ARRAY Technologies: Navigating Recovery in the Solar Sector

Rhys NorthwoodWednesday, May 7, 2025 6:31 am ET
16min read

The solar energy sector is undergoing a transformation, driven by government incentives, falling costs, and rising demand for clean power. Among the companies at the forefront of this shift is ARRAY Technologies (NASDAQ: ARRY), a leader in solar tracking systems. After facing margin pressures and operational headwinds in recent years, the company is now showing signs of recovery. Let’s dissect ARRAY’s financial turnaround, strategic moves, and the risks it must navigate to sustain momentum.

Revenue Surge and Operational Turnaround

ARRAY’s Q1 2025 results marked a pivotal moment. Revenue skyrocketed to $302.4 million, a 97% year-over-year increase from Q1 2024, fueled by strong demand for utility-scale solar projects. The company’s backlog grew to $2.0 billion—up 18% sequentially—driven by contracts with Independent Power Producers (IPPs) in Europe, the Middle East, and Asia. This order momentum suggests ARRAY is reclaiming market share after a challenging period.

Despite robust revenue growth, margin pressures remain a concern. Gross margins contracted to 26.5% (adjusted basis) in Q1 2025 from 38.3% in 2024, reflecting a shift to lower-margin projects and rising input costs. However, the company turned a net profit of $2.3 million, reversing a $11.3 million loss in the prior-year period. Adjusted EBITDA also improved to $40.6 million, underscoring operational efficiency gains.

Strategic Moves to Mitigate Risks

ARRAY’s recovery hinges on its ability to navigate regulatory and geopolitical risks:
1. IRA Compliance: The company achieved a milestone by offering quotes for 100% domestic content trackers under the Inflation Reduction Act (IRA). This positions it to secure federal tax credits for U.S. projects, reducing reliance on international supply chains.
2. Supply Chain Resilience: ARRAY’s domestic manufacturing focus mitigates tariff risks, particularly for torque tubes and structural fasteners. CEO Kevin Hostetler emphasized this as a “key advantage” in an era of global trade tensions.
3. Global Expansion: Strong contracting activity in Europe and Asia highlights ARRAY’s diversification beyond North America, reducing geographic concentration risk.

Challenges Ahead

While progress is evident, ARRAY faces hurdles that could derail its recovery:
- Margin Volatility: Cost pressures from raw materials and tariffs could further squeeze margins unless passed through to customers.
- Regulatory Uncertainty: Changes to the IRA or trade policies could disrupt project timelines and incentives.
- Execution Risks: Converting backlog into revenue depends on managing supply chain logistics and construction delays.

2025 Outlook and Valuation Considerations

ARRAY reaffirmed its full-year 2025 guidance:
- Revenue: $1.05–$1.15 billion
- Adjusted EBITDA: $180–$200 million
- Adjusted EPS: $0.60–$0.70

With $348 million in cash and no near-term debt maturities, the company is financially stable. However, its valuation—currently trading at ~12x forward EBITDA—reflects investor caution around margin sustainability.

Conclusion: A Path to Sustained Growth?

ARRAY Technologies is on a clear trajectory of recovery, leveraging strong demand for utility-scale solar and strategic moves to mitigate risks. Its $2.0 billion backlog, IRA-compliant products, and global customer base provide a solid foundation for growth. Yet, margin pressures and macroeconomic uncertainties remain critical tests.

Investors should focus on two key metrics:
1. Gross Margin Stability: If ARRAY can stabilize margins near 25–26% (vs. 2024’s 38%), it would signal operational maturity.
2. Backlog Conversion: Delivering on the $2.0 billion backlog without delays will validate execution strength.

The company’s Q1 results and strategic positioning suggest it could become a long-term beneficiary of the solar boom—if it can navigate today’s headwinds. For now, ARRAY’s story is one of resilience, but the road to sustained profitability remains under construction.

In summary, ARRAY’s recovery is real, but its success hinges on balancing growth with margin discipline. For investors willing to take on near-term volatility, the company’s role in the solar transition offers compelling upside potential.