Enphase Energy (ENPH) Q2 FY26 earnings call: guidance and Q&A

How will Enphase balance margin capture with market share adoption for SST, given its high potential profitability with 45X credits and future expansion into competitive markets like utility scale solar?

Enphase aims to be extremely competitive while focusing on value drivers like faster response times (enabling centralized battery storage), modularity, redundancy, reliability, and U.S. manufacturing. The 45X PTCs will also contribute to high profitability, but specific numbers were not disclosed.

“Our value drivers are like what we stated. Faster response times. And because the SST can respond within sub millisecond, we think the battery storage can move to the facility space, which is called it the data center black space. That will be a key differentiator for our solution.”

asked by Praneeth Satish · answered by Badrinarayanan Kothandaraman

Propel originations remained flat sequentially at 200 per week. What will drive the target of 500 originations per week by year-end, and is it due to demand or financing capacity?

The flat trend is due to Propel being in a pilot phase, deliberately scaling. Originations are already slightly higher in the current month. The growth to 500 per week will be driven by expanding to 12 states by the end of Q3 and SolSource securing sufficient financing capacity and tax credit buyers.

“It is simply a function of how many states we are in. For example, if I look at the first 4 weeks of this month, would say the numbers are running a little bit higher than the 200. So what we are going to do is to scale it to 12 states.”

asked by Praneeth Satish · answered by Badrinarayanan Kothandaraman

What is driving the significant safe harbor revenue, and why is Enphase still undershipping in Q3 despite seemingly improving demand in the U.S. residential market?

The safe harbor momentum is due to strong relationships with TPO partners and new partners, leveraging both the 5% and Physical Work Test methods. Enphase is undershipping in Q3 out of caution to maintain healthy channel inventory, aiming to bring down microinverter inventory. Core revenue (excluding safe harbor) is expected to grow by over 10% from Q2 to Q3, driven by U.S. growth and stable Europe despite seasonality.

“We are just cautious and we'd like to make sure we have a healthy channel inventory like we focused Q2 on getting healthier in the channel. That's why we said we are fine on batteries and slightly elevated on micros and we're going to bring that down.”

asked by Brian Lee · answered by Badrinarayanan Kothandaraman

How would an FCC ban on Chinese inverters impact Enphase's commercial business, and how is Enphase managing the ongoing challenges in the U.S. residential market due to weak capital flows and delayed FEOC guidance?

An FCC ban would create opportunities in small commercial and potentially utility scale. Enphase's small commercial revenue is expected to grow significantly, leveraging new 3-phase microinverters and the IQ Vault battery, all FEOC compliant and U.S. manufactured. For U.S. resi, Enphase is not waiting for external improvements, but actively driving growth through innovative financing (Propel), new products (G5 battery, Meter Collar, BiDi EV charger), and expanding into commercial, which helps restore the market affected by 25D expiry.

“For us, we are not stopping and waiting. We are not waiting for things to improve. We are taking matters into our own hands. It is about innovative financing, it is about innovative new products, it is about extending our range into commercial. And of course, the big one is data centers.”

asked by Philip Shen · answered by Badrinarayanan Kothandaraman

How elastic is battery demand to pricing adjustments, and how mature are the pricing conversations and design embeddings for the SST in data centers?

Battery demand is driven by pricing actions combined with organic demand generation (e.g., homeowner events in Europe), new products like the G5 battery with higher energy density and lower cost, and financing programs like Propel with high battery attach rates. For SST, internal technical progress is strong, and engagements with hyperscalers and the ecosystem are active, shaping product requirements. Pricing conversations are ongoing, but the focus is on value drivers like reliability, response time, and U.S. manufacturing. A full product build by year-end will open doors for larger conversations and pilots.

“So not just pricing action, but pricing plus a few other actions to drive demand.”

asked by Colin Rusch · answered by Badrinarayanan Kothandaraman

What is the expected recognition timeline for the $880 million Physical Work Test (PWT) backlog, and what is the current status of tariff impacts on battery supply?

Revenue from the PWT backlog ($878.6 million) is expected to begin recognition in 2028, as tax credits remain open until end-2027. It is expected to be linear. Regarding tariffs, the reciprocal tariff impact on gross margin has reduced from 5% to 2%. Enphase has diversified its microinverter supply chain and has non-China cell sources for batteries, which can be leveraged if Chinese battery tariffs increase, and is also exploring U.S.-made cells for future battery generations.

“That revenue, when will it be recognized if according to me, likely beginning 2028, because that is the sole point of safe harbor.”

asked by Dylan Nassano · answered by Badrinarayanan Kothandaraman