Key Highlights

  • Third-quarter revenue was $293.3 million versus $410.4 million a year earlier, including $85.0 million of safe harbor revenue.
  • Non-GAAP diluted EPS was $0.41 and GAAP diluted EPS $0.17, against a screened estimate of $0.50 (as screened).
  • Non-GAAP gross margin was 45.0% versus 49.2% a year ago, and GAAP gross margin was 43.3%.
  • Fourth-quarter revenue guidance is $225 million to $255 million, including 100 to 120 MWh of batteries.
  • Cash and marketable securities were $931.8 million, with no 2026 buybacks.

Enphase Energy Earnings: Why Did the Quarter Miss and the Next Guide Fall?

Enphase Energy (NASDAQ:ENPH) reported third-quarter results on Tuesday, October 27, with revenue of $293.3 million, flat on the second quarter's $291.9 million but down about 28.5% from $410.4 million a year earlier (calculated). Non-GAAP diluted EPS was $0.41 and GAAP diluted EPS was $0.17. The screened estimate was $0.50.

Fourth-quarter revenue guidance is $225 million to $255 million, about 18% below the third quarter at the midpoint (calculated). That range includes about $51.2 million of safe harbor revenue, versus $85.0 million in the third quarter.

Enphase makes solar microinverters and batteries. Investment impairments cut GAAP EPS by $0.15 and non-GAAP EPS by $0.14.

Gross Margin Squeeze: How Much Did Mix and Tariffs Cost?

Non-GAAP gross margin was 45.0%, down from 46.8% in the second quarter and 49.2% a year ago. GAAP gross margin was 43.3% versus 60.0% in the second quarter. Management cited product mix.

Reciprocal tariffs cut gross margin by about 1.3 points, down from about 2.0 points in the second quarter. Tariff refunds of about $52.0 million have been received over nine months.

Non-GAAP operating expenses were $78.4 million. Non-GAAP net income was $54.0 million, versus $23.4 million on a GAAP basis.

U.S. Residential Demand: What Did the End of the 25D Credit Do to Sell-Through?

Global sell-through rose about 1% sequentially, below the roughly 10% growth management expected. U.S. sell-through rose 5% sequentially but fell 35% from a year earlier, and U.S. revenue rose about 3%. Management said the Section 25D credit expiration and higher interest rates weigh on core U.S. residential demand.

European revenue fell about 11%, and sell-through there declined 12% sequentially. Battery shipments were 129.9 MWh, up from 113.8 MWh in the second quarter.

Growth drivers cited included the IQ9 commercial microinverter, the IQ Battery C80 and G5, and the Propel prepaid lease program. Fourth-quarter sell-through is assumed to fall about 10%.

Fourth-Quarter Outlook and Cash: What Do the Margin and Cost Ranges Show?

Guidance calls for GAAP gross margin of 38.0% to 41.0% and non-GAAP gross margin of 40.0% to 43.0%, each including about 2.0 points of tariff impact. GAAP operating expenses are guided to $119.0 million to $123.0 million, and non-GAAP to $76.0 million to $80.0 million.

Operating cash flow was about $0.1 million in the third quarter and $143.3 million year to date. Third-quarter free cash flow was negative $11.4 million, and $97.5 million year to date. Cash and marketable securities were $931.8 million, and no stock was repurchased in 2026, versus $130.0 million in the first nine months of 2025.

What to Watch Next: Can IQ SST and Commercial Products Offset Residential Weakness?

Management demonstrated a solid-state transformer converting 13.8 kV AC to 800 VDC for AI data centers. It plans to validate 34.5 kV operation and show a megawatt-scale system by the end of 2026, with customer pilots in 2027 and commercial shipments in 2028. The pipeline exceeds 50 customers and partners, while near-term results hinge on U.S. sell-through and tariff costs.