Sign in
EE

Enphase Energy, Inc. (ENPH)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 printed revenue of $356.1M and non-GAAP diluted EPS of $0.68; both missed S&P Global consensus ($362.0M revenue, $0.72 EPS). Non-GAAP gross margin was 48.9% with IRA benefit (38.3% ex-IRA), down sequentially due to lower 45X bookings and mix . Q1 misses vs consensus marked below with S&P Global disclaimer.*
  • Management guided Q2 2025 revenue to $340–$380M and signaled a new tariff headwind of ~200 bps to gross margin in Q2, stepping up to 6–8% in Q3 before mitigation fully offsets by Q2’26 .
  • Mix and macro: U.S. revenue fell ~13% q/q on seasonality and softer demand (partly offset by $54.3M safe harbor), while Europe rose ~7% q/q as IQ Battery 5P FlexPhase ramped; channel inventory for microinverters ticked up, expected to normalize in Q2 .
  • Product catalysts: ramping the fourth‑gen IQ Battery 10C, IQ Meter Collar, IQ Combiner 6C in the U.S., plus IQ EV Charger 2 and balcony solar kits in Europe; IQ9 GaN microinverters targeted for Q4 launch to open 480V 3‑phase commercial opportunity .
  • Liquidity and capital return: ended Q1 with $1.53B in cash, equivalents, restricted cash and marketable securities; repurchased ~$100M of stock in Q1 and retired $102.2M of 2025 converts .

What Went Well and What Went Wrong

What Went Well

  • Battery momentum and Europe stabilization: IQ Battery 5P shipments expanded to 170.1 MWh (+11.6% q/q), with Europe revenue +7% q/q driven by FlexPhase ramp; more than 10,900 certified battery installers globally .
  • Clear tariff mitigation plan and timeline: “We expect the gross margin impact to gradually lessen... and fully offset the impact starting in Q2 ’26,” supported by qualifying non‑China LFP cell sources and shifting raw materials out of China .
  • New product wave to lower system cost and expand TAM: “Our fourth generation system… significantly simplifies backup... what once took four boxes... can now be done with just two,” and IQ9 GaN microinverters targeted for Q4 to unlock small commercial growth .

What Went Wrong

  • Consensus miss and margin compression: Q1 revenue ($356.1M) and non‑GAAP EPS ($0.68) missed S&P Global consensus ($362.0M, $0.72), while non‑GAAP gross margin compressed to 48.9% (38.3% ex‑IRA) from 53.2% (39.7% ex‑IRA) in Q4 .*
  • U.S. demand softness and channel inventory: U.S. revenue down ~13% q/q on seasonality, high rates, and a large lease provider’s financial issues; microinverter channel inventory was “a little elevated,” expected to normalize with lower shipments and Q2 seasonality .
  • Tariff headwinds on batteries: new tariffs expected to cut gross margin ~2% in Q2 and 6–8% in Q3 as pre‑tariff inventory rolls off; ENPH will absorb a “majority” near‑term while moving supply outside China .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)380.9 382.7 356.1
GAAP Diluted EPS ($)0.33 0.45 0.22
Non-GAAP Diluted EPS ($)0.65 0.94 0.68
GAAP Gross Margin (%)46.8% 51.8% 47.2%
Non-GAAP Gross Margin (%)48.1% 53.2% 48.9%
Non-GAAP Gross Margin ex-IRA (%)38.9% 39.7% 38.3%
Free Cash Flow ($USD Millions)161.6 159.2 33.8
Cash, Equivalents, Restricted & Marketable Securities ($USD Billions)1.77 1.72 1.53
Microinverters Shipped (Million units)1.732 2.010 1.530
Batteries Shipped (MWh)172.9 152.4 170.1

Q1 2025 vs S&P Global consensus:

MetricActual Q1 2025Consensus Q1 2025Surprise
Revenue ($USD Millions)356.1 362.0*-5.9
Primary EPS (Non-GAAP) ($)0.68 0.72*-0.04

Values marked with * were retrieved from S&P Global.

Geography/Channel commentary (q/q vs Q4 2024):

ItemQ1 2025 Detail
U.S. revenue change~-13% q/q; seasonality and softer demand; offset by $54.3M safe harbor revenue
Europe revenue change~+7% q/q; driven by battery sales (IQ Battery 5P FlexPhase ramp)
Channel inventory (microinverters)“A little elevated,” expected to normalize on lower shipments and Q2 seasonality

KPIs and non-GAAP adjustments:

KPI / AdjustmentQ1 2025
Net IRA benefit ($USD Millions)37.9
Non-GAAP Operating Expenses ($USD Millions)79.4
Non-GAAP Operating Income ($USD Millions)94.6
Free Cash Flow ($USD Millions)33.8
Safe Harbor Revenue ($USD Millions)54.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q2 2025N/A (Q2 prior not guided)$340–$380; includes ~$40 safe harbor and 160–180 MWh battery shipments New
GAAP Gross Margin (%)Q2 2025N/A42–45 with net IRA; includes ~2 pp tariff impact New
Non-GAAP Gross Margin (%)Q2 2025N/A44–47 with IRA; 35–38 ex‑IRA; includes ~2 pp tariff impact New
Net IRA Benefit ($USD Millions)Q2 2025N/A$30–$33 (≈1.0M U.S. microinverters) New
GAAP Operating Expenses ($USD Millions)Q2 2025N/A$136–$140 New
Non-GAAP Operating Expenses ($USD Millions)Q2 2025N/A$78–$82 New
GAAP Tax Rate (%)FY 202517–19 (with IRA) for 2025 given at Q4 2024 21–23 GAAP; 15–17 non‑GAAP (with IRA) Updated
Revenue ($USD Millions)Q1 2025$340–$380; includes ~50 safe harbor; 150–170 MWh batteries Actual $356.1 In‑range
Non-GAAP Gross Margin (%)Q1 202548–51 with IRA; 38–41 ex‑IRA Actual 48.9 with IRA; 38.3 ex‑IRA In‑range
GAAP/Non-GAAP Opex ($USD Millions)Q1 2025GAAP $143–$147; Non‑GAAP $81–$85 GAAP $136.3; Non‑GAAP $79.4 Lower than guided

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs / MacroEmphasis on domestic content and U.S. manufacturing; no major tariff headwind disclosed New tariffs: ~2 pp GM hit in Q2; 6–8% in Q3; mitigation plans to fully offset by Q2’26 Near‑term headwind, medium‑term mitigation
Supply chain diversificationRamping U.S. microinverter production; higher domestic content products Accelerating LFP cell sourcing outside China; raw material moves to low‑tariff countries Diversification accelerating
Product roadmapAI energy software, EV charger prep; fourth‑gen system expected early 2025 Launching IQ Battery 10C, Meter Collar, Combiner 6C; IQ9 GaN in Q4; balcony solar kits Pipeline expanding
Regional trendsU.S. +43% q/q in Q3; Europe -15% q/q U.S. -13% q/q (seasonality, financing); Europe +7% q/q (battery ramp) U.S. cautious; Europe stabilizing on storage
Regulatory / StandardsBABA compliance; AI DIY permitting; NEM expansion solution Brazil fire standard; ongoing NEM dynamics; VPP programs expanding Standards supportive; VPP building
AI / TechnologyAI‑based energy management introduced; installer platform enhancements Continued AI investment in support; GenAI in SolarGraph; dynamic tariff optimization Expanding AI deployment
VPP / Grid servicesNew states added for VPP in Q3 Expanded support in PR, CO, NS; 26 programs in key U.S. states Growing participation

Management Commentary

  • “These tariffs are expected to reduce our gross margin by approximately 2% in Q2 ’25… Starting in Q3, we anticipate a 6% to 8% total gross margin impact… we expect to fully offset the impact starting in Q2 ’26.” — CEO Badri Kothandaraman .
  • “Our fourth generation IQ battery… significantly simplifies backup… what once took four boxes on the wall can now be done with just two.” — CEO Badri Kothandaraman .
  • “We are currently about 80% booked to the midpoint of our revenue guidance [for Q2].” — CEO Badri Kothandaraman .
  • “Non‑GAAP gross margin for Q1 was 48.9%… 38.3% before net IRA benefit… included $37.9M of net IRA benefit.” — CFO Mandy Yang .
  • “U.S. revenue decreased 13% q/q… partially offset by safe harbor revenue of $54M; Europe revenue increased ~7% q/q with battery sales ramp.” — Management commentary .

Q&A Highlights

  • Tariff strategy and pass‑through: ENPH will absorb a “majority” of near‑term battery tariff costs, passing a portion to customers; expects mitigation via non‑China LFP cells and raw materials to restore margins by Q2’26 .
  • Guidance bookings and demand: ~80% booked to Q2 midpoint; near‑term demand impacted by financing uncertainty and seasonality; expectation for seasonal improvement and product‑driven growth .
  • Battery volume/margin trajectory: Fourth‑gen system reduces overall backup system cost; expect continued battery growth in Europe (3‑phase backup) and margin improvements each quarter through Q2’26 .
  • Channel inventory: Microinverter channel inventory “a little elevated”; plan to ship less into channel and rely on Q2 seasonality to normalize .
  • Logistics and supply chain: 85% of microinverters made in U.S.; 25% of Q1 battery MWh made in Texas; supply chain already diversified to support scaling .

Estimates Context

  • Q1 2025 results missed S&P Global consensus: revenue $356.1M vs $362.0M*, EPS $0.68 vs $0.72*. Sequential margin compression (lower 45X bookings, product mix) further pressured the print . Values marked with * were retrieved from S&P Global.
  • Prior quarters: Q4 2024 beat on both revenue ($382.7M vs $377.5M*) and EPS ($0.94 vs $0.75*) amid stronger U.S. microinverter shipments; Q3 2024 missed on both revenue and EPS .*
  • Forward: Q2 guide embeds ~2 pp tariff headwind and lower IRA benefit ($30–$33M vs Q1 $37.9M), implying estimates may need to reflect near‑term margin compression even as product ramps support volumes .

Key Takeaways for Investors

  • Q1 2025 was mixed: revenue/EPS below consensus, margins down sequentially ex‑IRA; near‑term setup is constrained by tariffs and U.S. demand softness .*
  • Management is prioritizing margin recovery through non‑China LFP sourcing and raw materials re‑routing, targeting full offset of tariff impact by Q2’26; watch for quarterly progress (Q3 6–8% GM hit easing thereafter) .
  • Product catalysts are meaningful: IQ Battery 10C and Meter Collar lower backup install costs; IQ9 GaN microinverters open small‑commercial TAM; balcony solar kits and EV charger 2 expand Europe TAM .
  • Europe may be an incremental bright spot as storage attach rises (e.g., Germany 3‑phase backup attach ~30%) and FlexPhase ramps; monitor sell‑through trends vs Q1’s -9% seasonality .
  • U.S. demand headwinds include rates and financing, but safe harbor sales ($54.3M in Q1; ~$40M in Q2 guide) help bridge timing; channel inventory normalization depends on disciplined shipments and Q2 seasonality .
  • Balance sheet remains strong ($1.53B liquidity); ENPH repurchased ~$100M in Q1 and retired $102.2M converts, offering flexibility to execute mitigation and product launches .
  • Near‑term trading: sentiment likely hinges on tariff absorption path and margin prints vs guide; medium‑term thesis rests on product‑driven TAM expansion (storage, commercial microinverters, Europe) and successful supply chain diversification .

Values marked with * were retrieved from S&P Global.