SolarEdge Stock Drops 12% on Weak Outlook Despite Return to Profitability

The Israeli company SolarEdge, which has become one of the most prominent stories of collapse and recovery on Wall Street in recent years, published its results for the second quarter of 2026, and these numbers tell of a turning point.

For the first time in a long time, the company returned to a non-GAAP adjusted net profit of 3.6 million dollars, or 5 cents per share, after a long streak of losses. Revenues totaled 346.2 million dollars, a growth of about 20% compared to the same quarter last year, and above the analysts' forecast which stood at about 341 million dollars. It is important to be precise: on a GAAP accounting basis, the company still recorded a loss of 50 cents per share, so the turnaround is in the adjusted line.

This is also the sixth consecutive quarter in which gross profit margins have expanded year-over-year, a jump from only 11% a year ago to 27.5% now. A small asterisk is hidden here: part of the improvement relies on a one-time customs benefit of 13.3 million dollars, so not all of the surge comes from the core business. Nevertheless, the trend is clear.

What drove the quarter? Actually, not the inverters and optimizers that SolarEdge is identified with, but the batteries. The energy storage sector jumped to 126 million dollars and became the company's largest source of income for the first time, ahead of the optimizers (116.5 million) and the inverters (71.5 million). The volume sold climbed to 426 megawatt-hours, a sharp jump that reflects high demand for storage solutions, mainly in Europe.

But here comes the other side of the coin, and the part worth knowing before rushing to celebrate. Alongside the strong results, the company published a disappointing forecast for the third quarter: revenues of only 310 to 340 million dollars, with the midpoint standing at about 325 million dollars.

That is, not only is the forecast lower than the current quarter, it is also far from the market expectation which stood at about 367 million dollars. Such a gap, of more than 10%, is usually received coldly in the market. The disappointing forecast is dropping the stock by about 12% in pre-market trading in the USA.

From the company, it was stated that the forecast is conservative and does not include customs refunds of 11.5 million dollars that were already received in July. Excluding these caveats, the midpoint already hints at an adjusted operating profit in the next quarter as well, so it is possible that the actual picture will be better than the dry numbers.

In terms of financial stability, SolarEdge continues to project confidence. The company generated a positive free cash flow of 3.1 million dollars, and its balance of cash and investments minus debt even grew to 264.6 million dollars. After years in which the main concern was "burning" cash, this is a reassuring point.

And above all, the hidden card for the long term still hovers: the activity in the data center field. The technology that SolarEdge developed for voltage conversion to 800 volts DC is almost identical to what Nvidia requires for the next generation of its artificial intelligence servers. For now, this is still an activity in an early stage of development, without a material contribution to revenues, but the potential exists, and if it materializes, it may change the face of the company.

And what does all this mean for you? Even if you have never bought a SolarEdge stock directly, you may be exposed to it. Anyone who holds a fund tracking the Nasdaq or S&P 500 index, or a pension and provident fund with exposure to American technology stocks, probably also holds a small piece of this Israeli company. Since the beginning of the year, the stock has jumped by about 69%, and in the last year by about 90%.

But here also lies the risk: a stock that has risen so fast, partly against the background of regulatory expectations and not just actual performance, can fall just as fast when reality meets expectations. The weak forecast for the next quarter is exactly a reminder of that. The recovery is real, but it is still far from being guaranteed.

"The results of the second quarter mark an important milestone in SolarEdge's recovery process," said Shuki Nir, the company's CEO. "Revenues grew by 20% year-over-year, the operating loss on a GAAP basis narrowed significantly, and we returned to non-GAAP adjusted operating profitability for the first time since the second quarter of 2023, while we continue to generate positive free cash flow. Strong demand in Europe, alongside strength in the commercial (C&I) market in the USA, largely offset the broad weakness in the American residential market and led to the overall annual growth. We are focused on continuing this momentum, through the expansion of the Nexis platform in our core markets and the continuous promotion of SolarEdge's SST, in order to realize the significant opportunity in 'artificial intelligence factories'."