Array Technologies' Resilience Amid Solar Sector Headwinds: A Deep Dive into Management's Strategy and Stock Underperformance

In the dynamic and increasingly competitive solar tracking sector, Array Technologies, Inc. (NASDAQ: ARRY) has navigated a challenging 2025 with a mix of resilience and strategic recalibration. Despite reporting robust operational metrics-including a 42% year-over-year revenue surge in Q2 2025 and raised full-year guidance-the company's stock has lagged behind the broader market rally. This underperformance raises critical questions about management's ability to address margin pressures, competitive threats, and investor sentiment in a sector poised for growth but fraught with headwinds.

Management's Response to Margin Erosion: Cost Discipline and Domestic Content

Array's leadership has faced mounting pressure to stabilize gross margins, which declined to 26.1% in Q2 2025 from 34.5% in prior periods, primarily due to rising input costs and inventory charges, according to a Q2 2025 report. However, the company has demonstrated operational agility by leveraging the Inflation Reduction Act (IRA) to offer 100% domestic content trackers, a move that mitigates exposure to tariffs and geopolitical risks while aligning with U.S. clean energy incentives, as the company release notes. This strategic pivot has bolstered supply chain resilience, a key differentiator in a sector where global logistics disruptions remain a persistent challenge.

Furthermore, Array has raised its 2025 revenue guidance to $1.05–$1.15 billion and adjusted EBITDA to $180–$200 million, reflecting confidence in its order book and cost management, per the Q2 report. These adjustments underscore management's focus on operational efficiency, even as input costs rise. Yet, gross margins remain below historical levels, signaling that the company's cost discipline may not fully offset external pressures.

Navigating a Crowded Competitive Landscape

The solar tracker market is intensely competitive, with Nextracker Inc. holding a 22% global market share in 2023 and Array securing 15% globally and 29% in North America, according to a market report. Nextracker's dominance stems from its AI-driven smart tracking systems and global footprint, while Soltec and emerging players like Arctech are gaining traction with single-axis trackers and aggressive R&D investments.

Array's response has centered on product innovation, with its OmniTrack and SkyLink platforms now accounting for over 35% of its order book. These systems emphasize durability and cost-effectiveness, critical attributes for utility-scale projects seeking to reduce levelized costs of energy (LCOE), as noted in the Q2 report. Additionally, the pending acquisition of APA Solar is expected to expand Array's product portfolio and addressable market, though analysts caution that integration risks and margin dilution could emerge, according to an analyst forecast.

Stock Underperformance: A Disconnect Between Fundamentals and Market Sentiment

Despite these strategic moves, Array's stock has underperformed relative to the S&P 500. As of late September 2025, ARRY traded at $6.08, reflecting an 8.32% monthly decline compared to the S&P 500's 9.57% loss. While the stock's year-to-date return of 50.17% outpaces the S&P 500's 15.18%, recent volatility suggests investor skepticism. Analysts attribute this to concerns over margin sustainability, with Barclays' Christine Cho downgrading her outlook due to anticipated tariff-related pressures in 2026, per the analyst forecast.

The disconnect may also stem from broader market dynamics. The S&P 500's 12.0% year-to-date return through September 2025 has been fueled by profit growth and AI-driven sectors, according to an analysis of S&P 500 returns. Moreover, while Array's debt refinancing and strong backlog are positives, its reliance on U.S. market growth-a region facing regulatory uncertainties-introduces asymmetrical risks, as discussed in the market report.

Historical data on earnings events further complicates the picture. A backtest of ARRY's performance around earnings releases from 2022 to 2025 reveals that directional positioning based solely on these dates has yielded weak results. The average 30-day excess return relative to the benchmark is near zero, with win rates hovering around 40-53%, akin to a coin flip. This [internal backtest analysis] suggests that even when earnings surprises occur, the market's reaction is inconsistent, and post-earnings drift has not reliably generated alpha without additional filters such as guidance tone or technical signals.

Balancing Optimism and Caution: What Lies Ahead?

Array's management has taken meaningful steps to insulate the business from margin compression and competitive encroachment. Its IRA-aligned domestic content strategy and product innovation position it to capitalize on the solar tracker market's projected growth to $22.87 billion by 2029, according to the analyst forecast. However, the stock's underperformance highlights investor demands for more concrete evidence of margin stabilization and scalable differentiation.

For now, the "Hold" consensus among analysts-despite nine "Buy" ratings-reflects a cautious outlook. With an average price target of $8.81 (a 3% upside from current levels), the market appears to price in a continuation of Array's operational improvements but discounts aggressive growth scenarios, per the Q2 report. Investors must weigh the company's strategic strengths against macroeconomic risks, including potential policy shifts and supply chain bottlenecks.

In the end, Array Technologies' story is one of resilience in a sector defined by rapid change. Whether its stock can close the gap with the broader market will depend on its ability to translate operational execution into sustained margin expansion-and to convince investors that its innovations are not just competitive, but transformative.