with tailored products and solutions.
Expansion into data centers: Positioned to capture demand from data centers with proprietary solutions and MSAs with major hyperscalers.
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Risk or Challenges
Higher lithium prices: Temporarily slowed customer decisions, impacting order activity and potentially delaying revenue realization.
Customs issue in Vietnam and equipment shortage in Spain: Caused delays in shipments, pushing approximately $80 million of revenue into the next quarter.
Declining average sales prices (ASPs): Expected to continue, which could pressure revenue growth despite increased demand.
Dependency on U.S. domestic supply chain: While advantageous, it requires careful management of supplier relationships and production timelines to avoid disruptions.
Ownership change at Smyrna, Tennessee facility: Introduced uncertainty in supply chain stability, though mitigated by a new supply agreement.
Inventory investment: Significant investment in inventory ($220 million in Q2 and $100 million in Q3) ties up liquidity and increases financial risk if demand fluctuates.
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Guidance & Outlook
Revenue Guidance: Reaffirmed fiscal year 2026 revenue guidance in the range of $3.2 billion to $3.6 billion, with a midpoint of $3.4 billion. Approximately 70% of revenue is expected in the second half of the fiscal year, with 30% in Q3 and the remainder in Q4.
Adjusted EBITDA Guidance: Reaffirmed fiscal year 2026 adjusted EBITDA guidance in the range of $40 million to $60 million.
Annual Recurring Revenue (ARR): Expected to reach approximately $180 million by the end of fiscal 2026, up from $148 million in fiscal 2025.
Order Intake and Backlog: Order intake has doubled year-to-date, reaching approximately $2 billion in the first 7 months of fiscal 2026. The total backlog stands at a record $5.6 billion, with expectations for further growth.
Gross Margin Outlook: Adjusted gross margin for fiscal 2026 is expected to be in the range of 11% to 13%, with continued margin improvement anticipated beyond this year.
Liquidity Position: Liquidity is expected to return to approximately $900 million by the fiscal year-end, supported by execution on backlog and new orders.
Market Trends and Customer Segments: Data center projects are expected to contribute significantly to order intake in Q4 2026, with initial orders anticipated in Q3. The pipeline for data center projects has increased by over 30% since the last call.
Product and Supply Chain Developments: Smartstack product innovation continues to drive interest, with substantial completion of the first Smartstack and a growing backlog. U.S. domestic supply chain for battery cells is being strengthened, with additional capacity expected in fiscal 2027.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How is the company viewing the recent trend of some cell manufacturers vertically integrating?
A:The company has observed CATL and BYD integrating vertically. They have worked with CATL but not BYD. This trend has not significantly changed the competitive landscape or pricing. The company continues to grow its backlog and attract new customers, with 50% of new sales coming from new customers.
Q:What were the mechanics behind the wins of the two hyperscaler MSAs?
A:The company underwent a strict commercial, operational, and technical evaluation, competing against 26 players. Their deep knowledge, experience in managing fast response systems, infrastructure, and technology capabilities were key differentiators. They were able to meet stringent requirements and exceed expectations, which helped secure the wins.
Q:What specific products are hyperscalers following up with the company?
A:Hyperscalers are primarily focused on quality of power, managing data center fluctuations quickly and effectively. The company’s advanced controls and products have proven to meet these needs better than competitors. Domestic content was not a requirement but is being considered for its branding and competitive value.
Q:What is the company’s plan for rebuilding liquidity to $900 million by fiscal year-end?
A:The company plans to rebuild liquidity through organic cash flow by delivering inventory and collecting revenue. This aligns with their guidance for the year.
Q:How many other supplier MSAs did the company secure?
A:The company secured a very limited number of supplier MSAs, described as being able to fit in one hand with fingers left.
Q:Can you provide details on the size and scope of the two hyperscaler MSA deals?
A:The majority of the company’s pipeline, which is 12 gigawatts, is supported by deals behind these two MSAs. These deals involve multiple data centers across the U.S. Financial details are not being disclosed at this time.
Q:What is the deployment schedule for hyperscaler projects?
A:The pipeline is expected to convert into orders within a year, with tight delivery schedules. Hyperscaler projects are expected to have faster conversion rates from pipeline to orders and from orders to revenue compared to utility and developer projects.
Q:What are the expectations for gross margin in the back half of the year?
A:The company expects gross margins to be in the range of 11% to 13%, with a goal of around 12% for the year.
Q:What is the broader data center pipeline and its classification?
A:The data center pipeline increased by 30% from the last quarter, with a focus on hyperscalers. The pipeline is 12 gigawatts, and leads are three times that amount. Long-duration storage projects are classified as systems with 6 gigawatt-hours or more.
Q:Was there any seasonality or disruptions affecting revenue in the quarter?
A:Revenue was impacted by an $80 million shipping delay, but there were no other disruptions or seasonality factors. The company does not provide quarterly guidance but focuses on yearly performance.
Q:What are the product details for hyperscalers and data centers?
A:Hyperscalers and data centers require shorter-duration configurations, typically 2 hours or more. The company’s technology allows for stacking business models and addressing multiple needs like quality of power and voltage support. Response times are very short, significantly shorter than 100 milliseconds.
Q:What is the company’s capacity to meet U.S. storage market growth?
A:The company has multi-gigawatt capacity to meet pipeline demands and is planning additional capacity for 2028 and beyond. They prefer domestic content solutions but can also import equipment if needed.
Q:What are the company’s initiatives to reduce operating expenses?
A:The company aims to maintain cost discipline and achieve operating leverage by growing revenue faster than costs. Operating costs as a percentage of revenue are expected to decrease as revenue grows.
Q:What is the pricing and margin outlook for data center deals?
A:Margins for data center deals are in line with the company’s guidance of 10% to 15%. Pricing is not a major driver of financial results as demand expands significantly when ASPs decrease.
Q:What is the nature of the exclusivity for the hyperscaler MSAs?
A:The company is one of a very limited number of players in a competitive process. The MSAs are not exclusive but involve a small number of competitors.
Q:What are the characteristics of the 50% new customers?
A:The new customers are primarily developers and utilities that the company had not previously worked with. This is a result of significant investment in business development and global efforts to expand the customer base.
Q:What are the company’s plans for international markets?
A:The company sees demand growth in international markets and adjusts margins based on the competitive environment. Margins range from 10% to 15%, with variations by market.
Q:Do hyperscaler MSAs have special requirements for battery specifications?
A:Hyperscaler MSAs do not have specific requirements for battery brands or grades. The company uses LFP batteries and focuses on packaging capabilities. High C-rate batteries are part of the company’s product roadmap but are not yet in use.
Q:What is the ratio of storage to data center load in hyperscaler projects?
A:It is too early to provide a rule of thumb for the ratio of storage to data center load. The company is focused on converting its 12-gigawatt pipeline into orders within the next 12 months.
Q:Review of Unclear Management Responses
A:Management avoided providing specific financial details for the hyperscaler MSAs, such as the size of the deals in megawatts or financial impact. They also did not disclose the exact response times for inverters or the ratio of storage to data center load. Additionally, they did not provide specific numbers for operating expenses or capacity in gigawatt-hours. Answers were often vague or deferred to future updates.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ARR
ASPs
Act
BESS
FX derivative
MSAs
Slide progress
Slide update
Smyrna Tennessee
access
application
architecture
case customer
center project
cost ownership
customer requirement
customer segment
density
differentiator
expectation improvement
experience
expertise
hand
industry
interest
inventory delivery
life
liquidity position
model
momentum
month order
position delivery
pricing
progression
project hyperscalers
record backlog
remainder
shipment
supplier Smyrna
supply agreement
supply position
understanding
FLNC Transcript
Fluence Energy, Inc. (FLNC) Q2 2026 Earnings Call Transcript
Positive5-9
The earnings call summary shows strong financial performance with significant order intake and a robust pipeline, especially in the U.S. market. The company is addressing supply chain risks and expanding its domestic supplier base. The Q&A section highlights a positive outlook with new customer acquisitions and international market growth. Despite some vague responses, the overall sentiment is positive, supported by strategic partnerships and a growing market demand, leading to a prediction of a positive stock price movement in the short term.
Fluence Energy, Inc. (FLNC) Q1 2026 Earnings Call Transcript
Unknown2-5
The earnings call presents a mixed picture. Strong revenue expectations and market demand are offset by concerns such as unconverted pipelines and $20 million in incremental costs. The Q&A section reveals uncertainties in data center integration and competitive pressures. However, the company's liquidity and strategic plans remain stable. The market cap suggests moderate volatility, leading to a neutral stock price prediction.
Fluence Energy, Inc. (FLNC) Q4 2025 Earnings Call Transcript
Unknown11-25
The earnings call summary reveals a mix of positive and negative factors. While there is strong demand in the energy storage market and strategic legislative support, the company's revenue guidance is at the low end, and there are unresolved issues with supply chain and margins. The Q&A session highlights management's lack of clarity on critical details, such as data center margins and FIAC restrictions. Given the company's market cap of $2.4 billion, the stock is likely to experience a neutral movement within the next two weeks, balancing positive market trends with internal operational challenges.
Fluence Energy, Inc. (FLNC) Q3 2025 Earnings Call Transcript
Unknown8-12
The earnings call summary presents a mixed picture: while there are positive elements such as the launch of Smartstack technology and the company's liquidity position, there are also negative aspects like lowered revenue and EBITDA guidance due to tariff issues. The Q&A further reveals challenges with tariffs and ramp-up issues, but also highlights potential growth in non-U.S. markets. The overall sentiment is balanced by these opposing factors, leading to a neutral outlook for the stock price movement.
FLNC Slides
FLNC Report
Frequently Asked Questions
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