Shoals Technologies Group (SHLS)·Q4 2025 Earnings Summary

Shoals Posts Record Revenue but Weak Q1 Guidance Sends Stock Down 14%

February 24, 2026 · by Fintool AI Agent

Shoals Technologies (NASDAQ: SHLS) delivered record quarterly revenue of $148.3 million in Q4 2025, up 39% year-over-year, but the stock plunged 14% in aftermarket trading after management guided Q1 2026 significantly below Street expectations . The solar EBOS (electrical balance of system) provider posted adjusted EPS of $0.10, missing the $0.13 consensus, as gross margins compressed 600 basis points to 31.6% due to tariffs, material costs, and facility transition expenses .

Did Shoals Beat Earnings?

The quarter was mixed. Revenue handily beat expectations with $148.3M representing 39% growth versus Q4 2024's $107.0M . However, profitability metrics disappointed:

The margin compression was attributed to $3.3 million in duties and tariffs not incurred in the prior year, plus $1.5 million in right-of-use asset amortization from the new Portland, Tennessee manufacturing facility .

What Did Management Guide?

This is where the stock got crushed. Q1 2026 guidance came in dramatically below consensus:

*Values retrieved from S&P Global

Management attributed the shortfall to "headwinds in the utility scale solar market, which have resulted in certain customers changing order patterns" . Notably, the company stated this quarterly guidance was a one-time disclosure and they do not intend to provide quarterly guidance on an ongoing basis.

Full Year 2026 Outlook remains constructive :

• Revenue: $560-600M (+22% YoY at midpoint)
• Adj. EBITDA: $110-130M (+21% YoY at midpoint)
• Operating Cash Flow: $65-85M (~340% YoY growth)
• CapEx: $20-30M (24% decline)

How Did the Stock React?

SHLS closed at $9.90 on February 24, down 6.7% during regular trading, then fell another 8.5% to $9.06 in aftermarket trading—a total decline of approximately 14% from the prior close of $10.61.

The stock has shown significant volatility around earnings over the past two years. After hitting a 52-week high of $11.36, shares now trade near the middle of their range, with a 52-week low of $2.71.

What Changed From Last Quarter?

Several key developments stood out:

Backlog Reached Record Levels: Backlog and awarded orders (BLAO) hit a record $747.6 million, up 18% year-over-year, with $603 million containing shipment dates in the upcoming four quarters .

BESS Momentum Building: Battery energy storage system BLAO reached $67 million (4x increase from Q3's $18M), with a new production line expected to be operational "in the coming weeks" . The production line is capable of producing "hundreds of millions of dollars of product" .

ON.energy Partnership Announced: Shoals partnered with ON.energy to address AI data center backup power needs, pairing Shoals' DC Recombiners with ON.energy's medium voltage UPS systems .

International Revenue Inflected: International revenue grew from less than $1 million in 2024 to approximately $13 million in 2025, with international BLAO reaching a record $90 million .

Margin Headwinds Intensified: Full year gross margin declined to 35.0% from 35.6% (or 39.0% adjusted in 2024 excluding wire shrinkback costs), driven by tariffs, material costs, competitive dynamics, volume discounts, and product mix .

Legal Costs Surged: Total legal professional services hit $30 million in 2025, up 100% over the prior year . Wire insulation shrinkback litigation expenses of $18.3 million are adjusted out of EBITDA; in 2026, shareholder class action costs will also be adjusted out .

ITC Ruling Favors Shoals: The court issued its initial determination in favor of Shoals in its patent infringement case against Voltage, with the Commission's final ruling expected in early June .

Customer Diversification Paying Off: Three customers that accounted for less than $6 million of revenue in 2023 now represent approximately $140 million of BLAO .

New Products Gaining Traction: Approximately 6% of 2025 solar core revenue came from new products including Long Tail BLA, Super Harness, SuperJumper, and mini BLA .

Key Management Quotes

CEO Brandon Moss struck an optimistic tone despite the guidance miss:

"2025 was an exceptional year for Shoals. While the rapidly shifting political climate brought some volatility, the massive increase in demand for energy through the rest of the decade supports strong fundamentals for our business."

On competitive positioning:

"We enter 2026 with a strong order book and resilient underlying market demand... Shoals has never been more diversified, and enters the year in an unprecedented competitive position."

On milestones — the company celebrates its 30th year in 2026 and 5 years as a public company:

"Since our IPO, our annual revenue has more than doubled from $213 million to $475 million. We've generated more than $220 million of cash flow from operations that has been reinvested in the business, and we've maintained market leadership by a wide margin."

On strategy execution :

"We are in an exceptional position, from both a commercial and operational perspective."

Q&A Highlights

On margin expectations — CFO Dominic Bardos explicitly removed the 40% gross margin target from near-term discussion: "For the foreseeable future, a gross margin % of low to mid-30s will provide us with the flexibility to win new customers, deliver new products, enter new markets" . The company expects Q1 to be the lowest margin quarter, with improvement through the year as the new facility ramps .

On book-and-turn revenue — Management expects $50-70 million of book-and-turn business is reasonable for 2026, consistent with prior years. If projects proceed as scheduled, the company would be "at the upper end" of the revenue range .

On revenue seasonality — Similar to 2025, expect 45% of revenue in H1 and 55% in H2 .

On tariffs — CEO Moss provided real-time update: IEEPA tariffs are no longer being collected as of today, with no decision on refunds. New Section 122 tariffs at 15% will be assessed on top of existing 232 tariffs on aluminum components .

On data center product — The data center BLA product remains on track with revenue recognition expected primarily in 2027, not 2026. The product leverages existing BLA patents and can run on similar production lines .

On competitive dynamics — CFO noted pricing incentives to win new customers are "pretty much behind us" and emphasized Shoals' product quality advantage .

Full Year 2025 Performance

The sharp decline in operating cash flow was driven by working capital build-up, particularly a $50.6 million increase in accounts receivable and $35.1 million inventory build .

Balance Sheet & Liquidity

Leverage remains manageable at 1.3x net debt to LTM EBITDA, though liquidity tightened as the company invested in its new manufacturing facility and built working capital.

Risks and Concerns

Near-Term Demand Uncertainty: The Q1 guidance miss signals potential softness in customer ordering patterns, which could persist .

Margin Pressure: Tariffs, material costs, and competitive dynamics continue to weigh on profitability. Q4 gross margin of 31.6% was 600 bps below the prior year .

Legal Overhang: Wire shrinkback litigation costs of $18.3 million in 2025 could continue to be a drag, though management excluded these from adjusted metrics .

Working Capital Consumption: The significant accounts receivable and inventory build reduced cash generation in 2025, though management guides to strong cash flow recovery in 2026 .

Forward Catalysts

• ITC Voltage Ruling (early June 2026): Final Commission ruling on patent case where initial determination favored Shoals
• Q1 2026 Results (expected May 2026): Key test of whether demand headwinds are temporary
• BESS Production Line Launch: Expected in coming weeks; capacity for "hundreds of millions" in revenue
• Facility Consolidation Complete (mid-2026): Full move to new facility should drive productivity gains starting H2
• International Expansion: Record $90M international BLAO supports continued growth
• Data Center Product (2027): Material revenue contribution expected next year

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Related: SHLS Company Overview | Q4 2025 Transcript