Key Takeaways:
SolarEdge shares fell about 25% Wednesday after the inverter maker forecast third-quarter sales of $310 million to $340 million, below consensus.
"The sales outlook was a disappointing aspect of SolarEdge's otherwise good earnings," Chris Dendrinos, an analyst at RBC Capital Markets, said.
SolarEdge reported second-quarter sales of $342 million, up nearly 20% from a year earlier and matching analyst expectations. It swung to an adjusted profit of 5 cents a share, while the Street called for an adjusted loss of 3 cents a share, according to FactSet. The potential sales drop in the third quarter would mostly come from SolarEdge's Europe business, but the company is seeing continued weakness in the U.S., particularly in the residential solar market.
The stock, up nearly 30% this year and more than double in 2025, was on track to finish at its lowest point since April 15, when it closed at $37.83. Investors had bid up SolarEdge as a way to play the artificial-intelligence and data-center boom after the company announced work on a utility-scale transformer designed to handle data-center electric loads more efficiently.
The company said its solid-state-transformer project recently shifted to live demonstrations. SolarEdge showed potential customers and their engineering teams a working prototype a couple of weeks ago, CEO Shuki Nir said on a call with analysts. SolarEdge expects to have a fully working, proof-of-concept prototype by the end of the year and to establish pilot programs at data centers by next year. The new transformer could become a "meaningful" source of revenue in 2028, Nir said.
Uncertainty over new tax credit rules for home solar equipment has made it more difficult for providers to raise financing for systems and led to weaker customer demand for panels, Nir said. The weakness echoes pressure across the residential solar sector, where rival Enphase Energy has also flagged soft demand.
SolarEdge is planning an investor day next month to give more details on potential market size and revenue streams from the project and other initiatives.
The guidance cut shows SolarEdge's core solar business remains under pressure even as investors price in a data-center growth story. The investor day next month will test whether the solid-state transformer can justify the stock's AI premium.
This article is for informational purposes only and does not constitute investment advice.
