Fluence Energy (FLNC)·Q1 2026 Earnings Summary

Fluence Energy Stock Plunges 18% as Margin Collapse Overshadows Revenue Beat

February 5, 2026 · by Fintool AI Agent

Fluence Energy delivered a modest revenue beat in Q1 FY2026 but shocked investors with a severe gross margin contraction that sent shares tumbling 18% in regular trading. While revenue came in at $475 million (+154% YoY, +2.1% vs consensus), adjusted gross margin fell to just 5.6% — well below the 11-13% full-year target .

On the earnings call, CFO Ahmed Pasha attributed the margin miss to "$20 million of additional costs, a majority of which were associated with two specific projects outside the U.S." — one involving equipment scope changes, the other schedule-related . Management expects to recover these costs during FY26.

Despite the Q1 stumble, CEO Julian Nebreda struck an optimistic tone, highlighting record backlog of $5.5 billion, a 30% pipeline increase to $30 billion, and a data center opportunity spanning 36 GWh — largely not yet in the pipeline .

Did Fluence Energy Beat Earnings?

Mixed results: Revenue beat, but profitability metrics missed across the board.

*Values retrieved from S&P Global

The 154% YoY revenue growth was impressive, but the margin story dominated. Ahmed Pasha explained the variance reflects "two specific factors" :

1. Project cost overruns (~$20M): Scope changes on two non-US projects — one equipment-related, one schedule-related
2. Q1 seasonal dynamics: Revenue is lightly weighted while fixed overhead costs spread evenly across the year

What Caused the Margin Miss?

CFO Ahmed Pasha provided specific detail on the margin headwinds during Q&A:

"The $20 million impact... is at two projects, non-US projects, two different countries, different technologies, different stages of completion. Essentially, the change in scope of the project in both cases — one is the scope change in equipment, and the other one is in the schedule."

He added: "Whenever these changes happen, we always recover those under the contract from our customers. And that is what we plan on doing during the rest of the year."

Despite the soft Q1, management emphasized the rolling 12-month adjusted gross margin remains at 12.3% — still solidly in double-digit territory. They view this as "discrete project-specific items, not systemic or structural issues" .

How Did the Stock React?

The market reaction was severe, though moderated from after-hours levels:

FLNC had been on a remarkable run, up over 800% from its 52-week low of $3.46. Today's selloff erased significant gains but the stock remains well above its lows, trading at roughly 5x the 200-day moving average of $12.92.

What Did Management Guide?

FY2026 guidance reaffirmed — no change from November 2025:

Management's confidence rests on three factors :

1. Revenue midpoint now fully covered by orders in backlog
2. All equipment required for FY26 has been ordered, minimizing supply chain and commodity price risks
3. Clear visibility into operating cost structure needed to deliver 11-13% margins

What's Driving the $30 Billion Pipeline?

One of the most bullish elements of the call was pipeline growth. The $30 billion pipeline is up 30% ($7 billion) from $23 billion in September , with the US leading at $17 billion (up $7 billion or 70%) .

CEO Julian Nebreda explained the drivers:

"We are seeing growing demand from developers, IPPs, utilities, and rapidly expanding data center opportunities. During the quarter, we also ramped up our sales efforts in all our core markets, including expanding our sales channels and outreach to existing and potential new customers."

Data Center Opportunity: 36 GWh

The biggest growth lever discussed was data centers. Fluence is engaged in discussions covering 36 GWh of projects , including hyperscalers — and critically, "many of the 36 GWh of data center projects are not yet included in our pipeline" .

On conversion timing, Nebreda said:

"This is a new market segment for us... When we looked at the pipeline and what we're working on, we should expect something happening in the second half of the year, say third or fourth quarter of the calendar year."

The data center use cases are evolving beyond traditional front-of-meter storage to include :

• Speed to power: Storage enables faster grid interconnection by adapting demand to grid capabilities
• Quality of power: Voltage management, reactive power, and ramp rate control
• Backup power: Replacing higher-cost, carbon-intensive thermal gensets
• Behind-the-meter generation support: Firming on-site renewable or dispatchable generation

Long-Duration Energy Storage: 34 GWh

Fluence also highlighted early discussions on 34 GWh of long-duration energy storage projects, largely in Europe and the US . About 25% of these are currently in the pipeline .

ASC Battery Cell Resolution Update

A key question from analysts was the status of AESC's Tennessee facility and its PFE (Prohibited Foreign Entity) compliance for domestic content requirements under the One Big Beautiful Bill Act.

CEO Nebreda provided an update:

"Our main objective in our relationship with ASC is ensuring that we have access to PFE-compliant cells at competitive terms... We made them a proposal [for ownership]. Our understanding today is that they will resolve that problem in some other form... They will meet the conditions of the law without the need for us to get involved in the ownership structure of that plant."

This is a shift from prior quarters where a Fluence acquisition of ASC was discussed as a possibility. The company will remain an offtaker, with the existing MSA unchanged .

Supply Chain Diversification

The company added a second domestic cell offtake agreement last quarter and is now working with EV battery lines converting to battery energy storage system (BESS) production .

"The market for cells in the US is expanding like crazy. We have all these EV battery lines that are converted now into BESS... This is no different than what we saw in China two years ago when the EV demand came down and how that allowed for our markets to grow."

For FY26, the cell supply mix is roughly 50/50 domestic vs. imported, with 100% of needs secured .

Competitive Landscape: Response to Tesla

When asked about Tesla's comments on Megapack margin pressure from competition and tariffs, Nebreda was dismissive:

"We don't see any major competitiveness, no real changes. So unless Tesla is referring to us, maybe... In terms of tariff and all of the other stuff, I think we are very much aligned. So we are confirming our guidance with the view that there's no real change."

He added: "The competitive landscape has [not] changed at all. What we have seen is a significant diversification of battery cell suppliers."

Legal Settlements: Risk Off the Table

Two notable legal matters were resolved :

1. Moss Landing: Settled for an immaterial amount with insurers and subcontractors, with full release of claims and no admission of responsibility for the 2021 overheating incident

2. Diablo Canyon: Fluence obtained court dismissal of Diablo's $230 million disgorgement claim

These remove two overhang risks that had been outstanding for several quarters.

Operating Leverage Model

On margin expansion beyond FY26, Nebreda outlined the company's operating leverage framework:

"Usually, we assume that our gross margins stay the same and our ability to grow is a bit that will come out of our operating leverage... Our overhead would only grow at half, at no more than half of the growth of our top line growth."

This implies that as Fluence scales revenue toward and beyond $5 billion, operating margins should expand meaningfully even with flat gross margins.

Key Operating Metrics

Q&A Highlights

On FY26 upside potential:

"Our approach to our performance that we're working towards meeting our guidance. We're committed to meeting our guidance... Most of what we want to provide you better opportunities will be for 2027. That's what we want to do." — CEO Julian Nebreda

On Q1 order intake being the low point:

"Our order intake for this quarter will be the lowest one of the year. It will be the low point of the year, and we should be able to go and deliver better order intake that will provide stronger visibility for 2027." — CEO Julian Nebreda

On liquidity sufficiency:

"We have a billion-dollar liquidity, which we believe is sufficient to support our current plan... Those opportunities will require additional capital once they materialize, and then we will be opportunistic to see how we can raise that capital." — CFO Ahmed Pasha

On data center product fit:

"We have a very strong competitive advantage. Dense product, very safe... Reliability last year was close to 99%. Cybersecurity, we've been working very strong... For quality of power [<10ms response time], we have a roadmap to deliver that part." — CEO Julian Nebreda

The Bottom Line

Fluence delivered on the top line but stumbled on execution in Q1. The 154% YoY revenue growth and record $5.5B backlog demonstrate commercial strength, but a 5.6% adjusted gross margin in a capital-intensive business is concerning — even if management attributes it to discrete project issues.

The bull case rests on:

• Record backlog covering full-year revenue guidance midpoint
• 30% pipeline growth with 36 GWh of data center upside not yet in pipeline
• Expanding domestic supply chain with EV-to-BESS cell conversion
• Legal overhang removed with Moss Landing and Diablo Canyon resolved
• Clear operating leverage model for margin expansion at scale

The bear case focuses on:

• Q1 margin miss raises execution questions — can they recover the $20M?
• Q1 was the low point for orders — will conversion from pipeline accelerate?
• Cash burn of $238M in Q1 with significant working capital needs ahead
• Data center opportunity is unproven — no backlog conversion yet

For a company that's supposed to be turning the corner on profitability, Q1 was a step backward. But with guidance reaffirmed and management pointing to H2 margin recovery, the next two quarters will be critical to restoring investor confidence.

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Fluence Energy reports earnings for fiscal Q1 2026 (October-December 2025). The company has a September fiscal year-end.

Related: FLNC Company Profile | Q4 FY25 Earnings | Q1 FY26 Earnings Transcript