Bloom Energy - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered another record quarter: revenue $401.2M, non-GAAP EPS $0.10, and adjusted EBITDA $41.2M, with gross margin expanding to 28.2% from 21.8% YoY.
• Bloom beat Wall Street consensus: revenue $401.2M vs $378.9M*, and non-GAAP EPS $0.10 vs $0.018*, reiterating full-year guidance (revenue $1.65–$1.85B, ~29% non-GAAP GM, non-GAAP OpInc $135–$165M).
• Strategic catalysts: direct hyperscaler purchase order with Oracle (90-day power deployment), growing utility channel via AEP (part of 100MW purchase order), and plans to double factory capacity to 2GW by end of 2026.
• Non-GAAP services remained profitable for the 6th straight quarter; GAAP EPS (-$0.18) was impacted by a $32.3M loss on extinguishment from the convertible note exchange to 2029.
• Stock reaction catalysts: AI data center momentum, reiterated guidance, consensus beats, capacity expansion, and ITC visibility with safe harbor for 2025 installations supporting demand timing.

What Went Well and What Went Wrong

What Went Well

• “Third straight quarter of quarterly record revenue and profits” driven by AI data center demand and strong execution; revenue grew 19.5% YoY to $401.2M; non-GAAP operating income improved to $28.6M.
• Direct hyperscaler win: “purchase order” with Oracle to power AI data centers, with “power available…in 90 days,” underscoring time-to-power advantage and load-following capability.
• Services durability: “6th straight quarter of non-GAAP services profitability,” with management citing double-digit service margins tied to reliability improvements.

What Went Wrong

• GAAP EPS of -$0.18 and GAAP net loss (-$42.6M) due to a non-recurring $32.3M loss on extinguishment from exchanging 2025 converts into 2029 notes; operating loss was -$3.5M GAAP despite non-GAAP profitability.
• Operating cash flow was negative (-$213.1M) as BE level-loaded factories and built inventory ahead of expected 2H shipments; receivables and inventory increased materially.
• Electricity revenue fell QoQ ($12.8M vs $27.0M in Q1), and GAAP gross margin dipped modestly QoQ (26.7% vs 27.2% in Q1) despite strong YoY expansion.

Transcript

Speaker 3

Thank you for standing by. My name is Greg and I will be your conference operator today. At this time, I would like to welcome everyone to today's Bloom Energy second quarter 2025 financial results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you'd like to withdraw your question, press STAR one again.

Speaker 0

Thank you.

Speaker 3

I would now like to turn the call over to Michael Tierney, Head of Investor Relations. Michael.

Speaker 0

Thank you and good afternoon everybody. Thank you for joining us for Bloom Energy second quarter 2025 earnings call. To supplement this conference call, we furnished our second quarter 2025 earnings press release with the SEC on Form 8-K and have posted it along with supplemental financial information that we will reference throughout this call to our Investor Relations website. During this conference call, both in our prepared remarks and in answers to your questions, we may make forward-looking statements that represent our expectations regarding future events and our future financial performance. These include statements about the company's business results, products, new markets, strategy, financial position, liquidity, and full year outlook for 2025. These statements are predictions based upon our expectations, estimates, and assumptions.

However, as these statements deal with future events, they are subject to numerous known and unknown risks and uncertainties, as discussed in detail in our documents filed with the SEC, including our most recently filed Forms 10-K and 10-Q. We assume no obligation to revise any forward-looking statement made on today's call. During this call and in our second quarter 2025 earnings press release, we refer to GAAP and non-GAAP financial measures. The non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between the GAAP and non-GAAP financial measures is included in our second quarter 2025 earnings press release available on our Investor Relations website. Joining me on the call today are K.R.

Sridhar, Founder, Chairman, and Chief Executive Officer, and Maciej Kurzymski, our Acting Principal Financial Officer. K.R. will begin with an overview of our progress and then Maciej will review financial highlights for the quarter. After our prepared remarks, we will have time to take your questions. I will now turn the call over.

Speaker 1

Good afternoon and thank you for joining us today. Bloom Energy had an excellent quarter, the highest revenue and most profitable second quarter in our 24 year history. When the company was founded and again in our IPO prospectus seven years ago, we painted a bold vision to become the power provider of choice for the digital world. Over the last couple of calls, I've.

Speaker 5

Told you that our business is at.

Speaker 1

An inflection point as demand for clean, reliable, and rapidly deployable power is surging.

Speaker 5

Now there is tangible evidence.

Speaker 1

Six months ago we announced a strategic partnership with a major U.S. utility company, American Electric Power. Yesterday, AEP announced that Amazon Web Services and Coralogix, both data center operators, are deploying Bloom systems in Ohio. AEP CEO Bill Furman noted that demand for power is, I quote, growing at a pace I haven't seen in my 45-year career. He notes, interconnection agreements take five to seven years in many U.S. states, even for AEP, the largest owner of electric transmission systems in the U.S. To avoid such a long delay, Bill also added that AEP is giving its customers solutions so they can come online quicker. Fuel cells will get AWS and Coralogix up and running quickly. Indeed, AI companies need power at AI speed. Waiting five to seven years is untenable and Bloom moves at AI speed.

Just last week, for instance, we announced our partnership with Oracle to power their AI data centers. We have committed to having power available to their first data center in 90 days. Time to power is one of many value propositions Bloom brings. We are also cleaner, more reliable, and more cost effective than alternatives. Because our power systems are designed and purpose built for data centers and other mission critical applications, our installations do not require the band-aids that turbines and engines need to power data centers. For example, we don't need multiple AC to DC converters or specialized equipment to suppress harmonics. Eliminating these band-aids enables data centers to lower costs, increase reliability, and reduce carbon footprint. We are excited to collaborate directly with Oracle to help them leverage all of the benefits the Bloom platform provides. The result?

Oracle can optimize the watts to FLOPS ratio, resulting in increased revenue growth and margins. Commercial and industrial customers are also increasingly valuing the velocity with which we operate. Quanta Computer, for instance, builds the AI servers that are used in the AI data centers. Their demand growth is highly correlated with AI data center demand growth. We informed you about our rapid deployment at their Fremont facility last year. Happy with our execution, they ordered an islanded load-following microgrid which we installed in Q2. We expect new orders from other AI hardware ecosystem players soon, complementing demand we see from our more traditional commercial and industrial customers. Bloom Energy is clearly delivering for customers, and our strong fundamentals mean we are also delivering for you, our investors. This quarter we had record profits and operating margin, the third quarter in a row that we are hitting similar marks.

Our service business has been profitable for six quarters in a row, and for the first time ever we had double-digit % margins, evidence of our increased reliability. We refinanced our convertible notes that were previously due in 2025, providing increased optionality to finance growth. One other highlight for the quarter: U.S. lawmakers and the administration restored tax credit benefits to companies who install our fuel cell systems. Our country's leaders recognize that baseload power is critical to winning the AI race, reshoring factories, creating jobs, and growing the economy. The tax credit will be another tailwind as we continue to grow our business. Let me close by reflecting on our position. Bloom Energy is in a strong place. In the 12 years since we began shipping product, we have generated over 40 terawatt hours of electricity.

We have deployed more than 22,000 Energy Servers, our power generators totaling well over a million fuel cell stacks. Each of those million-plus fuel cell stacks has a unique digital twin, and over our history we have collected over 4.5 trillion data points from the field. Now, thanks to AI, we are unlocking new ways to improve our performance, reduce costs, and deliver more value to our customers. We are operating at scale and are scaling with purpose. Now our robust product has robust demand. We will double our factory capacity from 1 gigawatt a year now to 2 gigawatts a year by the end of next year. Our mission has never felt more urgent, and we are ready. I'll turn it over to Maciek now, and I look forward to answering your questions.

Thank you KR and good afternoon everyone. As KR mentioned, selection of our fuel cell energy service by Oracle to power their cloud computing is another proof point for how well our technology is suited for on-site, highly reliable and variable load-following power. I am thrilled to see further adoption of a fuel cell technology by leaders in the AI space. Beyond that, I'm going to limit my comments to our Q2 financial performance. A consistent theme at Bloom has been a relentless focus on product cost reduction and discipline around all other spend to drive profitable growth. The first half of fiscal 2025 is evidence of those efforts. Equally important, commercial execution was strong. All of this yielded a strong second quarter and first half for us. Highlights included record second quarter revenue and gross margin and our sixth consecutive quarter profitability in our service business.

As a reminder, I will focus my discussion on non-GAAP adjusted cost and profitability metrics. For a reconciliation of GAAP to non-GAAP, please see our press release and the supplemental deck on our website. Revenue for the quarter was $401 million, up 19.5% year over year. Gross margin was 28.2%, 650 basis points higher than the 21.8% gross margin in Q2 of 2024 attributable to mix and level-loaded manufacturing. As we said last quarter, we took advantage of our balance sheet and our visibility into customer demand to maximize efficiency and level-load our factory during the first half of the year. We expect to work down this inventory as our shipment of product accelerates in the second half of fiscal 2025. Our operating income was $28.6 million versus $3.2 million loss in Q2 last year.

Adjusted EBITDA was $41.2 million versus $10.2 million in Q2 of 2024 while EPS was a positive $0.10 versus a loss of $0.06 a year ago. Again, these are all non-GAAP results. With this quarter, we have now had a profitable service business for six consecutive quarters. We expect this trend to continue together with margin improvement. Finally, during the second quarter we refinanced $113 million of our convertible notes that was due in August 2025. To provide more optionality to fund future growth, it was exchanged into our existing 2029 convertible notes. Turning to the full year, we are reiterating our 2025 guidance. As a reminder, we expect 2025 revenue of $1.65 to $1.85 billion, non-GAAP gross margin of approximately 29% and non-GAAP operating income of $135 to $165 million. We expect positive cash flow from operations around the same level that you saw in fiscal 2024.

We also expect CAPEX to be around the same level as fiscal 2024. As we have mentioned before, we expect to see similar revenue seasonality with roughly a 40/60 first half second half split. We are committed to maintaining strong fiscal discipline as we continue to scale. To conclude, we delivered record Q2 financial results and are reiterating our 2025 guidance. Our fuel cell solution was built for this moment when on-site, scalable, reliable, load-following power is required in a matter of months. We are well positioned to meet the moment. Operator, we are now happy to take questions.

Speaker 3

Thank you very much. At this time, I would like to remind everyone in order to ask a question, press Star then the number one on your telephone keypad. Once again, Star one. We will pause just a moment to compile the Q&A roster. It looks like our first question comes from the line of David Arcaro with Morgan Stanley. David, please go ahead.

Speaker 1

Oh, hi.

Thanks so much. I appreciate it.

Speaker 5

Hey David, I was wondering if you could.

Speaker 0

Hi.

Wondering if you could elaborate on your recent success with hyperscalers. How are you seeing Bloom servers being used? Are they the exclusive power source? Are these AI data centers? Are these large scale deployments? Broadly with that customer set, could you see this Oracle partnership potentially act as an accelerant and spur more additional deals?

Speaker 5

David, first, welcome to the family of analysts that are covering us. Nice to have you on. Yes, look, the Oracle deal is the first time we as a company are directly interacting with a hyperscaler as our customer. Here.

Speaker 1

Yes, it is.

Speaker 5

It falls in the size class of the AI data centers, and it will be one single data center that the first project will power. We are working with them on it.

Speaker 1

Many of the projects, the significant.

Speaker 5

Here again, it's an islanded power. It is not connected to the grid, and we carry the primary and the secondary load for this particular customer. It is significant. It is exactly what we have built this, you know, our architecture for. They will be able to use it to a lot of capability Bloom is able to offer. It offers an opportunity for us to get started there and keep improving the number of capable attributes that Bloom brings flowing all the way into the data center and thereby optimizing both capital cost and operating cost for the customer. We see this as extremely significant, and we are the primary source, and it is load following. It'll prove that we can load follow at large scale, it'll prove that we can operate at large scale, and most importantly, AI speed.

It'll prove that we can install stamp sizes at that level within the 90 days that we have told you we would do in our opening remarks.

Excellent. Yeah, thanks for that color. Certainly quite an accomplishment. Maybe following on that, what gives you the confidence here now to double your production capacity? Are you, do you also have kind of an inflection in visibility and does the backlog give you confidence there, or is it the underlying fundamentals of the industry which have certainly been indicating strong demand here?

Thank you, David. Yes, we have always stated when we have been asked that we will never get past our headlights. We have told you in the past that in the last two quarters we have seen strong commercial activity. We have told you that it is very diverse and it is high quality at this point in time. When we look at that pipeline, it has gotten us to a level of confidence where we absolutely feel like this is the right thing to do. That's why we are expanding the capacity, number one, right. Number two, this should be fairly simple and it should be mind boggling for all of us. We shouldn't get numb to this fact. The large hyperscalers put together are going to spend more than $1 billion a day on CAPEX, weekday and weekend.

It's more than $500 billion are going to be spent just in this calendar year by those people. You take that number of $500 billion and you say an order of magnitude down, at least $50 billion of power capital equipment needs to be spent to electrify that additional demand that's going.

Speaker 1

To come on.

Speaker 5

You take that and you do a simple math and say more than one sizable nuclear power plant's worth of baseload is what is needed every month. We all know what can be done by the existing legacy electric infrastructure in this country. It cannot move at AI speed. We are an obvious solution. It is self-evident to me that our demand is going to be high and it would be wrong for us not to go and invest that money because we have that level of confidence not just from what we are seeing in the pipeline but when we look at this kind of investment and we look at where is the tail for this. This is a secular trend. It is not a one year or a two year trend. You put that together.

Absolutely, we should be building these factories and the 2 gigawatt is a start to multi-gigawatts. We will keep building over time, absolute confidence. Thank you.

Excellent. Thank you so much for taking my questions.

Speaker 3

Thanks, David. Our next question comes from the line of Mark Strauss with JP Morgan. Mark, please go ahead.

Speaker 1

Hey, this is Michael on for Mark. I guess just to follow up on that last question. How long do you expect it to take to build out this capacity? I guess what's the timeline in terms of when you expect to exceed the current 1 gigawatt of capacity?

Thanks.

Speaker 5

I think the exact timelines are not something that we would be discussing at this point in time. Here is the point, Michael. We pride ourselves on moving at AI speed. We are going to make sure that we are going to have capacity all of this year and all of next year to meet the kind of timelines that others can't, can't or definitely what our customers want. The capacity we build and how quickly we get that on. We were built for this moment. It is not like you can take any factory of any other legacy technology and expand capacity at this rate. It takes deliberate thought process to have said, I need the supply chain ready, I need the manufacturing ready, I need the equipment ready. We can move on a dime.

We can increase capacity in six months and we can, in most cases, I would venture to guess, provide that kind of additional capacity faster than a data center can stand up their own data center. This is where we are today. This is where we'll continue to be through 2026. That's why we're doing this expansion plan. Okay, great.

Speaker 1

Maybe if I could just throw one more. Is there any estimate on how much this will cost, or how should we expect you to fund the expansion?

Speaker 5

We are well funded for what we need to do in terms of going to 2 gigawatts around ballpark numbers. Think about $100 million is how you should be thinking about this. It'll come spread over quarters and we are well funded for it.

Speaker 3

Thank you. All right, thank you, Mark. Our next question comes from the line of Manav Gupta with UBS. Manav, please go ahead.

Congratulations on a strong quarter.

I wanted to focus a little bit.

On the improvement we are seeing in the operating margin. I mean, you are at already about 7.1% and if you look at, you know, your guide for this year, it's close to like 8.5% if I take the midpoint of it. Making excellent progress on the operating margins to help us understand what's driving it. When we look at 2026 or 2027, would the target be to get to double digit operating margin.

Speaker 1

Levels also on service?

Speaker 5

You're talking about operating margin.

Speaker 0

Yeah.

Speaker 1

That's a great question.

Speaker 5

As you clearly understand and you are looking at the numbers and you've been predicting our models, what you're seeing is tremendous fiscal discipline. We have a finance team here that works so well with the rest of our organization in managing how we spend, whether it's in OpEx, whether it is in how we procure. Also, we have a commercial team that's extremely good at making sure that our customers get great value at the same time we get value for what we bring to them in terms of time to power and other issues. Between that combination and our cost reduction continuing, you should absolutely expect our operating income to keep getting better as we go forward. Will it vary quarter to quarter within a year? Absolutely. That depends on mix and volume; that will happen.

What has helped us this year is we are more level loaded by choice. You're seeing that in our inventory hold when you look at our cash. You're seeing that is a deliberate choice that we have made. Overall, for the entire year, we will reap the benefits of it by level loading that factory.

Perfect. Sir, we were on the American Electric Power call yesterday and they said some very nice things about you and your scalability of your product. I'm just trying to understand you can scale up that order. I think you're doing a couple of data centers through American Electric Power and as you work with them, do you continue to see more American Electric Power collaboration and more deployment of your product through American Electric Power?

As you know, the service agreement was for one gigawatt. If you just look at the AEP numbers and look at where their demand and where that gap is, we are hopeful that working together we can fulfill that gigawatt and think about future agreements like this very soon. We are working together. It is not just a hope. There is a pipeline, and that pipeline for AEP is, again, robust. We work with them, and you'll hear more, I'm sure, in the coming months.

Yeah. I would only like to say one thing conclusively. Two quarters ago, I think, asked you a question that, you know, this deep SEQ is happening and some data center providers are pulling back. You are very firm. This is a blip. Do not look at it. Things will correct very quickly. You had great vision and foresight. Absolutely. It was a blip. Nobody's even talking about it now. Thank you.

Speaker 1

Thank you.

Speaker 5

I appreciate that comment.

Speaker 3

All right, thanks, Manav. Just an update, folks. From this point forward, in the interest of time, we ask that all callers please limit yourselves to one question to allow everyone that has a question to ask it. Thanks in advance for your understanding. It looks like our next question comes from the line of Chris Dendrinos with RBC Capital Markets. Chris, please go ahead.

Speaker 0

Thank you. I wanted to ask about the value proposition you all bring, and I guess maybe specifically on the combined heat power solution. I know in the past you've kind of spoken about it, and it seems really appealing from an efficiency standpoint. I'm curious, are you deploying that with Oracle here? If not, what's kind of the interest level, and where are you at in that solution process with other potential customers? Thanks.

Speaker 5

That's a very good question, Chris. Here is what we see in our pipeline. The interest, as soon as our customers know that we can offer the CHP solution commercially, is very high. Most customers we are talking to today, their approach is give us this quick time to power ASAP and within a few months can we come back to you and retrofit the combined heat and power? The beauty of our solution is we're able to offer that. It's like adding an app on your phone. We can add the CHP as an app, and that flexibility, that beauty of our technology, is very appealing to them. We are seeing that not just from data center customers, but from our commercial and industrial customers whose factories need to be air conditioned or whose factories need steam. We are seeing this across the board in every area.

You are correct to point out from a value proposition wise, it is the equivalent of not needing 20% of your power in a data center. It is the equivalent of not paying for it when you have taken care of your cooling with our waste, with the waste heat as opposed to putting more electricity in. That's a big deal. Thank you.

Speaker 3

All right, thanks, Chris. One more update folks, I forgot to mention before the last caller, even though we are asking you to limit yourself to one question moving forward, feel free to re-enter the queue if you do have an additional question. Thank you. Our next question comes from the line of Maheep Mandloi with Mizuho. Please go ahead.

Hi, thanks for taking the question. This is actually David Benjamin on from Maheep. I understand there's robust demand and looks like, you know, based on guidance, 40% in the first half. It looks like you guys are on track towards the top end of the guidance. I was wondering just the first part.

Speaker 1

What would it take to?

You know, raise that up the bottom end? Secondly, are there any concerns with push outs from the fourth quarter due to potentially ITC being available next year?

Speaker 5

Thank you. Great question.

Speaker 1

So.

Speaker 5

That was nice of you to sneak in the two questions together. Let me answer the second part first. David, on ITC, I should have been clearer in my prepared remarks, but let me try to be very slow, deliberate, and perfectly clear so everybody understands this. Our customers have no gap from a timing perspective on ITC. They used to enjoy ITC last year through this year. They'll continue enjoying all of this year, and it'll continue from 2026 all the way to 2032. There is zero gap. There seems to be some confusion among people reading this. Yes, you're absolutely right. The BBB reinstated ITC for fuel cells starting January of 2026. However, we have secured enough volume under safe harbor so our customers in 2025 don't have to wait for 2026 to be able to avail of those credits.

Therefore, there should be no penalty for any customer or no advantage to any customer to push out buying or installing their systems in 2025. Is that clear? Now, in terms of the guidance and where we are, we have reiterated the guidance. Where we fall in that range, why do we give you a range? It has nothing to do with our ability to ship the systems. It's got everything to do with if the customer is ready. Many of these things are greenfield. They need to finish their factory or their data center on time. They need to be able to connect. Gas needs to be there, and permits need to be there. It could easily move out a couple weeks on either side or a month on either side.

None of these projects are in jeopardy of coming in or not, but when we recognize revenue will depend on those things, and until we have clarity on that, we have to give you a range.

Speaker 3

Okay, thank you, David. Our next question comes from the line of Chris Sung with Wolfe Research. Chris, please go ahead.

Speaker 0

Hey, thanks for taking my question. Congrats on the Oracle deal.

I was just curious. Order was expected to be delivered within.

Speaker 5

90 days, yet there was no change in the full year guideline. Should we assume this is already embedded or would you need to announce additional deals in order to achieve those targets?

Speaker 1

Thanks.

Speaker 5

We have told you from the beginning of the year and we'll continue to reiterate that statement that a portion of our revenue for the year would come from deals that we book, build, ship, and recognize revenue in the same year. It's a wonderful thing. I just remember right after our IPO, it used to be 18 to 24 months on average to book something and then get a deal done. The pace at which business is moving now allows us to do that, to shrink that cycle very well. We would be concerned about that.

Speaker 1

Shrunk cycle if there was reasons to.

Speaker 5

Believe that it's not a secular trend.

Speaker 1

It is just a seasonal move.

Speaker 5

We don't see this as a seasonal move. The fact that we have a secular trend there, the pace of business, the velocity of being able to convert a deal to a booking happens faster, is all fantastic from where we sit. Thank you, Chris.

Speaker 3

Our next question comes from the line of Dushyant Ailani with Jefferies. Dushyant, please go ahead.

Speaker 0

Hi, thanks for taking my question.

Speaker 1

Just the one on.

Speaker 0

I guess in the past you've talked about opportunities outside the U.S. I think you've also mentioned Taiwan in the past. Could you kind of briefly mention how those conversations are progressing and what opportunities.

Speaker 5

You're seeing outside the U.S. Look, today when we look at our business in general, roughly 30% of that comes from international and 70% comes from domestic. We expect to continue that ratio at least through the next year or so because, as all of you know and follow from what's going on, there's tremendous action here in the U.S. market.

Speaker 1

Okay.

Speaker 5

We see that, and we truly believe in the diversity of the market. Not only are we continuing to show strength in Korea and keep that business going, we are developing new markets. I think we have mentioned to you, Taiwan, Germany, Italy, and the UK are the obvious next places we are looking at. In all those places we are.

Speaker 1

Making progress, establishing into a new market.

Speaker 5

Being able to get the policymakers, the regulators lined up with something new to them is very similar to how it was new to people in California and, you know, like New England when we started in the early days. That process is going. I'm very happy with the progress we are making in those places.

Speaker 3

All right, thank you, Dushyant. Our next question comes from the line of Colin Rusch with Oppenheimer & Company. Colin, please go ahead.

Speaker 0

Thanks so much, guys. As you look out at the landscape of opportunities, are there situations where you could end up being used as temporary power for a couple of years and then have those servers move on to other locations? Are you starting to see any sort of incremental demand growth for longer cycle industrials, potentially chemical plants and other things that are looking to ramp and have power shortages as well as the data center opportunity you guys talked about?

Speaker 5

Colin, that's a very good question and the answer is absolutely yes. This is the reason, if you remember, we completely changed how we install our systems from a go and pour concrete and install it on a concrete to on a skid. Think of this as grid to go. We can just take these units on a truck, drop it in a site, and then move that skid from one location to another with ease. All it takes is three connections: the gas connection, the electric connection, and the communications, which is wireless. It's as simple as that. Here is another interesting thing, right?

Speaker 1

It is even better than if you.

Speaker 5

Think of temporary power coming from combustion engines, because you can't take a few blades and put it in one location and a few other blades in another location. If you want to take 100 megawatt and break it into five, you know, like 20 megawatts, with our Bloom systems, the modular nature of it, not only can you take our units and put them in different locations, you can fragment it or aggregate it as you wish. It is definitely a very attractive option that we can offer. Even the hyperscalers are very interested in that because in some locations, if they're able to get power, they can easily move it to another location where they need more power. This becomes very, very attractive. In fact, to us, this is an amazing selling point. Are we concerned about will they need the power two years from now?

Anybody who thinks two years is the bridge and something miraculous is going to be there, you're just, you know, you're just going to go to the next bridge. It's a bridge to a bridge. It's not a bridge to a solution, and you all know that.

Speaker 3

All right, thank you very much, Colin. Our next question comes from the line of Sherif Elmaghrabi with BTIG. Sherif, please go ahead.

Speaker 0

Hey, thanks for taking my question. Another tax credit question, safe harbor aside, the triple B does give more visibility and my understanding is that domestic content bonuses have actually been raised. My question is, with the tax credit picture set, hopefully set, does that.

Speaker 5

Put you in a position to push pricing? Sorry, something got cut off on this. I'm really sorry on our end. Can you just repeat that question one more time if you don't mind, Sherif? Sorry.

Speaker 1

Sure.

Speaker 0

I'm saying that BBB crystallizes the tax credit picture, and I think in some cases it actually increases the benefit. Does that level of visibility put you.

Speaker 5

In a position to push pricing? Yeah. What happens with the BBB is there is no domestic content adder when it comes to the ITC, right. I think I'm answering your question. If not, let me know and I'll. It is a flat 30%.

Speaker 1

Okay.

Speaker 5

Whereas in the previous version of the bill that ended last year, our customers can avail of either 40% or 50%, depending on whether they are not in an energy community or in an energy community. If they're not in an energy community, it's 40%. If they're in an energy community, it's 50%. From that perspective, yes, their subsidies go down a little bit, but given how high the price of electricity has gone up at 30%, our attractiveness will be extremely high. You also know that every year we bring down cost reductions. Between those two things, we don't see any issues with relation to maintaining our margins, if that's your question.

Speaker 0

Yeah, that's very helpful. Thanks, K.R.

Speaker 3

All right, thank you, Sherif. Our next question comes from the line of Noel Parks with Tuohy Brothers. Noel, please go ahead.

Hello, good afternoon.

Speaker 0

I wonder if you could talk.

Speaker 5

Bit about product development and maybe update.

Speaker 0

Us on your upcoming generation of the.

Speaker 5

Bloom Energy Server and what incremental benefits.

Speaker 0

You're anticipating from that.

Speaker 5

Any comment you have on the effect on the economics for the product for you would be no, thank you very much for that question. Here is what is really interesting about the Bloom platform going forward. That improvement that we are talking about does not need to happen by generations as a step function. It is happening continuously, quarter after quarter of things coming, of new ideas being robustized, completely manufacturable and entering into production in a line. Think of our product continuously improving as opposed to going from one model of a product to another model of a product. We are able to incorporate that seamlessly. Lots of developments are continuing to happen. In a way, if you saw earnings script, we are maintaining guidance on our margin even though there can be a 4% tariff hit on our materials.

All that is coming from further improvements coming into our product. We do not anymore talk about our product in terms of generations, but in terms of it is getting healthier and healthier as the days go by and it's getting better and better. Why is that? It goes back to, if you look at my script, we get real time feedback from the digital twins that we have set in place. The 4 trillion data points that come into us and how we analyze it, how we learn from it, how we improve it gives us a unique ability that I do not think exists in the power industry other than at Bloom, where we are able to improve our product. You will see this as a continuous improvement as opposed to a step improvement going forward. We bring new attributes.

For example, CHP was a new attribute, load following was a new attribute, being able to operate islanded and load following was a new attribute. We bring these attributes into the product.

Speaker 3

Great, thanks for the question, Noel. Our next question comes from Chris Dendrinos with RBC Capital Markets. Chris, please go ahead.

Speaker 0

Yeah, thanks for taking the follow-up.

I wanted to go back to the.

Value proposition, and I think you slightly hit on this in Colin's question. Maybe just comparing y'all's solution to like a natural gas turbine. We've seen those get deployed in some situations, and I think, you know, could you just help us paint a better picture of where you see your solution really being the most optimal compared to a gas turbine? I mean, to me it looks like it should always be, but there are certainly reasons that are driving some customers to take up a gas turbine. Just trying to get a sense of what those kind of driving forces might be.

Speaker 1

Thanks.

Speaker 5

Chris, I completely agree with you, but you know, nobody gets fired for buying IBM, right? Anyway, if you look at economics, here is what I can tell you. You look at the demand growth and you look at where numbers are going. What we heard even six months ago of 20% of data centers may be islanded and not connected to the grid, that number is now hovering on 40%. The amount of data centers that are telling us in the surveys that they would use islanded power is going up when you go there. The monolithic turbine needs one additional monolith to be able to, so when one unit is being serviced, the other unit is on standby.

You put that together compared to the Bloom architecture where it's one lego block and you compare apples and apples for a grid level availability of 999 or even a high nines available of 5, 9 or 6 nines. You compare that apples and apples. Our CapEx compares favorably or at a minimum at parity with turbines. On the other hand, those turbines have at least 15 to 20% more fuel that they will consume compared to us. On the OpEx there's a significant win. On top of that, we have no air pollution. Whereas getting an air permit to put a lot of turbines if you live in a populated area is very difficult. You're probably reading in the press. You combine all those things. Because we are easier to permit, we remove the friction to permitting so we are faster. Time to power is everything in this business.

Secondly, operating cost is lower. CapEx is at parity. You put them all together. I think we compare more than favorably to any other alternative way of producing electricity.

Speaker 3

All right, thank you for the follow-up, Chris. Our next question comes from the line of Sky Landon with Rothschild & Co Redburn. Sky, please go ahead.

Speaker 1

Hi, thanks very much. More of a clarification for myself on the AEP announcement recently regarding the Amazon.

Speaker 0

Web services.

Speaker 1

Are you able to confirm whether those projects are included within the 100 megawatts, or if those are additional on top of 100 megawatts?

Speaker 5

Thanks.

Speaker 1

It is.

Speaker 5

It is part of the 100 megawatts.

Speaker 1

That was in the purchase order and the.

Speaker 5

Other 900 megawatts are what we are working actively on the pipeline. Thank you.

Speaker 3

Perfect.

Speaker 1

Thanks.

Thanks Sky.

Speaker 3

Our final question today comes from the line of Dimple Gosai with Bank of America. Dimple, please go ahead.

Hi, good evening. Thank you so much for taking my question. I actually have two if that's okay. The first one is just trying to get more clarity or understanding around the Oracle deal. Is this a done deal? Is there a framework to deploy, any KPIs that need to be met? Any color would be super helpful for us. The second question is if you can talk a little bit about your capital needs or liquidity in terms of funding the manufacturing expansion. Thank you.

Speaker 1

On the first question on the Oracle deal.

Speaker 5

We are a company that don't discuss on earnings calls, LOI and MOUs and things like that. This is a purchase order we are executing. They will have power in 90 days.

Speaker 1

Period.

Speaker 5

In terms of how much capacity and dollars we need, you may have joined us late. I don't want to hold everybody up on that. We have already answered that question. It'll be in the transcripts. Thank you very much. With that last question, let me say that, look, AI is moving faster than any technology in history, faster than the Internet.

Speaker 1

Orders of magnitude.

Speaker 5

Faster than the electricity industry. It's demanding more, more power, more data centers, more urgency. Our company, Bloom Energy, our entire company was.

Speaker 1

Built for such a moment.

Speaker 5

We are ready and we can move at AI speed. The advantages of our purpose-built digital platform have never been more obvious and relevant to everybody. The opportunity in front of us is both massive and secular. We are confident in our strategy, we are confident in our execution. Internally, we ourselves have shifted to a higher gear because we are going to blaze forward. We thank you for your confidence in us and your continued support. We wish you a good day.