Q4 2025 SolarEdge Technologies Inc Earnings Call

February 18, 2026

Speaker #4: Please stand by. Your meeting is about to begin. Hello and welcome to the SolarEdge conference call for the fourth quarter and year ended December 31, 2025.

Operator: Hello, and welcome to the SolarEdge Conference Call for the Fourth Quarter and Year Ended December 31, 2025. This call is being webcast live on the company's website at www.solaredge.com in the Investors section on the Events Calendar page. This call is the sole property and copyright of SolarEdge, with all rights reserved, and any recording, reproduction, or transmission of this call without the express written consent of SolarEdge is prohibited. You may listen to a webcast replay of this call by visiting the Event Calendar page of the SolarEdge investor website.

Speaker #4: This call is being webcast live on the company's website at www.solaredge.com in the Investors section on the Events Calendar page. This call is the sole property and copyright of SolarEdge, with all rights reserved, and any recording, reproduction, or transmission of this call without the express written consent of SolarEdge is prohibited.

Speaker #4: You may listen to a webcast replay of this call by visiting the event calendar page of the SolarEdge investor website. I would now like to turn the call over to JB Lowe, Head of Investor Relations for SolarEdge.

J.B. Lowe: I would now like to turn the call over to J.B. Lowe, Head of Investor Relations for SolarEdge. Please go ahead.

Operator: I would now like to turn the call over to J.B. Lowe, Head of Investor Relations for SolarEdge. Please go ahead.

Speaker #4: Please go ahead.

Speaker #5: Good morning, and thank you for joining us to discuss SolarEdge's operating results for the fourth quarter and year ended 2025, as well as the company's outlook for the first quarter of 2026.

J.B. Lowe: Good morning, and thank you for joining us to discuss SolarEdge's operating results for Q4 and year ended December 31, 2025, as well as the company's outlook for Q1 2026. With me today are Shuki Nir, Chief Executive Officer, and Asaf Alperovitz, Chief Financial Officer. Shuki will begin with a brief review of the results for Q4, ended December 31, 2025. Asaf will review the financial results for Q4, followed by the company's outlook for Q1 2026. We will then open the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations.

Speaker #5: With me today are Shuki Neer, chief executive officer and Asaf Alperovitz, chief financial officer. Shuki will begin with a brief review of the results for the fourth quarter ended December 31st, 2025.

Speaker #5: Asaf will review the financial results for the fourth quarter, followed by the company's outlook for the first quarter of 2026. We will then open the call for questions.

Speaker #5: Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations.

Speaker #5: We encourage you to review the safe harbor statements contained in our earnings press release and our filings with the SEC for a more complete description of such risks and uncertainties.

J.B. Lowe: We encourage you to review the Safe Harbor statements contained in our earnings press release and our filings with the SEC for a more complete description of such risks and uncertainties. Please note, during this earnings call, we may refer to certain Non-GAAP measures, which are not measures prepared in accordance with US GAAP. The Non-GAAP measures are being presented because we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. Reconciliation of these measures can be found in our earnings press release and SEC filings. These Non-GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures prepared in accordance with US GAAP.

Speaker #5: Please note, during this earnings call we may refer to certain non-GAAP measures, which are not measures prepared in accordance with US GAAP. These non-GAAP measures are being presented because we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance.

Speaker #5: Reconciliation of these measures can be found in our earnings press release and SEC filings. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP.

Speaker #5: Listeners who do not have a copy of the quarter and year-end December 31, 2025, press release may obtain a copy by visiting the Investor Relations section of the company's website.

J.B. Lowe: Listeners who do not have a copy of the quarter and year-end December 31, 2025, press release may obtain a copy by visiting the investor relations section of the company's website. With that, I will turn it over to Shuki.

Speaker #5: With that, I will turn it over to Shuki. Thank you, JB. Good morning, everyone, and thank you for joining us today. A year ago, on my first earnings call as SolarEdge's CEO, I laid out the four key priorities that would drive our turnaround.

Shuki Nir: Thank you, J.B. Good morning, everyone, and thank you for joining us today. A year ago, on my first earnings call as SolarEdge CEO, I laid out the four key priorities that would drive our turnaround. Today, I would like to focus first on the meaningful progress we've made over the last year, and then on the transformation of SolarEdge that we see coming in 2026. First, on the turnaround. We gained momentum last year, delivering strong year-over-year revenue growth and expanding our gross margins in each and every quarter. Our solid fourth quarter results continued this trend. Fourth quarter revenue was up 70% year-over-year, without the benefit of any significant one-time pull forward of revenue, and outperformed the typical seasonal decline.

Speaker #5: Today, I would like to focus first on the meaningful progress we've made over the last year, and then on the transformation of SolarEdge that we see coming in 2026.

Speaker #5: First, on the turnaround. We gained momentum last year, delivering strong year-over-year revenue growth and expanding our gross margins in each and every quarter. Our solid fourth quarter results continue this trend.

Speaker #5: Fourth quarter revenue was up 70% year-over-year, without the benefit of any significant one-time pull forward of revenue, and outperformed the typical seasonal decline. We expanded margins for the fifth consecutive quarter, exceeding the top end of our margin guidance, and generated $43 million of free cash flow.

Shuki Nir: We expanded margins for the fifth consecutive quarter, exceeding the top end of our margin guidance, and generated $43 million of free cash flow. This concludes a very successful year of stabilizing our financial situation. We grew revenue by 30% year-over-year, lifted gross margins from negative territory in 2024 to 23% in the last quarter of 2025, and generated $77 million in free cash flow for the year versus negative $421 million in 2024. In the US, we increased our market share in all categories, residential, commercial, and storage. And in Europe, we gained share in C&I and stabilized our share position in the residential market. And we did so before rolling out our SolarEdge Nexus Pro platform, a remarkable achievement and testament to the strength of our brand and execution of our team.

Speaker #5: This concludes a very successful year of stabilizing our financial situation. We grew revenue by 30% year-over-year, lifted gross margins from negative territory in 2024 to 23% in the last quarter of 2025, and generated $77 million in free cash flow for the year versus negative $421 million in 2024.

Speaker #5: In the US, we increased our market share in all categories: residential, commercial, and storage. And in Europe, we gained share in CNI and stabilized our share position in the residential market.

Speaker #5: And we did so before rolling out our SolarEdge Nexus platform, a remarkable achievement and testament to the strength of our brand and execution of our team.

Speaker #5: We also introduced the single SKU concept, which has received extremely positive feedback from our customers. We launched several new products, including initial units of Nexus platform.

Shuki Nir: We also introduced the Single SKU concept, which has received extremely positive feedback from our customers. We launched several new products, including initial units of Nexus platform, and we continue to ramp up our US manufacturing, serving domestic demand and exporting our first product late in the year. I'm so proud of the progress we achieved last year, which was made possible by our relentless focus on operational excellence and a renewed commitment to delivering a best-in-class customer experience. But 2025 was just the first step in our turnaround journey. It was about defense, restoring discipline, generating strong free cash flow, rebuilding margin. 2026 is about shifting to offense while keeping this discipline intact. We will focus on moving towards profitable growth, gaining share, scaling Nexus, and investing in new high-growth adjacencies such as AI data center power.

Speaker #5: And we continue to ramp up our US manufacturing, serving domestic demand and exporting our first product late in the year. I'm so proud of the progress we achieved last year, which was made possible by our relentless focus on operational excellence and a renewed commitment to delivering a best-in-class customer experience.

Speaker #5: But 2025 was just the first step in our turnaround journey. It was about defense. Restoring discipline, generating strong free cash flow, rebuilding margins. 2026 is about shifting to offense.

Speaker #5: While keeping this discipline intact, we will focus on moving towards profitable growth, gaining share, scaling Nexus, and investing in new high-growth adjacencies such as AI and data center power.

Speaker #5: And I believe 2026 will be a transformational year for SOLAREDGE that will take the company to the next level. Starting with profitable growth. As you can see from the midpoint of our guidance, we expect Q1 to be another quarter of year-over-year revenue growth and margin expansion.

Shuki Nir: I believe 2026 will be a transformational year for SolarEdge that will take the company to the next level. Starting with profitable growth. As you can see from the midpoint of our guidance, we expect Q1 to be another quarter of year-over-year revenue growth and margin expansion, and revenue will once again trend above typical seasonality. If these trends continue, we would be on target to achieve EBIT profitability later this year. We are focused on operational excellence in order to continuously improve our margins and enhance customer experience. For example, we will be selling our products in a more selected number of key markets where we believe we can win, and where winning will make a meaningful impact on our results. Such change allows us to roll out the Single SKU concept globally, to consolidate warehouses, and to streamline our supply chain.

Speaker #5: And revenue will once again trend above typical seasonality. If these trends continue, we would be on target to achieve EBIT profitability later this year.

Speaker #5: We have focused on operational excellence in order to continuously improve our margins and enhance customer experience. For example, we will be selling our products in a more selected number of key markets where we believe we can win and where winning will make a meaningful impact on our results.

Speaker #5: Such change allows us to roll out the single SKU concept globally to consolidate warehouses and to streamline our supply chain. The next area of transformation is market share gains.

Shuki Nir: The next area of transformation is market share gains. Starting with the US resi market. The market is expected to change this year, as 48E is the only available tax credit in residential solar. We have described how we believe this market evolution plays directly into our strength as the leading provider to TPO. We have deep relationships and integrated infrastructure with these customers, and we offer high-quality products designed to be domestic content and FEOC compliant, produce more energy, deliver better economics, and provide faster payback to our customers. As such, we maintained our number one position in US residential in Q3 2025 and aim to drive further share gains this year. Moving to the CNI market in the US. We are pressing our advantages here.

Speaker #5: Starting with the US ready market. The market is expected to change this year as 48E is the only available tax credit in residential solar.

Speaker #5: We have described how we believe this market evolution plays directly into our strength as the leading provider to TPO. We have deep relationships and integrated infrastructure with these customers.

Speaker #5: And we offer high-quality products designed to be domestic content and FIO compliant, produce more energy, deliver better economics, and provide faster payback to our customers.

Speaker #5: As such, we maintained our number one position in U.S. residential in the third quarter of 2025, and aim to drive further share gains this year.

Speaker #5: Moving to the CNI market in the US, we are pressing our advantages here. Out of the three leading manufacturers in the market, we are the only ones whose products are designed to be both domestic content and FIO compliant.

Shuki Nir: Out of the three leading manufacturers in the market, we are the only one whose products are designed to be both domestic content and FEOC compliant, which should provide a significant advantage to our customers. Consequently, in Q3 2025, we achieved the number one share position across the entire C&I market, even when including ground mount. We believe that we can grow our share further due to the same dynamics. Let's talk about Europe. While the market remains slow, we expect 2026 revenue to exceed 2025 levels as we spent most of last year clearing channel inventory. This growth potential can be amplified by gaining further market share in 2026, and I believe we have several tailwinds in this market. First, US-made products with a lower cost structure that we have started exporting. Second, the introduction of the Single SKU.

Speaker #5: This should provide a significant advantage to our customers. Consequently, in the third quarter of 2025, we achieved the number one share position across the entire CNI market, even when including ground mount.

Speaker #5: We believe that we can grow our share further due to the same dynamics. Let's talk about Europe. While the market remains slow, we expect 2026 revenue to exceed 2025 levels, as we spent most of last year clearing channel inventory.

Speaker #5: This gross potential can be amplified by gaining further market share in 2026. And I believe we have several tailwinds in this market. First, US-made products with a lower cost structure that we have started exporting.

Speaker #5: Second, the introduction of the single SKU. And third, the Nexus rollout enhances our product offering, particularly in the 15 to 30 kilowatt segment, providing a full home backup solution for larger homes.

Shuki Nir: And third, the Nexus rollout enhances our product offering, particularly in the 15- to 30-kW segment, providing a full home backup solution for larger homes. Switching to batteries, which impact market share in all regions and segments. Battery attach rates are expected to continue to rise worldwide, and our advantages are very applicable here. Our DC-coupled architecture delivers as much as 6% higher efficiency, which can result in up to 24 more days of energy per year than AC-coupled alternatives. This translates into meaningful savings for system owners and is a major reason we believe our products can continue to take share in the TPO-dominated US market and around the world. In fact, we are already seeing market share gains in the US, where we became the No. 2 supplier for residential batteries in Q3 of 2025.

Speaker #5: Switching to batteries, which impacts market share in all regions and segments. Battery attach rates are expected to continue to rise worldwide, and our advantages are very applicable here.

Speaker #5: Our DC coupled architecture delivers as much as 6% higher efficiency. Which can result in up to 24 more days of energy per year than AC coupled alternatives.

Speaker #5: This translates into meaningful savings for system owners and is a major reason we believe our products can continue to take share in the TPO-dominated U.S. market and around the world.

Speaker #5: In fact, we are already seeing market share gains in the U.S., where we became the number two supplier for residential batteries in the third quarter of 2025.

Speaker #5: Our third area of transformation is product innovation and leadership. I'm very pleased to say that we are on schedule for the launch of our Nexus platform, with an exciting launch event in Germany on March 19th.

Shuki Nir: Our third area of transformation is product innovation and leadership. I'm very pleased to say that we are on schedule for the launch of our Nexus platform with an exciting launch event in Germany on 19 March. Our first customers have told us that this is the best SolarEdge product ever, and yesterday, my family became part of this group of satisfied customers when the full Nexus system was installed at our house. Nexus is lighter and takes up less wall space. The modularity and stackability of the system offers flexibility both during the sales process and during installation. Our installation and commissioning times are expected to come down, showing that the work we've put in to alleviate installer pain points is on the right track. In the US, Nexus batteries will come with an industry-leading 185 amps LRA, which is needed for true full home backup.

Speaker #5: Our first customers have told us that this is the best SOLAREDGE product ever. And yesterday, my family became part of this group of satisfied customers when the full Nexus system was installed at our house.

Speaker #5: Nexus is lighter and takes up less wall space. The modularity and stackability of the system offer flexibility both during the sales process and during installation.

Speaker #5: Our installation and commissioning times are expected to come down, showing that the work we've put in to alleviate installer pain points is on the right track.

Speaker #5: In the US, Nexus batteries will come with an industry-leading 185 amps LRA, which is needed for true full home backup. Our meter collar solution includes passive cooling, which we think is going to improve reliability in the field.

Shuki Nir: Our meter collar solution includes passive cooling, which we think is going to improve reliability in the field, and serviceability itself is a major differentiator. Most issues can be solved by swapping necessary parts without having to remove and take apart the entire unit. The fourth element of the transformation is investing in AI data center power solutions. As you all know, power is the limiting factor for AI expansion. NVIDIA is guiding the industry to improve this through a transition to 800-volt DC architecture, an architecture that fits perfectly for the technical expertise SolarEdge has refined over the last two decades. We believe this represents a multi-billion-dollar addressable opportunity over time.

Speaker #5: And serviceability itself is a major differentiator. Most issues can be solved by swapping necessary parts without having to remove and take apart entire units.

Speaker #5: The fourth element of the transformation is investing in AI, data center power solutions. As you all know, power is the limiting factor for AI expansion.

Speaker #5: NVIDIA is guiding the industry to improve this through a transition to 800-volt DC architecture—an architecture that fits perfectly with the technical expertise SolarEdge has refined over the last two decades.

Speaker #5: We believe this represents a multi-billion dollars addressable opportunity over time. Since our last call, we have made progress in our solid state transformer platform as we pursue a unique system that converts 34.5 kilovolts directly into 800 volt DC with efficiency of over 99%.

Shuki Nir: Since our last call, we have made progress in our Solid-State Transformer platform as we pursue a unique system that converts 34.5kV directly into 800V DC with efficiency of over 99%. Our topology is purpose-built for direct medium voltage input, using a modular, high-frequency conversion architecture designed to increase efficiency at the data center and reduce stages, losses, and footprint versus conventional alternatives. We have already engaged with potential customers and ecosystem partners. Based on the feedback and requirements from industry participants, we believe this gives us a structural advantage in efficiency, controllability, and power density. Potential partners also recognize our DC-coupled architecture expertise and the system-level value we bring. In addition, based on our large-scale power electronics manufacturing experience, we expect to have a clear path to scale production capacity as market demand develops.

Speaker #5: Our topology is purpose-built for direct medium-voltage input, using a modular high-frequency conversion architecture designed to increase efficiency at the data center and reduce stage losses and footprint versus conventional alternatives.

Speaker #5: We have already engaged with potential customers and ecosystem partners. Based on the feedback and requirements from industry participants, we believe this gives us a structural advantage in efficiency, controllability, and power density.

Speaker #5: Potential partners also recognize our DC-coupled architecture expertise and the system-level value we bring. In addition, based on our large-scale power electronics manufacturing experience, we expect to have a clear path to scale production capacity as market demand develops.

Speaker #5: To summarize, in 2025 we set out to turn the SolarEdge business around and to lay the foundations for profitable growth. I'm very proud of the work we did and the progress we made.

Shuki Nir: To summarize, in 2025, we set out to turn the SolarEdge business around and to lay the foundations for profitable growth. I'm very proud of the work we did and the progress we made. But that was last year. 2026 is about execution at scale. We are working towards profitable growth. Our aim is to gain market share globally. We will ship Nexus in the high volume, and we will advance our opportunity in AI data center power solutions. We are moving forward with discipline, but with an offense mindset, focused on winning in every segment we compete in. I cannot wait to share our progress with you in the coming quarter. With that, I will turn it over to Asaf.

Speaker #5: But that was last year. 2026 is about execution at scale. We are working towards profitable growth. Our aim is to gain market share globally.

Speaker #5: We will ship Nexus in the high volume and we will advance our opportunity in AI, data center power solutions. We are moving forward with discipline, but with an offense mindset focused on winning in every segment we compete in.

Speaker #5: I cannot wait to share our progress with you in the coming quarters. With that, I will turn it over to Asaf.

Speaker #2: Thank you, Shuki, and good morning everyone. Starting with our quarterly results. Non-GAAP revenues for the fourth quarter were $334 million, up 70% year over year and slightly down quarter over quarter, outperforming the typical seasonal decline of 10 to 15%.

Asaf Alperovitz: Thank you, Shuki, and good morning, everyone. Starting with our quarterly results. Non-GAAP revenues for the fourth quarter were $334 million, up 70% year over year, and slightly down quarter over quarter, outperforming the typical seasonal decline of 10 to 15%. This result does not include any significant one-time or pull forward of revenue from either Safe Harbor or 25 B. Revenue from the US this quarter amounted to $198 million, down 3% quarter over quarter, and representing 59% of our revenues. Revenues from Europe were $99 million, down 1% quarter over quarter, and representing 30% of our revenues. International markets revenues were $37 million, up 2% quarter over quarter, and representing 11% of our revenues.

Speaker #2: This result does not include any significant one-time or pull-forward of revenue, from either Safe Harbor or 25D. Revenue from the U.S. this quarter amounted to $198 million, down 3% quarter over quarter, and representing 59% of our revenues.

Speaker #2: Revenues from Europe were $99 million, down 1% quarter over quarter and representing 30% of our revenues. International markets revenues were $37 million, up 2% quarter over quarter and representing 11% of our revenues.

Speaker #2: Non-GAAP gross margin this quarter was up significantly to 23.3% compared to 18.8% in Q3, just above the higher end of our guidance. The higher gross margin is largely due to higher sales of US-made products and lower seasonal warranty cost.

Asaf Alperovitz: Non-GAAP gross margin this quarter was up significantly to 23.3%, compared to 18.8% in Q3, just above the higher end of our guidance. The higher gross margin is largely due to higher sales of US-made products and lower seasonal warranty costs. We continue to take actions to streamline our operations and focus on our core businesses. Subsequent to year-end, we sold the remainder of our eMobility business for a consideration of $12 million. This sale resulted in a GAAP net loss of approximately $8 million. Additionally, in Q4, we recorded a one-time non-cash finance expense of approximately $60 million related to the closure of the Kokam battery manufacturing division.

Speaker #2: We continue to take actions to streamline our operations and focus on our core businesses. Subsequent to year end, we sold the remainder of our e-mobility business for a consideration of 12 million dollars.

Speaker #2: This sale resulted in a gap net loss of approximately 8 million dollars. Additionally, in Q4, we recorded a one time non-cash finance expense of approximately 60 million dollars related to the closure of the COCAM battery manufacturing division.

Speaker #2: These actions are a continuation of the process that we began in late 2024 to optimize our portfolio, which included the sale of our tracker business and battery manufacturing facilities in South Korea.

Asaf Alperovitz: These actions are a continuation of the process that we began in late 2024 to optimize our portfolio, which included the sale of our tracker business and battery manufacturing facilities in South Korea. We believe these portfolio optimization actions are largely complete, and the expense reduction associated with these moves will allow us to invest and focus more strategically on our core products and businesses and accelerate the development of our data center offering. Non-GAAP operating expenses for Q3 were $88.7 million, up slightly from last quarter and within our guidance range, despite headwinds from the continued strengthening of the new Israeli shekel, net of hedging.

Speaker #2: We believe these portfolio optimization actions are largely complete, and the expense reduction associated with these moves will allow us to invest and focus more strategically on our core products and businesses, and accelerate the development of our data center offering.

Speaker #2: Non-GAAP operating expenses for the third quarter were $88.7 million, up slightly from last quarter and within our guidance range, despite headwinds from the continued strengthening of the new Israeli shekel net of hedging.

Speaker #2: Non-GAAP operating loss for Q4 was $11 million, compared to a non-GAAP operating loss of $23.8 million in Q3, cutting our operating loss by more than half for the second straight quarter.

Asaf Alperovitz: Non-GAAP operating loss for Q4 was $11 million, compared to a non-GAAP operating loss of $23.8 million in Q3, cutting our operating loss by more than half for the second straight quarter. This is a promising result and speaks to the progress we have made in executing our turnaround plan and is another step on a journey back to profitable growth. Our non-GAAP net loss was $8.2 million in Q4, compared to a non-GAAP net loss of $18.3 million in Q3, also a reduction of over 50%. Non-GAAP net loss per share was $0.14 in Q4, compared to $0.31 in Q3. The lower operating and net losses, the lowest in five consecutive quarters, are largely due to our higher growth, profit, and margins. Turning to our balance sheet now.

Speaker #2: This is a promising result and speaks to the progress we have made in executing our turnaround plan, and is another step on a journey back to profitable growth.

Speaker #2: Our non-GAAP net loss was $8.2 million in Q4, compared to a non-GAAP net loss of $18.3 million in Q3, also a reduction of over 50%.

Speaker #2: Non-GAAP net loss per share was $0.14 in Q4 compared to $0.31 in Q3. The lower operating and net losses, the lowest in five consecutive quarters, are largely due to our higher gross profit and margins. Turning to our balance sheet now.

Speaker #2: As of December 31, 2025, our cash and equivalents portfolio was approximately $581 million. Our cash and investment portfolio increased by approximately $34 million in Q4.

Asaf Alperovitz: As of 31 December 2025, our cash and equivalents portfolio was approximately $581 million. Our cash and investment portfolio increased by approximately $34 million in Q4. This is the result of our strong positive free cash flow for the quarter of approximately $43 million, which was largely driven by working capital items and our continued CapEx discipline. Despite the volatile tariff environment, we managed to generate $77 million in free cash flow in 2025, a complete turnaround from the negative free cash flow of $421 million in 2024. For Q1, we expect to continue to deliver positive free cash flow, despite our planned investment in working capital to support our anticipated growth. This reflects solid underlying operating performance and continued discipline in managing expenses and capital investment.

Speaker #2: This is the result of our strong positive free cash flow for the quarter of approximately $43 million, which was largely driven by working capital items and our continued CapEx discipline.

Speaker #2: Despite the volatile tariff environment, we managed to generate $77 million in free cash flow in 2025—a complete turnaround from the negative free cash flow of $421 million in 2024.

Speaker #2: For Q1, we expect to continue to deliver positive free cash flow despite our planned investment in working capital to support our anticipated growth. This reflects solid underlying operating performance and continued discipline in managing expenses and capital investment.

Speaker #2: Turning to our working capital items. We remain hyper-focused on improving our cash conversion cycle. Our inventory increased by $22 million as we had higher raw materials procurement to support the launch of our Nexus platform and due to higher battery demand.

Asaf Alperovitz: Turning to our working capital items. We remain hyper-focused on improving our cash conversion cycle. Our inventory increased by $22 million, as we had higher raw materials procurement to support the launch of our Nexus platform and due to higher battery demand. AR net decreased this quarter to $267 million, compared to $286 million last quarter, driven by a strong collection this quarter. A quick update on disclosures. As we mentioned last quarter, we have discontinued the megawatt ship disclosure. We are now disclosing the number of inverters, optimizers, and megawatt-hours of batteries that we recognize as revenue on a quarterly basis. We are also now providing revenue by product type on a quarterly basis.

Speaker #2: AR net decreased this quarter to 267 million dollars compared to 286 million dollars last quarter driven by our strong collection this quarter. A quick update on disclosures.

Speaker #2: As we mentioned last quarter, we have discontinued the megawatt chip disclosure. We are now disclosing the number of inverters, optimizers, and megawatt-hours of batteries that we recognize as revenue on a quarterly basis.

Speaker #2: We are also now providing revenue by product type on a quarterly basis. You can find the current quarter data in the press release and supplemental tables, which also include historical quarterly data going back to Q1 of 2024.

Asaf Alperovitz: You can find the current quarter data in the press release and supplemental tables, which also include historical quarterly data going back to Q1 of 2024.

Speaker #2: We believe this new matrix will help analysts and investors better understand the underlying dynamics of a business. Turning now to our guidance for the first quarter of 2026.

Shuki Nir: ... We believe these new metrics will help analysts and investors better understand the underlying dynamics of our business. Turning now to our guidance for Q1 2026. We are expecting revenues to be within the range of $290 to 320 million, which, at the midpoint, reflects a better than normal seasonal trend for the first quarter. This range does not include any significant one-time pull forward of revenues. We expect non-GAAP gross margin to be within the range of 20% to 24%. We expect the non-GAAP operating expenses to be within the range of $88 to 93 million. The quarter-over-quarter increase at the midpoint is largely due to the strengthening of the Israeli new shekel against the US dollar, net of hedging.

Asaf Alperovitz: ... We believe these new metrics will help analysts and investors better understand the underlying dynamics of our business. Turning now to our guidance for Q1 2026. We are expecting revenues to be within the range of $290 to 320 million, which, at the midpoint, reflects a better than normal seasonal trend for the first quarter. This range does not include any significant one-time pull forward of revenues. We expect non-GAAP gross margin to be within the range of 20% to 24%. We expect the non-GAAP operating expenses to be within the range of $88 to 93 million. The quarter-over-quarter increase at the midpoint is largely due to the strengthening of the Israeli new shekel against the US dollar, net of hedging.

Speaker #2: We are expecting revenues to be within the range of 290 to 320 million dollars which at the midpoint reflects a better than normal seasonal trend for the first quarter.

Speaker #2: This range does not include any significant one-time pull-forward of revenues. We expect non-GAAP gross margin to be within the range of 20% to 24%.

Speaker #2: We expect a non-gap operating expenses to be within the range of 88 to 93 million dollars. The quarter over quarter increased at the midpoint is largely due to the strengthening of the new Israel Shekel against the US dollar net of hedging.

Speaker #2: I will now turn the call over to the operator to open it up for any questions. Operator?

Shuki Nir: I will now turn the call over to the operator to open it up for any questions. Operator?

Asaf Alperovitz: I will now turn the call over to the operator to open it up for any questions. Operator?

Speaker #1: Thank you. And if you would like to ask a question, please press *1 on your keypad. To leave the queue at any time, press *2.

J.B. Lowe: Thank you. And if you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. We ask that you please limit yourself to one question and one follow-up, to allow everyone a chance to ask their question. Once again, that is star and one to ask a question. And we will take our first question from Brian Lee with Goldman Sachs. Please go ahead. Your line is open.

Operator: Thank you. And if you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. We ask that you please limit yourself to one question and one follow-up, to allow everyone a chance to ask their question. Once again, that is star and one to ask a question. And we will take our first question from Brian Lee with Goldman Sachs. Please go ahead. Your line is open.

Speaker #1: We ask that you please limit yourself to one question and one follow-up to allow everyone a chance to ask their question. Once again, that is *STAR N1* to ask a question.

Speaker #1: And we will take our first question from Brian Lee with Goldman Sachs. Please go ahead. Your line is open.

Speaker #3: Hey guys, good morning. Thanks for taking the questions. Kudos on the solid execution here. Maybe first question on the AI data center opportunity—I mean, it sounds like it's starting to crystallize a bit more, so I appreciate the additional color this quarter.

Brian Lee: Hey, guys. Good morning. Thanks for taking the questions. Kudos on the solid execution here. Maybe first question on the AI data center opportunity. I mean, it sounds like it's starting to crystallize a bit more, so appreciate the additional color this quarter. Can you give us a sense, I know it's not going to impact 2026, but it does sound like it'll be part of your 2027 business plan. What kind of needs to happen between now and then? Like, when do you have a product, kind of in beta version? How long do you think the qualification cycle will be with, you know, potential customers? And then, I guess, how do you envision, you know, the actual manufacturing of the product? Is that something that you will take on?

Speaker #3: Can you give us a sense? I know it's not going to impact 2026, but it does sound like it'll be part of your 2027 business plan.

Speaker #3: What kind of needs to happen between now and then? When do you have a product kind of in beta version? How long do you think the qualification cycle will be with potential customers and then I guess how do you envision the actual manufacturing of the product?

Speaker #3: Is that something that you will take on? Is it ST Micro? Will you need to build a new factory? Just trying to understand maybe the logistics from here to when you fully commercialize the product and get into the market.

Brian Lee: Is it STMicro, where you need to build a new factory? Just trying to understand the, maybe the logistics from here to when you, you know, fully commercialize the product and get into the market.

Speaker #4: Yeah. Thank you, Brian. It's really exciting time for the data center opportunity that we have. As we said, we believe this is a multi-billion dollar opportunity for us.

Shuki Nir: Yeah. Thank you, Brian. It's really exciting time for the data center opportunity that we have. As we said, we believe this is a multibillion-dollar opportunity for us. And as we shared with you before, NVIDIA is targeting the new generation of the GPUs that require the 800-volt DC architecture for 2027. So assuming there are no delays in their roadmap, this is where the market is heading to have initial data centers that are designed to support 800-volt DC.

Speaker #4: And as we shared with you before, NVIDIA is targeting the new generation of GPUs that require the 800-volt DC architecture for 2027. So, assuming there are no delays in their roadmap, this is where the market is heading: to have initial solutions, initial data centers that are designed to support 800-volt DC.

Shuki Nir: And as you know, some of the data centers are looking into hybrid solutions, which is basically taking the AC infrastructure, adding some additional components to it, called the sidecar, and that will give them an 800V DC with a lower risk for execution, if you will, but with much lower efficiency. When they look into the SST solution, then that should provide a much higher efficiency, and at the same time, it will require for us and for others to develop the technology, to go through what you refer to as pilots or POCs, or other ways for the data centers to feel comfortable around this solution in order to deploy it in mass.

Speaker #4: And as you know, some of the data centers are looking into hybrid solutions which is basically taking the AC infrastructure, adding some additional components to it called the sidecar and that will give them an 800-volt DC with a lower risk for execution if you will but with much lower efficiency.

Speaker #4: When they look into the SST solution, that should provide much higher efficiency. And at the same time, it will require for us and for others to develop the technology to go through what you refer to as pilot or POCs, or other ways for the data centers to feel comfortable around this solution in order to deploy it in mass.

Shuki Nir: We have started engaging with the ecosystem players, with the different participants, whether it's the hyperscalers, whether it's the other power electronics providers and some other players in the market. The feedback that we've received so far about our technology, about the expertise that we bring to the table, some additional information that we actually bring to the table that some of them were not aware of. So the feedback that we've received is that our solution seems to be very attractive for them. The ability to convert 34.5 kilovolts directly into 800-volt DC with efficiency of over 99%, is very impressive. We've started the discussions. At this stage, the discussions are at a technical level. The technical teams are under NDA, obviously.

Speaker #4: We have started engaging with the ecosystem players with the different participants—whether it's the hyperscalers, whether it's the other power electronics providers, and some other players in the market.

Speaker #4: And the feedback that we've received so far about our technology, about the expertise that we bring to the table, and some additional information that we actually bring to the table that some of them were not aware of.

Speaker #4: So the feedback that we've received is that our solution seems to be very attractive for them. The ability to go from kilovolts directly into 800-volt DC with efficiency of over 99% is very impressive.

Speaker #4: And we've started the discussions. At this stage, the discussions are at a technical level. The technical teams are under NDA; obviously, they try to understand better how our technology is architected, how we are implementing the different parts of the solution.

Shuki Nir: They try to understand better how our technology is architectured, how we are implementing the different parts of the solution. And we believe that after that, we will start having discussions about initial real pro or prototype testing. And as you said, we do not expect any revenue before 2027, and the industry is expecting the ramp-up to actually start in 2028. That brings another point that many people don't think about, but our ability and our experience in mass production of gigawatt-scale inverters or solutions is something that is going to be very, very important as these data center, AI data center builders and operators are going to consider with whom to partner. That will give us a clear path, we believe, to mass production.

Speaker #4: And we believe that, after that, we will start having discussions about initial real or prototype testing, and as you said, we do not expect any revenue before 2027.

Speaker #4: And the industry is expecting the ramp-up to actually start in 2028. That brings another point that many people don't think about, but our ability and our experience in mass production of gigawatt-scale inverters or solutions is something that is going to be very, very important as these AI data center builders and operators are going to consider with whom to partner.

Speaker #4: That will give us a clear path, we believe, to mass production.

Speaker #3: Super helpful. Appreciate all the color. And then, just to follow up on maybe the guidance and the safe harbor—I know it's not been your usual policy to comment much on safe harbor, and you don't include it in the guidance.

Brian Lee: Super helpful. I appreciate all the color. And then just to follow up on the maybe the guidance in the safe harbor. I know it's not been your usual policy to comment much on Safe Harbor, and you don't include it in the guidance. But maybe just a question on, you know, the sort of market dynamics here as it relates to Safe Harbor. You know, you have no Safe Harbor per your acknowledgment in Q4 revenues. You're not embedding anything in Q1. I know one of your peers, your major peer, has seen it for several quarters in a row, and has also alluded to the fact that, you know, they're seeing it in Q1 and expect it into Q2, and maybe even into Q3.

Speaker #3: But maybe just a question on the sort of market dynamics here as it relates to safe harbor. You have no safe harbor, per your acknowledgment, in Q4 revenues.

Speaker #3: You're not embedding anything in Q1. I know one of your peers—your major peer—has seen it for several quarters in a row and has also alluded to the fact that they're seeing it in Q1 and expect it into Q2 and maybe even into Q3.

Speaker #3: So, how much of this is maybe just a different go-to-market strategy? Are they just being more aggressive than you? Is there a share shift amongst that part of the market that wants to safe harbor?

Brian Lee: So, how much of this is maybe just a different go-to-market strategy, or are they just being more aggressive than you? Is there a share shift among that part of the market that wants to Safe Harbor? Maybe speak to that. Or are you actually anticipating Safe Harbor to positively impact you in Q1 and beyond, but you're just not showcasing it? Just maybe some thoughts around that and how you're different versus your peers. Thank you.

Speaker #3: Maybe speak to that. Are you actually anticipating Safe Harbor to positively impact you in Q1 and beyond, but you're just not facing it? Just maybe some thoughts around that, and how you're different versus your peers.

Speaker #3: Thank you.

Speaker #4: Yeah, yes. Again, thank you. Thank you for bringing it up, because there might be some confusion out there about what we're referring to when we say there is no significant pull forward of revenue.

Shuki Nir: Yes, again, thank you, thank you for bringing it up, because there might be some confusion out there about what we're referring to when we say there is no significant pull forward of revenue, and we'd like to emphasize that. When Asaf and I, when we talk about guidance for the quarter or the results of the fourth quarter, we're saying that there was no significant revenue that was recognized, that is Safe Harbor. At the same time, we've done lots of Safe Harbor deals based on the physical work test. And as we shared in previous calls, what happens over there is the structure of the transaction is such that because of the fact that it's a unique inventory item, and it...

Speaker #4: And we'd like to emphasize that when Asaf and I—when we talk about guidance for the quarter or the results of the first quarter—we're saying that there was no significant revenue that was recognized. That is safe harbor.

Speaker #4: At the same time, we've done lots of safe harbor deals based on the physical work test. And as we shared in previous calls, what happens over there is the structure of the transaction is such that because of the fact that it's a unique inventory item, and it there is no revenue recognition until the delivery of the product, and the customers have the ability to actually procure the product at the time that they need it, then we have not recognized revenue associated with that.

Shuki Nir: There is no revenue recognition until the delivery of the product, and the customers have the ability to actually procure the product at the time that they need it; then we've not recognized revenue associated with that, but we have signed significant Safe Harbor deals associated with the physical inverters. In addition to that, from time to time, we are having the 5% Safe Harbor deals, and in that case, we recognize them within the quarter. But if they don't fall to the definition of the Safe Harbor or the pull forward of revenue, then we don't count them towards that. So Asaf, do you want to-

Speaker #4: But we have signed significant safe harbor deals associated with the physical work test. In addition to that, from time to time, we are having the 5% safe harbor deals.

Speaker #4: And in that case, we recognize them within the quarter. But if they don't fall to the definition of the safe harbor or the pull forward of revenue, then we don't count them towards that.

Speaker #4: So, Asaf, do you want to?

Asaf Alperovitz: Maybe just to complement a couple of points. So, as it relates to the physical work desk, for us, it results in a revenue recognition profile, but I will say is, more similar to the normal cadence of the way we do business. Again, no forward, no pull forward. We noted no pull forward for Q4, no pull forward for Q1 in terms of, our guidance. And, an important benefit that we do get is it does provide us with a much better visibility, I would say, and we can entirely optimize the entire supply chain. And of course, from our customer perspective, it's a major benefit because they do not have to put a large upfront amount of payment, and, they can pay, for the products as they pull them.

Speaker #3: Maybe just to complement a couple of points. So, as it relates to the physical work test, for us, it results in a revenue recognition profile that I would say is more similar to the normal cadence of the way we do business.

Speaker #3: Again, all forward, no pull-forward. We noted no pull-forward for Q4, no pull-forward for Q1 in terms of our guidance. And an important benefit that we do get is it does provide us with much better visibility, I would say.

Speaker #3: And we can optimize the entire supply chain. And, of course, from our customer perspective, it's a major benefit because they did not have to put a large upfront amount as a payment.

Speaker #3: And they can pay for the product as they pulled them. So I think it's beneficial to both ourselves and our customers.

Asaf Alperovitz: So I think it's beneficial to both ourselves and our customers.

Speaker #1: Thank you. Our next question comes from Philip Shen with Roth Capital Partners. Please go ahead. Your line is open.

J.B. Lowe: Thank you. Our next question comes from Philip Shen with Roth Capital Partners. Please go ahead. Your line is open.

Operator: Thank you. Our next question comes from Philip Shen with Roth Capital Partners. Please go ahead. Your line is open.

Speaker #5: Hi, everyone. Thanks for taking my questions. I know you haven't provided an outlook for Q2 and beyond, but was wondering if you could give us some color on how you would expect revenue to trend in Q2 and margins as well.

Philip Shen: Hi, everyone. Thanks for taking my questions. I know you haven't provided an outlook for Q2 and beyond, but was wondering if you could give us some color on how you would expect revenue to trend in Q2 and margins as well? Would you expect the kind of similar historical seasonality with revenues going higher in Q2 versus Q1? And if you can share what the magnitude directionally might be, that would be fantastic. Thanks.

Speaker #5: Would you expect the kind of similar historical seasonality with revenues going higher in Q2 versus Q1? And if you can share what the magnitude directionally might be that would be fantastic.

Speaker #5: Thanks.

Speaker #4: Thank you for the great question, and good morning. So, in terms of—as you know—we do not guide past the next quarter. As you noted, there is, of course, a positive seasonality driving Q2.

Asaf Alperovitz: Thank you for the great question, and good morning. So in terms of, as you know, we do not guide past next quarter. As you noted, there is of course a positive seasonality driver in Q2. Typically, it's around 15% to 20%. So we do expect to be up, but we won't comment on on beyond Q1. In terms of the overall drivers for the 2026 revenue, I think as Shuki noted in our prepared remarks, in the in the US, as we have said, we see continued shift towards the TPO this year.

Speaker #4: Typically, it's around 15 to 20 percent. So we do expect to be up, but we want comments on beyond Q1. In terms of the overall drivers for the 2006 revenue, I think as Shukri noted in our prepared remarks, in the US, as we have said, we see continued shift towards the TPO this year.

Speaker #4: And as you know, we work with all the TPOs. We build designated infrastructure with them, and we have multi-year relationship with them. So we certainly see that as a positive.

Asaf Alperovitz: And as you know, the people we work with, all the TPOs, we build designated the infrastructure with them, and we have a multi-year relationship with them, so we certainly see that as a positive. Our new Nexus platform is on track with our rollout plans. It comes very, as you know, very highly competitive feature set. We do have a better cost structure implemented in these products. We do see in the US significant C&I opportunities. We believe that we have a unique position as a domestic content and TPO enabler to our customers, including enterprise customers. Now, moving to the EU continent, so for the first half of 2025 last year, as you know, we saw significant inventory clearance in the channel.

Speaker #4: Our new nexus platform is on track with our rollout plans and comes very as you know, very highly competitive feature set. We do have better cost structure implemented in this product.

Speaker #4: We do see in the US significant CNI opportunities. We believe that we have a unique position as a domestic content provider and enabler to our customers.

Speaker #4: Including enterprise customers, now moving to the EU continent. So for the first half of 2025, last year, we, as you know, we saw significant inventory clearance in the channel.

Speaker #4: This will make year-over-year comps fairly achievable to exceed in the first half of this year, of 2026. At the same time, the EU market remains sluggish and could even go down this year.

Asaf Alperovitz: This will make year-over-year comps fairly achievable to exceed in the first half of this year, 2026. At the same time, the EU market remains sluggish and, like, would even go down this year. So, I would say it will be an interplay between a weak market, a new product rollout, and our market share expansion efforts. We're highly focused on that. As Shuki mentioned, I think we have multiple reasons to be optimistic, including again, the Nexus, exporting from the US with a better cost structure that will enable and allow us to be even more competitive. We're penetrating new segments in Europe with our 20 kW inverter and the single SKU rollout, of course.

Speaker #4: So I would say it will be an interplay between a weak market, a new product rollout, market share expansion efforts. We're highly focused on that.

Speaker #4: As Shukri mentioned, I think we have multiple reasons to be optimistic. Including, again, the nexus exporting from the US with better cost structure that will enable and allow us to be even more competitive.

Speaker #4: We're penetrating new segments. In Europe, with our 20-kilowatt inverter, and the single SKU rollout, of course. In terms of margins, so again, we're not guiding beyond the next margin.

Asaf Alperovitz: In terms of margins, so again, we're not guiding beyond the next margin. And as it's related to speak specifically for Q1 margin, as you can see in the mid-range of our guidance, it's slightly lower than Q4. Mostly because of the lower revenue, because of the seasonality trend that we referred to. This will be partly mitigated or set off by higher sales of US products and efficiencies that we start seeing from the implementation of our Single SKU rollout. Talking about the longer horizon, I think you asked about that. So again, we don't give guidance, but there are certain levers that we discussed, which are very relevant now, even more. So one would be the higher revenue, of course, Q2 and beyond.

Speaker #4: As it relates to specifically for Q1 margin, as you can see in the mid-range of our guidance, it's slightly lower than Q4. Mostly because of the lower revenue, because of the seasonality trend that we referred to.

Speaker #4: This will be partly mitigated or set off by higher sales of U.S. product and efficiencies that we will start seeing from the implementation of our single SKU rollout.

Speaker #4: Talking about the longer horizon—I think you asked about that. So, again, we don’t give guidance, but there are certain levers that we discussed which are very relevant now, even more so.

Speaker #4: The one would be the higher revenue. Of course, Q2 and beyond, if you look at the natural seasonality trend, we expect to follow that.

Asaf Alperovitz: If you look at the natural seasonality trend, we expect to follow that. The continuous ramp up of the US production, we are ramping up the US production as we go, preparing for growth. I think I talked about the Nexus and the new products. In terms of the battery, in terms of the Nexus, we're shifting from NMC to LFP, so that's another major cost driver, saver. I think we talked a lot about the single SKU framework, that's gonna be also a gross margin supportive item for us. On top of all of that, of course, you need to look at mix and things that we cannot relate to now. Overall, the trend is positive as we move forward.

Speaker #4: The continuous ramp-up of the US production. We are ramping up the US production as we go. Preparing for growth. I think I talked about the nexus and the new products.

Speaker #4: In terms of the battery, in terms of the nexus, we are shifting from NMC to LFP. So that's another major cost driver, saver. And of course, I think we talked a lot about the single SKU framework that's going to be also a gross margin supportive item for us.

Speaker #4: So, on top of all of that, of course, you need to look at mix and things that we cannot relate to now. But overall, the trend is positive as we move forward.

Speaker #5: Great. Thank you for the great color, Asaf. I was wondering if you could talk through maybe your free cash flow expectations for '26. The second part of my question is tied to the European markets.

Philip Shen: Great. Thank you for the great color, Asaf. I was wondering if you could talk through maybe your free cash flow expectations for 2026. The second part of my question is tied to the European market. Was wondering if you could help us understand, you know, give us a better understanding. I know you guys are very enthusiastic about the market out there. And it seems like from a competitive positioning standpoint with the Chinese removing the VAT rebates that might put your products in an even better position. So maybe walk us through kind of the competitive dynamics between the new Nexus platform, relative to what's out there today, and then the massive focus on storage and your benefits there. Thanks.

Speaker #5: I was wondering if you could help us understand, give us a better understanding. I know you guys are very enthusiastic about the market out there.

Speaker #5: And it seems like from a competitive positioning standpoint, with the Chinese removing the VAT rebates, that might put your products in an even better position.

Speaker #5: So maybe walk us through kind of the competitive dynamics between the new nexus platform relative to what's out there today and then the massive focus on storage in your benefits there.

Speaker #5: Thanks.

Speaker #4: Well, thank you for the question. I'll start with the cash flow, and I'm sure Shukri will be excited to tell you about our actions and focusing the EU market.

Asaf Alperovitz: Well, thank you for the question. I'll start with the cash flow, and I'm sure Shuki will be excited to tell you about our actions and focus in the new market. So, for 2025 Q4, we ended with a $43 million, a very strong free cash flow quarter, with overall $77 million for the entire year. So again, we believe it's a pretty strong performance. And again, for beyond Q1, we said that we would be free cash flow positive for Q1. We gave actual guidance for that. We're not gonna give anything beyond that. What I can say is that we're always focusing on, you know, improving our cash conversion cycle, which would be supportive of our cash generation, of course.

Speaker #4: So for 2025, Q4, we ended with 43 million dollars, a very strong free cash flow quarter. With overall 77 million dollars for the entire year.

Speaker #4: So again, we believe it's a pretty strong performance. And again, for beyond Q1, we said that we will be free cash flow positive for Q1.

Speaker #4: We gave actual guidance to that. We are not going to give anything beyond that. What I can say is that we're always focusing on improving our cash conversion cycle.

Speaker #4: Which would be supportive of our cash generation, of course. That said, in a growth environment where we anticipating, we would invest in working capital.

Asaf Alperovitz: That said, in a growth environment where we're anticipating, we would invest in working capital. Considering our work towards improved margin profile, we believe this would be a prudent investment that we're making. Actually, you can look at what we've done in, again, 2025. We transitioned from a massively negative free cash flow position in 2024, to a strong $77 million in 2025, and we were positive in three out of four quarters during 2025. So overall, we're very focused on cash flow and working capital management. Q1 will be positive free cash flow, and beyond that, we'll just have to be a bit patient. Shuki, I'm sure you want, yeah.

Speaker #4: Considering our work towards improved margin profile, we believe this would be a prudent investment that we're making. Actually, you can look at what we've done in, again, 2025.

Speaker #4: We transitioned from a massively negative free cash flow position in '24 to a strong 77 million in '25. And we were positive in three out of four quarters during 2025.

Speaker #4: So overall, we're very focused on cash flow and working capital management. Q1 will be positive. Free cash flow and beyond that, we'll just have to be a bit patient.

Speaker #4: Shukri, I'm sure you are, yeah.

Speaker #3: Yes. Thank you, Phil. About Europe, to your question. So yes, at this stage, it seems that, and again, we're talking about different countries, different dynamics in each of the countries.

Shuki Nir: Yes. Now, thank you, Phil. About Europe, to your question. So yes, at this stage, it seems that. And again, we're talking about different countries, different dynamics in each of the countries, but overall, the market remains somewhat slow. At the same time, we believe that we have a good opportunity in Europe to gain additional market share, both in the C&I and the resi markets. And it start with the fact that we are starting, we've started exporting our products from US manufacturing to Europe.

Speaker #3: But overall, the market remains somewhat slow. At the same time, we believe that we have a good opportunity in Europe to gain additional market share, both in the CNI and the resume markets.

Speaker #3: And it starts with the fact that we are starting we've started exporting our products from US manufacturing to Europe. These are newly built products.

Shuki Nir: These are newly built products, designed and by SolarEdge, manufactured in the US with a very good cost structure, that will allow us to compete, as you said, as you suggested, more aggressively in the market. The second piece is the rollout of Nexus, and as I mentioned, on 19 March, we're having a launch event in Germany. We are expecting hundreds of installers to come over to experience first-hand the ease of installation, the speed of the commissioning process. And I couldn't avoid sharing the fact that they installed it in my house, you know, yesterday. And we are very happy with that. The Nexus platform brings...

Speaker #3: Designed and by SolarEdge, manufactured in the US, with a very good cost structure that will allow us to compete, as you said, as you suggested, more aggressively in the market.

Speaker #3: The second piece is the rollout of nexus and, as I mentioned, on March 19, we're having a launch event in Germany. We are expecting hundreds of installers to come over to experience firsthand the ease of installation, the speed of the commissioning process.

Speaker #3: And I couldn't avoid sharing the fact that they installed it in my house yesterday. And we are very, very happy with that. The Nexus platform brings, and we discussed it in previous calls as well.

Shuki Nir: And we discussed it in previous calls as well. It was designed from the bottom up as a system. So it's not like an inverter that somehow a battery is attached to it. We're actually looking at the entire system, the efficiency both in the high kilowatts rating, as I said, we are addressing now the 15kW to 30kW rating, which is a major segment in the DACH region. But at the same time, also, many houses, when they go at night, they go to the battery, they actually consume less than 1kW. And the efficiency over there is really important.

Speaker #3: It was designed from the bottoms up as a system. So it's not like an inverter that somehow a battery is attached to it. We're actually looking at the entire system, the efficiency, both in the high kilowatts rating, as Asaf said, we're addressing now the 15 to 30 kilowatt rating, which is a major segment in the DACH region.

Speaker #3: But at the same time, also, many houses when they go at night, they go to the battery, they actually consume less than one kilowatt.

Speaker #3: And the efficiency over there is really, really important. Some competitors are boasting some high efficiency ratings in the high kilowatts. But when you really test them in the low kilowatts, you get embarrassing results.

Shuki Nir: Some competitors are boasting some high efficiency rating in the high kilowatts, but when you really test them in the low kilowatts, you get embarrassing results. We are very proud of the expertise that we have in DC architecture, and because of that, and the DC coupling between the inverter and the battery, we can actually have both high efficiency at the high kilowatt rating, but also when the system goes to sub 1 kilowatt, we demonstrate leading efficiency. I can go on and on about the advantages of Nexus, but we are very excited about it. We believe it will help us gain share. And the last piece is the operational excellence.

Speaker #3: We are very proud of the expertise that we have in this architecture. And because of that and the DC coupling between the inverter and the battery, we can actually have both high efficiency at the high kilowatt rating, but also when the system goes to sub one kilowatt, we demonstrate leading efficiencies.

Speaker #3: I can go on and on about the advantages of nexus, but we are very excited about it. We believe it will help us gain share.

Speaker #3: And the last piece is the operational excellence. We talk about single fuel that really simplifies the work and the cash management and the inventory management and the reliability of the product for us and for our customers.

Shuki Nir: We talk about single SKU that really simplifies the work, the cash management, the inventory management, and the reliability of the product for us and for our customers. We've also stopped selling our products in many different countries. We are focused on the countries where we can win, where we believe we can win, and where winning is going to make an impact on our results. And that allows us actually to focus on less countries, but with a much bigger force. On the CNI side, between our storage solution that is taking off and the inverters that we continue selling, we believe that we can gain share over there. So all in all, we are optimistic about Europe in 2026.

Speaker #3: We've also stopped selling our products in many different countries. We are focused on the countries where we can win, where we believe we can win, and where winning is going to make an impact on our results.

Speaker #3: And that allows us actually to focus on fewer countries, but with a much bigger force. On the CNI side, between our storage solution that is taking off and the inverters that we continue selling, we believe that we can gain share over there.

Speaker #3: So, all in all, we are optimistic about Europe in 2026.

Speaker #1: Thank you. We will move next with David Arcaro with Morgan Stanley. Please go ahead. Your line is open.

J.B. Lowe: Thank you. We will move next with David Arcaro, with Morgan Stanley. Please go ahead, your line is open.

Operator: Thank you. We will move next with David Arcaro, with Morgan Stanley. Please go ahead, your line is open.

Speaker #5: Oh, hi. Thank you. Good morning. I was wondering if you could give an update on where channel inventory currently stands maybe in the US and Europe, how healthy the levels are right now.

David Arcaro: Oh, hi, thank you. Good morning. I was wondering if you could give an update on where channel inventory currently stands, maybe in the US and Europe, how healthy the levels are right now?

Speaker #3: Yeah, thank you, Dave. So as we discussed in past calls, most of our distributors in Europe have resumed normal levels of inventory, and that's the reason that we actually consumed some of our own inventory.

Shuki Nir: Yeah. Thank you, Dave. So as we discussed in past calls, most of our distributors in Europe have resumed normal levels of inventory. And that's the reason that we actually consumed some of our in inventory, and now we've started producing product for Europe in the US. So when they need additional product, and they do, they will start buying our newly produced products from the US. In the US channel, overall, the channel has normal levels of inventories. Nothing major to report over there.

Speaker #3: And now we've started producing product for Europe in the US. So when they need additional products—and they do—they will start buying our newly produced products from the US.

Speaker #3: In the US channel, overall, the channel has normal levels of inventories. Nothing major to report over there.

Speaker #5: Got it. Okay, great. Thank you. And then let's see. Megawatts of battery storage were strong for this quarter. I was wondering if you could just touch on what you're seeing in terms of the market backdrop and demand for storage, maybe in the near term.

David Arcaro: Got it. Okay, great. Thank you. And then, let's see, the megawatts battery storage were strong for this quarter. I was wondering if you could just touch on what you're seeing in terms of the market backdrop and demand for storage, maybe in the near term, you know, how is that trending kind of seasonally into Q1, and as you look into the first half of the year into Q2, the direction of that you're expecting for battery storage volumes?

Speaker #5: How is that trending kind of seasonally into one Q and as you look into the first half of the year into two Q, the direction of you're expecting for battery storage volumes?

Speaker #3: Yeah. So as we said, the need for storage is increasing globally and in both segments, both the residential and the CNI. So what you're seeing almost in every market and every segment is up and to the right when it refers to the attach rates.

Shuki Nir: Yeah. So as we said, the need for storage is increasing globally and in both segments, both the residential and the CNI. So what you're seeing almost in every market and every segment is up into the right when it refers to the attach rates. And as I mentioned earlier, we believe that we are offering a complete solution for our customers, and because of that, and where the market is trending, we expect to see storage becoming a bigger and bigger part of our sales.

Speaker #3: And as I mentioned earlier, we believe that we are offering a complete solution for our customers. And because of that and where the market is trending, we expect to see storage becoming a bigger and bigger part of our sales.

Shuki Nir: As I mentioned, with the Nexus, this competitive advantage is significantly higher, and we do expect that to be some sort of step function, if you will, in terms of the attractiveness of our storage and backup solution. And in the CNI side, in Europe and in international markets, we continue to see that more and more customers understand or calculate the return on investment that they can have from adding storage to their solution, and we see a major opportunity over there. And now, I believe that later in the year, we will start also addressing the installed base.

Speaker #3: As I mentioned, with the nexus actually, this competitive advantage is significantly higher. And we do expect that to be some sort of a step function, if you will, in terms of the attractiveness of our storage and backup solutions.

Speaker #3: And on the CNI side, in Europe and in international markets, we continue to see that more and more customers understand or calculate the return on investment that they can have from adding storage to their solution.

Speaker #3: And we see a major opportunity over there. And now I believe that later in the year, we will start also addressing the installed base.

Shuki Nir: We have, as you know, a very large installed base in many markets, and in the ones where it makes sense, we will find a way to actually leverage on that as well.

Speaker #3: As you know, we have a very large installed base in many markets. And in the ones where it makes sense, we will find a way to actually leverage on that as well.

Speaker #1: Thank you. Our next question comes from Dylan Nesano with Wolf Research. Please go ahead. Your line is open.

J.B. Lowe: Thank you. Our next question comes from Dylan Naseno with Wolfe Research. Please go ahead, your line is open.

Operator: Thank you. Our next question comes from Dylan Naseno with Wolfe Research. Please go ahead, your line is open.

Speaker #4: Hey, good morning. Thanks for taking my question. I just wanted to go back to the solid-state transformer and maybe approach it from more of a technical perspective.

Dylan Nassano: Hey, good morning. Thanks for taking my question. I just wanted to go back to the solid state transformer, and maybe approach it from more of a technical perspective. Could you just kind of walk through what you see the relative advantages being, or even differences in application between your planned silicon carbide architecture and something that's like GaN-based, for example?

Speaker #4: Could you just kind of walk through what you see the relative advantages being or even differences in application between your planned silicon carbide architecture and something that's like GaN-based, for example?

Shuki Nir: So, thank you, Dylan. This is... It's an excellent question, and I believe that it's too early for us to actually comment on such a question. What we have said is actually we've looked into several potential partners when we develop the architecture that is going to be highly efficient in the conversion. And in a way, if you think about it, in solar, it's about cost is the main driver. While in the AI data center, the cost of our system is obviously important, but it's not the main driver, it's the performance that we can generate. And if we can increase the efficiency from 98 to 99%, it adds significant value.

Speaker #3: So thank you, Dylan. This is an excellent question. And I believe that it's too early for us to actually comment on such questions. What we have said is, actually, we've looked into several potential partners when we developed the architecture that is going to be highly efficient in the conversion.

Speaker #3: And in a way, if you think about it, in solar, it's about cost is the main driver. While in the AI data center, the cost of our system is obviously important, but it's not the main driver.

Speaker #3: It's the performance that we can generate. And if we can increase the efficiency from 98 to 99%, it adds significant, significant value. So it's not like a cost game to the same level.

Shuki Nir: So, you know, it's not like a cost game to the same level. Now, I'm not, you know, a Ph.D. in engineering. I don't have a Ph.D. in engineering, but to the best of my knowledge, GaN are less relevant in AI data center solutions. But let's leave it at that, because I may be wrong.

Speaker #3: Now, I'm not a PhD in engineering. I don't have a PhD in engineering. But to the best of my knowledge, GaN are less relevant in AI data center solutions.

Speaker #3: But let's leave it at that because I may be wrong.

Speaker #4: Okay. Fair enough. And then just for a quick follow-up, so your partner there, Infineon, they had some bullish comments on AI data center demand on their call.

Dylan Nassano: Okay, fair enough. And then just for a quick follow-up: so your partner there, Infineon, they had some bullish comments on AI data center demand on their call, and they raised their CapEx outlook as a result of that. So just given your earlier comments, can you kind of frame up this ramping demand in terms of, like, incremental R&D spend or even CapEx? And then, sorry if I didn't catch this earlier, but have you decided where you intend to manufacture these, and is there any benefit to doing so in the US versus overseas? Thank you.

Speaker #4: And they raised their CapEx outlook as a result of that. So just given your earlier comments, can you kind of frame up this ramping demand in terms of incremental R&D spend or even CapEx?

Speaker #4: And then sorry if I didn't catch this earlier, but have you decided where you intend to manufacture these? And is there any benefit to doing so in the US versus overseas?

Speaker #4: Thank you.

Speaker #3: Yes. So I cannot obviously comment on what Infineon does or doesn't do. I'd like to emphasize two points here. One is we believe that this is a multi-billion dollar opportunity for us, the SST for AI data centers.

Shuki Nir: Yes. So I cannot obviously comment on what Infineon does or doesn't do. I'd like to emphasize two points here. One is we believe that this is a multi-billion-dollar opportunity for us, the SST for AI data centers. At the same time, Infineon does support other companies that are larger than SolarEdge as well. So, you know, what they do with regard to CapEx or their comments about the market are not necessarily referring to what we are doing. And to your question about have we chosen where to manufacture? Not yet. There are some considerations that are favoring the US, obviously, and we have the infrastructure that is required and the expertise and the partners that are needed in order to ramp up manufacturing in the US quite quickly.

Speaker #3: At the same time, Infineon does support other companies that are larger than SolarEdge as well. So what they do with regard to CapEx or their comments about the market are not necessarily referring to what we are doing.

Speaker #3: To your question about have we chosen where to manufacture? Not yet. There are some considerations that are favoring the US. Obviously. And we have the infrastructure that is required and the expertise and the partners that are needed in order to ramp up manufacturing in the US quite quickly.

Speaker #3: And therefore, it's definitely a region or a location that we may favor.

Shuki Nir: And therefore, it's definitely a region or a location that we may favor.

Speaker #2: And as it relates to incremental OpEx and CapEx, certainly we believe in the opportunity of the SST. And we plan to invest both CapEx and OpEx.

Asaf Alperovitz: As it relates to incremental OpEx and CapEx, certainly we believe in the opportunity of the SST, and we plan to invest both CapEx and OpEx. Our investment is incorporated in our guidance for Q1. Beyond that, we will share with you our progress, of course.

Speaker #2: Our investment is incorporated in our guidance for Q1. And beyond that, we will share with you our progress, of course.

Speaker #1: Thank you. We will move next with Mark Strauss with JPMorgan. Please go ahead.

J.B. Lowe: Thank you. We will move next with Mark Strauss with JP Morgan. Please go ahead.

Operator: Thank you. We will move next with Mark Strauss with JP Morgan. Please go ahead.

Speaker #5: Yes, thank you very much for taking our questions. Shirkey, I wanted to go back to the comments that you guys have been making for a while now about the US CNI business, and your favorable competitive advantage with FIOC and domestic content.

Mark Strouse: Yes, thank you very much for taking our questions. Shuki, I wanted to go back to the comments that you guys have been making for a while now about kind of the US C&I business and your favorable competitive advantage with FEOC and domestic content. Just curious, with the initial guidelines that came out from Treasury last week, if you have any comment there, positive or negative, and kind of how you're thinking about the durability of that advantage over the next, you know, coming quarters or coming years? Thank you.

Speaker #5: Just curious, with the initial guidelines that came out from Treasury last week, if you have any comment there—positive or negative—and kind of how you're thinking about the durability of that advantage over the next coming quarters or coming years.

Speaker #5: Thank you.

Speaker #3: Yes. Thank you, Mark. And you're right. We're very optimistic about what we can offer to our customers on the CNI segment in the US.

Shuki Nir: Yes, thank you, Mark. And, you're right, we're very optimistic about what we can offer to our customers on the C&I segment in the US, as our products have been designed to be both FIOC and domestic content compliant. The recent FIOC guidelines or rules with regard to the materials and the manufacturing are, they're more specific, but at the same time, they've not really changed what we had assumed until now. So from that perspective, we are in compliance with the... We continue to believe that we're in compliance, our products are in compliance with the FIOC requirements. What remains open is about foreign entity, and on that front, SolarEdge has nothing to be concerned about.

Speaker #3: As our products have been designed to be both FIOC and domestic content compliant. The recent FIOC guidelines or rules with regard to the materials and the manufacturing are more specific.

Speaker #3: But at the same time, they've not really changed what we had assumed until now. So from that perspective, we are in compliance with the we continue to believe that we're in compliance.

Speaker #3: Our products are in compliance with the FIOC requirements. What remained open is about foreign entity, and on that front, SolarEdge has nothing to be concerned about.

Speaker #3: We are in a US company owned by US shareholders. So we are not concerned about that part. So we continue to follow any development that may happen.

Shuki Nir: We are a US company owned by US shareholders, so we are not concerned about that part. So we continue to follow any development that may happen, but at this stage, the products that we currently have, you know, they were designed to comply with the current ruling and will continue doing so.

Speaker #3: But at this stage, the product that we currently have they were designed to comply with the current ruling. And we'll continue doing so.

Speaker #5: Great, thank you. And then just a real quick follow-up, if I can, Asaf. The Q1 guide, the 20% to 24% gross margin—I'm sorry if I missed it.

Mark Strouse: Great, thank you. Then just a real quick follow-up, if I can, Asaf. The Q1 guide, the 20% to 24% gross margin, I'm sorry if I missed it, but did you say kind of what the impact is on, or what the impact is from tariffs reflected in that? Thank you.

Speaker #5: But did you say kind of what the impact is on or what the impact is from tariffs reflected in that? Thank you.

Speaker #3: Hi. Good morning. Actually, we did not quantify the tariff impact. At this point, we see tariffs as simply an additional cost of doing business in the US.

Asaf Alperovitz: Hi, good morning. Actually, we, we did not quantify the tariff impact. At this point, we, we see tariffs as simply an additional cost of doing business in the US, along, of course, with the labor expenses, component costs, everything related to the US manufacturing. As you know, we don't typically single out any specific cost item unless they're temporary or, or one time, and we, we see tariffs no longer as such. So we'll just report our gross margin going forward.

Speaker #3: Along, of course, with the labor expenses component codes, everything related to the US manufacturing. As you know, we don't typically single out any specific codes tighter unless temporary or one time.

Speaker #3: And we see tariffs no longer as such, so we'll just report our gross margin going forward. And one important point I want to make is that as we increase our exports from US-produced products, and so to global business, which is, of course, a meaningful part of our business, as you know, we get back some of the tariffs through what is referred to as a drawback mechanism, which will reduce the net impact of tariffs over time.

Asaf Alperovitz: One important point I want to make is that, as we increase our exports from US-produced product and sell to global business, which is, of course, a meaningful part of our business, as you know, we get back some of the tariffs through what is referred to as a drawback mechanism, which will reduce the net impact of tariffs over time, certainly on a weighted average basis of our overall sales.

Speaker #3: Certainly, on a weighted average basis of our overall sales. And just to finalize and say that, despite these tariff incremental costs, we can note that we still exceeded the high end of our gross margin guidance for Q4.

Shuki Nir: ... and just to finalize and say that despite these tariff incremental costs, we can note that we still exceeded the high end of our gross margin guidance for Q4. And we are only seeing, I would say, a slight dip at the midpoint in Q1, the 22% that you referred to, despite the decline in seasonality. So I hope I answered you fully.

Asaf Alperovitz: ... and just to finalize and say that despite these tariff incremental costs, we can note that we still exceeded the high end of our gross margin guidance for Q4. And we are only seeing, I would say, a slight dip at the midpoint in Q1, the 22% that you referred to, despite the decline in seasonality. So I hope I answered you fully.

Speaker #3: And we are only seeing, I would say, a slight dip at the midpoint in Q1—the 22% that you referred to—despite the decline in seasonality.

Speaker #3: So I hope I answered you fully.

Speaker #1: Thank you. We will move next with Chris Tendrinos with RBC Capital Markets. Please go ahead, your line is open.

J.B. Lowe: Thank you. We will move next with Chris Tendrinos with RBC Capital Markets. Please go ahead, your line is open.

Operator: Thank you. We will move next with Chris Tendrinos with RBC Capital Markets. Please go ahead, your line is open.

Speaker #6: Yeah, good morning. Thank you. I guess maybe just to start here, to follow up on that prior comment. As it relates to battery sourcing, and I think you mentioned you're going from NMC to LFP.

Chris Dendrinos: Yeah, good morning, and thank you. I guess so maybe just to start here, to follow up on that, on that prior comment. As it relates to battery sourcing, and I think you mentioned you're going from NMC to LFP, do you have supply from outside of China? And just maybe speak to the security of that supply chain. Thanks.

Speaker #6: Do you have supply from outside of China and just maybe speak to the security of that supply chain? Thanks.

Speaker #3: Yes. Thank you, Chris, for that question. And as we stated before, what our supply chain team has been doing for years—and definitely in this past year, they've been doing—is we constantly look at the combination of FIOC and domestic content compliance, cost, availability—and cost is inclusive of everything, between tariffs and other parameters that impact it.

Shuki Nir: Yeah, thank you, Chris, for the question. And as we stated before, what our supply chain team has been doing for years, and definitely in this past year they've been doing, is we constantly look at the combination of FIOC and domestic content compliance, cost, availability. And cost is inclusive of everything between tariffs and other parameters that impact it. And lastly, but first, is reliability of the product, which obviously we are trying not to compromise on them. So we are going to change from time to time. We have more than one source of battery cells as well as other components that we're using. So we look at that as optimizing the situation as it goes.

Speaker #3: And lastly, but first, is reliability of the product. Which obviously, we are trying not to compromise on them. So we are going to change from time to time.

Speaker #3: We have more than one source of battery sales, as well as other components that we are using. So we look at that as optimizing the situation as it goes.

Speaker #6: Got it. And then maybe just as a follow-up, as it relates to the Nexus platform, how are you thinking about the kind of full-scale rollout here and when should we expect the platform to be kind of fully scaled or fully rolled out across the globe?

Chris Dendrinos: Got it. And then maybe just as a follow-up, as it relates to the Nexus platform, you know, how are you thinking about the kind of full-scale rollout here? And when should we expect the platform to be kind of fully scaled or fully rolled out across the globe? Thanks.

Speaker #6: Thanks.

Speaker #3: Yeah. That's an excellent question. So we are going to start in Europe with the DACH region and with the US. And then we are going to continue rolling out to different countries in Europe and then to Australia and some other markets.

Shuki Nir: Yeah, that, that's an excellent question. So we are going to start in Europe with the DACH region and with the US, and then we are going to continue rolling out to different countries in Europe and then to Australia and some other markets. The ramp up is going to take some time. We are going to start. As we said, we've started already initial quantities, but I would say that the high volume is going to start in the third quarter of the year. And we believe that we can finish the transition, you know, in Q1, maybe, of 2027, but that will be already the long sale, I would say. Most of the transition should happen in the second half of this year.

Speaker #3: The ramp-up is going to take some time. We are going to start, as we said, we start initial quantity. We've started already initial quantities.

Speaker #3: But I would say that the high volume is going to start in the third quarter of the year. And we believe that we can finish the transition in Q1 maybe, of '27.

Speaker #3: But that will be already the long tail, I would say. Most of the transition should happen in the second half of this year.

Speaker #1: Thank you. Our next question comes from Julian Dumoulin-Smith with Jefferies. Please go ahead. Your line is open.

J.B. Lowe: Thank you. Our next question comes from Julian Dumolin-Smith, with Jefferies. Please go ahead, your line is open.

Operator: Thank you. Our next question comes from Julian Dumolin-Smith, with Jefferies. Please go ahead, your line is open.

Speaker #7: Hey. Good morning, Kim. Thank you guys very much for the time. Maybe just a quick few follow-up items. First, just in terms of the seasonality commentary from earlier, just to elaborate a little bit further, can you comment on the CNI trend?

Julien Dumoulin-Smith: Hey, good morning, team. Thank you guys very much for the time. Maybe just a quick few follow-up items. First, just in terms of the seasonality commentary from earlier, just to elaborate a little bit further, can you comment on the CNI trend? Is that part of the secular trend that you're seeing kind of that performance, and why you didn't want to comment too specifically about through the course of 2026? What else is impacting the trends that you're observing, if you can elaborate a little bit more to the earlier question? And I've got a quick follow-up on... Well, I'll ask you the follow-up here as well. Just on 45X, how much of that credit are you expecting here, if you can elaborate just a little bit more on that front, in the quarter itself?

Speaker #7: Is that part of the secular trend that you're seeing, kind of that upper performance and why you didn't want to comment too specifically about through the course of '26?

Speaker #7: What else is impacting the trends that you're observing? If you can elaborate a little bit more on the earlier question. And I've got a quick follow-up as well—actually, I'll ask you the follow-up here as well.

Speaker #7: Just on 45X, how much of that credit are you expecting here? If you can elaborate just a little bit more on that front in the quarter itself.

Speaker #7: And when do you expect some of those deferred revenues to unwind?

Julien Dumoulin-Smith: When do you expect some of those deferred revenues to unwind?

Speaker #3: All right, so thank you, Julian. I'll start with the first question, and then Asaf will go to the 45X. So, for the seasonality trend—and you know it as well as anyone—when we combine storage, resi, CNI, US, and Europe, to start talking about seasonality in specific and very precise numbers is kind of hard.

Shuki Nir: All right. So, thank you, Julian. And I'll start with the first question, and then Asaf will go to the 45X. So, for the seasonality trend, you know, and you know it as well as anyone. It's when we combine storage, resi, CNI, US, and Europe, to start talking about seasonality in specific and very precise numbers is kind of hard. When we say historical trends, we're referring to how the industry has trended over the last several years, which includes both CNI and resi. And for that, when we say that we expect Q2 to be higher than Q1, it's a combination of both. Asaf?

Speaker #3: When we say historical trends, we are referring to how the industry has trended over the last several years, which includes both CNI and resi.

Speaker #3: And for that, when we say that we expect Q2 to be higher than Q1, it's a combination of both. Asaf?

Speaker #7: Thank you, Shukri. I think you asked about the 45X. So, I think, as you know, since the beginning of the year, we don't break out our 45X in our press release.

Asaf Alperovitz: Thank you, Shuki. I think you asked about 45X, so, I think as you know, since the beginning of the year, we don't break out 45X in our press release. The reason we don't is it's an integral part of the US manufacturing cost structure, and 45X is the single most attractive incentive, we believe in the world currently for manufacturing our products. This is why, as you are aware, we moved the shift at about 90% of our production capacity to the US over the last couple of years. And generally, as a company, our strategy is to manufacture in the location that delivers the lowest net cost to us, including incentive, of course.

Speaker #7: The reason we don't is it's an integral part of a U.S. manufacturing cost structure. And 45X is the single most attractive incentive, we believe, in the world currently for manufacturing our products.

Speaker #7: This is why as you are aware, we moved and shifted about 90% of our production capacity to the US over the last couple of years.

Speaker #7: And generally, as a company, our strategy is to manufacture in the location that delivers the lowest net cost to us, including incentive, of course.

Asaf Alperovitz: And again, this is currently the US, and we expect it will continue to be as such, as long as the 45X is in place. So we're very focused in the US, certainly as long as the 45X is there.

Speaker #7: And again, this is currently the US. And we expect it will continue to be as such as long as the 45X is in place.

Speaker #7: So we are very focused in the US, certainly as long as the 45X is there.

J.B. Lowe: Thank you. We will move next with Colin Roche, with Oppenheimer. Please go ahead, your line is open.

Operator: Thank you. We will move next with Colin Roche, with Oppenheimer. Please go ahead, your line is open.

Speaker #1: Thank you. We will move next with Colin Roche with Oppenheimer. Please go ahead. Your line is open.

Speaker #8: Thanks so much, guys. You've talked a lot about taking some market share, and I'm just curious about your strategy around pricing and balancing margin within that strategy, and how aggressive you expect to be here over the course of 2026.

Colin Rusch: Thanks so much, guys. You know, you've talked a lot about taking some market share here, and I'm just curious about your strategy around pricing and balancing margin within that strategy, and how aggressive you expect to be here over the course of 2026?

Speaker #3: Thank you, Colin. It used to say it's the million-dollar question. It's probably the billion-dollar question. How you optimize between margin and market share. We are definitely trying to optimize them both.

Shuki Nir: ... thank you, Colin. This is, we used to say it's the million-dollar question; it's probably the billion-dollar question, you know, how you optimize between margin and market share. We're definitely trying to optimize them both. There are certain things that we need to take into account when we think about pricing and about gaining share. The first priority for us is to add value to our customers, whether it's through the product and the benefits that it brings, whether it's through our service, our reliability of the product, and the ease of doing business with us. And we're putting a lot of efforts improving all of these.

Speaker #3: There are certain things that we need to take into account when we think about pricing and about gaining share. The first priority for us is to add value to our customers, whether it's through the product and the benefits that it brings, whether it's through our service, our reliability of the product, and the ease of doing business with us.

Speaker #3: And we are putting a lot of effort into improving all of these. And that being said, we have competition. So while we can have a premium, we have to keep it in check with what we can do.

Shuki Nir: And that being said, we have competition, so while we can have a premium, we have to keep it in check with what we can do with what we can do. And then we are following the share gains as it pertains to the premium that we're charging in the market. And we believe that we are doing a good job so far, both expanding our margins, increasing our shares, and increasing our margins, actually, even.

Speaker #3: With what we can do, and then we are following the share gains as it pertains to the premium that we are charging in the market.

Speaker #3: And we believe that we are doing a good job so far, both expanding our margins and increasing our share and increasing our margins, actually, eventually.

Vikram Bagri: Excellent. And then, the follow-up is really around the solid-state transformer and the opportunity, data center, and how you're, you know, tracking the competitive landscape. There's obviously a number of folks working on solutions here, and there's a lot of, you know, I guess, figuring out that's happening right now. I guess, how are you approaching benchmarking progress from some of the other folks working on this, and keeping track of your own progress and some of the future-proofing that's gonna be required to really stay competitive and durable, as a, you know, equipment provider into that market over time?

Speaker #8: Excellent. And then the follow-up is really around the solid-state transformer and the opportunity data center and how you're tracking the competitive landscape. There's obviously a number of folks working on solutions here.

Colin Rusch: Excellent. And then, the follow-up is really around the solid-state transformer and the opportunity, data center, and how you're, you know, tracking the competitive landscape. There's obviously a number of folks working on solutions here, and there's a lot of, you know, I guess, figuring out that's happening right now. I guess, how are you approaching benchmarking progress from some of the other folks working on this, and keeping track of your own progress and some of the future-proofing that's gonna be required to really stay competitive and durable, as a, you know, equipment provider into that market over time?

Speaker #8: And there's a lot of, I guess, figuring out that's happening right now. I guess, how are you approaching benchmarking progress from some of the other folks working on this and keeping track of your own progress and some of the future-proofing that's going to be required to really stay competitive and durable as a equipment provider into that market over time?

Speaker #3: Yeah. So obviously, we're not the only ones who identified the multibillion-dollar opportunity that is out there. And there is a bunch there is a bunch of startup companies that are pursuing this opportunity.

Shuki Nir: Yeah. So, obviously, we're not the only ones who identified the multi-billion dollar opportunity that is out there, and there is a bunch of startup companies that are pursuing this opportunity, other companies that have been providers of power electronics to data centers, and maybe some additional ones. We believe that what we bring to the table is similar to what we did in solar for the last two decades, expertise in what matters the most here, which is the DC architecture, the ability to have highest efficiency, the ability to actually manufacture at scale.

Speaker #3: Other companies that have been providers of power electronics to data centers and maybe some additional ones. And we believe that what we bring to the table is similar to what we did in SOLAR for the last two decades, is expertise in what matters the most here, which is the DC architecture.

Speaker #3: The ability to have highest efficiency. The ability to actually manufacture at scale. And we think that if we can bring a superior solution and then continue to innovate and to bring additional solutions to the market, we'll maintain the leadership.

Shuki Nir: We think that if we can bring a superior solution and then continue to innovate and to bring additional solutions to the market, we'll maintain the leadership, and we'll be able to get our fair share of this opportunity. It will require additional investment, additional focus, and luckily for us, it's actually right in our wheelhouse. It's exactly where we are really, really good. Our team is excellent in this area, and we plan on leveraging on that.

Speaker #3: And we'll be able to get our fair share of this opportunity. It will require additional investment, additional focus, and luckily for us, it's actually right in our wheelhouse.

Speaker #3: It's exactly where we are really, really good. Our team is excellent in this area. And we plan on leveraging on that.

Speaker #1: Thank you. We will move next with Corinne Blanchard with Deutsche Bank. Please go ahead. Your line is open.

J.B. Lowe: Thank you. We will move next with Corinne Blanchard with Deutsche Bank. Please go ahead, your line is open.

Operator: Thank you. We will move next with Corinne Blanchard with Deutsche Bank. Please go ahead, your line is open.

Speaker #9: Hi. Good morning, team. Thank you for taking my question. Most of them have been answered. But maybe can you discuss whether you're considering changing pricing strategy in Europe or in the US this year or in 2027?

Corinne Blanchard: Hey, good morning, team. Thank you for taking my question. Most of them have been answered, but maybe can you discuss whether you're considering changing pricing strategy in Europe or in the US this year or, like, in 2027? And then maybe if you can talk as well a little bit about, like, you know, your exposure to the TPO market, and you have less exposure to the 25B. Just what are you seeing here in the TPO market and, you know, peer pressure trying to enter the market? Thank you.

Speaker #9: And then maybe if you can talk as well a little bit about your exposure to the TPO market. And you have less exposure to the 25D.

Speaker #9: Just what are you seeing here in the TPO market and PR price you're trying to enter the market? Thank you.

Speaker #3: Yeah. So I've just covered the pricing in Europe and in the US. We are not going to change pricing strategy per se. But our intention is to continue pushing forward our advantages to continue providing more and more value to our customers.

Shuki Nir: Yeah. So I've just covered the pricing in Europe and in the US. We are not going to change pricing strategy per se, but our intention is to continue pushing forward our advantages, to continue providing more and more value to our customers, and to have the applicable premium paid to us, and at the same time, look at how we can continue to gain share. And that is applicable in both markets. Even though the competitive landscape is slightly different, the strategy remains the same. The second question was about?

Speaker #3: And to have the applicable premium paid to us. And at the same time, look at how we can continue to gain share. And that is applicable in both markets, even though the competitive landscape is slightly different.

Speaker #3: The strategy remains the same. The second question was about?

Corinne Blanchard: Just how you see like the TPO market, and I know it has been already asked, but, like, are you seeing like an increased competition, like of peers trying to enter the TPO market? And how do you, like, see the market evolving for this year in 2027?

Speaker #1: Just how do you see the TPO market? And I know it has been already asked, but are you seeing increased competition from peers trying to enter the TPO market?

Speaker #1: And how do you see the market evolving for this year and '27?

Speaker #3: Yeah. So obviously, with 48D remaining the only tax benefit in SOLAR, the market is shifting towards the TPO. And as we said earlier, we feel that over the years, we've partnered with the TPOs.

Shuki Nir: Yeah. So obviously, with 48 remaining the only tax benefit in solar, the market is shifting towards the TPO. And as we said earlier, we feel that over the years, we've partnered with the TPOs, we are providing them with the value that they need, not only at the product level and the additional power that we generate and the best efficiency that we can have in both high kilowatt and low kilowatts, but actually in terms of integration of systems, knowing how to work with them and support them. So we feel that we are there for them, and we are happy that this part of the market is growing.

Speaker #3: We are providing them with the value that they need. Not only at the product level and the additional power that we generate and the best efficiency that we can have both in high kilowatt and low kilowatt.

Speaker #3: But actually, in terms of integration of systems, knowing how to work with them, and support them. So we feel that we are there for them.

Speaker #3: And we are happy that this part of the market is growing.

Speaker #1: Thank you. We will move next with Vikram Bagri with Citi. Please go ahead.

J.B. Lowe: Thank you. We will move next with Vikram Bagri, with Citi. Please go ahead.

Operator: Thank you. We will move next with Vikram Bagri, with Citi. Please go ahead.

Speaker #10: Hi. Good morning, everyone. Citi, you talked about single SKU consolidating warehouses, streamlining operations, and a lot of initiatives you're taking to improve the profitability.

Vikram Bagri: Good morning, everyone. Shuki, you talked about single SKU, consolidating warehouses, streamlining operations, and a lot of, you know, initiatives you're taking to improve the profitability. Is there a way to quantify the impact of these initiatives on OpEx costs as well as on OpEx? I'm trying to understand the building blocks of how you reach EBIT profitability by year-end 2026. How much of that is operating leverage from, you know, gaining market share and increasing revenues versus-

Speaker #10: Is there a way to quantify the impact of these initiatives on OCOVs as well as on OPEX? I'm trying to understand the building blocks of how you reach EBIT profitability by year end '26.

Speaker #10: How much of that is operating leverage from gaining market share and increasing revenues versus 45X ramping up versus cost-saving? If you can quantify or sort of directionally guide us how these factors will contribute towards the EBIT profitability by year end.

[Analyst]: ... You know, 45X ramping up versus, you know, cost saving. If you can quantify or sort of directionally guide us, you know, how these factors will contribute towards, you know, the EBIT profitability by then? And then I have a follow-up.

Vikram Bagri: ... You know, 45X ramping up versus, you know, cost saving. If you can quantify or sort of directionally guide us, you know, how these factors will contribute towards, you know, the EBIT profitability by then? And then I have a follow-up.

Speaker #10: And then I have a follow-up.

Speaker #3: Sure. So, hi. Good morning. I think on the gross margin levers—I expanded in the last question—talking about the main levers, of course, the high revenue, the ramp-up of US production, the introduction of the Nexus, the shift from NMC to LFP, and so on and so forth.

Asaf Alperovitz: Sure. So hi, good morning. I think with the gross margin levers, I expanded in the last question talking about the main levers, of course, the high revenue, the ramp of US production, introduction of the Nexus, the shift from NMC to LFP, and so on and so forth. I didn't touch about the OpEx much, so maybe it's an opportunity to talk about our OpEx drivers and cost reduction levers. So there are, of course, a couple of moving parts, I would say. As we noted in the prepared remarks, we continued in 2025 and throughout 2025 to optimize our product portfolio.

Speaker #3: I didn't touch about the OPEX much. So maybe it's an opportunity to talk about our OPEX drivers and cost reduction levers. So here there are, of course, a couple of moving parts, I would say.

Speaker #3: As we noted in the prepared remarks, we continued in 2025. And throughout 2025, to optimize our product portfolio. We shut down our COCA energy storage division.

Asaf Alperovitz: We shut down our Kokam Energy Storage division, we divested our tractor business, SolGig, and we sold our mobility operation that just after the year ended. All of these are positive contributors to our expenses, and we enable us to focus more on the core businesses and on the SST. But on the other hand, during 2026, as I said, we plan to increase our investment in OpEx and CapEx in the SST project. Another important factor, maybe the last one to relate to, is the strengthening of the Israeli new shekel, which has been a meaningful headwind for us over the course of the last 12 months. If I remember correctly, it's up more than 14% over the course of the last 12 months.

Speaker #3: We divested our tracker business, SolarGeek, and we sold our mobility operation. That just after the EU ended. All of these are positive contributors to our expenses.

Speaker #3: And we enable us to focus more on the core businesses and on the SST. But on the other hand, during 2026, as I said, we plan to increase our investment in OPEX and CAPEX in the SST project.

Speaker #3: Another important factor, maybe the last one to relate to, is the strengthening of the new Israeli shekel. Which has been a meaningful headwind for us over the course of the last 12 months, if I remember correctly.

Speaker #3: It's up more than 14% over the course of the last 12 months. And yet, with this shekel trend, we've been hedging, of course. But at a less attractive rate.

Asaf Alperovitz: Yet, with this shekel trend, we've been hedging, of course, but at a less attractive rate. Still, putting all of these factors together, we feel very comfortable with our $88 to 93 million guidance for Q1. Like I said, it's a pretty good run rate to assume. Of course, assuming current macro environment condition will persist, nobody knows that. So, again, we didn't give specific guidelines as to when we will reach profitability. We are highly focused on returning to profitable growth, sometime within 2026.

Speaker #3: And still putting all of these factors together, we feel very comfortable with our 88 to 93 million guidance for Q1. I can say it's a pretty good run rate.

Speaker #3: To assume. Of course, assuming current macro environment condition will persist and nobody knows that. So again, we didn't give a specific guidelines as to when we will reach profitability.

Speaker #3: We are highly focused on turning to profitable growth sometimes within 2026.

Speaker #10: Thanks, Asaf. And then as a follow-up, Asaf, you mentioned investments in working capital this year. And you also mentioned in response to this question and previous questions, potential investments in solid state transformer product as well.

[Analyst]: Thanks, Asaf. And then as a follow-up, Asaf, you mentioned investments in working capital this year, and you also mentioned in response to this question and previous questions, potential investments in solid-state transformer product as well. I wanted to ask the free cash flow question slightly differently. Do you expect positive free cash flow this year, or you know, there will be sort of free cash flow draw this year because of all the investments you're making? Thank you.

Vikram Bagri: Thanks, Asaf. And then as a follow-up, Asaf, you mentioned investments in working capital this year, and you also mentioned in response to this question and previous questions, potential investments in solid-state transformer product as well. I wanted to ask the free cash flow question slightly differently. Do you expect positive free cash flow this year, or you know, there will be sort of free cash flow draw this year because of all the investments you're making? Thank you.

Speaker #10: I wanted to ask the free cash flow question slightly differently. Do you expect positive free cash flow this year? Or there will be sort of free cash flow draw this year because of all the investments you're making?

Speaker #10: Thank you.

Asaf Alperovitz: Sure. I think I answered this question before, but for Q1, we gave specific guidance as it relates to being free cash flow positive. Beyond that, we are not guiding. We'll have to wait for the next quarter. We are extremely focused, Shuki, myself, and the entire company, in managing working capital. I think as the profile margin will improve, and we keep controlling, of course, the discipline around OpEx and CapEx, you will see that. In terms of CapEx, I do have to say that we do expect to have significantly higher CapEx next year. In 2025, if I remember correctly, it was in the neighborhood of $25 million.

Speaker #3: Sure. So again, I think I answered this question before. But for Q1, we gave specific guidance as it relates to being free cash flow positive.

Speaker #3: Beyond that, we're not guiding. We'll have to wait for the next quarter. And we are extremely focused, Shouki, myself, and the entire company in managing our working capital.

Speaker #3: I think as the profile margin will improve, and we keep control controlling, of course, the discipline around OPEX and CAPEX. You will see that.

Speaker #3: In terms of CAPEX, I do have to say that we do expect to have significantly higher CAPEX next year. In 2025, if I remember correctly, it was in the neighborhood of 25 million dollars.

Speaker #3: With the incremental investment associated with SST, and to ramp up our production I think we'll see higher CAPEX next year in '26.

Asaf Alperovitz: With the incremental investment associated with SS, SST, and to ramp up our production, I think we'll see higher CapEx next year in 2026.

J.B. Lowe: Thank you. At this time, we have reached our allotted time for questions. I will now turn the call back over to Shuki.

Operator: Thank you. At this time, we have reached our allotted time for questions. I will now turn the call back over to Shuki.

Speaker #1: Thank you. And at this time, we have reached our allotted time for questions. I will now turn the call back over to Shouki.

Speaker #11: Thank you. Thank you, everyone, for attending this call. As we said at the beginning, we are very excited about what we did in 2025.

Asaf Alperovitz: Thank you. Thank you everyone for attending this call. As we said at the beginning, we are very excited about what we did in 2025, and now we are moving into offense. Our intention is to drive into profitable growth, to gain market share, to roll out Nexus, and we're very excited about the opportunity we have in the AI data center power solution. And we can't wait to update you as we make more progress. Thank you.

Shuki Nir: Thank you. Thank you everyone for attending this call. As we said at the beginning, we are very excited about what we did in 2025, and now we are moving into offense. Our intention is to drive into profitable growth, to gain market share, to roll out Nexus, and we're very excited about the opportunity we have in the AI data center power solution. And we can't wait to update you as we make more progress. Thank you.

Speaker #11: And now we are moving into offense. Our intention is to drive into profitable growth, to gain market share, to roll out Nexus. And we're very excited about the opportunity we have in the AI data center power solutions.

Speaker #11: And we can't wait to update you as we make more progress. Thank you.

J.B. Lowe: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Q4 2025 SolarEdge Technologies Inc Earnings Call

Request a DemoDemo

SEDG

Solaredge Technologies

Earnings