Q3 2025 SolarEdge Technologies Inc Earnings Call

Speaker #3: This call is being webcast live on the company's website at . In the investors section on the Events Calendar page . This call is the sole property and copyright of Solaredge , with all rights reserved and any recording , reproduction or transmission of the call without the express written consent of Solaredge is prohibited .

Speaker #3: You may listen to a webcast replay of this call by visiting the events Calendar page of the Solaredge investor website . I would now like to turn the call over to JB Lowe , Head of Investor Relations for Solaredge .

Speaker #3: Please go ahead .

Speaker #4: Good morning , and thank you for joining us to discuss Solaredge operating results for the third quarter ended September 30th , 2025 . As well as the company's outlook for the fourth quarter of 2025 .

Speaker #4: With me today are shuki near Chief Executive Officer and Asaf Alperovitz Chief Financial Officer . Shuki will begin with a brief review of the results for the third quarter ended September 30th , 2025 .

Speaker #4: A staff will review the financial results for the third quarter , followed by the company's outlook for the fourth quarter of 2025 . We will then open the call for questions .

Speaker #4: Please note that this call will include forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations .

Speaker #4: We encourage you to review the Safe harbor statements contained in our earnings press release , and our filings with the SEC . For a more complete description of such risks and uncertainties .

Speaker #4: Please note during this earnings call , we may refer to certain non-GAAP measures which are not measures prepared in accordance with US GAAP .

Speaker #4: The non-GAAP measures are being presented because we believe that they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance .

Speaker #4: Reconciliation of these measures can be found in our earnings press release and SEC filings . These non-GAAP measures should not be considered in isolation from as substitutes for , or superior to , financial measures prepared in accordance with US GAAP .

Speaker #4: Listeners who do not have a copy of the quarter ended September 30th , 2025 press release may obtain a copy by visiting the Investor Relations section of the company's website .

Speaker #4: With that , I will turn the call over to Shuki .

Speaker #5: Thank you . JB . Good morning everyone , and thank you for joining us . I'm pleased to report that we delivered a strong third quarter .

Speaker #5: We believe this is a clear evidence that we are making solid progress on our turnaround , and that the company is on the right trajectory .

Speaker #5: Our results and our Q4 outlook demonstrate that the momentum we have built throughout the year is continuing . We are executing on our plans , and I'm very proud of the way the team has performed in recent quarters .

Speaker #5: As for our key priorities , first , on financial strength in Q3 , we delivered 44% year over year revenue growth and continued expanding our margins for the fourth straight quarter .

Speaker #5: The midpoint of our Q4 outlook follows the same trajectory of year over year improvement . I'd like to highlight that both our Q3 financials and Q4 guidance do not include significant one time or full forward of revenue .

Speaker #5: Either from safe Harbor or from the 25 rush towards the end of the year . We have also kicked off several operational excellence initiatives .

Speaker #5: For example , a major change that should have a long term positive impact is the single SKU . We have implemented a software defined platform that significantly reduces the complexity of our business for residential and commercial applications globally .

Speaker #5: It allows us to manufacture and ship one ski of the inverter to the market . Then the installers can program it to the desired kilowatt rating in the field .

Speaker #5: This framework simplifies everything from forecasting and manufacturing to inventory management , logistics service and support , saving time and money for us . Our distributors and our installers .

Speaker #5: It also adds flexibility for home and business owners if they need a bigger system in the future . A simple over-the-air software update can boost the inverter rating .

Speaker #5: It is a true win win win solution , and we are working on additional solutions as we continue to improve efficiencies across the business .

Speaker #5: At the same time, we have been hyper-focused on our costs, discipline, and have reached the lowest non-GAAP operating expense to revenue ratio in the last two years.

Speaker #5: This helped us to generate positive free cash flow in Q3 and exit the quarter with a cash and investment portfolio of approximately $550 million .

Speaker #5: We also expect to generate positive free cash flow in Q4 and for the full year . This performance and outlook gave us confidence to repay the 25 converts from our balance sheet upon maturity .

Speaker #5: In September . Our second priority is gaining market share , starting with the progress in capturing market share in US . Ready ? We are proud that with McKinsey , reported Solaredge .

Speaker #5: As regaining the number one residential inverter market share position in the second quarter . This is the first time we've had the leading market share position since the the third quarter of 2021 and is a reflection of our improved quality and service and our team's performance .

Speaker #5: Looking into 2026 , the market is expected to undergo a structural change in favor of the CPO model . We believe this market shift plays directly into Solaredge is unique strength .

Speaker #5: We have developed deep relationships and integrated infrastructure with Tpos for years . We have delivered high quality domestic content and non-fiat products that the Tpos require in our technology platform is perfectly suited for .

Speaker #5: The TPO model . Due to its superior energy production and native DC architecture . If harboring is an additional and crucial element that can secure future market share , certain of our partners have saved forward with us through the 5% method .

Speaker #5: Additionally , we designed and executed customized safe harboring strategies for TPO partners through the Physical Work Test , such transactions have several benefits for our customers .

Speaker #5: It lets them qualify their projects over multiple years for a lower capital outlay for Solaredge . This transactions provide better visibility into our business for future years by helping our customers safe , harbor through the physical work of significant nature , methods .

Speaker #5: We are able to manufacture and deliver the full product closer to the time the customer needs it . Therefore , we can manage the manufacturing over time and there is no pull forward of revenues .

Speaker #5: That is typically associated with a 5% safe harbor transaction . We believe that our strengths are even more the CNI space in the US .

Speaker #5: Some of the largest enterprises in the US have already safe harbor CNI products from us via the physical work method . In addition , we believe that we are the only scaled player capable of delivering a non and domestic content compliant CNI solution .

Speaker #5: This combination positions us very well to gain additional market share in the years ahead . Turning to pronounced in Europe . While the markets remain challenging , the majority of our distribution partners hold normalized levels of inventory .

Speaker #5: This resulted in EU revenues reaching $100 million in the quarter , up 45% quarter over quarter and up 21% year over year . We believe our position in Europe will continue to improve as we ramp up sales of commercial storage , deliver products made in the US and roll out the next generation Nexus platform in the coming quarters .

Speaker #5: This brings me to our third priority accelerating innovation . The solar edge value proposition is simple . Whether you are an installer , a home owner , or a business , our solutions save you money or save you time .

Speaker #5: And in many cases , save you both . The markets we serve are increasingly looking for integrated systems , and over the last we've expanded and improved our technology platform to deliver holistic , end to end solutions that save our customers even more time and money .

Speaker #5: In Q3 , we continued the development and filled installations of our next generation Nexus platform , and in the last few weeks , we have shipped initial volumes of the new three phase inverter to customers .

Speaker #5: Even at this early stage , the feedback we are getting is that installations have been significantly simplified compared with our previous generation . Two weeks ago .

Speaker #5: We rolled out our one four CNI Energy Management system across our entire CNI installed base . Now , customers can control and optimize all types of behind the meter devices and loads from solar to storage to EV charging to HVAC , all from a customized dashboard .

Speaker #5: We intend to add additional enhanced features in the quarters ahead that will generate recurring revenue streams . Our first priority is ramping up our US manufacturing in Q3 .

Speaker #5: We reached an important milestone by exporting our first US manufactured residential product to Australia . We expect to begin shipping both residential and CNI products to additional markets in the coming weeks , which will allow us to be more competitive in markets outside of the US .

Speaker #5: To summarize , we believe our turnaround is delivering tangible results . We're improving our finances , we are driving efficiencies across the business .

Speaker #5: We are strategically positioned to capture market share in our main markets , and we are progressing with our next gen platform . While we are encouraged by our progress , there is still plenty of work to be done .

Speaker #5: We remain relentlessly focused on building a healthier , more profitable and more innovative business for the long term . There is one more thing .

Speaker #5: This morning we announced the collaboration with Infineon to advance our solid state transformer platform for the data centers of the future . This has the potential to strategically expand our core technology into the data center market .

Speaker #5: Positioning us to help build smarter , more efficient energy systems for the AI era . We are in the early stages here and will share more as we make progress .

Speaker #5: With that , I will turn it over to Assaf . Thank you .

Speaker #6: And good morning everyone . Starting with a quarterly results , the non-GAAP revenues for the third quarter were $340 million , up 21% quarter over quarter .

Speaker #6: Revenues from the US this quarter amounted to $203 million , up 10% quarter over quarter and representing 60% of our revenues . Revenues from Europe were $101 million , up 55% quarter over quarter .

Speaker #6: And representing 30% of our revenues . International markets revenue were $36 million , down 8% quarter over quarter . And representing 10% of our revenues .

Speaker #6: non-GAAP gross margin this quarter was up to 18.8% , compared to 13.1% in Q2 , reaching the higher end of our guidance . The higher gross margin is largely due to higher revenue , which drove increased utilization of our operational costs and higher sales of us made products .

Speaker #6: This was partly offset by incremental tariffs , which impacted our gross margin by approximately 2% in line with our expectations during the third quarter , we continued to take action to streamline our operations and focus on core business .

Speaker #6: As such , we sold our sales to manufacturing facility in the third quarter for total proceeds of 26.1 million . As part of this transaction , we recorded a small capital gain .

Speaker #6: We also settled certain claims associated with the discontinued energy storage division, which resulted in a one-time gain of approximately $15 million. That was recorded as an offset to our GAAP COGS going forward. We continue to seek avenues to rightsize our business with an emphasis on cost reduction and a focus on our core activities.

Speaker #6: non-GAAP operating expenses for the third quarter were $87.7 million at the midpoint of our guidance , despite headwinds from the continued strengthening of the new Israeli shekel net of hedging last quarter , we reported non-GAAP opex of $85.2 million , or $89 million .

Speaker #6: When adjusted for one time reversal of accrual for bad debt and other items . non-GAAP operating loss for Q3 was $23.8 million , compared to a non-GAAP operating loss of $48.3 million in Q2 , cutting our operating loss by more than a half .

Speaker #6: This is a promising result , and speaks to the progress we have made in executing our turnaround plan and is another step on a journey back to profitable growth .

Speaker #6: Our non-GAAP net loss was $18.3 million in Q3 , compared to a non-GAAP net loss of $47.7 million in Q2 , a reduction of over 60% .

Speaker #6: non-GAAP net loss per share was $0.31 in Q3 , compared to $0.81 in Q2 , the lower operating and net losses are largely due to a higher revenue and a higher gross margin .

Speaker #6: Turning now to our balance sheet . As of September 30th , 2025 , our cash and investment portfolio was approximately $547 million , net of the repayment of $342 million of our 2025 convertible notes in September , our cash and investment portfolio increased by approximately $77 million .

Speaker #6: This is the result of our positive free cash flow for the quarter of approximately $23 million , which was largely , driven by working capital items and our continued CapEx , CapEx discipline .

Speaker #6: It also includes the proceeds from the sale of our seller two facility of 26.1 million and other items for the first nine months of the year .

Speaker #6: We generated approximately $34 million in free cash flow . We also expect to be free cash flow positive in the fourth quarter , and therefore our on track to meet our expectations of generating positive free cash flow for the full year of 2025 .

Speaker #6: This should allow us to head into 2026 with a healthy cash position to support our growth plans. Our inventory was flat at approximately $530 million.

Speaker #6: Despite our manufacturing ramp up to support anticipated growth , our Dio declined from 217 to 177 . As we continue to improve our inventory management processes .

Speaker #6: Arnett increased this quarter to $286 million , compared to $217 million last quarter , mostly due to higher revenues . DSO increased from 57 to 68 days due to the timing of collections , while DPO increased from 59 to 77 .

Speaker #6: In total . Our cash conversion cycle days declined from 215 to 168 days . As we are laser focused on improving our working capital management .

Speaker #6: Turning to an update on our disclosures as mentioned , we are in the process of rolling out the single SKU framework across both residential and commercial applications globally .

Speaker #6: Under this framework, we will no longer know the kilowatt ratings of the inverter at the time of shipment, as the power rating will be set through a software update when installed in the field.

Speaker #6: As a result , we will be discontinuing the megawatt shipped metric starting in the fourth quarter . Instead , and as you can see in the earnings release this morning , we will be providing the number of inverters , optimizer and megawatt hours of batteries that we recognize as revenues during the quarter .

Speaker #6: Additionally , starting in Q4 , we intend to begin disclosing revenue derived from inverters , optimizers and batteries on a quarterly basis within our form 10-q .

Speaker #6: We believe this additional disclosure will help analysts and investors more accurately analyze our operating and financial performance . This move is part of the evolution that we started talking about last quarter .

Speaker #6: The market is moving to more system based solutions and is less focused on discrete products . Our technology platform , including the single SKU , the launch of our Nexus platform and the introduction of additional elements like EV chargers , batteries and energy management software are helping to drive this evolution .

Speaker #6: Our solution deliver flexibility and scalability to meet the growing needs of our customers . Turning now to our guidance for the fourth quarter of 2025 , we're expecting revenues to be within the range of 310 to $340 million , which reflects a better than normal seasonal trend for the fourth quarter .

Speaker #6: We expect non-GAAP gross margin to be within the range of 19 to 23% , including approximately two percentage points of new tariff impact .

Speaker #6: We expect a non-GAAP operating expenses to be within the range of 85 to $90 million . I will now turn the call over to the operator to open it up for any questions .

Speaker #6: Operator .

Speaker #3: Thank you . At this time , if you'd like to ask a question , please press the star and one keys on your telephone keypad .

Speaker #3: Keep in mind you may remove yourself from the question queue at any time by pressing star and two . In the interest of time , we ask that you limit yourself to one question and one follow up .

Speaker #3: We'll take our first question from Philip Shen with Roth Capital Partners . Please go ahead . Your line is open .

Speaker #7: Hey guys , thanks for taking my questions . Congrats on hitting free cash flow positive and making progress . There . I was wondering if you could talk through .

Speaker #7: I know you don't have guidance for 2026 , but I was wondering if you could help us understand what revenue growth you might be able to see for the year , and maybe , you know , sequentially .

Speaker #7: And then if you can commit to positive free cash flow for 26 as well . Thanks .

Speaker #6: Hi , Philip . Good morning and thank you for your question . As you know , we do not guide past the next quarter with without providing guidance , what we can say is that typically Q1 is down around 10% versus Q4 due to the typical historical seasonality at this time , we don't have any reason why it would be much different in Q1 of 2006 .

Speaker #6: In terms of relating to 2026 free cash flow . I mean , we don't guide for free cash flow or provide any targets on that .

Speaker #6: As we noted for this year , we're going to be free cash positive Q1 to Q3 were $34 million free cash positive . And we also noted with the fact that there will be free cash flow positive in Q4 .

Speaker #6: More than that , I don't think we can elaborate .

Speaker #7: Okay . Got it . Thanks . Regardless . And then shifting over to the Infineon announcement , was wondering if you could talk through what the timing of any commercialization might be .

Speaker #7: Do you have any bookings yet , or do you think it's more likely for like the 27 , 2028 timeframe ? Is it more of a medium term or longer term effort , or do you think near term , there's an opportunity to generate revenues or bookings ?

Speaker #7: Thanks .

Speaker #5: Yes . Thank you . Phil , I'd like to provide some more color before I get to your specific question . I think that everybody is aware of the fact that the data center of the future is going to be based on DC architecture .

Speaker #5: The white papers around it , and everybody understands that DC architecture is better for for these data centers . And the goal is basically to maximize the utilization of the data center and to squeeze as many GPUs as possible .

Speaker #5: So DC architecture is directly in our wheelhouse . We have 20 years of experience with this architecture . We have dozens of gigawatts installed in the field in conditions that are much harsher than data centers .

Speaker #5: And what we have from from past developments and past experience is we have all the building blocks for the solid state transformer that we are aiming at .

Speaker #5: That market . And so we have started discussions with different players in the ecosystem , and the feedback has been very , very positive .

Speaker #5: Our potential solution is very relevant and competitive . We are talking about 99% efficiency rate and efficiency is very , very critical . As you know , because it increases the utilization of the GPUs as we push more energy through the system and it reduces the heat that is generated .

Speaker #5: So you need less cooling in the data center . And with all of that being said , what we announced today is the evolution of our long term partnership with Infineon .

Speaker #5: They are considered to be one of the leaders in the power electronics supply chain for data center . And in general . So we are very happy with the partnership with them .

Speaker #5: And and as I mentioned , we've engaged with with other people and other companies in the ecosystem . And we are trying to , if you will , scale towards where the park is going to be and the 800 volt DC architecture is , is expected to really start in 2027 .

Speaker #5: And so you said then , rightfully so . This is something that we are looking into 20 2027 , 2028 timeframe .

Speaker #3: We'll take our next question from Christine Cho with Barclays . Please go ahead . Your line is open .

Speaker #8: Thank you for taking my question . Just as a follow up to your last comment . So you said that you expect to see the financial impact in 2728 .

Speaker #8: Are you going to sort of give any indications to the market about how the progress is going with respect to , you know , bookings and , and , you know , any contracts that you might sign before that ?

Speaker #5: So when we get to it , we will , as we said , we will share more information as we make progress at this stage .

Speaker #5: I think that the the most important thing is this new architecture is about to happen two years from now . And we feel and not just feel based on inputs that we are getting .

Speaker #5: Is that the solution that we have developed ? That is not final yet ? Obviously , the building blocks that we have are definitely .

Speaker #5: They fit , you know what the market is looking for . And we will update you as we make progress .

Speaker #8: Okay . Moving on to gross margins . You know , those continue to come in nicely in prior calls . You've mentioned that , you know , one of the biggest drivers is , you know , the fixed cost absorption with higher revenues .

Speaker #8: But in for Q your revenue is sequentially down , but gross margins continue to improve . So can you just give us an idea ?

Speaker #8: Is this primarily due to 45 x ramping or , you know , is is there you know , a material impact from like selling of your new products , which are better margin ?

Speaker #8: And I'm assuming that , you know , the sequential top line decline in four Q is mostly due to seasonality . So , you know , if you could give us an idea of how much margin improvement there would have been had revenues been flattish .

Speaker #8: And lastly, for most of this year, I think you had quite a bit of legacy European product in the inventory on your balance sheet.

Speaker #8: That was probably lower margin . Has that largely washed out at this point ? Thank you .

Speaker #6: Hi , Christine . Good morning . You asked a couple of questions there , so I hope I'll cover them all . If not , please remind me so you are right .

Speaker #6: We did indicate that a major driver of gross margin is revenue , where we have leverage as we utilize our fixed cost position .

Speaker #6: You're also right in terms of the Q4 , that we do feel the seasonality impact in terms of the guidance we provided on revenue , just to remind you in terms of some additional levers on gross margin , I think you've related to some of them .

Speaker #6: The ramping up of the US production , as we said in the past , it's the most economically attractive location for us to manufacturing .

Speaker #6: Of course , considering considering the IRA credit . And as you know , we started selling us made products globally . We had a PR on initial sales to Australia , and we're going to sell more into the international markets and customers in the coming months .

Speaker #6: Also , in terms of the Nexus , the new product introduction , I think we had started and we are going to gradually ramp up the introduction and this will have a positive contribution because they're coming up with a better margin profile .

Speaker #6: And they also represent some new revenue streams and some new segments for us, such as the big roof in Germany with the 20 kilowatt, which we are ahead under-penetrated, I would say until today. These new products are again coming with a structure and cost structure and higher margin.

Speaker #6: And of course, you alluded to the fact in the script about the single SKU framework. We discussed that and we believe that this will significantly help us improve our margin.

Speaker #6: It simplifies and improves the efficiency of the entire supply chain . By the way , for both us and our customers , it starts from a very efficient planning to component sourcing , logistics , warehousing , manufacturing , of course , inventory management , all the way through service and support and of course , whenever you think about margin profile , you need to consider that it also depends on the mix of product , geographies and segments .

Speaker #6: And in terms of Europe , you ask or think about the utilization of existing inventories from our balance sheet towards sales . So we said that at least until the end of the year , we will do that .

Speaker #6: And throughout next year , I think we see a lower , lower impact of that . And again , as we ramp up the the the shipments of the Nexus and sending us produced products to , to export markets .

Speaker #6: We will enjoy the 45 X impact into a further extent . Anything I missed in my response ?

Speaker #8: No . That's it . Thank you .

Speaker #6: My pleasure .

Speaker #3: We'll take our next question from Mark Strauss with JP Morgan . Please go ahead . Your line is open .

Speaker #9: Sorry . Can I go back to the the Infinity in partnership once more . Can you just talk about the go to market there ?

Speaker #9: The plan there is that wood that continue to be through your your normal distribution partners . Or is there any kind of incremental investment that would be needed on the go to market ?

Speaker #9: And then I've got a quick follow up . Thank you .

Speaker #5: Yeah . Thank you . Mark . So so as you as you know , this market is is basically the ecosystem is is pretty tight .

Speaker #5: The number of potential customers and customers is not that large . And we will actually I believe we will be able to to approach them directly or through some of the distribution partners .

Speaker #5: But we've not finalized our plans on that regard yet . We are looking at that . Piece as something that is not going to be a major investment from our side , and and I didn't mention earlier , but one of the things that is actually working in our favor is that in in the past , we we built the infrastructure to support a similar systems here in our labs .

Speaker #5: So there is there is a significant amount of CapEx that was was going into that infrastructure . And now we don't have to actually spend that money .

Speaker #9: Okay . Thank you for that . And then you mentioned the market share within us . Rizzi . Curious if you can give similar color on kind of how your market share is trending in Europe .

Speaker #9: You've lost share over the last several years . How , how how much have you bounced back ? How far off the bottom are you and how far away are you from getting back to where you were several years ago ?

Speaker #5: Yes , absolutely . So as we said , the last quarter , we we we felt that we turned the corner and we actually did so , between Q2 to Q3 and we don't have final numbers for Q3 yet .

Speaker #5: But the numbers we have are more or less the same as Q2 . So we definitely feel based on information coming back from our from our partners as well as from from from the field , is that we've turned the corner .

Speaker #5: There is still a lot of room to grow in terms of of market share compared to where we were in the past and where we believe that we can be moving forward .

Speaker #5: The reason for for our optimism about the the positive momentum in Europe is a combination of of several different things . One is the commercial storage that that we have now .

Speaker #5: We sell now and we expect that to continue growing . The second one is , as we said , most of our distribution partners have normalized levels of inventory .

Speaker #5: So now they can they can use new products and bring them quickly to the market . And the third one is the introduction of Nexus .

Speaker #5: That's a covered earlier . It does open some new segments for us as well as it has a better structure by itself . And also due to the fact that it's going to be manufactured in the US and exported to Europe .

Speaker #5: This will allow us to be more competitive in the marketplace . While not sacrificing margin necessarily . And all of these reasons are are giving us optimism as to where we can grow .

Speaker #5: And there is definitely room to grow .

Speaker #3: .

Speaker #10: Hi . Thank you . Good morning . I was wondering if you could maybe update us on the trajectory that you're expecting in terms of the tariff impact , are you still on track to offset tariff impacts over the next couple of quarters ?

Speaker #10: As we look into 2026 ?

Speaker #6: Hi , David . Good morning and thank you for your question . We reported a net impact from incremental tariff in of 2% in our Q3 .

Speaker #6: We guided pretty much roughly to the same estimated tariff impact in Q4 . And I think we , as we've said in the couple of recent quarters , we are extremely focused on diversifying and finding alternative sources and optimizing the supply chain to address this dynamic tariff involvement .

Speaker #6: And of course , at the same time , the quality and reliability of our product is very , very important for us . And I don't think we'll disclose any any more .

Speaker #6: Information in terms of our sourcing . But overall , we expect in the coming few quarters to have pretty much the same impact .

Speaker #6: And we also said the net impact also may be mitigated by some pricing that we may take .

Speaker #10: Okay , sure . Thanks . That makes sense . And then , you know , could you elaborate on what you're seeing in the US in terms of demand ?

Speaker #10: You know , how healthy has the residential market been ? Maybe if you could touch on CNI and if you expect any pull forward to happen in four ?

Speaker #10: Q I know you didn't bake it into the guidance , but curious what you're seeing there .

Speaker #5: Yes , absolutely . Thank you . David , so , so as a as mentioned , and as I believe most analysts and players in the market expect the US market next year to undergo a significant shift .

Speaker #5: And that the 25 D is going to end . So overall , the market is expected to go down by 20 to 30% .

Speaker #5: And the share that the Tpo's are going to gain is going to come at the account of of the of the cash and loan .

Speaker #5: As you know , and we we feel for a variety of reasons that I mentioned in our prepared remarks that our partnership with the Tpo's is strong .

Speaker #5: We have built the infrastructure , the relationship and the advantages of our products are such that they play to the Tpo's require as well as the different transactions that we we've engaged with .

Speaker #5: The Tpo's . As we mentioned about the safe harboring . So all of these things give us confidence about future market share . As for pull forward , as we said earlier , we don't have any significant pull forward of revenue in Q3 or in our guidance for Q4 due to the any safe harbor or the rush towards the end of the year .

Speaker #5: Of the 25 D , so so we we are looking at , as I said , no significant pull forward in this quarter .

Speaker #3: We'll take our next question from Dylan Asano with Wolfe Research . Please go ahead . Your line is open .

Speaker #11: Yeah . Hi . Good morning . I just want to comment . The solid state transformer partnership from a little bit of a different angle .

Speaker #11: Anything you can provide on just kind of how meaningful that opportunity could be . You know , whether that's like a Tam or maybe just , you know , how many dollars are spent on this kind of product per an average size data center ?

Speaker #5: Yeah . Thank you . Dylan . We can we can provide everybody . Most people are talking about 100GW of data centers that are going to come on board online in the next decade .

Speaker #5: All of them will need Transformers . And now it's a matter of math , of what percentage of these data centers are going to be with the new DC architecture .

Speaker #5: And what kind of share we can get out of this , of this piece . But it's it's a very based on every analysis that we've looked at and that we have seen .

Speaker #5: It's a very significant opportunity and we're very excited about it , because it's not that we are seeing a large opportunity out there , and we're trying to chase it .

Speaker #5: Actually , the the core competencies of this company and the components that we already have are all pointing us to that direction , almost regardless of the size of the opportunity .

Speaker #5: We are very happy that the opportunity is very large, but we also feel that we are very well positioned to capture this opportunity.

Speaker #11: Got it . Thank you . And then for my follow up , just going back to Europe , it sounds like you're in a better spot now relative to , you know , the last couple of quarters .

Speaker #11: So just any kind of outlook on just underlying demand going into 2026 , is there any reason to maybe expect the market to be a little bit stronger or weaker ?

Speaker #5: So there are you can hear opinions why the market can be stronger and why the market can be weaker . And as you as you know , your work is a collection of countries and not a single market .

Speaker #5: So , so some people are talking about UK being stronger and the battery opportunity in the Netherlands and Germany for us is going to be a very , very large opportunity because of the nexus opening a new segment for us .

Speaker #5: But we have to recall , as I mentioned earlier , in one of the earlier questions , the share gain opportunity for us is , is significant and whether the market goes up or down 10% .

Speaker #5: It doesn't really matter in size of the opportunity for us . And I think that we are well positioned , as I mentioned earlier , we believe that we are well positioned to capture additional market share in Europe in 2026 .

Speaker #5: And once we capture more market share , obviously it helps if the market is growing . But even if the market is stable or declining , it's it will still show positive momentum for us terms of the .

Speaker #3: We'll take our next question from Colin Rusch with Oppenheimer , please go ahead . Your line is open .

Speaker #12: Thanks so much , guys . Can you talk a little bit about sell through on the stationary storage systems and commissioning for systems that aren't attached to solar or are retrofitted ?

Speaker #12: You know , you guys have some visibility into where those things are going , but just want to get a sense of that , that growth driver .

Speaker #5: Thank you . Are you referring to storage systems that are not attached to PV ?

Speaker #12: Exactly . Or would be a retrofit into an existing PV system that that didn't have a storage system previously ?

Speaker #5: Okay , so for standalone storage , it's a it's an insignificant amount that we are seeing . You know , I'm talking about the solar edge installations , not what about the market in general .

Speaker #5: We are not seeing anything significant there . As for the the retrofit or the upgrade to the installed base , the opportunity for us is huge .

Speaker #5: Our installed base is is very significant . As you know , and in some countries . Homeowners and business owners are going to be driven into adding storage to their existing system , either by just buying storage or by upgrading the PV and adding storage to it .

Speaker #5: So we've started experimenting in in these areas . It's these are early days . Today , I think that as the market evolves and as the opportunity , as we leverage more on this opportunity , we will provide you with more information .

Speaker #5: But but what what some people tend to forget is also the same opportunity exists in the CNI market . Actually for , for for businesses having the ability to , to use their PV during the day in order to charge batteries or to store excess PV production can actually be even bigger opportunity than than for residential .

Speaker #12: That's super helpful . Thank you . And then I guess a follow on question there just around some of the evolution in battery chemistries and different duty cycles that we're starting to see in some of these larger systems .

Speaker #12: Can you talk about , you know , maybe adjacent to some of the work you're doing with Infineon and the DC to DC architecture for larger scale systems , but also at the commercial systems where the solutions may be a bit more complex here .

Speaker #12: And , you know , performance may be enabled by newer chemistries that you're seeing on the battery side . Is that an opportunity that you guys are seeing real time , or is it a little ways out in terms of being able to mix and match some of the chemistries and optimize performance for different , different value capture on the storage systems for particularly for CNI ?

Speaker #5: Yes . It's a great question . And rest assured that our CTO and technical team is looking into all the different technologies that are out there , from sodium to others at the moment .

Speaker #5: The solutions that we have are we have one solution that is based on NFC and the other ones are using RP . These are the ones that are today in mass production .

Speaker #5: These are the ones when we when we report revenues . These are the solutions that we are selling . We are obviously looking into all directions .

Speaker #5: And when other chemistry or other solutions are going to come online and are going to be available, either from a cost perspective or from a functionality perspective, we are going to introduce them into our solutions.

Speaker #5: And as it pertains to data centers , there are many different discussions about what storage can be doing there , whether it's for backup only or is it for for spikes from the grid , or is it a potential replacement for UPS ?

Speaker #5: But but these are early days before we can we can comment about our solution for storage for data center .

Speaker #3: And we'll take our next question from Brian Lee with Goldman Sachs . Please go ahead . Your line is open .

Speaker #13: Hey , good morning . Thanks for taking the questions . I hopped on a little bit late , so apologies if some of this is redundant .

Speaker #13: Did you guys provide or could you guys provide a bit of an update on where your manufacturing footprint stands today in the US ?

Speaker #13: You know , whether megawatt units or just kind of percentage of of overall shipments and then kind of what's what's the thought process around getting that up to , I guess presumably 100% US manufacturing ?

Speaker #13: What sort of the time frame and cadence to , to reach those targets into 2026 or beyond ?

Speaker #5: Yeah . Thank you Brian . And welcome to our call . It's a so what we what we've done . If you look at the last two years we've ramped up ramped up the manufacturing in the US in order to support mainly the US demand and the levels that we were talking about in the past were along the lines of 70,000 inverters per quarter .

Speaker #5: And the capacity to manufacture 2 million optimizers per quarter and what we have done in the last two quarters , I would say , or quarter and a half is we've continued the ramp up in order to start supporting the exportation from outside of the US into Europe and other international markets .

Speaker #5: As we announced a few weeks ago , we started by shipping some residential units , residential inverters to to Australia , and in the coming weeks we we we are expecting to to continue shipping to Europe and to some countries in Europe and some other countries in , Asia and the goal or the end goal , the end state , if you will , is to have most , if not all .

Speaker #5: I would say most of the manufacturing done in the US . There will always a pockets that will be made outside of the US for a variety of reasons , whether it's a it's a small volume or whether it's something that is needed in a specific non-US market .

Speaker #5: But the intention is , is to concentrate the manufacturing in the US because it it helps our scale up . It helps our operational efficiency , and it's closer to our largest market .

Speaker #6: Makes sense. Yeah, yeah.

Speaker #5: Second question . Just just to add in terms of the units , because I so we started I mentioned what we said before , what we are our ramp up now is mainly around the commercial inverter .

Speaker #5: And we are reaching about 20,000 inverters in in Q4 . And we expect to continue . Increasing this number in the , in the following quarters as we are going after not only the US market , but actually the European market and Asian market .

Speaker #13: Awesome that that makes a lot of sense . My follow up was on , I guess the near revenue cadence . I think you guys mentioned earlier in the call you're expecting Q1 to be down 10% or so .

Speaker #13: So kind of in line with with normal seasonality , but you're not seeing much , if any , safe harboring or 25 d pull forward at the moment .

Speaker #13: Like as you think about , you know , your Q1 view , that seems to be much better than some of your peers and kind of what we're hearing across the channel , at least in the US .

Speaker #13: And as you said , US is still your biggest market . Are you anticipating 48 e safe harboring and pull forward in your Q1 outlook , or is that something that you're seeing visibility into , into to Q of next year , just kind of want to understand a little bit about , you know , how you're thinking about safe harboring into one Q and two Q of next year .

Speaker #13: Thank you guys .

Speaker #5: Yeah . So thank you for highlighting the Q1 thing , Brian . As for safe harboring in 2020 , in Q1 26 , at this stage , we don't anticipate any significant pull forward of revenue into Q1 .

Speaker #5: So , so the direction that the soft provided is , is excluded of excluding something like that , should it happen and what we what we described during the call is that we've worked with our partners and also with the enterprises and the and the strategic CNI customers on what is referred to as the physical work test .

Speaker #5: Safe harboring and the several advantages to that method . One of them is that it allows our customers not to outlay a lot of cash upfront , but actually due to the continuous nature of of the of the transaction , they consume the units as they need them and not just within the first 105 days .

Speaker #5: For us , what it does is it gives us better visibility into into future manufacturing supply chain and revenue . And and it's not creating pull forward of revenue because the units are supposed to to be consumed as they need them .

Speaker #5: And so for that reason , in this type of safe harboring , we don't we don't see revenue when the when the transaction is signed .

Speaker #5: And so we don't expect any significant other type of safe harbour in Q1 . When we talk about the numbers .

Speaker #3: We'll take our next question from Julien Dumoulin-smith with Jefferies . Please go ahead . Your line is open .

Speaker #14: Hey , good morning team . Thank you guys very much for the time . Appreciate it . Hey , just wanted to come back to the Infineon opportunity here .

Speaker #14: And I want to ask you guys very specifically , how do you think about sort of the content per megawatt , sort of the split if you think about the solid state solution here , how much of that is coming from the Infineon side or how much per megawatt is coming from your side ?

Speaker #14: As you think about this technology ? I know you said it's still obviously in development as you ramp into that 27 opportunity , but as it stands today , how would you frame that that the split , if you will .

Speaker #5: So Infineon has been a very , very close and strategic partner for us for for many , many years . And they're components have been instrumental to the success of our inverters in the past .

Speaker #5: But but at the end of the day , it's one of the components that is putting together the hardware of the solution . And on top of that , we have different .

Speaker #5: Obviously , we put different components together as well as the software or the firmware that makes the entire thing tick . And here in data center , we believe that we will have to have another layer that will manage the redundancy and other things .

Speaker #5: So all of these things , solar energy is doing . And so I don't know whether it's I don't know how to split it to megawatts , but think about it as they are a very strategic vendor for us .

Speaker #5: But then we sell the solution eventually .

Speaker #14: Got it . So it sounds like you all maintain the majority of that sale to the extent to which you deliver a product .

Speaker #14: Here versus Infineon .

Speaker #5: Yes , we delivered the product . You know , knock on wood , but we will deliver products .

Speaker #14: , right ? No , no , no , of course . And then if I can ask a broader question here , obviously it's some respects you're pivoting out of what was an inventory challenge situation .

Speaker #14: How do you think about providing longer term views ? You guys had a 22 analyst day . How do you think about providing a longer term , multi-year view of some sort in 26 , especially as the CNI opportunity and as the psst , psst opportunity becomes a little clearer over a multi-year view ?

Speaker #6: What we said in our recent meeting is that sometimes during the first half of next year , we will provide a financial model , financial algorithm will go through the main blocks that will represent our growth trajectory and opportunities , both on revenue and margin will share .

Speaker #6: This model again sometime in the first half of next year , including the CNI opportunity and others . Of course .

Speaker #3: And we'll take our next question from Jeff Osborne with TD Cohen . Please go ahead . Your line is open .

Speaker #15: Yeah . Thank you . Just two quick ones . I was wondering on the fixed costs . I think you folks had talked about 90 to 95 million .

Speaker #15: I didn't know if that's a good run rate to think about over the next couple of quarters . That was question one . And then question two is just any thoughts on on pricing as it relates to Solaredge heading into year end and into 26 for both yourselves and the industry would be helpful .

Speaker #6: So in terms of the fixed cost , yeah , we we mentioned that it's around $90 million . And of course being fixed cost , we don't expect them to to change dramatically .

Speaker #6: We are focusing on trying to reduce costs through automation . I think the I believe the single SKU concept again , will help us streamline the entire supply chain with the simplicity , more efficiency .

Speaker #6: So we also want to reduce the fixed costs . It may take a couple of quarters . And again , as revenue increase will have better utilization of such fixed costs , the second question was .

Speaker #5: I think .

Speaker #6: The yeah , go ahead .

Speaker #5: So for pricing , as you know , you know pricing is is determined by by the value we bring to the market . And as well as the competitive landscape and in a way you can look at the US market and see that pricing over there .

Speaker #5: I would say is more or less the same . It's not we haven't seen any any pressure downwards . Pressure . And in Europe and in other markets , while in the past we did see price reductions and as we we shared with all of you earlier or not earlier in November 24th , we reduced our prices in Europe and since then , the feedback that we are getting is that our pricing is competitive compared to the premium and the additional value that we are bringing .

Speaker #5: So we haven't seen any a significant pressure in terms of pricing . Also in markets outside of the US .

Speaker #3: We will take our next question from Chris Dendrinos with RBC Capital Markets . Please go ahead . Your line is open .

Speaker #16: Yeah . Thank you . I wanted to follow up on CNI demand here . And I know you all kind of stopped reporting some of the metrics there , but maybe just kind of help frame up what that demand picture looks right like right now .

Speaker #16: And then I think you mentioned you'll be the only ones that can offer a Fiat compliant product with us manufacturing . So , you know , do you have the scale , I guess , to to ramp manufacturing for that CNI product ?

Speaker #16: If demand really strengthens ? Thanks .

Speaker #5: Yeah . Thank you Chris . It's a we said that we believe that we are the only scaled manufacturer with a capable of providing non-fiat and domestic content compliant products to the US .

Speaker #5: CNI and we've actually we've already started doing it . Obviously we've started with a transaction . We've executed some some safe harbor transactions with with CNI customers for for future use as well .

Speaker #5: And we are overall we are we believe that we are well positioned to gain additional market share in this important segment in the US .

Speaker #5: So overall , the way we look at it is that we are well positioned in that market and we believe that we have the solution that that our customers need outside of the US .

Speaker #5: As we mentioned , we we've continued seeing increased attach rate to storage in commercial . So we are seeing growth on that piece of our business .

Speaker #5: The commercial storage . And as we will start exporting from the US , the commercial units , we believe that we can be more competitive in markets in which we will more constrained .

Speaker #5: I would say until now , great .

Speaker #16: Thanks . And that's it for me . Thank you .

Speaker #3: We'll take our next question from John Wyndham with UBS . Please go ahead . Your line is open .

Speaker #15: Okay . Perfect . Thanks for taking the questions . I wanted to pivot back to manufacturing conversation . You were on previously . Just to be clear that US manufacturing for export , won .

Speaker #15: You're entitled to the 45 X for that . Is that correct ? And then two , how do you think about expanding us capacity in a flexible way , given that the tax cut to expire ?

Speaker #15: Thanks .

Speaker #6: Hi . Good morning . Yeah , you are right . We are getting the 45 credits on manufacturing . Whether we sell in the US or whether we export to non-US market , we work with world leading providers Jabil and Flex , mostly .

Speaker #6: As you may know , we have a very scalable operation with them within the existing premises . So we will be able to support the anticipated growth trajectory we have with them .

Speaker #6: And again , continue to to to enjoy the leverage of higher volume of the operation .

Speaker #15: Appreciate it . Thanks . Sure .

Speaker #3: And there are no further questions on the line at this time . I'll turn the program back to our presenters for any additional or closing remarks .

Speaker #5: Well , thank you everyone for attending our call today . As we said , we're excited about the opportunities ahead of us . We've executed well so far and we're thankful to our team .

Speaker #5: But there is lots of work to be done . And we are . We are all on it . Thank you and talk to you next quarter .

Speaker #6: Thank you .