SolarEdge Technologies, Inc. (NASDAQ:SEDG) Q3 2025 Earnings Call Transcript

SolarEdge Technologies, Inc. (NASDAQ:SEDG) Q3 2025 Earnings Call Transcript November 5, 2025

SolarEdge Technologies, Inc. misses on earnings expectations. Reported EPS is $-0.86129 EPS, expectations were $-0.38.

Operator: Hello, and welcome to the SolarEdge Conference Call for the Third Quarter ended September 30, 2025. This call is being webcast live on the company’s website at www.solaredge.com in the Investors section on the Events Calendar page. This call is the sole property and copyright of SolarEdge with all rights reserved and any recording, reproduction or transmission of the call without the expressed written consent of SolarEdge is prohibited. You may listen to a webcast replay of this call by visiting the Events Calendar page of the SolarEdge Investor website. I would now like to turn the call over to J.B. Lowe, Head of Investor Relations for SolarEdge. Please go ahead.

John Lowe: Good morning, and thank you for joining us to discuss SolarEdge’s operating results for the third quarter ended September 30, 2025, as well as the company’s outlook for the fourth quarter of 2025. With me today are: Shuki Nir, Chief Executive Officer; and Asaf Alperovitz, Chief Financial Officer. Shuki will begin with a brief review of the results for the third quarter ended September 30, 2025. Asaf will review the financial results for the third quarter, followed by the company’s outlook for the fourth quarter of 2025. We will then open the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management’s current expectations.

We encourage you to review the safe harbor statements contained in our earnings press release and our filings with the SEC for a more complete description of such risks and uncertainties. Please note, during this earnings call, we may refer to certain non-GAAP measures, which are not measures prepared in accordance with U.S. GAAP. The non-GAAP measures are being presented because we believe that they provide investors with a means of evaluating and understanding how the company’s management evaluates the company’s operating performance. Reconciliation of these measures can be found in our earnings press release and SEC filings. These non-GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP.

Listeners who do not have a copy of the quarter ended September 30, 2025, press release may obtain a copy by visiting the Investor Relations section of the company’s website. With that, I will turn the call over to Shuki.

Yehoshua Nir: Thank you, J.B. Good morning, everyone, and thank you for joining us. I’m pleased to report that we delivered a strong third quarter. We believe this is a clear evidence that we are making solid progress on our turnaround and that the company is on the right trajectory. Our results and our Q4 outlook demonstrate that the momentum we have built throughout the year is continuing. We are executing on our plan, and I’m very proud of the way the team has performed in recent quarters. As for our key priorities, first, on financial strength. In Q3, we delivered 44% year-over-year revenue growth and continued expanding our margin for the fourth straight quarter. The midpoint of our Q4 outlook follows the same trajectory of year-over-year improvement.

I’d like to highlight that both our Q3 financials and our Q4 guidance do not include significant onetime or pull forward of revenue, either from safe harbor or from the 25B (sic) [ 25D ] rush towards the end of the year. We have also kicked off several operational excellence initiatives. For example, a major change that should have a long-term positive impact is the single SKU. We have implemented a software-defined platform that significantly reduces the complexity of our business for residential and commercial applications globally. It allows us to manufacture and ship one SKU of the inverter to the market. Then the installers can program it to the desired kilowatt rating in the field. This framework simplifies everything from forecasting and manufacturing to inventory management, logistics, service and support, saving time and money for us, our distributors and our installers.

It also adds flexibility for home and business owners. If they need a bigger system in the future, a simple over-the-air software update can boost the inverter rating. It is a true win-win-win solution, and we are working on additional solutions as we continue to improve efficiencies across the business. At the same time, we have been hyper focused on our cost discipline and reached the lowest non-GAAP OpEx to revenue ratio in the last 2 years. This helped us to generate positive free cash flow in Q3 and exit the quarter with a cash and investment portfolio of approximately $550 million. We also expect to generate positive free cash flow in Q4 and for the full year. This performance and outlook gave us confidence to repay the ’25 converts from our balance sheet upon maturity in September.

Our second priority is gaining market share. Starting with the progress in capturing market share in U.S. resi. We are proud that Wood Mackenzie reported SolarEdge as regaining the #1 residential inverter market share position in the second quarter. This is the first time we’ve had a leading market share position since the third quarter of 2021 and is a reflection of our improved quality and service and our team’s performance. Looking into 2026, the resi market is expected to undergo a structural change in favor of the TPO model. We believe this market shift plays directly into SolarEdge’s unique strength. We have developed deep relationships and integrated infrastructure with TPOs for years. We have delivered high-quality domestic content and non-FEOC products that the TPOs require.

And our technology platform is perfectly suited for the TPO model due to its superior energy production and native DC architecture. Safe harboring is an additional and crucial element that can secure future market share. Certain of our partners have safe harbors with us through the 5% method. Additionally, we designed and executed customized safe harboring strategy for our TPO partners through the physical work test. Such transactions have several benefits. For our customers, it lets them qualify their projects over multiple years for a lower capital outlay. For SolarEdge, these transactions provide better visibility into our business for future years. By helping our customers safe harbor through the physical work of significant nature methods, we are able to manufacture and deliver the full product closer to the time the customer needs it.

Therefore, we can manage the manufacturing over time, and there is no pull forward of revenues that is typically associated with a 5% safe harbor transaction. We believe that our strengths are even more pronounced in the C&I space in the U.S. Some of the largest enterprises in the U.S. have already safe harbored C&I products from us via the physical work method. In addition, we believe that we are the only scaled player capable of delivering a non-FEOC and domestic content compliance C&I solution. This combination positions us very well to gain additional market share in the years ahead. Turning to Europe. While the markets remain challenging, the majority of our distribution partners hold normalized levels of inventory. This resulted in EU revenues reaching $100 million in the quarter, up 45% quarter-over-quarter and up 21% year-over-year.

We believe our position in Europe will continue to improve as we ramp up sales of commercial storage, deliver products made in the U.S. and roll out the next-generation Nexis platform in the coming quarters. This brings me to our third priority, accelerating innovation. The SolarEdge value proposition is simple. Whether you are an installer, a homeowner or a business, our solutions save you money or save you time and in many cases, save you both. The markets we serve are increasingly looking for integrated systems. And over the last year, we’ve expanded and improved our technology platform to deliver holistic end-to-end solutions that save our customers even more time and money. In Q3, we continued the development and field installation of our next-generation Nexis platform.

And in the last few weeks, we have shipped initial volumes of the new 3-phase inverter to customers. Even at this early stage, the feedback we are getting is that installations have been significantly simplified compared with our previous generation. Two weeks ago, we rolled out our ONE for C&I energy management system across our entire C&I installed base. Now customers can control and optimize all types of behind-the-meter devices and loads from solar to storage to EV charging to HVAC, all from a customized dashboard. We intend to add additional enhanced features in the quarters ahead that will generate recurring revenue streams. Our fourth priority is ramping up our U.S. manufacturing. In Q3, we reached an important milestone by exporting our first U.S. manufactured residential products to Australia.

We expect to begin shipping both residential and C&I products to additional markets in the coming weeks, which will allow us to be more competitive in markets outside of the U.S. To summarize, we believe our turnaround is delivering tangible results. We’re improving our finances. We are driving efficiencies across the business. We are strategically positioned to capture market share in our main markets, and we are progressing with our next-gen platform. While we are encouraged by our progress, there is still plenty of work to be done. We remain relentlessly focused on building a healthier, more profitable and more innovative business for the long term. There is one more thing. This morning, we announced a collaboration with to advance our solid-state transformer platform for the data centers of the future.

This has the potential to strategically expand our core technology into the data center market, positioning us to help build smarter, more efficient energy systems for the AI era. We are in the early stages here, and we’ll share more as we make progress. With that, I will turn it over to Asaf.

Asaf Alperovitz: Thank you, Shuki, and good morning, everyone. Starting with our quarterly results. The non-GAAP revenues for the third quarter were $340 million, up 21% quarter-over-quarter. Revenues from the U.S. this quarter amounted to $203 million, up 10% quarter-over-quarter and representing 60% of our revenues. Revenues from Europe were $101 million, up 55% quarter-over-quarter and representing 30% of our revenues. International markets revenue were $36 million, down 8% quarter-over-quarter and representing 10% of our revenues. Non-GAAP gross margin this quarter was up to 18.8% compared to 13.1% in Q2, reaching the higher end of our guidance. The higher gross margin is largely due to higher revenue, which drove increased utilization of our operational costs and higher sales of U.S.-made products.

This was partly offset by incremental tariffs, which impacted our gross margin by approximately 2%, in line with our expectations. During the third quarter, we continued to take action to streamline our operations and focus on core business. As such, we sold our Sella 2 manufacturing facility in the third quarter for total proceeds of $26.1 million. As part of this transaction, we recorded a small capital gain. We also settled certain claims associated with the discontinued energy storage division that resulted in a onetime gain of approximately $15 million that was recorded as an offset to our GAAP COGS. Going forward, we continue to seek avenues to rightsize our business with an emphasis on cost reduction and a focus on our core activities.

Non-GAAP operating expenses for the third quarter were $87.7 million at the midpoint of our guidance despite headwinds from the continued strengthening of the new Israeli shekel, net of hedging. Last quarter, we reported non-GAAP OpEx of $85.2 million or $89 million when adjusted for onetime reversal of accrual for bad debt and other items. Non-GAAP operating loss for Q3 was $23.8 million compared to a non-GAAP operating loss of $48.3 million in Q2, cutting our operating loss by more than half. This is a promising result and speaks to the progress we have made in executing our turnaround plan and is another step on our journey back to profitable growth. Our non-GAAP net loss was $18.3 million in Q3 compared to a non-GAAP net loss of $47.7 million in Q2, a reduction of over 60%.

Non-GAAP net loss per share was $0.31 in Q3 compared to $0.81 in Q2. The lower operating and net losses are largely due to a higher revenue and a higher gross margin. Turning now to our balance sheet. As of September 30, 2025, our cash and investment portfolio was approximately $547 million. Net of the repayment of $342 million of our 2025 convertible notes in September, our cash and investment portfolio increased by approximately $77 million. This is the result of our positive free cash flow for the quarter of approximately $23 million, which was largely driven by working capital items and our continued CapEx discipline. It also includes the proceeds from the sale of our Sella 2 facility of $26.1 million and other items. For the first 9 months of the year, we generated approximately $34 million in free cash flow.

We also expect to be free cash flow positive in the fourth quarter and therefore, are on track to meet our expectation of generating positive free cash flow for the full year of 2025. This should allow us to head into 2026 with a healthy cash position to support our growth plans. Our inventory was flat at approximately $530 million despite our manufacturing ramp-up to support anticipated growth. Our DIO declined from 217 to 177 as we continue to improve our inventory management processes. AR net increased this quarter to $286 million compared to $217 million last quarter, mostly due to higher revenues. DSO increased from 57 to 68 days due to the timing of collections, while DPO increased from 59 to 77. In total, our cash conversion cycle days declined from 215 to 168 days as we are laser-focused on improving our working capital management.

Turning to an update on our disclosures. As Shuki mentioned, we are in the process of rolling out the single SKU framework across both residential and commercial applications globally. Under this framework, we will no longer know the kilowatt ratings of the inverter at the time of shipment as the power rating will be set through a software update when installed in the field. As a result, we will be discontinuing the megawatt shipped metric starting in the fourth quarter. Instead, and as you can see in the earnings release this morning, we will be providing the number of inverters, optimizer and megawatt hours of batteries that we recognize as revenues during the quarter. Additionally, starting in Q4, we intend to begin disclosing revenue derived from inverters, optimizers and batteries on a quarterly basis within our Form 10-Q.

We believe this additional disclosure will help analysts and investors more accurately analyze our operating and financial performance. This move is part of the evolution that we started talking about last quarter. The market is moving to more system-based solution and is less focused on discrete products. Our technology platform, including the single SKU, the launch of our Nexis platform and the introduction of additional elements like EV chargers, batteries and energy management software are helping to drive this evolution. Our solution deliver flexibility and scalability to meet the growing needs of our customers. Turning now to our guidance for the fourth quarter of 2025. We’re expecting revenues to be within the range of $310 million to $340 million, which reflects a better-than-normal seasonal trend for the fourth quarter.

We expect non-GAAP gross margin to be within the range of 19% to 23%, including approximately 2 percentage points of new tariff impact. We expect the non-GAAP operating expenses to be within the range of $85 million to $90 million. I will now turn the call over to the operator to open it up for any questions. Operator?

Q&A Session

Operator: [Operator Instructions] We’ll take our first question from Philip Shen with ROTH Capital Partners.

Philip Shen: Congrats on hitting free cash flow positive and making progress there. I was wondering if you could talk through — I know, you don’t have guidance for 2026, but I was wondering if you could help us understand what revenue growth you might be able to see for the year and maybe sequentially? And then if you can commit to positive free cash flow for ’26 as well.

Asaf Alperovitz: Philip, thank you for the question. As you know, we do not guide for the next quarter. Without providing guidance, what we can say is that typically, Q1 is down around 10% versus Q4 due to the typical historical seasonality. At this time, we don’t have any reason why it would be much different than Q1 of [ 2006. ] In terms of relating to 2026 free cash flow, I mean, we don’t guide for free cash flow or provide any target on that. As we noted for this year, we’re going to be free cash positive. Q1 to Q3 were $34 million free cash positive. And we also noted with the fact that we will be free cash flow positive in Q4. More than that, I don’t think we can elaborate.

Philip Shen: Okay. Got it. And then shifting over to the Infineon announcement. I was wondering if you could talk through what the timing of any commercialization might be? Do you have any bookings yet? Or do you think it’s more likely for like the ’27, 2028 time frame? Is it more of a medium-term or longer-term effort? Or do you think near term, there’s an opportunity to generate revenues or bookings?

Yehoshua Nir: Yes. Thank you, Philip. I’d like to provide some more color before I get to your specific question. I think that everybody is aware of the fact that the data center of the future is going to be based on DC architecture. There are white papers around it, and everybody understands that DC architecture is better for these data centers. And the goal is basically to maximize the utilization of the data center and to squeeze as many GPUs as possible. So DC architecture is directly in our wheelhouse. We have 20 years of experience with this architecture. We have dozens of gigawatts installed in the field in conditions that are much harsher than data centers. And what we have from past developments and past experience is we have all the building blocks for the solid-state transformer that we’re aiming at that market.

And so we have started discussions with different players in the ecosystem. And the feedback has been very, very positive. Our potential solution is very relevant and competitive. We are talking about 99% efficiency rate. And efficiency is very, very critical, as you know, because it increases the utilization of the GPUs as we push more energy through the system, and it reduces the heat that is generated, so you need less cooling in the data center. And with all of that being said, what we announced today is the evolution of our long-term partnership with Infineon. They are considered to be one of the leaders in the power electronic supply chain for data center and in general. So we are very happy with the partnership with them. And as I mentioned, we’ve engaged with other people and other companies in the ecosystem.

And we are trying to, if you will, scale towards where the pack is going to be. And the 800-volt DC architecture is expected to really start in 2027. And so you said and rightfully so, this is something that we are looking into 2027, 2028 time frame.

Operator: We’ll take our next question from Christine Cho with Barclays.

Christine Cho: Just as a follow-up to your last comment. So you said that you expect to see the financial impact in ’27, ’28. Are you going to sort of give any indications to the market about how the progress is going with respect to bookings and any contracts that you might sign before that?

Yehoshua Nir: So when we get to it, we will — as we said, we will share more information as we make progress. At this stage, I think that the most important thing is this new architecture is about to happen 2 years from now. And we feel and not just feel based on the inputs that we are getting is that the solution that we have developed that is not final yet, obviously, the building blocks that we have are definitely — they fit what the market is looking for, and we will update you as we make progress.

Christine Cho: Okay. Moving on to gross margins. Those continue to come in nicely. In prior calls, you’ve mentioned that one of the biggest drivers is the fixed cost absorption with higher revenues. But in 4Q, your revenue is sequentially down, but gross margins continue to improve. So can you just give us an idea, is this primarily due to 45X ramping? Or is there a material impact from like sell-in of your new products, which are better margin? And I’m assuming that the sequential top line decline in 4Q is mostly due to seasonality. So if you could give us an idea of how much margin improvement there would have been had revenues been flattish? And lastly, for most of this year, I think you had quite a bit of legacy European products in the inventory on your balance sheet that was probably lower margin. Has that largely washed out at this point?

Asaf Alperovitz: Christine, you asked a couple of questions there. So I hope I’ll cover them all. If we’re not, please remind me. So — you are right, we did indicate that the major driver of gross margin is revenue, where we have leverage as we utilize our fixed cost position. You’re also right in terms of the Q4 that we do feel there’s a seasonality impact in terms of the guidance we provided on revenue. Just to remind you, in terms of some additional levers on gross margin, I think you’ve related to some of them. The ramping up of the U.S. production. As we said in the past, it’s the most economically attractive location for us to manufacturing, of course, considering the IRA credit. And as you know, we started selling U.S.-made products globally.

We had a PR on initial sales to Australia, and we’re going to sell more into the international markets and customers in the coming months. Also in terms of the Nexis, the new product introduction, I think we had started, and we’re going to gradually ramp up the introduction. And these will have a positive contribution because they are coming up with a better margin profile, and they also represent some new revenue streams and some new segments for us, such as the bigger roof in Germany with a 20-kilowatt, which we had underpenetrated, I would say, until today. These new products are, again, coming with a structure and — a cost structure and higher margin. And of course, Shuki alluded to the fact in the script about the single SKU framework.

We discussed that, and we believe that this will significantly help us improve our margin. It simplifies and improves the efficiency of the entire supply chain. By the way, for both us and our customers. It starts from very efficient planning to component sourcing, logistics, warehousing, manufacturing, of course, inventory management, all the way through service and support. And of course, whenever you think about the margin profile, you need to consider that it also depends on the mix of our product, geographies and segments. And in terms of Europe, you asked, I think, about the utilization of existing inventories from our balance sheet towards sales. So we said that at least until the end of the year, we will do that. And throughout next year, I think we’ll see lower impact of that.

And again, as we ramp up the shipments of the Nexis and sending U.S. produced products to export markets, we will enjoy the 45X impact into a further extent. Anything I missed in my response?

Christine Cho: No, that’s it.

Operator: We’ll take our next question from Mark Strouse with JPMorgan.

Mark W. Strouse: Sorry, Shuki, can I go back to the Infineon partnership once more? Can you just talk about the go-to-market there, the plan there? Is that — would that continue to be through your normal distribution partners? Or is there any kind of incremental investment that would be needed on the go-to-market? And then I’ve got a quick follow-up.

Yehoshua Nir: Yes. Thank you, Mark. So as you know, this market is basically — the ecosystem is pretty tight. The number of potential customers and customers is not that large. We will actually — I believe we will be able to approach them directly or through some of the distribution partners, but we’ve not finalized our plans on that regard yet. We are looking at that piece as something that is not going to be a major investment from our side. And I didn’t mention earlier, but one of the things that is actually working in our favor is that in the past, we built the infrastructure to support similar systems here in our labs. So there is a significant amount of CapEx that was going into that infrastructure, and now we don’t have to actually spend that money.

Mark W. Strouse: Okay. And then you mentioned the market share within U.S. resi. Curious, if you can give similar color on kind of how your market share is trending in Europe. You’ve lost share over the last several years. How much have you bounced back? How far off the bottom are you? And how far away are you from getting back to where you were several years ago?

Yehoshua Nir: Yes, absolutely. So as we said last quarter, we felt that we turned the corner and we actually did. So between Q2 to Q3 — and we don’t have final numbers for Q3 yet, but the numbers we have are more or less the same as Q2. So we definitely feel, based on information coming back from our partners as well as from the field, is that we’ve turned the corner. There is still a lot of room to grow in terms of market share compared to where we were in the past and where we believe that we can be moving forward. The reason for our optimism about the momentum — the positive momentum in Europe is a combination of several different things. One is the commercial storage that we have now, we sell now, and we expect that to continue growing.

The second one is, as we said, most of our distribution partners have normalized levels of inventory. So now they can use new products and bring them quickly to the market. And the third one is the introduction of Nexis that Asaf covered earlier. It does open some new segments for us as well as it has a better cost structure by itself, and also due to the fact that it’s going to be manufactured in the U.S. and exported to Europe, this will allow us to be more competitive in the marketplace while not sacrificing margin necessarily. And all of these reasons are giving us optimism as to where we can grow, and there is definitely room to grow.

Operator: We’ll take our next question from David Arcaro with Morgan Stanley.

David Arcaro: I was wondering if you could maybe update us on the trajectory that you’re expecting in terms of the tariff impact. Are you still on track to offset tariff impacts over the next couple of quarters as we look into 2026?

Asaf Alperovitz: David, thank you for your question. We reported a net impact from incremental tariff of 2% in our Q3. We guided pretty much roughly to the same estimated tariff impact in Q4. And I think we — as we’ve said in the couple of recent quarters that we are extremely focused on diversifying and finding alternative sources and optimizing the supply chain to address this dynamic tariff involvement. And of course, at the same time, the quality and reliability of our product is very, very important for us. And I don’t think we’ll disclose any more information in terms of our sourcing. But overall, we expect in the coming few quarters to have pretty much the same impact. And we also said the net impact also may be mitigated by some pricing actions that we may take.

David Arcaro: Okay. Sure. That makes sense. And then could you elaborate on what you’re seeing in the U.S. in terms of demand? How healthy has the residential market been? Maybe if you could touch on C&I and if you expect any pull forward to happen in 4Q? I know you didn’t bake it into the guidance, but curious what you’re seeing there.

Yehoshua Nir: Yes, absolutely. Thank you, David. So as mentioned and as I believe most analysts and players in the market expect the U.S. resi market next year to undergo a significant shift that the 25D is going to end. So overall, the market is expected to go down by 20% to 30%. And the share that the TPOs are going to gain is going to come at the account of the cash and loan, as you know. We feel for a variety of reasons, as I mentioned in our prepared remarks, that our partnership with the TPOs is strong. We have built the infrastructure, the relationship and the advantages of our products are such that they play to what the TPOs require as well as the different transactions that we’ve engaged with the TPOs, as we mentioned, about the safe harboring.

So all of these things give us confidence about future market share. As for pull forward, as we said earlier, we don’t have any significant pull forward of revenue in Q3 or in our guidance for Q4 due to the — any safe harbor or the rush towards the end of the year of the 25D. So we are looking at, as I said, no significant pull forward in this quarter.

Operator: We’ll take our next question from Dylan Nassano with Wolfe Research.

Dylan Nassano: I just want to come at the solid-state transformer partnership from a little bit of a different angle. Anything you can provide on just kind of how meaningful that opportunity could be, whether that’s like a TAM or maybe just how many dollars are spent on this kind of product per an average sized data center?

Yehoshua Nir: Yes. Thank you, Dylan. We can provide — everybody are — most people are talking about the 100 gigawatts of data centers that are going to come on board online in the next decade. All of them will need transformers. And now it’s a matter of math of what percentage of these data centers are going to be with the new DC architecture and what kind of share we can get out of this piece. But it’s a very — based on every analysis that we’ve looked at it and that we have seen, it’s a very significant opportunity. And we are very excited about it because it’s not that we are seeing a large opportunity out there, and we’re trying to chase it. Actually, the core competencies of this company and the components that we already have are all pointing us to that direction, almost regardless of the size of the opportunity. So we are very happy that the opportunity is very large, but we also feel that we are very well positioned to capture on this opportunity.

Dylan Nassano: Got it. And then for my follow-up, just going back to Europe. It sounds like you’re in a better spot now relative to the last couple of quarters. So just any kind of outlook on just underlying demand going into 2026? Is there any reason to maybe expect the market to be a little bit stronger or weaker?

Yehoshua Nir: So there are — you can hear opinions why the market can be stronger and why the market can be weaker. And as you know, Europe is a collection of countries and not a single market. So some people are talking about U.K. being stronger and the battery opportunity in the Netherlands. And Germany for us is going to be a very, very large opportunity because of the Nexis opening a new segment for us. But we have to recall, as I mentioned earlier in one of the earlier questions, the share gain opportunity for us is significant. And whether the market goes up or down 10%, it doesn’t really matter in terms of the size of the opportunity for us. I think that we are well positioned, as I mentioned earlier, we believe that we are well positioned to capture additional market share in Europe in 2026.

And once we capture more market share, obviously, it helps if the market is growing. But even if the market is stable or declining, it will still show positive momentum for us.

Operator: We’ll take our next question from Colin Rusch with Oppenheimer.

Colin Rusch: Can you talk a little bit about sell-through on the stationary storage systems and commissioning for systems that aren’t attached to solar or are retrofitted? I know you guys have some visibility into where those things are going, but I just want to get a sense of that growth driver.

Yehoshua Nir: Are you referring to storage systems that are not attached to PV?

Colin Rusch: Exactly. Or would it be a retrofit into an existing PV system that didn’t have a storage system previously?

Yehoshua Nir: Okay. So for stand-alone storage, it’s an insignificant amount that we are seeing. I’m talking about the SolarEdge installations, not about the market in general. We are not seeing anything significant there. As for the retrofit or the upgrade to the installed base, the opportunity for us is huge. Our installed base is very significant, as you know. And in some countries, homeowners and business owners are going to be driven into adding storage to their existing systems, either by just buying storage or by upgrading the PV and adding storage to it. So we’ve started experimenting in this area. It’s — these are early days today. I think that as the market evolves and as the opportunity — as we leverage more on this opportunity, we will provide you with more information.

But what some people tend to forget is also the same opportunity exists in the C&I market actually. For businesses, having the ability to use their PV during the day in order to charge batteries or to store excess PV production can actually be even bigger opportunity than for residential.

Colin Rusch: That’s super helpful. And then I mean, I guess a follow-on question there, just around some of the evolution in battery chemistries and different duty cycles that we’re starting to see in some of these larger systems. Can you talk about maybe adjacent to some of the work you’re doing with Infineon and this DC architecture for larger-scale systems, but also at the commercial systems where the solutions may be a bit more complex here and performance may be enabled by newer chemistries that you’re seeing on the battery side. Is that an opportunity that you guys are seeing real time? Or is it a little ways out in terms of being able to mix and match some of the chemistries and optimize performance for different value capture on those storage systems particularly for C&I?

Yehoshua Nir: Yes. It’s a great question. And rest assured that our CTO and technical team is looking into all the different technologies that are out there from sodium to others. At the moment, the solutions that we have are — we have one solution that is based on NMC and the other ones are using LFP. These are the ones that are today in mass production. These are the ones when we report revenues. These are the solutions that we are selling. We are obviously looking into all directions. And when other chemistry or other solutions are going to come online and are going to be available either from a cost perspective or from a functionality perspective, we are going to introduce them into our solutions. As it pertains to data centers, there are many different discussions about what storage can be doing there, whether it’s for backup only or is it for spikes from the grid or is it a potential replacement for UPS, but these are early days before we can comment about our solution for storage for data center.

Operator: And we’ll take our next question from Brian Lee with Goldman Sachs.

Brian Lee: I hopped on a little bit late, so apologies if some of this is redundant. Did you guys provide — or could you guys provide a bit of an update on where your manufacturing footprint stands today in the U.S., whether megawatt units or just kind of percentage of overall shipments? And then kind of what’s the thought process around getting that up to, I guess, presumably 100% U.S. manufacturing? What’s sort of the time frame and cadence to reach those targets into 2026 or beyond?

Yehoshua Nir: Yes. Thank you, Brian, and welcome to our call. It’s — so what we’ve done, if you look at the last 2 years, we’ve ramped up the manufacturing in the U.S. in order to support mainly the U.S. demand. The levels that we were talking about in the past were along the lines of 70,000 inverters per quarter and the capacity to manufacture 2 million optimizers per quarter. And what we have done in the last 2 quarters, I would say, or 1.5 quarters is we’ve continued the ramp-up in order to start supporting the exportation from outside of the U.S. into Europe and other international markets. As we announced a few weeks ago, we started by shipping some residential units — residential inverters to Australia. And in the coming weeks, we are expecting to continue shipping to Europe and — to some countries in Europe and then some other countries in Asia.

And the goal or the end goal, the end state, if you will, is to have most, if not all of — I would say most of the manufacturing done in the U.S. There will always be pockets that will be made outside of the U.S. for a variety of reasons, whether it’s a small volume or whether it’s something that is needed in a specific non-U.S. market. But the intention is to concentrate the manufacturing in the U.S. because it helps our scale up. It helps our operational efficiency, and it’s closer to our largest market. Just to add in terms of the units because I — so we started — I mentioned what we said before. What we are — our ramp-up now is mainly around the commercial inverter. And we are reaching about 20,000 inverters in Q4, and we expect to continue increasing this number in the following quarters as we are going after not only the U.S. market, but actually the European market and the Asian market.

Brian Lee: Awesome. That makes a lot of sense. And just my follow-up was on, I guess, the near-term revenue cadence. I think you guys mentioned earlier in the call, you’re expecting Q1 to be down 10% or so, so kind of in line with normal seasonality. But you’re not seeing much, if any, safe harboring or 25D pull forward at the moment. As you think about your Q1 view, that seems to be much better than some of your peers and kind of what we’re hearing across the channel, at least in the U.S. And as you said, U.S. is still your biggest market. Are you anticipating 48E safe harboring and pull forward in your Q1 outlook? Or is that something that you’re seeing visibility into 2Q of next year? Just kind of want to understand a little bit about how you’re thinking about safe harboring into 1Q and 2Q of next year.

Yehoshua Nir: Yes. Also thank you for highlighting the Q1 thing, Brian. As for safe harboring in — in Q1 ’26, at this stage, we don’t anticipate any significant pull forward of revenue into Q1. So the direction that Asaf provided is excluding something like that, should it happen. And what we described during the call is that we’ve worked with our TPO partners and also with the enterprises and the strategic C&I customers on what is referred to as the physical work test safe harboring. And there are several advantages to that method. One of them is that it allows our customers not to outlay a lot of cash upfront, but actually due to the continuous nature of the transaction, they consume the units as they need them and not just within the first 105 days.

For us, what it does is it gives us better visibility into future manufacturing, supply chain and revenue, and it’s not creating pull forward of revenue because the units are supposed to be consumed as they need them. So for that reason, in this type of safe harboring, we don’t — we don’t see revenue when the transaction is signed. And so we don’t expect any significant other type of safe harbor in Q1 when we talk about the numbers.

Operator: We’ll take our next question from Julien Dumoulin-Smith with Jefferies.

Julien Dumoulin-Smith: I just wanted to come back to the Infineon opportunity here. And a, I want to ask you guys very specifically, how do you think about sort of the content per megawatt, sort of the split if you think about the solid-state solution here? How much of that is coming from the Infineon side? Or how much per megawatt is coming from your side as you think about this technology? I know you said it’s still obviously in development as you ramp into that ’27 opportunity. But as it stands today, how would you frame that — the split, if you will?

Yehoshua Nir: So Infineon has been a very, very close and strategic partner for us for many, many years. And their components have been instrumental to the success of our inverters in the past. But at the end of the day, it’s one of the components that is putting together the hardware of the solution. And on top of that, we have different — obviously, we put different components together as well as the software or the firmware that makes the entire thing tick. And here, in data center, we believe that we will have to have another layer that will manage the redundancy and other things. So all of these things, SolarEdge is doing. So I don’t know whether it — I don’t know how to split it to megawatts, but think about it as they are a very strategic vendor for us, but then we sell the solution eventually.

Julien Dumoulin-Smith: Got it. So it sounds like you all maintain the majority of that sale to the extent to which you deliver a product here versus Infineon.

Yehoshua Nir: Yes, we deliver the product. Knock on wood, but we would deliver product.

Julien Dumoulin-Smith: Right. No, no, no, of course. And then if I can ask a broader question here. Obviously, in some respects, you’re pivoting out of what was an inventory challenge situation. How do you think about providing longer-term views? You guys had a ’22 Analyst Day. How do you think about providing a longer-term multiyear view of some sort in ’26, especially as the C&I opportunity and as the SST opportunity becomes a little clearer over a multiyear view?

Asaf Alperovitz: What we said in our recent meeting is that sometime during the first half of next year, we will provide a financial model, financial algorithm. We’ll go through the main blocks that will represent our growth trajectory and opportunities, both on revenue and margin. We’ll share this model again sometime in the first half of next year, including the C&I opportunity and others, of course.

Operator: And we’ll take our next question from Jeff Osborne with TD Cowen.

Jeffrey Osborne: Just 2 quick ones. I was wondering on the fixed costs. I think you folks had talked about $90 million to $95 million. I didn’t know if that’s a good run rate to think about over the next couple of quarters. That was question one. And then question two is just any thoughts on pricing as it relates to SolarEdge heading into year-end and into ’26 for both yourselves and the industry would be helpful.

Asaf Alperovitz: So in terms of the fixed cost, yes, we mentioned that it’s around $90 million. And of course, being fixed cost, we don’t expect them to change dramatically. We are focusing on trying to reduce cost through further automation. I think I believe the single SKU concept, again, will help us streamline the entire supply chain with the simplicity and more efficiency. So we also want to reduce the fixed cost. It may take a couple of quarters. And again, as revenue increase, we’ll have better utilization of such fixed costs. The second question was?

Yehoshua Nir: I take that one.

Asaf Alperovitz: Yes, go ahead.

Yehoshua Nir: So for pricing, as you know, pricing is determined by the value we bring to the market and as well as the competitive landscape. And in a way, you can look at the U.S. market and see that pricing over there, I would say, is more or less the same. It’s not — we haven’t seen any pressure — downward pressure. In Europe and in other markets, while in the past, we did see price reductions and as we shared with all of you earlier — or not earlier, in November ’24, we reduced our prices in Europe. And since then, the feedback that we are getting is that our pricing is competitive compared to the premium and the additional value that we are bringing. So we haven’t seen any significant pressure in terms of pricing also in markets outside of the U.S.

Operator: We will take our next question from Chris Dendrinos with RBC Capital Markets.

Christopher Dendrinos: I wanted to follow up on C&I demand here, and I know you all kind of stopped reporting some of the metrics there, but maybe just kind of help frame up what that demand picture looks like right now? And then I think you mentioned you’ll be the only ones that can offer a FEOC-compliant product with U.S. manufacturing. So do you have the scale, I guess, to ramp manufacturing for that C&I product if demand really strengthens?

Yehoshua Nir: Yes. Thank you, Chris. It’s — we said that we believe that we are the only scaled manufacturer who is capable of providing non-FEOC and domestic content compliant products to the U.S. C&I. And we’ve actually — we’ve already started doing it, obviously. We’ve started with — we’ve executed some safe harbor transactions with C&I customers for future years as well. And we are — overall, we believe that we are well positioned to gain additional market share in this important segment in the U.S. So overall, the way we look at it is that we are well positioned in that market, and we believe that we have the solution that our customers need. Outside of the U.S., as we mentioned, we’ve continued seeing increased attach rate to storage in commercial.

So we are seeing growth on that piece of our business, the commercial storage. And as we will start exporting from the U.S., the commercial units, we believe that we can be more competitive in markets in which we were more constrained, I would say, until now.

Operator: We’ll take our next question from Jon Windham with UBS.

Jonathan Windham: I wanted to pivot back to the manufacturing conversation you were on previously. Just to be clear, this U.S. manufacturing for export, one, you’re entitled to the 45X for that. Is that correct? And then two, how do you think about expanding U.S. capacity in a flexible way given that the tax credits do expire?

Asaf Alperovitz: Yes, you are right. We are getting a 45X credit for manufacturing, whether we sell in the U.S. or whether we export to non-U.S. market. We work with the world-leading providers, Jabil and Flex, mostly, as you may know. We have a very scalable operation with them within the existing premises. So we will be able to support the anticipated growth trajectory we have with them. And again, continue to enjoy the leverage of higher volume of the operation.

Operator: And there are no further questions on the line at this time. I’ll turn the program back to our presenters for any additional or closing remarks.

Yehoshua Nir: So thank you, everyone, for attending our call today. As we said, we’re excited about the opportunities ahead of us. We’ve executed well so far, and we’re thankful to our team, but there’s lots of work to be done, and we are all on it. Thank you, and talk to you next quarter.

Asaf Alperovitz: Thank you.

Operator: This does conclude today’s program. Thank you for your participation, and you may now disconnect.