Fluence Energy (NASDAQ:FLNC) saw its shares tumble more than 17% in premarket trading on Thursday, as the company slashed its fiscal 2026 guidance despite reporting a record backlog. The stock was indicated at $11.80, after closing Wednesday's session down 9.2% at $14.23. The sharp decline reflects investor concerns over the company's ability to convert its growing order book into cash flow.
Guidance Reduction
Management reduced the fiscal 2026 revenue midpoint by 11.8%, or $400 million, to a range of $2.9-$3.1 billion. The adjusted EBITDA midpoint was cut by $60 million, now expected between -$30 million and $10 million. The company attributed the delay to production issues, which will push certain project deliveries into fiscal 2027.
"Customer demand for Fluence solutions continues to strengthen," said CEO Julian Nebreda, noting that production is expected to meet target levels early in fiscal 2027. However, the delivery gap remains a key concern for investors.
Backlog and Demand
Despite the guidance cut, Fluence reported an all-time high backlog of $6.4 billion, representing 2.1 times the updated annual sales midpoint. Order intake for the quarter was over $1.44 billion, up 183% year-over-year, and 2.2 times revenue. The company also secured $850 million in data-center contracts by July, including a $550 million deal with an undisclosed hyperscaler.
While these figures indicate strong demand, the conversion to cash flow has been problematic. Inventory increased by 72% to $783 million, while total cash declined 49% to $365 million compared to September. The inventory build offset 94% of the cash decline, raising questions about working capital management.
Financial Performance
For the fiscal third quarter, Fluence reported revenue of $649.8 million, up 7.9% year-over-year, but fell short of consensus estimates of $811-$819 million by about 20%. GAAP gross margin contracted by 9.7 percentage points to 5.1%, and the company posted a net loss of $44.3 million versus a profit of $6.9 million in the prior year. Adjusted EBITDA came in at -$29.3 million, down $56.7 million year-over-year.
CFO Ahmed Pasha noted that the associated revenue from the data-center contracts remains in backlog and is expected to be recognized in fiscal 2027. Liquidity at quarter-end was $863 million, providing some buffer against execution risk.
Analyst Sentiment
Prior to the announcement, 50% of analysts maintained Hold ratings, with a consensus price target of $20.13. The stock's decline suggests that analysts may revise their outlooks downward. The company is scheduled to hold its earnings call at 8:30 a.m. EDT, where investors will seek clarity on production timelines and working capital improvements.
Market Implications
The sharp drop in Fluence shares highlights the challenges facing the energy storage sector, where rapid growth often comes with significant operational hurdles. The company's ability to manage its supply chain and convert its record backlog into profitable revenue will be critical in the coming quarters.
