SolarEdge Technologies (SEDG) saw its shares decline approximately 6% in midday trading Wednesday, as the solar equipment maker reported a deeper adjusted first-quarter loss than analysts had anticipated. The stock was trading at $41.91, recovering from an earlier low of $37.83, as investors weighed the mixed results against the company's turnaround efforts.
The company posted revenue of $310.5 million for the quarter, representing a 46% year-over-year increase but a 7.4% sequential decline. Despite the top-line beat against the Street's $304.5 million estimate, the adjusted loss per share of $0.43 exceeded the consensus forecast of $0.27. On a GAAP basis, the net loss stood at $57.4 million.
Chief Executive Shuki Nir highlighted the 46% revenue growth and noted that it marked the sixth consecutive quarter of gross margin improvement. However, the earnings miss overshadowed the positive revenue performance, leading to the stock's decline. The company is targeting near-breakeven operating profitability in the current quarter, with guidance for second-quarter revenue between $325 million and $355 million and non-GAAP gross margins in the range of 23% to 27%, compared to last quarter's 23.5%.
Geographic performance was mixed, with U.S. revenue falling 20% sequentially to $158 million, while European revenue rose 14% to $114 million. CFO Asaf Alperovitz attributed the European uptick to robust battery demand and a rebound in March after a slow start to the year. The company's product mix showed a shift, with inverter revenue declining to $63.3 million from $82.2 million in the prior quarter, while battery revenue for photovoltaic systems increased to $94.9 million from $88.5 million.
SolarEdge is banking on new product launches to drive its recovery. Nir stated that the company has "shifted from defense to offense" and noted that all planned second-quarter Nexis production in Europe has been fully booked by customers. He also highlighted a nascent opportunity in AI data-center power systems, focusing on high-voltage direct-current solutions.
Despite these positive signals, the quarter was not without challenges. Adjusted earnings were impacted by a $14 million charge related to doubtful debt from a single U.S. customer, which Alperovitz clarified was not connected to Freedom Forever. The company holds a lien of approximately $100 million related to Freedom Forever but remains uncertain about recovery prospects.
The competitive landscape remains intense, with SolarEdge identifying Enphase Energy and Tesla as key rivals in the North American residential solar storage and inverter market. Analysts have pointed to sluggish residential solar adoption in Europe and stiff competition in the U.S. as ongoing headwinds.
Free cash flow for the quarter was $20.7 million, down sharply from $43.3 million in the previous quarter, indicating tighter liquidity as the company navigates its turnaround. The broader solar sector continues to face demand softness and inventory overhangs, with SolarEdge having previously announced multiple rounds of job cuts to streamline operations.
Investors remain skeptical about the sustainability of SolarEdge's recovery, as evidenced by Wednesday's share price reaction. The company must now demonstrate that it can maintain margins, achieve operating breakeven in the second quarter, and offset U.S. weakness with strong demand for Nexis products in Europe. The path ahead remains challenging, but the company's focus on innovation and cost discipline may provide a foundation for future growth.
