Bloom Energy reported a solid Q1 beat, with revenue rising 39% YoY and Q1 positive adjusted EPS for the first time ever. Margins expanded strongly YoY, across all reportable segments, and management maintained its guide for a ~29% adjusted gross margin, implying more potential margin growth ahead.
The company reiterated their full year guidance, with many comments in the Q&A that showed a level of confidence that will be rare this earnings season. Management stated their sourcing is not dependent on China, their demand is expected to be unwavering in the face of tariffs, and their competitive positioning is second to none for on-site power as data centers continue to face a dire power situation that must be augmented with systems that avoid a “monolithic failure of one unit.”
Overall, Q1’s growth and FY25’s guide reflects improving fundamentals for Bloom, though they are still far from GAAP profitability.
Revenue Growth Exceeds Estimates at 39% YoY
Bloom delivered a record Q1 with 38.6% YoY revenue growth to $326.02 million, more than 11% ahead of the $293.35 million consensus estimate for 24.7% YoY growth. Revenue growth historically has been lumpy, but the 39% growth was a solid improvement from last year’s (-14.5%) YoY decline, benefiting from project timing.
Management stated that they expect revenue to be weighted in the back half of the year, with approximately 40% in 1H and 60% in 2H. This is currently reflected in quarterly revenue estimates, with Bloom expected to see sequential growth each quarter to exit the year at $621 million in Q4.
For FY25, management maintained its revenue guidance between $1.65 to $1.85 billion, for YoY growth of 19.1% at midpoint. According to the opening remarks, management is expecting a 40/60 split on revenue with slightly more revenue recognized in the second half.
The CEO used the word “confident” in many instances when discussing the full year guidance, such as this: " So, we stand by those numbers. We wouldn't likely reiterate that guidance if we didn't have strength in our conviction. So, it's a strong conviction that we can represent it. So, how we do it is internal to us, but the what we will deliver is what I can state with conviction to you. So, that's the key part that I want you to understand in terms of where our guidance is.”
Key Segments
When discussing end markets, Bloom Energy went into detail in the opening remarks to state they foresee no changes to AI data center demand. For example, even if capex were to slow, Bloom foresees AI data centers continuing to increase spend on power: “Even down the road, should there be a slowdown in the pace of investing, the total gigawatt gap is so large that it will not have a meaningful impact on Bloom's growth in this market.” They also detailed that Commercial and Industrial end markets would also have to continue spending on power. The pocket of weakness that BE foresees would be in the retail space, such as a “stretch out of decision-making cycles.” Ultimately it was stated that, “Based on the bottoms-up customer-by-customer forecast in these three segments, we remain confident in our previously provided 2025 revenue guidance.” The translation is that AI data centers can absorb any slowdown from the retail end market.
- Product revenue, from fuel cell systems sales, rose 38.1% YoY to $211.8 million, compared to a (21%) YoY decline in the year ago quarter.
- Installation revenue, when Bloom is ready for startup and commissioning new systems, surged 194% YoY to $33.7 million, supporting commentary that project timing aided the quarter’s performance.
- Service revenue declined (5.2%) YoY to $53.6 million.
- Electricity revenue rose 92% YoY to $27.0 million.
Gross Margins Show Strong YoY Expansion
Notably, gross margin has expanded more than 1,000 basis points from 17.5% last year to 28.7% this year. All four of Bloom’s segments reported positive GAAP and adjusted gross margins:
- Product adjusted gross margin of 35.0%, up 930 basis points YoY.
- Installation adjusted gross margin of 3.8%, up more than 3,300 basis points YoY.
- Service adjusted gross margin of 4.8%, up 340 basis points YoY.
- Electricity adjusted gross margin of 57.1%, up more than 2,500 basis points YoY.
For the full year, management held its 29% adjusted gross margin guide, implying some further strengthening though the remainder as the year as seasonal revenue strength begins to kick in.
Adjusted operating income posted a turnaround at $13.2 million compared to losses of ($30.7 million) last year. Adjusted operating margin was 4.0%, versus (13.1%) in the year ago quarter. Full year adjusted operating income is expected to be between $135 million and $165 million, for ~39% YoY growth at midpoint. EBITDA was $25.2 million compared to losses of ($18.2 million) last year.
While Bloom’s manufacturing is primarily US-based, management acknowledged that they import some materials and components, although not from China. Given the more geographically diverse 10% tariff in place, management expects up to a 100 bp impact to full-year gross margins if the current tariff structure persists throughout the year.
With that said, Bloom Energy is maintaining their gross margin guidance this year with management stating they will find ways to absorb this from cost cutting: “So, we are going to take this externality and make it a challenge to find that 100 basis points and other activities we do and speed it up and not use tariff as an excuse to not meet our guidance.”
Bloom Energy is not GAAP profitable yet, with a (5.8%) GAAP operating margin and a (7.3%) GAAP net margin, but this is certainly a strong beginning to what may be an important turnaround for the company.
First Ever Positive Q1 Adjusted EPS
Bloom reported its first ever Q1 positive adjusted EPS, earning a thin $0.03 this quarter. While Bloom is still expected to see positive adjusted EPS in each quarter of this year, estimates have been coming lower, especially for Q2.
At the end of January, Q2’s adjusted EPS estimate sat at $0.05, before getting revised lower to $0.04 in February. Now, the estimate next quarter stands at just $0.01, with the low end of analysts at a ($0.12) loss, which would likely reflect broader macro-related weakness and margin softness as Bloom is not expecting a high degree of impact from tariffs.
Cash and Balance Sheet
Given revenue is lumpy and typically seasonally strong in Q4, Bloom’s negative cash flows are to be expected in the first quarter. However, cash flows did improve on a YoY basis.
- Operating cash flow was ($110.8) million in Q1, for a (34.0%) margin. This improved from a cash flow of ($147.3) million last year at a (62.6%) margin. For the full year, management is expecting operating cash flow to remain similar to 2024’s level at $92 million.
- Free cash flow was ($124.9) million in Q1, for a (38.3%) margin, improving from ($168.7) million last year at a (71.7%) margin.
- Unrestricted cash and equivalents totaled $794.8 million, while debt remained steady at $1.13 billion.
Earnings Q&A:
Confidence in Meeting FY Guidance:
What stood out on the call was management’s willingness to discuss their high level of confidence in meeting fiscal year guidance. Not only did they go into detail as to how they will absorb any economic impact, but they also made it crystal clear they are not dependent on China. At one point, management even used the words “extreme confidence” stating:
“So, we're super excited about this cycle. Extreme confidence in being able to meet those demands. And will certain projects shift in the short term? Maybe they will, but the amount of projects that get executed is plenty and enough given where we are for us to be able to meet the guidance. That's how we see it.”
Given so few companies will be able to illustrate confidence in a fiscal year guide, I’d like to share one more quote from the call:
“We have to book, build, ship and recognize revenue for a portion of our second half revenue in order to meet the guidance. Now, if we didn't have confidence in that entire process, including the bookings, and also timing, because timing means revenue recognition, we wouldn't be making this. So, very strong confidence based on everything that we see.”
In terms of demand dynamics, they also shared that it’s no longer a question as to whether data centers need on-site power – this helps management to reiterate their guidance.
“And let me explain a couple things here. The big shift, Andrew, that's happened in our business and I think it's worth taking the two extra minutes to explain this to you. It is — no longer do we see our customers, whether it is data centers or large factories, asking if on-site power is needed. That debate is over. The grid can only do so much in the short term, and without on-site power, people are not going to have power. That is no longer a question to us.”
In terms of competition, BE pointed toward 30MW and 50MW microturbines as the primary competitor, yet also stated these are not ideal compared to hydrogen backup power.
“There are many, many reasons why CCGT will not be a good choice for situations like this if they are not connected to the grid for them to load follow. And then, if they're not connected to the grid, remember, they have to be maintained, they have to be shut down, you cannot have a monolithic failure of one unit. So, if you build two of those to back it up, all those become super expensive.”
Not Dependent on China:
Part of the reason that Bloom can reiterate guidance is because the company has no reliance on China. After quite a bit of digging by analysts, it appears they literally have zero direct sourcing out of China that cannot be immediately sourced elsewhere.
“We have two manufacturing and assembly facilities and they are both located in the United States. Our products are proudly made in America. Yes, we do import materials and components from abroad, but not from China. The majority of our material spend is in custom-made components unique to us, which give us control over pricing and sourcing. We have excellent long-standing partners and are jointly invested in each other's success. If the current tariff structure continues throughout the year, we expect to see up to 100 basis point impact on our gross margin for the year.”
As discussed above, Bloom Energy plans to cut costs in order to aborb the 100 basis points, thus is not changing gross margin guidance this year.
One analyst pushed about a disclosure in their SEC filings on the use of “scandium in your fuel cell ink coatings” yet management stated they will instead source this elsewhere.
“So, the first thing for you to know is, like, number one, we are not dependent on China for scandium. I can state that very clearly. Okay. Number one. Number two, we get this from multiple geographies and multiple continents.”
Taiwan is a Growth Market
In the noisy backdrop about imports and tariff structures, it was interesting to hear a discussion from a United States company on how they will become an important exporter in the near term. In particular, Bloom pointed to Taiwan as a strong growth market as well as Europe.
“And if you look at Asia, we are really targeting Taiwan in a major way because the entire AI supply chain, the amount of growth that's happening in Taiwan in the face of them — in the face of their grid not being able to grow fast enough and deliver power and rising costs of power out there and then — and them depending quite significantly on natural gas as their source of, like, energy, all that fits very well for us.”
Additional Commentary on Deal Cycles
There were two notable conversations about deal cycles on the call. The first is that for larger utility deals such as the AEP deal it takes about nine months for the Public Utilities Commission (PUC) approval process. The second comment was that Bloom expects implementation cycles to “shrink” the more that utility backup power becomes exhausted from the sheer number of AI data center buildouts.
Conclusion:
Bloom Energy had an excellent earnings report – the best I’ve seen yet, which is saying a lot as Big Tech earnings were exceptionally strong last night. The market reaction may not be aligned with this takeaway as there was a minimal response, yet if Bloom Energy continues on this trajectory, that is sure to change.
The company reiterated its full year guidance while volunteering visibility into how they will achieve this, on top of a material turnaround in their fundamentals. They also offered commentary that matches what we presented in our Q2 webinar, which is that BE looks to be a rare yet important pocket of resilience in the tech sector.
We will, of course, be monitoring for any changes. Ideally, the company would be GAAP profitable and lower debt, but this is not a quality (or value) stock – it's a momentum stock with the goal of capturing the strong and sudden trajectory of AI data center power consumption the I/O Fund is expecting to see over the next 1-2 years. In that regard, last night’s report was nearly a perfect 10.
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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