SOLAREDGE TECHNOLOGIES, INC. (SEDG)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $219.5M, up 12% q/q and 7% y/y, with Non-GAAP EPS at ($1.14); both revenue and EPS modestly beat Wall Street consensus (Revenue: $219.5M vs $204.2M*, EPS: ($1.14) vs ($1.16)*) and marked a second consecutive quarter of positive free cash flow .
• Gross margin recovered meaningfully: GAAP GM to 8.0% (from -57.2% in Q4) and Non-GAAP GM to 7.8% (from -39.5% in Q4) as impairments subsided and OpEx fell; however, profitability remained negative on both GAAP and Non-GAAP bases .
• Q2 2025 guidance implies sequential acceleration: revenues $265–$285M, Non-GAAP GM 8–12% (including ~200 bps tariff impact), Non-GAAP OpEx $90–$95M; management expects tariffs (145% China, 10% other) to reduce GM by ~2 pts in Q2 and 4–6 pts in H2 2025 net of pricing, with mitigation actions underway .
• Operational KPIs improved: shipments reached ~1.2 GW inverters and 180 MWh batteries (best since Q3 2023), ASP/watt fell to $0.173 (down 17% q/q) on Europe pricing and mix, while battery ASP/kWh rose to $267 on mix .
• Narrative catalysts: U.S. manufacturing ramp (70k inverters/quarter capacity; domestic content wins), European share recapture through pricing/promotion, and new products (Nexus platform, 14a-compliant controller, solar-powered EV fleet charging) support medium-term thesis despite near-term tariff headwinds .

What Went Well and What Went Wrong

What Went Well

• Sequential revenue growth and margin recovery: revenue +12% q/q to $219.5M; Non-GAAP GM turned positive at 7.8% vs -39.5% in Q4; Non-GAAP OpEx fell to $89.1M; second straight quarter of positive FCF ($19.8M) .
• U.S. manufacturing ramp and domestic content strategy: capacity reached ~70,000 inverters per quarter with first domestic content C&I product shipped; management highlighted progress and domestic content advantage amid tariffs .
• Management tone on turnaround: “We delivered a second straight quarter of positive free cash flow and are executing on our strategic priorities… we remain relentlessly focused on elevating our execution” — CEO Shuki Nir .
• European market-share initiatives: signs of improved sell-through and channel feedback; Germany and Netherlands showed particular strength; battery upgrade campaign tapping net metering changes .
• Product innovation momentum: Nexus platform on track for Q4 2025 initial volumes; Germany §14a-compliant ONE Controller; launch of solar-powered EV fleet charging with reported ~70% cost reduction at a beta customer .

What Went Wrong

• Profitability still negative: GAAP net loss ($98.5M) and Non-GAAP net loss ($66.1M); GAAP operating loss ($102.7M) despite margin improvement .
• ASP pressure and mix: ASP per watt fell to $0.173 (down 17% q/q) due to Europe pricing actions and optimizer-to-inverter ratio mix; indicates continued pricing pressure to regain share .
• Tariff headwinds: newly introduced 145% China and 10% ex-China tariffs expected to reduce Q2 GM by ~2 pts and H2 GM by 4–6 pts net of pricing; FCF outlook trimmed to ~breakeven for 2025 .
• Europe remains challenged: management expects European market to decline y/y in 2025 and channel normalization by end of Q2; continued inventory consumption required .
• Dependency on safe harbor/IRA mechanics for cash cadence: Q4 commentary indicated 45X monetization and safe harbor shipments influencing deferred revenue and restricted cash, highlighting financing cadence sensitivity .

Financial Results

Values marked with * retrieved from S&P Global.

Guidance Changes

Management further quantified tariff impacts: ~2 pts GM reduction in Q2, and 4–6 pts in H2 2025 net of pricing adjustments, with supply chain diversification actions underway .

Earnings Call Themes & Trends

Management Commentary

• “We delivered a second straight quarter of positive free cash flow and are executing on our strategic priorities… we remain relentlessly focused on elevating our execution across our business.” — CEO Shuki Nir .
• “In Q1, we executed our plans to ramp up manufacturing of U.S.-made products… capacity of 70,000 inverters per quarter, including the shipment of our first domestic content C&I product.” — Shuki Nir .
• “Assuming tariffs of 145% [China] and 10% [others], we expect ~2% reduction in Q2 gross margin… and 4%–6% impact in the second half, net of pricing adjustments… reducing to ~2% by Q1 2026.” — Shuki Nir .
• “We are cautiously optimistic that we have turned the corner in our market share position [in Europe]… Germany and the Netherlands showed strength, with battery upgrade campaigns ahead of net metering changes.” — Shuki Nir .
• “Total revenue for Q1 was $219.5M; Non-GAAP revenues were $212.1M… Non-GAAP gross margin 7.8% vs -39.5% in Q4… Non-GAAP OpEx $89.1M.” — CFO Asaf Alperovitz .

Q&A Highlights

• Tariffs: Management quantified impacts (2 pts Q2 GM, 4–6 pts H2), based on 145%/10% rates; supply-chain diversification underway, with quality standards prioritized .
• Pricing/ASP: Value-based pricing to reflect technology advantages; Europe promotions showing early positive signs; inventory normalization expected to reduce incremental pricing support .
• Inventory normalization: Majority of European distributors expected to reach normalized inventory by end of Q2; continued inventory consumption, especially in Europe .
• 45X/transferability: Ongoing monetization cadence; if transferability timing issues arise, direct pay/bridge financing options considered; 45X becoming normalized in reporting .
• Convert strategy: Plan unchanged—use cash on balance sheet to retire debt; net cash and investments ~$794M, net of total debt ~$113M .
• Batteries/Sella 2: Ex-China supply diversification in process; Sella 2 (Korea, NMC) not planned for cell production due to time and CapEx; expect rising battery attach rates .

Estimates Context

• Q1 2025 vs consensus: Revenue $219.5M beat vs $204.2M*, and Non-GAAP EPS ($1.14) beat vs ($1.165)*; modest outperformance driven by higher shipments and improved margins from lower impairments .
• Q2 2025 consensus context: Revenue consensus $274.5M* sits within management’s $265–$285M guide; EPS consensus ($0.839)* broadly aligns with guidance commentary on GM and OpEx ranges .
  Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Sequential recovery is real: revenue growth, margin improvement, and positive FCF two quarters in a row support stabilization, though losses persist .
• Expect tariff headwinds near term: Q2 GM hit (~2 pts) and H2 GM hit (4–6 pts) are explicit; supply chain actions and U.S. manufacturing should mitigate by 2026 .
• European normalization is pivotal: channel inventory normalization by end-Q2 and pricing promotions aim to recapture share; watch Germany/Netherlands data .
• Domestic content advantage: U.S. manufacturing ramp and 45X credits underpin competitive positioning in TPO/C&I and help liquidity/FCF cadence .
• New products are a 2H catalyst: Nexus platform, §14a controller, EV charging solution expand software-led energy management, potentially improving margin mix .
• Near-term trading lens: modest beats and raised sequential guide can support sentiment, but ASP pressure and tariff overhang cap upside until margins inflect; monitor Q2 GM delivery vs 8–12% .
• Medium-term thesis: If share recapture in Europe/U.S., tariff mitigation, and cost/OpEx targets ($85–$90M run-rate by YE25) execute, path to EBIT margin restoration emerges alongside domestic content wins .

Additional References

• Press release (Q1 2025): revenue/margins, guidance, non-GAAP reconciliations .
• Q1 2025 earnings call transcript: strategy, tariffs, regional trends, pricing, batteries .
• Relevant Q1 2025 press releases: Solar-powered EV fleet charging rollout; §14a-compliant controller launch .
• Prior quarters: Q4 2024 press release & call for trend analysis (impairments, 45X cadence, guidance) .