SolarEdge Technologies Inc (SEDG) (Q2 2026) Earnings Call Highlights: First Non-GAAP Operating Profit in Nearly Three Years

• Revenue: GAAP revenue of $346.2 million, up 11.5% quarter-over-quarter and 19.6% year-over-year.
• Non-GAAP Revenue: $345.5 million, up 11.5% quarter-over-quarter and 23% year-over-year.
• Revenue by Region: US revenue of $154.9 million (44.7% of revenue); Europe revenue of $154.4 million (44.6% of revenue); International revenue of $36.9 million (10.7% of revenue).
• GAAP Gross Margin: 27.5%, compared to 22% in Q1 and 11.1% in the year-ago quarter.
• Non-GAAP Gross Margin: 28.6%, compared to 23.5% in Q1 and 13.1% in the year-ago quarter.
• GAAP Operating Expenses: $111.2 million, down from $123.3 million in Q1 and $147.6 million in the year-ago quarter.
• Non-GAAP Operating Expenses: $88.5 million, compared to $97.7 million in Q1 and $85.2 million in the year-ago quarter.
• GAAP Operating Loss: $16 million, compared to a loss of $55 million in Q1 and a loss of $115.5 million in the year-ago quarter.
• Non-GAAP Operating Income: $10.2 million, compared to a loss of $24.8 million in Q1 and a loss of $48.3 million in the year-ago quarter.
• GAAP Net Loss: $30.8 million, compared to a loss of $57.4 million in Q1 and a loss of $124.7 million in the year-ago quarter.
• Non-GAAP Net Income: $3.6 million, compared to a loss of $26.3 million in Q1 and a loss of $47.7 million in the year-ago quarter.
• GAAP Net Loss Per Share: $0.50, compared to a loss of $0.95 in Q1 and a loss of $2.13 in the year-ago quarter.
• Non-GAAP Net Profit Per Diluted Share: $0.05, compared to a loss of $0.43 in Q1 and a loss of $0.81 in the year-ago quarter.
• Cash and Marketable Securities: $601.6 million as of June 30, 2026, up from $581.1 million as of December 31, 2025.
• Free Cash Flow: $3.1 million generated in Q2, compared to $20.7 million in Q1 and negative $9.1 million in the year-ago quarter.
• Capital Expenditure: $12 million in the first half of 2026; full-year guidance remains $60 million-$80 million.
• Nexis Shipments: Exceeded $60 million in Q2 for the three-phase version in Europe.
• Upsell Activities: Generated more than $20 million in Q2 from retrofit campaigns.
• Q3 2026 Guidance: Revenue expected between $310 million and $340 million; non-GAAP gross margin of approximately 22% to 26%; non-GAAP operating expenses of approximately $86 million to $91 million.

Release Date: August 05, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SolarEdge Technologies Inc SEDG achieved non-GAAP operating profitability for the first time in nearly three years, with non-GAAP operating income of $10.2 million in Q2 2026.
• Revenue grew 20% year-over-year to $346 million, with non-GAAP gross margin expanding for the sixth consecutive quarter to 28.6%.
• The company gained significant market share in the US C&I rooftop segment, now holding more than 50% of installations, and has systems on rooftops of over 60% of Fortune 100 companies.
• The Nexis platform is gaining traction, with shipments exceeding $60 million in Q2 and positive feedback from installers, including an independent benchmark showing EUR5,000 in additional savings over 15 years.
• The company is making progress in the AI factory market, with live demonstrations of its SST validating 99% efficiency and direct medium voltage AC to regulated DC conversion, and expects to have a working system by end of 2026.
• SolarEdge generated positive free cash flow of $3.1 million in Q2, and expects positive free cash flow for the full year, supported by strong cash management and monetization of 45X credits.

Negative Points

• The US residential market remains soft due to slower tax equity funding and uncertainty around FEOC, leading to lower purchases from distributors and strained installer cash flows.
• The company expects a sequential revenue decline in Q3 2026, with guidance of $310-$340 million, primarily due to European seasonality and continued US softness.
• Non-GAAP gross margin is expected to decline to 22%-26% in Q3, down from 28.6% in Q2, due to lower scale and fixed cost absorption.
• The company faces headwinds from a strengthening Israeli shekel against the US dollar, which impacts operating expenses.
• There is uncertainty regarding the timing of market recovery, as clarity on FEOC definitions and funding environment is needed for the US resi market to rebound.
• The company is experiencing some component supply chain pressures, particularly in memory, due to data center demand, leading to price increases that need to be absorbed.

Q & A Highlights

Q: Can you walk us through the pieces of the 3Q guide, including European seasonality, US resi softness, and storage volumes? How much of this persists into 4Q?
A: Shuki Nir, CEO: The sequential decline is driven by two main factors. We expect Europe to decline by approximately $15 million at the midpoint, mainly due to seasonality, affecting both PV and storage. In the US, we expect the softness in the residential market to continue, also impacting both PV and storage. We are not guiding for Q4, but we see storage becoming a larger piece of our business over time due to higher attach rates and retrofit activities. The market rebound is tied to clarity around FEOC and the financing environment, and we believe we are well-positioned to benefit when that happens.

Q: You mentioned no significant pull-forward revenue from safe harbor, but your peer has seen significant amounts. What is the difference in your strategy, and how does the recent FCC foreign inverter ban impact SolarEdge?
A: Shuki Nir, CEO: Our customers strongly prefer the physical work test, which aligns their purchases with demand and creates a healthier channel flow. They are comfortable with this approach because they believe in the long-term value of Nexis. We have signed significant safe harbor transactions on both the C&I and resi sides and will share more details at our Investor Day. Regarding the FCC ruling, SolarEdge is a US company with manufacturing in Utah, Florida, and Texas. We are in compliance with the FCC Covered List and see no reason we won't remain so. This is a step in the right direction for the safety of the US energy market.

Q: Regarding the FCC inverter action, have you applied for exemptions for Nexis, and could this delay its US rollout? Is this more of a tailwind for your C&I business?
A: Shuki Nir, CEO: To be very clear, Nexis is made in the US by a US company, so there is no need or reason to ask for an exemption. It is part of the FCC list, and this will not delay the Nexis rollout in any way. We are starting to roll out Nexis in the US in Q3. For the C&I opportunity, the impact on non-compliant companies is not yet clear. We have already gained share in the C&I market to over 50% of rooftop installations due to our technology and FEOC/domestic content compliance. The other major C&I players are not complying with both, so we expect this traction to continue with the FCC ruling.

Q: Can you talk about the trend lines on storage pricing? Is the improvement mix-related or are you monetizing more effectively?
A: Shuki Nir, CEO: Storage pricing is a combination of three products: C&I storage in Europe, single-phase residential, and three-phase residential storage. Overall, our storage prices have remained stable per product. The differences you see quarter-to-quarter are mainly due to product mix. We are seeing growing demand for storage products in general, and with Nexis, which was designed from the ground up as a PV plus storage solution, we believe we will continue to benefit from this trend.

Q: What shifts are you seeing in component availability, pricing, and inflationary pressures for the back half of 2026?
A: Shuki Nir, CEO: Component suppliers have always said shortages are coming, and data center demand is creating strain on some components, particularly memory. Our supply chain team has worked diligently to secure supply. In some cases, like memory, we have to absorb some price increases, but these are not significant in the grand scheme of things. We are working with partners to secure supply and support our customers.

Q: Can you talk about the SST and what we should expect in the next six months?
A: Maoz Sigron, CFO: We spent the last couple of weeks demonstrating a working prototype of the SST to prospective customers. Seeing an actual working model that goes from medium voltage to 800-volt DC regulated alleviated many concerns about product maturity. Over the next few months, we will work to get the proof-of-concept prototype fully working at the full three-phase 34.5-kilovolt voltage. Then 2027 will be pilots at data centers, with meaningful revenue expected in 2028.

Q: When do you expect to be in a position to share a ballpark of revenue expectations for the SST?
A: Shuki Nir, CEO: The industry is transitioning, and with NVIDIA sharing its roadmap for GPUs that will require 800 volts, that is step one. The second step is whether people will use sidecar or other inefficient solutions or transition to SSTs. We expect revenue to start in 2028. During our Investor Day on September 10, we will share more information about how we think about the opportunity and revenue evolution in that part of the business.

Q: Regarding Q4, is there anything different or similar to historical seasonality?
A: Shuki Nir, CEO: We don't guide beyond the current quarter. For Q4, we are seeing improvement on the storage side, particularly in the Netherlands where people are anticipating the elimination of net metering and upgrading existing systems. Usually, there is a seasonal decline between Q3 and Q4, but we will also see the ramp-up of Nexis. With these three moving parts, we are not providing guidance at this stage and will share more as we get closer to Q4.

Q: What have you heard about potential inverter bans on Chinese players in Europe?
A: Shuki Nir, CEO: There is one directive already issued in Europe that projects funded by the European Bank cannot use unauthorized inverters. This is mainly applicable to utility and some C&I business opportunities for us. For other segments like C&I and residential, there is some sentiment that a ban might happen, but we don't want to speculate about if and when.

Q: What is driving the lower sequential gross margins in Q3, and is it mostly US or Europe?
A: Maoz Sigron, CFO: The expected gross margin for Q3 is 24%. The main reason is the scale of the business, which is different in Q3 and aligned with our fixed costs in the cost of goods. If you take this out, you can actually see a small improvement quarter-over-quarter.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.