What is the potential impact of recent policy changes like the FCC's inverter ruling or Section 232 Solar Module Tariff on US solar projects, and how is Stem mitigating this?

The company's projects are spread across multiple countries, and the specific US-only policy changes mentioned have not had any impact on their C&I or utility-scale projects. They navigate this by staying informed and working with customers and partners. “Listen, I think we are seeing, first of all, our projects are spread across, as we said, in multiple countries, different continents. So some of these policy changes are U.S. only. And the particular policy that you're raising, we've not seen any impact from that on our projects, be it within the C&I space or even in the utility-scale space.”

Given H1 EBITDA of $8.2 million, why does the full-year guidance of $10 million to $15 million imply a modest step down in H2, and is there potential to exceed the high end?

The H1 performance was strong due to a very low percentage of battery hardware resale revenue. H2 is expected to have a higher percentage of battery hardware resale, which has lower margins, thus putting some pressure on EBITDA margins. The company is tracking toward the higher end of the guidance range, but the mix shift explains the implied H2 moderation. “Remember, we had a very low percentage of our revenue coming from battery hardware resale this quarter, or this first half, so that will increase as a percentage of the revenue, which will bring our margins down a little bit more in line. It'll also put a little pressure on the EBITDA margins. So, I think the answer there is we don't see any real weakness in that space. It's just a matter of timing and our battery hardware resale.”

Is the implied H2 gross margin decline primarily mix-related due to higher battery resale, and are there any anticipated changes in software and services margins?

Yes, the decline is primarily mix-related. Battery hardware resale has significantly lower margins (10%-11%), which will naturally lower the overall margin percentage when it increases in H2. Software (around 75%) and edge hardware (45%-47%) margins are expected to remain consistent. “Yes, thanks, Justin. No, I think you're right. The reason we're saying it's going to pull back a little bit is if you look at our slide 12 in our appendix of the supplement, you'll see battery hardware is expected to be around 10% to 11% margins. So when we bring that in, it just naturally lowers our margin percentage, and those deals are generally a little bit bigger in size with that lower margin.”

STEM

Stem (STEM) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Utilities· Aug 12, 2026

Source: earnings call transcript

Executive summary

Stem, Inc. Q2 FY26 — Continued Adjusted EBITDA Profitability and International Expansion

Stem, Inc. delivered its fifth consecutive quarter of positive adjusted EBITDA and record non-GAAP gross margins in Q2 FY26, driven by a software-centric revenue mix. The company reaffirmed its full-year guidance, anticipating continued operational leverage and strategic expansion into utility-scale and international markets, despite a year-over-year revenue decline attributed to lower battery hardware resales.

Highlights

Achieved fifth consecutive quarter of positive adjusted EBITDA at $6.2 million, up 63% from Q2 FY25.
Non-GAAP gross margin reached a record 55%, an increase from 49% in Q2 FY25.
Operating cash flow turned positive at $0.3 million, representing a $9 million sequential improvement.
Bookings grew nearly 40% sequentially to $36.8 million in the quarter.
PowerTrack EMS expanded into Latin America (Chile) and Hungary, and won The smarter E AWARD 2026.

Concerns

Total revenue declined 12% year-over-year to $33.7 million, primarily due to lower battery hardware resale revenue ($0.3 million vs. $5.4 million in Q2 FY25).
Managed services revenue decreased 34% year-over-year to $5.9 million against an unusually strong Q2 FY25.
Battery hardware resale revenue is expected to trend toward the lower end of the full-year $40 million guidance range.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Total Revenue	$140 million to $190 million high materiality	FY26	High
Full-year 2026 Software, Services, and Edge Hardware Revenue	$130 million to $150 million medium materiality	FY26	High
Full-year 2026 Battery Hardware Resale Revenue	up to $40 million, trending toward lower end medium materiality	FY26	Medium
Full-year 2026 Non-GAAP Gross Margin	40% to 50%, trending toward higher end high materiality	FY26	Medium
Full-year 2026 Adjusted EBITDA	$10 million to $15 million, tracking toward high end high materiality	FY26	High
Full-year 2026 Operating Cash Flow	$0 to $10 million high materiality	FY26	High
Year-end 2026 ARR	$65 million to $70 million high materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
PowerTrack software Reflecting continued strength in core commercial and industrial solar monitoring business.	$10.5 million	11%	—	—
Edge hardware Growth driven by shift in revenue mix towards utility-scale projects requiring more edge hardware.	$14.8 million	22%	—	—
Project and professional services	$2.2 million	-6%	—	—
Managed services Against an unusually strong Q2 FY25, where roughly 100 MWh were brought online.	$5.9 million	-34%	—	—
Battery hardware resale Minimal revenue in the first half of the year, expected to increase in the second half.	$0.3 million	down from $5.4 million in Q2 FY25	—	—

Orderbook & backlog

Bookings $36.8 million Q2 FY26

up 39% QoQ, up 7% YoY

Contracted Backlog $27.1 million Q2 FY26 end

up 18% QoQ

Product announcements

Product	Type	Timeline
Iona	launch	June
PowerTrack EMS	milestone	—
PowerTrack UX	update	—

Deals & partnerships

Raccoon Automated fault detection and event management technology

Acquired in April, integration into PowerTrack is progressing well. Development and sales teams are working on packaging and releasing this new capability to customers.

Nuvation Energy Co-marketing agreement for domestic control projects

Working closely with Nuvation's technical and sales team, co-presented at the IEEE Power & Energy Society General Meeting in Montreal in late July.

Copec Granja Solar Project in Chile

PowerTrack EMS will serve as the primary control system for a 420 MWh battery storage system being added to an existing 135-megawatt solar facility in Latin America.

Solar Markt Group Hybridization project in Hungary

Selected PowerTrack EMS as the integrated energy management plant control and SCADA platform for two 80 MWh battery systems being added to two existing 60-megawatt solar sites. PowerTrack PPC is already in place for existing solar assets. Commercial operation of fully hybridized assets expected in fall 2026.

Risks & headwinds

Lower battery hardware resale revenue Q2 FY26, expected to continue in H2 FY26

Q2 FY26 revenue of $0.3 million, down from $5.4 million in Q2 FY25

Mitigation:Shift in revenue mix towards higher-margin software, services, and edge hardware; expectation for increased battery hardware resale in H2.

Decline in managed services revenue Q2 FY26

Down 34% YoY to $5.9 million

Mitigation:Attributed to an unusually strong comparable quarter in Q2 FY25; no specific mitigation mentioned beyond general growth initiatives.

Potential impact of US policy changes (FCC inverter ruling, Section 232 tariffs) Ongoing

Not quantified, management states no current impact

Mitigation:Projects are spread across multiple countries; company navigates by staying on top of policies and working with customers and partners.

What to watch in Q3 FY26

Battery hardware resale revenue

next quarter

Current trending toward lower end of $40 million range

Target clarity on actual full-year revenue

Why it matters

Impacts total revenue and gross margin mix for the full year.

We provided guidance on battery hardware resales of up to $40 million, which we still anticipate to be weighted to the second half of the year, and we expect to trend toward the lower end of that range.

Find out whether STEM delivers this. Inve re-checks your case every morning.

Q&A highlights

What is driving the strong performance in edge hardware revenue (up 22% YoY) and its gross margin?

The growth in edge hardware is a natural shift in the revenue mix as the company expands into the utility-scale space, where projects inherently require a greater percentage of edge hardware deployment due to their nature and size.

“Yes, look, we had a good quarter, and as we grow into the utility-scale space, this kind of shift in the mix is natural. These projects come as a configuration with a greater percentage of edge hardware deployment just because of the nature and the size of these projects.”

asked by Jonathan Windham · answered by Arun Narayanan

2 min read 6 chapters

Detailed narrative

Operational Leverage and Profitability

Stem achieved its fifth consecutive quarter of positive adjusted EBITDA, reaching $6.2 million in Q2 FY26, a 63% increase year-over-year. Non-GAAP gross margin hit a record 55%, driven by a revenue mix weighted towards software, services, and edge hardware, with minimal battery hardware resales.

Operating cash flow turned positive at $0.3 million, a $9 million sequential improvement, reflecting the benefits of increased high-margin billings and disciplined cost management, with cash operating expenses remaining flat sequentially and down 11% year-over-year.

PowerTrack Platform Strengthening and Enhancements

The core PowerTrack platform continued to strengthen, adding approximately 0.8 GW of solar assets under management, which contributed to a 3% sequential growth in PowerTrack ARR. Product improvements, including an updated UX with dark mode and feedback tools, were shipped to enhance daily workflows for operators.

The integration of the recently acquired Raccoon automated fault detection technology into PowerTrack is progressing well, with plans for a substantive update in Q3.

Accelerated Growth Foundation and International Expansion

Stem is building a foundation for accelerated growth in 2027 and beyond, focusing on utility-scale deployments and international expansion. Bookings in the utility-scale segment grew nearly 40% sequentially. PowerTrack EMS successfully entered Latin America with the Granja Solar Project in Chile (420 MWh battery storage) and expanded in Hungary with Solar Markt Group (two 80 MWh battery systems), demonstrating the commercial prospects of their EMS offering for hybrid utility-scale projects.

Industry Recognition and Strategic Partnerships

PowerTrack EMS received external validation by winning The smarter E AWARD 2026 in the Smart Integrated Energy category, recognizing its innovative platform for clean energy systems. A co-marketing agreement and partnership with Nuvation Energy continues to build optionality for projects requiring domestic control, with joint presentations already taking place.

New Market Opportunities in AI and Data Centers

The company officially launched Iona, its AI services offering, in June, and is actively engaging with existing customers to identify AI applications for their operations. Additionally, Stem is exploring how its energy optimization software and market expertise can support data center developers and operators, with development on this offering currently ongoing.

Revenue Mix Shift and Guidance Reaffirmation

Total revenue for Q2 FY26 was $33.7 million, down 12% year-over-year, primarily due to a significant reduction in battery hardware resale revenue to $0.3 million from $5.4 million in Q2 FY25. Conversely, revenue from software, services, and edge hardware grew 1% year-over-year to $33.4 million.

Despite the revenue mix shift, the company reaffirmed its full-year 2026 guidance across all metrics, expecting to trend towards the higher end of its non-GAAP gross margin and adjusted EBITDA ranges.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.