ITM Power's FY25 Performance: A High-Growth Green Energy Play Amid Rising Losses

The green hydrogen revolution is accelerating, and ITM Power, a UK-based leader in electrolyzer technology, has positioned itself at the forefront of this transition. Its FY25 results, released in August 2025, paint a compelling yet complex picture: record revenue growth of 50% year-on-year to £26.0 million, a 400% surge in two years, and a £145.1 million order backlog—nearly 90% higher than FY24. Yet, these gains come alongside a widening adjusted EBITDA loss of £33.0 million, driven by legacy contracts and under-absorbed factory costs. For investors, the question is whether ITM's short-term pain justifies its long-term promise in a sector poised for explosive growth.

The Revenue Momentum: A Sector on Fire

ITM Power's FY25 performance reflects the surging demand for green hydrogen, a critical enabler of decarbonization in industries like steel, shipping, and energy storage. The company's revenue growth outpaced even its upgraded guidance, fueled by a backlog that now includes 60% profitable contracts. This shift is no accident: ITM has strategically pivoted toward higher-margin projects, such as its Hydropulse “Build, Own, Operate” model, which reduces customer capital expenditure and locks in long-term revenue streams.

The global hydrogen market is expected to grow at a compound annual rate of 25% through 2030, driven by regulatory tailwinds like the EU's Net-Zero Industry Act and Japan's Hydrogen Society Promotion Act. ITM's dominance in electrolyzer technology—coupled with its full ownership of core manufacturing processes—positions it to capture a significant share of this growth.

The Profitability Dilemma: Scaling at a Cost

Despite the revenue surge, ITM's adjusted EBITDA loss widened to £33.0 million in FY25. This is not a failure but a symptom of rapid scaling. The company is absorbing the drag of older, loss-making contracts while ramping up production capacity to meet its £35–40 million FY26 revenue target. Legacy contracts, which account for 40% of the backlog, are expected to convert to revenue in FY26, but their low margins will continue to weigh on profitability until they phase out.

The loss is also exacerbated by under-absorbed factory costs. As ITM invests £10–15 million in R&D and manufacturing automation, it is prioritizing long-term efficiency over short-term margins. This is a common trade-off in high-growth tech sectors, where upfront capital expenditures are necessary to achieve economies of scale.

Strategic Moves to Bridge the Gap

ITM's management is acutely aware of the profitability challenge. The company's FY26 guidance anticipates a narrower EBITDA loss of £27–29 million, driven by improved factory absorption and the phasing out of legacy contracts. Key initiatives include:
1. CHRONOS Platform Development: A next-generation electrolyzer stack designed to reduce costs and increase efficiency.
2. Hydropulse Expansion: By taking on capital and operational risk for industrial clients, ITM can secure recurring revenue while minimizing its own exposure.
3. Geographic Diversification: Targeting high-growth markets in Europe and Asia-Pacific, where regulatory frameworks and subsidies are accelerating hydrogen adoption.

The company's cash position—£207.0 million at the end of FY25—provides a buffer to fund these initiatives without diluting shareholders. This financial flexibility is a critical advantage in a sector where capex requirements are high and returns are long-term.

Investment Considerations: Balancing Risk and Reward

For investors, ITM Power embodies the classic high-growth paradox: exceptional revenue momentum in a transformative sector, paired with near-term profitability challenges. The company's path to profitability hinges on three factors:
1. Backlog Execution: Converting the £145.1 million backlog into revenue while maintaining margins.
2. Technological Leadership: Sustaining innovation in electrolyzer efficiency to outpace competitors.
3. Capital Discipline: Avoiding over-investment in low-return projects as it scales.

The risks are real. Legacy contracts could delay profitability, and the hydrogen sector remains capital-intensive. However, ITM's strategic focus on high-margin models like Hydropulse and its technological edge in the CHRONOS platform suggest a clear roadmap to turn losses into gains.

Conclusion: A High-Conviction Play for the Long Term

ITM Power's FY25 results underscore its role as a pivotal player in the green hydrogen transition. While the adjusted EBITDA loss is a red flag for short-term investors, the company's revenue growth, robust backlog, and strategic investments in automation and R&D signal a narrowing path to profitability. For those with a long-term horizon and an appetite for sector-leading innovation, ITM represents a compelling high-growth opportunity.

Investment Advice: Investors should monitor ITM's FY26 EBITDA trends and its ability to convert legacy contracts into profitable revenue. A gradual improvement in margins, coupled with continued backlog growth, could justify a premium valuation. However, patience is key—this is a multi-year play, not a quick win.