Bloom Energy is retracing the 10% pop it saw yesterday from the news Bloom has agreed to supply Oracle with solid oxide fuel cell (SOFC) servers. Despite Bloom Energy being in direct contact with its first hyperscaler customer with Oracle, the drawback is that BE had already baked this into fiscal year guidance. Thus, the company was only able to reiterate fiscal year guidance of $1.65 to $1.85 billion, corresponding to YoY growth of 19.1%.
Despite the weak price action from inflated expectations around the Oracle deal, there were many bright spots in the report. Bloom reported its third consecutive quarter of record revenue and profits and reported six consecutive quarters of profitability in the Services segment.
Bloom also outlined a plan to double its factory footprint from 1 GW to 2 GW by the end of 2026 to meet growing demand, with this expected to cost in the “ballpark of $100 million,” funded through a recent refinance of debt notes for $113 million.
To help compare, Data Center Frontier estimates that BE has deployed 400 MW of capacity to data centers this year, and has delivered 1.5GW of power in total across 1,200+ global installations. Therefore, 2GW exceeds Bloom’s total history of installations and is about 5X its 2025 data center business.
Details around its new partnership with Oracle were the main focus on the call, plus how quickly Bloom can scale capacity and how the company plans to fund any future expansion.
Although we expect Bloom to be very volatile, the fact is that very few alternative energy companies can move as quickly as BE in what our firm has dubbed an energy crisis in getting power to data centers.
As the CEO stated on the call, to wait 5-7 years is “untenable.” To compare, Bloom will power Oracle with on-site power solutions in as soon as 90 days. Additional key customers for BE include American Electric Power (AEP), Quanta and Equinix. Notably, Amazon and Cologix are customers of Bloom through AEP in Ohio.
Perhaps the most important statement on the call was when the CEO stated: “We expect new orders from other AI hardware ecosystem players soon, complementing demand we see from our more traditional commercial and industrial customers.”
Revenue Beats by 6%, Yet FY25 Guide Maintained
Bloom reported a nearly 6% beat to estimates in Q2, reporting $401.2 million in revenue versus estimates for $378.9 million. Revenue grew 19.5% YoY, slowing from 38.6% growth in Q1.
According to management, this represents the highest revenue and most profitable Q2 yet: “Bloom had an excellent quarter, the highest revenue and most profitable second quarter in our 24-year history […] Over the last couple of calls, I've told you that our business is at an inflection point as demand for clean, reliable and rapidly deployable power is surging. Now there is tangible evidence.”
Growth is expected to rebound to the high-20% level in Q3 to $424.9 million, though notably this comes against a substantially weaker comp in Q3 2024’s (17.5%) decline. On the other hand, Q4 faces a difficult 60% comp, and as a result, growth is estimated to be <7% YoY to $610.5 million.
Despite the beat in Q2 and recent deal with Oracle to deliver fuel cells to AI data centers within 90 days, Bloom maintained its full-year revenue guidance at $1.65 to $1.85 billion. This corresponds to YoY growth of 19.1%.
Key Segments
Product revenue growth moderated slightly in Q2 but remained in the 30% range, while Installation and Electricity both declined YoY, reversing from strong growth last quarter.
- Product revenue increased 31.1% YoY to $296.6 million, slowing from 38% growth in Q1.
- Installation revenue declined (12.5%) YoY to $37.4 million, reversing sharply from 194% growth last quarter.
- Service revenue increased 3.7% YoY to $54.4 million, rebounding from a (5%) decline in Q1.
- Electricity revenue declined (9.8%) YoY to $12.8 million, reversing from 92% growth in Q1.
Operating Margins Expand
On a YoY basis, margins have improved quite substantially. Bloom is transforming into a stronger company fundamentally when considering its GAAP operating margins were previously deep in the red double-digits.
Gross margins dipped sequentially, yet operating margins expanded on a GAAP and adjusted basis. Notably, Bloom believes their operating margins will continue to expand: “Between that combination and our cost reduction continuing, you should absolutely expect our operating income to keep getting better as we go forward.”
- GAAP gross margin was 26.7%, down 0.5 points QoQ but up more than 6 points YoY. Adjusted gross margin was 28.2%, also down 0.5 points QoQ and up more than 6 points YoY.
- GAAP operating margin is approaching positive territory at (0.9%) in Q2, up nearly 5 points QoQ and 6 points YoY.
- Adjusted operating margin was 7.1%, up more than 3 points QoQ and 8 points YoY. Adjusted EBITDA was $41.2 million.
- GAAP net margin was (10.6%), down 3.3 points QoQ and up nearly 8 points YoY. Adjusted net margin was 5.5%, up 3.5 points QoQ and 9.7 points YoY.
EPS
Bloom beat EPS estimates on an adjusted basis as adjusted margins expanded down the line, though GAAP EPS fell short.
- Adjusted EPS of $0.10 beat estimates for $0.02, and represented a notable $0.16 improvement YoY.
- GAAP EPS was ($0.18), missing estimates for ($0.10) as GAAP net margin declined sequentially.
Looking ahead, Bloom is expected to see profits at least at this level through the end of the year, generating the bulk of its earnings in Q4 at $0.31.
Cash and Balance Sheet
Cash flows worsened sequentially, with operating cash flow falling by more than ($100 million) versus Q1. This weighed on unrestricted cash and equivalents, while debt was unchanged.
- Operating cash flow was ($213.1 million) in Q2 for a (53.1%) margin, nearly double Q1’s ($110.8 million) outflow. For the first half of 2025, operating cash flow was ($323.9 million), approximately flat YoY.
- Bloom guided for FY25 operating cash flow to be approximately flat to FY24 at $92 million, suggesting 2H operating cash flow in the range of $410 million, likely concentrated heavily in Q4.
- Free cash flow was ($220.4 million) in Q2 for a (54.9%) margin. For the first half, FCF was ($345.3 million), just over a 1% improvement YoY.
- Unrestricted cash and equivalents totaled $574.8 million, down from $794.8 million in Q1. This raises the risk that Bloom will turn to financing methods as Bloom likely awaits cash flows meaningfully improving in Q4.
- Debt remained steady at $1.13 billion.. According to the opening remarks: “Finally, during the second quarter, we refinanced $113 million of our convertible note that was due in August 2025 to provide more optionality to fund future growth. It was exchanged into our existing 2029 convertible notes.”
- Inventories were $690 million, up 12.7% QoQ from $612.5 million in Q1, supporting some near-term deployment growth for the Oracle partnership.
Earnings Q&A:
Bloom becoming more attractive to hyperscalers:
When asked about the Oracle deal, the CEO stated that it was “islanded power” to where Bloom is the first source and the second source (rather than being backup power to the grid) and that “it will be one single data center that the first project will power and we are working with them on many of the projects” — hinting the partnership is expected to expand over time and is “extremely significant” for Bloom Energy.
“So we see this as extremely significant, and we are the primary source, and it is load following. So it will prove that we can load follow at large scale. It will prove that we can operate at large scale and most importantly, AI speed. It will prove that we can install stamp sizes at that level within the 90 days that we have told you we would do in our opening remarks.”
There was also discussions that Bloom may have an important cross-sell opportunity beyond time to power, which is a combined heat power solution that helps to increase efficiency through thermal management. It was briefly mentioned it could save up to 20% of power costs: “And you are correct to point out from a value proposition wise, right, it is the equivalent of not needing 20% of your power in a data center, right? It is the equivalent of not paying for it when you have taken care of your cooling with our waste — with the waste heat as opposed to putting more electricity. That's a big deal.”
Overall, Bloom is quite confident their solution drives down costs compared to other solutions. When asked how they compare to natural gas turbines, the CEO stated: “On the other hand, those turbines have at least 15 to 20 percentages — like percentage points more fuel that they will consume compared to us. So on the OpEx, there's a significant win. And on top of that, we have no air pollution, whereas getting an air permit to put a lot of turbines if you live in a populated area is very difficult. You're probably reading in the press.
So you combine all those things, A, because we are easier to permit, we remove the friction to permitting, so we are faster. Time to power is everything in this business. Secondly, operating cost is lower. CapEx is at parity. You put them all together, I think we compare more than favorably to any other alternative way of producing electricity.”
2GW on the Way to Multi-GW
According to management, it will cost $100 million to grow from 1GW to 2GW capacity: “So we are funded for what we — we are well funded for what we need to do in terms of going to 2 gigawatts. Round ballpark numbers, think about $100 million is how you should be thinking about this. And it will come spread over quarters. And we have enough.”
An analyst asked what gives management the confidence to double capacity – (which is more than just doubling capacity as it also represents more capacity than the company has installed in its lifetime at 1.5GW).
The CEO pointed toward the visibility in backlog and also the large capex spend and what that essentially means for power capital equipment:
“So we have told you in the past that in the last 2 quarters, we have seen strong commercial activity. We have told you that it is very diverse, and it is high quality. At this point in time, when we look at that pipeline, it has gotten us to a level of confidence where we absolutely feel like this is the right thing to do. That's why we are expanding the capacity, number one, right?
Number two, this should be fairly simple, and it should be mind-boggling for all of us, and we shouldn't get numb to this fact. The large hyperscalers put together are going to spend more than $1 billion a day on CapEx, weekday and weekend. It's more than $500 billion are going to be spent just in this calendar year by those people. So you take that number of $500 billion and you say, an order of magnitude down, at least $50 billion of power capital equipment needs to be spent to electrify that additional demand that's going to come on.”
Tax Credit Benefits:
Lastly, tax credits are a tailwind for Bloom Energy as there are tax credit benefits to companies who use their energy solutions. According to the CEO during the Q&A session, it’s about a 30% incentive:
K. Sridhar Co-Founder, CEO & Chairman
[..] So it is a flat 30%, okay? Whereas in the previous version of the bill that ended last year, but safe harbored now, our customers can avail of either 40% or 50%, depending on whether they are not in an energy community or in an energy community. If they're not in an energy community, it's 40%. If they're in an energy community, it's 50%. So from that perspective, yes, their subsidies go down a little bit. But given how high the price of electricity has gone up, at 30%, our attractiveness will be extremely high.”
Conclusion:
Bloom Energy is reserved for Advanced members because it does not have a quality fundamental profile, mainly seen in its need to raise cash to build capacity. However, there is a hypergrowth story here for many years to come. Bloom provides immediate time to power within 90 days compared to nuclear in 5-7 years’ time. The company articulates why they can compete with natural gas turbines with roughly 20% better energy costs albeit Bloom is an alternative energy source and many data center operators have less experience with hydrogen fuel cells. That is why Bloom will become more of a snowball effect, to where each deal (Oracle, AWS via AEP, and Quanta) will build on itself to prove to future hyperscalers that Bloom is not only a viable choice but a preferred method to quickly get power to data centers.
What I’m saying — perhaps in a long-winded way — is that it’s the intraquarter deal announcements that will move this stock. I anticipate the I/O Fund will actively trade Bloom over the next few GPU generations as they push forward power requirements that only a handful of companies can (quickly) meet. Bloom is one of those companies.
Please note: The I/O Fund conducts research and draws conclusions for the Fund’s positions. We then share that information with our readers. This is not a guarantee of a stock’s performance. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis.
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