SunPower's Q3 2025 Earnings Call: Contradictions Emerge in Acquisitions, Solar Efficiency, and Battery Contracts

Date of Call: October 21, 2025

Financials Results

• Revenue: $70.0M, up from $67.5M prior quarter
• Gross Margin: Reported near ~48% but management says adjusted/core gross margin ~38%; reported figure includes ~4–5 pts from favorable SunPower-bought deals and Sunder acquisition will reduce gross margin by a few points
• Operating Margin: Operating income $3.12M (up from $2.42M prior quarter), ~4.5% of revenue; GAAP operating result -$2.3M after $5.4M stock compensation and amortization charges

Guidance:

• Q4 outlook: estimated record revenue $83M and estimated operating profit $3.5M.
• Q1 simulation: worst-case operating profit at least $2M (management expects to beat that).
• Medium-term target: grow from ~$303M (2025) to $1B revenue by 2028 (~50% CAGR) with ~10% operating margin.
• Core gross-margin assumption ~38%; near-term reported gross margin may be higher due to one-time favorable deals and Sunder mix will dilute initially.

Business Commentary:

* Revenue Growth and Acquisition Impact: - SunPower Inc. reported a revenue increase to $70 million from $67.5 million, with the fourth quartershowing a significant rise. - The growth was largely driven by the strategic acquisition of Sunder Energy and stabilizing revenue despite challenges from the ITC tax credit changes.

• Operating Income and Cost Management:
• SunPower achieved an operating income of $3.12 million, up from $2.42 million in the previous quarter.

• The increase was attributed to effective cost control measures, including reducing headcount and improving revenue per employee.

• Sales Force Expansion and Market Expansion:

• The acquisition of Sunder Energy expanded SunPower's sales force to 1,744 members, up from 888, nearly doubling sales capacity.

• This expansion was targeted to fill gaps in geographic coverage, increasing bookings and sales in key markets such as California, Texas, and Florida.

• Strategic Partnerships and Future Growth:

• SunPower signed a joint development agreement with REC, aiming to enhance its panel partnership, which is crucial as demand for panels is high.
• The agreement is part of SunPower's strategy to leverage its partnerships to capture market opportunities and secure production capacity.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted sequential revenue increase to $70M and operating income of $3.12M (vs $2.42M prior quarter), said bookings 'just doubled' after the Sunder acquisition, provided an $83M/$3.5M near-term outlook and a $1B-by-2028 growth target, and emphasized accretive acquisitions and margin targets (~38% gross, ~10% operating).

Q&A:

• Question from Derek Soderberg (Cantor Fitzgerald & Co., Research Division): T.J., you just mentioned the $200,000 battery opportunity with Enphase. I'm imagining those are part of a solar install as well, but curious if those are Enphase batteries? And then how should we sort of quantify that opportunity for SunPower?
  Response: The opportunity came through Enphase (the only approved battery on SunPower's AVL); Enphase is the compatible choice and details are not being disclosed at this time.

• Question from Derek Soderberg (Cantor Fitzgerald & Co., Research Division): On the 2028 goal to reach a $1B run rate, is the gross-margin base ~38% including Sunder, and how should we think about EPS / the 10% profit margin target at $1B?
  Response: Management says core gross margin target is ~38% (reported near-term may be higher from one-offs); with higher volume they target ~10% operating margin; Sunder's sales business has ~16% gross margin and will dilute aggregate margin during the ramp; EPS is currently a few pennies negative.

• Question from Web: Based on 2Q, SunPower's breakeven revenue has proven defensible in the mid-$60 million revenue range. Post acquisition, do you anticipate any changes to that breakeven revenue level?
  Response: No change to breakeven; the principal requirement is scaling the fulfillment/installation team to service higher bookings.

• Question from Gus Richard (Northland Capital): Regarding the battery contract duration — how many years is the battery contract for; if the numbers are right, it would be $1 billion revenue for Enphase?
  Response: Management did not provide a contract-duration; instead emphasized battery economics (avg ~8.5 kWh sizes), Enphase compatibility, and that batteries are increasingly attractive due to time-of-use spreads and regional tariff dynamics.

• Question from Web: While appreciating the opportunity to acquire attractive assets, how do you balance acquisitions versus bolstering the balance sheet and the potential need to raise capital?
  Response: SunPower seeks accretive, culture-fit acquisitions within a budget, prefers to pay with stock when feasible, will raise equity only when non-dilutive, and expects roughly 1–2 acquisitions per year as capacity allows.

• Question from Gus Richard (Northland Capital): How many of the Sunder sales are being converted into EPC revenue at this point?
  Response: Conversion is minimal this quarter (pipeline fill/ramp required); plan is to ramp in Q4 and, if they capture ~50% of Sunder orders, that could translate to about $20M sales + $20M internal install revenue per quarter.

• Question from Web: As energy demand accelerates due to data center growth and energy pricing increases, how does the energy price trajectory play into your long-term vision for growth?
  Response: Management expects higher energy prices and storage innovations (distributed batteries, pumped hydro) to accelerate solar demand; technological and efficiency improvements (including in AI) will also shape and potentially reduce incremental power needs.

• Question from Web: In the last earnings call you mentioned you may not be CEO in a year's time. Is that still expected, and can you share succession planning?
  Response: No firm succession plan — Rodgers remains CEO, has attempted to recruit successors unsuccessfully, is continuing the search but is not rushing to step down.

Contradiction Point 1

Acquisitions and Financial Strategy

It involves the company's strategy regarding acquisitions and potential financial needs, which are crucial for investors and stakeholders to understand the company's growth plans and financial stability.

Can you discuss how you balance acquisitions with strengthening the balance sheet and the need to raise capital? - Northland Capital

2025Q3: I'm looking for acquisitions priced effectively and that fit our company culture and operations. We aim to make acquisitions annually, utilizing stock for payment where possible. - Thurman Rodgers(CEO)

If Carlyle refuses to convert its debt, how can the company address working capital needs to return to a $100 million annual run rate? - Derek Soderberg (Cantor Fitzgerald)

2024Q1: T.J. Rodgers states that if Carlyle insists on their debt contracts, it would prevent the company from success. He suggests that a debt-to-equity swap is necessary. If Carlyle doesn't agree, he believes the company may not survive. - T.J. Rodgers(CEO)

Contradiction Point 2

Solar Efficiency and Cost

It involves the company's efficiency and cost structures in the solar industry, which are key indicators of competitiveness and sustainability.

Are the $200,000 battery opportunities with Enphase Enphase batteries, and how should we quantify this opportunity for SunPower? - Derek Soderberg (Cantor Fitzgerald & Co., Research Division)

2025Q3: We are the only company that has a strong brand without having to sell at low prices, and we are bringing the highest quality standards to the solar industry. - Thurman Rodgers(CEO)

Can you discuss the current economics for solar customers, including the value proposition for customers and the availability of pioneer products to sub-owners? - Brian Wuebbels (Complete Solaria)

2024Q1: We are by far the most efficient solar company in the world, and we are by far the most expensive solar company in the world. - T.J. Rodgers(CEO)

Contradiction Point 3

Battery Contract Duration and Potential

It involves the duration and potential of battery contracts, which are crucial for understanding SunPower's strategic growth and financial projections.

How many years is the battery contract, and would it generate $1 billion in revenue for Enphase? - Northland Capital (Gus Richard)

2025Q3: The battery contract is for a significant number of years, with a current focus on 50% attachment rates. The opportunity is substantial, with potential for increased battery sales. - Thurman Rodgers(CEO & Executive Chairman)

T.J. mentioned the $200,000 battery opportunity with Enphase. Are those Enphase batteries, and how should we quantify that opportunity for SunPower? - Derek Soderberg (Cantor Fitzgerald & Co., Research Division)

2024Q4: These are indeed Enphase batteries, compatible with future electronic systems. The opportunity is large, with a $200,000 order for an existing group. I can't disclose the details but it's a promising development. - Thurman Rodgers(CEO & Executive Chairman)

Contradiction Point 4

Acquisition Strategy and Stock for Payment

It involves changes in SunPower's acquisition strategy and the use of stock for payment, affecting potential financial and operational impacts.

How do you balance acquisitions, strengthening the balance sheet, and capital-raising needs? - Northland Capital

2025Q3: I'm looking for acquisitions priced effectively and that fit our company culture and operations. We aim to make acquisitions annually, utilizing stock for payment where possible. We're currently targeting six companies and plan to maintain our financial discipline. - Thurman Rodgers(CEO)

How does stock price and valuation affect your willingness to use stock for acquisitions? What is your view on current valuation relative to that? - Web (Indiscernible)

2025Q1: We're open to using stock for acquisitions if it provides fair value. Our focus is on lean operations and cost efficiency. Current valuation reflects our lean approach, positioning us for growth. - T.J. Rodgers(CEO)

Contradiction Point 5

Acquisition Strategy and Timing

It involves SunPower's acquisition strategy and timing, which are essential for understanding its growth strategy and financial health.

How do you balance acquisitions with strengthening the balance sheet and potential capital raising needs? - Northland Capital (Gus Richard)

2025Q3: I'm looking for acquisitions priced effectively and that fit our company culture and operations. We aim to make acquisitions annually, utilizing stock for payment where possible. We're currently targeting six companies and plan to maintain our financial discipline. - Thurman Rodgers(CEO & Executive Chairman)

Regarding additional acquisitions, what is your appetite, and are you pursuing targets as bolt-ons to current operations or to expand your footprint and offerings? - Questioner's Name (Northland Capital)

2024Q4: CSLR prefers acquisitions of companies with strong practices and customer loyalty over expanding the footprint. Bolt-on acquisitions focusing on consumer/commercial and technology are potential targets. - Thurman Rodgers(Chairman and CEO)