SolarEdge Technologies, Inc. (SEDG) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with revenue and margin growth, innovative product launches, and positive market share movement. The Q&A session highlights management's strategic initiatives, such as the Nexis platform, and efforts to optimize costs and efficiency. Despite some uncertainties, like weak European markets and inventory adjustments, the overall sentiment is positive, driven by strong battery performance, clear U.S. channels, and strategic R&D. The market cap suggests moderate volatility, leading to an expected stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Total Revenues $289 million for Q2 2025, with non-GAAP revenues at $281 million after excluding $8 million from discontinued operations. This represents quarter-over-quarter and year-over-year top-line growth, attributed to higher U.S. production volume and favorable regional mix.
Revenues from the U.S. $185 million, representing 66% of non-GAAP revenues. This growth is linked to increased U.S. production and demand.
Revenues from Europe $65 million, representing 23% of non-GAAP revenues. This reflects normalized inventory levels and initial market share gains in Europe.
Revenues from International Markets $31 million, representing 11% of non-GAAP revenues. No specific reasons for changes were mentioned.
Non-GAAP Gross Margin 13.1% in Q2 2025, up from 7.8% in Q1. The increase is due to higher revenue, increased utilization of operational cost structure, higher U.S. production volume, and favorable regional mix. This was partially offset by incremental tariffs.
Non-GAAP Operating Expenses $85 million in Q2 2025, down from $89 million in Q1. The decrease is attributed to streamlining operations and a reversal of an accrual for bad debt due to collection of aged AR balances.
Non-GAAP Operating Loss $48.3 million in Q2 2025, compared to $72.4 million in Q1. The improvement is due to higher revenue, higher gross margin, and lower operating expenses.
Non-GAAP Net Loss $47.7 million in Q2 2025, compared to $66.1 million in Q1. The improvement is attributed to higher revenue, higher gross margin, and lower operating expenses.
Non-GAAP Net Loss Per Share $0.81 in Q2 2025, compared to $1.14 in Q1. This reflects the same reasons as the net loss improvement.
Cash and Investments Portfolio $812 million as of June 30, 2025. Net cash position increased by $19 million to $470 million, attributed to effective working capital management.
Free Cash Flow A use of $9 million in Q2 2025, largely due to the timing of certain working capital items. However, free cash flow for the first half of 2025 was $10.8 million.
Inventory $529 million, down by $108 million. This marks the fifth consecutive quarter of inventory reduction, despite ramping up U.S. production.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Nexis platform: Remains on track for initial volumes by the end of the year. Demonstrations planned for RE+ event to showcase its ease of installation.
Commercial storage: Achieved record sales in Q2 and expects continued growth. Positioned to combine PV, storage, and energy management software for C&I customers.
Wevo EV charging software: Selected by PG&E to manage nearly 4,000 EV chargers. Enabled the largest public charging station in New York state and entered a strategic partnership with Schaeffler Group for global deployment.
U.S. residential market: Shift to TPO model expected to accelerate in 2026. Positioned to capitalize on this shift due to strong infrastructure and product fit.
U.S. C&I segment: Signed multiyear agreements with Solar Landscape and a leading U.S. retailer to deploy SolarEdge products across numerous locations.
European market: Achieved initial market share gains in Q2. Improved go-to-market strategy and partnerships with installers and distributors.
U.S. manufacturing: Expanded footprint with production facilities in Texas, Florida, and Utah. Plans to ramp up production to support exports to Europe and international customers.
Inventory management: Reduced inventory for the fifth consecutive quarter, despite ramping up U.S. production.
Regulatory alignment: Benefiting from the One Big Beautiful Bill Act, which supports U.S. manufacturing and storage tax credits.
Tariff optimization: Efforts to optimize supply chain reduced gross margin headwind from tariffs to 2% in the second half of 2025.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Regulatory and Tariff Changes: The company faces challenges from changing tariff rates and domestic content requirements, which have impacted gross margins and require ongoing supply chain optimization. Tariff headwinds are expected to persist into 2026.
Residential Demand Decline: Demand in the residential market is expected to decline in 2026 due to the elimination of the 25D credit, which may only be partially offset by a shift to TPOs.
European Market Share: The company’s market share in Europe remains below historical levels, indicating challenges in regaining its competitive position despite recent improvements.
Operational Streamlining: The company incurred significant one-time expenses related to the disposition of non-core activities, including a $37 million write-down of the Sella 2 facility and an $18 million expense for the tracker business, reflecting challenges in focusing on core operations.
Inventory and Cash Flow Management: While inventory levels have been reduced, the company still faces challenges in managing working capital and maintaining positive free cash flow, as evidenced by a $9 million cash flow use in Q2.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Revenue Expectations: SolarEdge expects revenues for Q3 2025 to be within the range of $315 million to $355 million.
Gross Margin Projections: Non-GAAP gross margin for Q3 2025 is expected to be within the range of 15% to 19%, including approximately 2 percentage points of new tariff impact.
Free Cash Flow: The company expects to be free cash flow positive for the full year 2025.
Market Trends and Demand: Demand in the residential space is expected to decline in 2026 with the elimination of the 25D credit, partially offset by a shift to TPOs as the 48E credit continues through 2027. The company anticipates significant acceleration in the TPO model in 2026.
U.S. Manufacturing and Exports: SolarEdge plans to ramp up U.S. production towards the end of 2025 to support exports of competitive products to European and international customers.
Commercial Storage Growth: The company expects continued growth in commercial storage, following a record sales quarter.
European Market Expansion: SolarEdge sees an opportunity to grow its business in Europe further in the coming quarters, supported by improved go-to-market strategies and next-generation platform launches.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
The selected topic was not discussed during the call.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Was there any benefit from safe harbor or pull forward from 25D customers in Q2 and Q3 revenue?
A:The Q3 guidance does not include a significant pull forward of demand relative to 25D or safe harbor. The year-over-year and quarter-over-quarter revenue growth is attributed to rebuilding the business.
Q:How should we think about the cadence of margins as revenue normalizes?
A:The biggest driver of margin improvement is increased revenue, which leads to better utilization of fixed cost infrastructure. Other factors include the expansion of production footprint, new product standards with better cost structures, automation, and enhanced inventory and logistics management. However, the impact of mix between geographies, products, and market segments may vary.
Q:How much safe harbor could be in the guide for C&I or residential segments?
A:Management avoided providing details on safe harbor deals for C&I or residential segments. They emphasized their strong position as a partner for such deals and highlighted opportunities in the C&I segment due to domestic content and FEOC requirements.
Q:What are the 2026 margin puts and takes?
A:Management expects to neutralize the tariff impact entirely next year through diversified production and potential price increases. Key margin levers include higher revenue, better utilization of fixed costs, new products, and ramping up U.S. production, which is economically attractive due to higher benefits and credits.
Q:What is the revenue growth expectation for Q3 in Europe and the U.S.?
A:In the U.S., channels are largely clear, and revenue is expected to catch up with underlying demand. However, the new market remains weak and could weaken further next year. In Europe, while channels are normalized, the market remains weak, but new products and market share expansion efforts are expected to drive growth.
Q:What is the leverage on gross margin with incremental revenue?
A:The fixed cost infrastructure embedded in COGS is around $90-$95 million. Incremental revenue improves gross margin by better utilizing this fixed cost infrastructure.
Q:What are the key R&D initiatives?
A:Key R&D initiatives include energy management optimization, combining PV, storage, and energy management capabilities, and exploring virtual power plants and grid services.
Q:Are there additional areas for cost reduction in the organization?
A:Management is continuously focused on improving efficiency and reducing costs, including through automation and product simplification. The upcoming Nexis system is expected to have a more attractive cost structure.
Q:What drove strong battery performance this quarter, and how is the TPO market shifting?
A:Increased attach rates between solar and storage drove strong battery performance. The TPO market is expected to shift towards a storage-led market with ITC in place, and management anticipates providing solutions to support this shift.
Q:What drove solid free cash flow this quarter, and what is the sustainability of these drivers?
A:Free cash flow was driven by working capital tailwinds and lower incremental tariffs. Management guided to positive free cash flow for the year but noted that timing of cash flow items may shift.
Q:What are the inventory levels in the U.S. and Europe?
A:Most distributors in Europe have resumed normal inventory levels, while some have not. In the U.S., no abnormal inventory buildup has been observed.
Q:What is the view on the U.S. market TAM for 2026 and 2027?
A:The elimination of 25D is expected to significantly reduce the segment it supports, while the TPO segment is expected to grow. Overall, the market may decline by around 20%, but SolarEdge is well-positioned to benefit from the TPO segment's growth.
Q:What is the strategy for regaining market share in Europe?
A:The strategy includes working closely with distribution partners and installers, introducing the Nexis platform with better cost structures, and leveraging strong channel support to regain market share.
Q:What is the opportunity with the Nexis platform in Europe?
A:The Nexis platform supports larger systems (up to 20 kW) and stackable batteries, addressing growing segments in markets like Germany. It also offers better cost structures and reliability.
Q:Why is the Q3 revenue guide below the $375 million sell-through in Europe?
A:Some distributors have not yet normalized inventory levels, and seasonality and product preferences also contribute to the gap between sell-through and revenue.
Q:How will shipping U.S. products to Europe impact margins and FX hedging?
A:Shipping U.S. products to Europe removes the natural hedge of matching revenues and costs in the same currency. Management is implementing efficient hedging methodologies to address this.
Q:How much revenue can the current manufacturing base support?
A:The current production layout can support significant revenue increases and is expected to suffice for multiple quarters before requiring further ramp-up.
Q:Is pricing in Europe where it needs to be, or are additional actions required?
A:Pricing does not appear to be a blocking factor for growth in Europe. Management is confident in gaining market share without significant price moves but will respond to market needs if necessary.
Q:What is the battery cell sourcing strategy, and are battery margins at target levels?
A:Battery cell sourcing prioritizes quality, reliability, and compliance with requirements like tariffs and FEOC. Battery margins are lower than other products, and management is working to improve cost structures.
Q:How much is elevated warranty impacting margins, and what is the outlook?
A:Improved product quality and simplified structures like the Nexis platform are expected to reduce warranty impacts over time, leading to a positive trend in margins.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers to questions about safe harbor details for C&I and residential segments, as well as specific margin impacts from battery products. They also did not disclose the cash impact from 45X monetization or provide detailed guidance on warranty impacts.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Asaf
Bank
Capital
Co
Group
Inc Research
LLC Research
Nexis
Officer
Research Division
Securities
Shuki
SolarEdge product
TPO model
TPOs
adoption
agreement
chain
content FEOC
enterprise
measure
momentum
opportunity
pillar turnaround
platform
position
press release
priority
progress pillar
requirement content
result
share
shift
software service
tariff
trend
turnaround journey
week
SEDG Transcript
SolarEdge Technologies, Inc. (SEDG) Q3 2025 Earnings Call Transcript
Unknown11-5
The earnings call presents mixed signals. While the company has stable financials and strategic partnerships, concerns include declining U.S. residential demand and lack of clear revenue guidance for 2026. European market optimism is balanced by tariff impacts and unclear management responses. Given the market cap, the stock is likely to remain neutral.
SolarEdge Technologies, Inc. (SEDG) Q2 2025 Earnings Call Transcript
Positive8-7
The earnings call reveals strong financial performance with revenue and margin growth, innovative product launches, and positive market share movement. The Q&A session highlights management's strategic initiatives, such as the Nexis platform, and efforts to optimize costs and efficiency. Despite some uncertainties, like weak European markets and inventory adjustments, the overall sentiment is positive, driven by strong battery performance, clear U.S. channels, and strategic R&D. The market cap suggests moderate volatility, leading to an expected stock price increase of 2% to 8% over the next two weeks.
SolarEdge Technologies, Inc. (SEDG) Q1 2025 Earnings Call Transcript
Positive5-6
The earnings call summary shows significant improvement in financial performance, with reduced losses and positive free cash flow. The company has strong liquidity and effective cost management. Despite some uncertainties in the Q&A section, the overall sentiment is positive due to improved margins, reduced operating expenses, and a solid cash position. The guidance for positive free cash flow in Q1 2025 and strategic initiatives like US manufacturing ramp-up also contribute to a positive outlook. Given the company's market cap, a positive stock price movement (2% to 8%) is expected over the next two weeks.
SolarEdge Technologies, Inc. (SEDG) 37th Annual Roth Conference (Transcript)
Neutral3-18
SEDG Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
