Solar's Q2 2025 Earnings: Unraveling Contradictions in Supply Chain, Revenue Growth, and Inventory Management

Battery sourcing and supply chain optimization, inventory management and expectations, 45X generation and revenue impact, revenue growth trends and market dynamics, and inventory normalization and sell-through are the key contradictions discussed in Solar



Revenue and Gross Margin Improvement:
- SolarEdge Technologies reported revenues of $289 million in Q2 2025, with non-GAAP revenues excluding discontinued operations at $281 million, marking a 66% contribution from the U.S. market.
- Non-GAAP gross margin increased to 13.1% from 7.8% in Q1, primarily due to higher revenue and U.S. production volume, offset by 1% tariff impact.
- The improvement in gross margin was supported by increased revenue, which led to better utilization of operational cost structures, and higher U.S. production.

Turnaround and Strategic Initiatives:
- The company is focusing on a turnaround journey across four priority areas: financial strength, recapturing market share, accelerating innovation, and ramping up U.S. manufacturing.
- Progress includes building infrastructure for TPO partners and meeting domestic content and FEOC requirements, which are expected to support market share gains.
- The enactment of the One Big Beautiful Bill Act preserves the 45X advanced manufacturing credit, aligning with SolarEdge's onshoring manufacturing strategy.

U.S. Market and C&I Segment Growth:
- The U.S. market contributed 66% of SolarEdge's non-GAAP revenues in Q2, with a focus on the residential TPO model and C&I segment.
- The company signed a multiyear agreement with Solar Landscape and secured a frame agreement with a leading U.S. retailer, indicating strong opportunities in C&I.
- Growth in the U.S. market is supported by an expected shift to TPO models and C&I segments that benefit from domestic content and FEOC requirements.

European Market Recovery:
- Europe accounted for 23% of non-GAAP revenues in Q2, with signs of improvement following a period of inventory normalization.
- SolarEdge's pricing and promotion campaigns have shown success, leading to initial market share gains in Europe.
- The company plans to capitalize on these gains by leveraging its leading-edge software and service solutions and through the introduction of the Nexis platform.