Enphase Sales Miss as US Market Slump Hits Q2 Results

Enphase Energy posted second-quarter revenue that fell short of Wall Street expectations, with the U.S. residential solar market showing less demand than the company had forecast heading into the summer.

Revenue came in at $345 million for the three months ended June 30, below the $360 million midpoint of Enphase's own guidance range. Adjusted earnings per share were 78 cents, beating the 73-cent consensus estimate, helped by cost controls and a shift toward higher-margin battery products.

The miss landed on the U.S. side. Enphase had expected the domestic market to improve sequentially in Q2 after a slow start to the year. Instead, it stayed roughly flat, CEO Badri Kothandaraman said on the call. Shipments into the U.S. were about 1.1 million microinverters, down from the 1.2 million the company had projected.

"The U.S. market did not improve as we expected going into the second quarter," Kothandaraman said. "We saw a slower recovery in demand."

Europe provided the upside. Shipments into the region hit about 820,000 microinverters, helped by the Netherlands, Germany and France. The company's battery business also grew, with IQ Battery shipments rising 25% sequentially. Batteries now represent a larger share of revenue and carry higher margins than standalone microinverters.

Gross margin came in at 45.2%, within the company's long-term target range and slightly above the 44% midpoint of guidance. Enphase has been reducing its reliance on contract manufacturers in China, shifting production to Mexico and India. That move has raised costs in the short term but the company expects it to stabilize by year-end.

For the third quarter, Enphase guided revenue of $350 million to $410 million, with a midpoint of $380 million. The range implies a sequential improvement but still leaves the company well below the $600 million-plus quarterly revenue it was generating in 2023 before the U.S. solar market turned.

Kothandaraman said the company expects U.S. demand to pick up in the second half as installers work through inventory and interest rates stabilize. He pointed to growing interest in battery storage paired with solar, a segment Enphase has been pushing with its IQ Battery 5P product.

"We believe the second half will be better than the first half," he said. "The fundamentals are still there."

Enphase ended the quarter with $1.7 billion in cash and equivalents. The company did not announce a share buyback or dividend.

Shares fell about 6% in after-hours trading following the release.

Analysts on the call pressed Kothandaraman on the pace of the U.S. recovery. One asked whether the company's guidance assumed a specific timeline for Federal Reserve rate cuts. Kothandaraman said Enphase was not counting on lower rates to drive demand, but that any cut would be a "tailwind."

Another question focused on competition from Tesla's solar and battery offerings. Kothandaraman said Enphase's advantage lies in its installer network and the reliability of its microinverter technology, which he called "best in class."

Enphase stock is down about 30% from its 52-week high. The broader solar sector has struggled this year as high interest rates and policy uncertainty have weighed on residential installation volumes. The company's stock market analysis page shows a Moderate Alpha Score of 62, reflecting the mixed outlook between its cash position and the slow U.S. recovery.

Wells Fargo analyst Praneeth Satish asked whether Enphase was considering deeper cost cuts. Kothandaraman said the company was "always looking at efficiency" but did not announce any restructuring plans.

The company reiterated its long-term target of 45% to 50% gross margins and said it expects to grow revenue as the U.S. market eventually recovers and European adoption continues to expand. No specific date for a return to peak revenue levels was given.