Stem Q2 Earnings Call Highlights

Profitability improved significantly: Adjusted EBITDA rose 63% year over year to $6 million, marking Stem’s fifth consecutive positive quarter, while operating cash flow turned positive at $300,000. Record non-GAAP gross margin reached 55% as software and edge hardware contributed more to the revenue mix. Core business growth offset lower battery resales: Total revenue fell 12% to $34 million largely because battery hardware resale revenue dropped sharply, but PowerTrack software revenue increased 11% and edge-hardware revenue rose 22%. Bookings climbed 39% sequentially to $37 million, with PowerTrack ARR up 13% year over year. International expansion is accelerating: Stem secured utility-scale PowerTrack EMS projects in Chile and Hungary, expanding bookings across six countries and three continents. The company reaffirmed its 2026 guidance and said it is tracking toward the high end of its $10 million–$15 million adjusted EBITDA outlook.

Stem NYSE: STEM reported second-quarter results that highlighted continued profitability progress, higher software and edge-hardware revenue, and expanding utility-scale energy-management-system deployments internationally. The company reaffirmed its full-year 2026 guidance, while management said it is tracking toward the high end of its adjusted EBITDA range. Chief Executive Officer Arun Narayanan said the quarter marked Stem’s fifth consecutive period of positive adjusted EBITDA and its second consecutive quarter of record non-GAAP gross margin. He attributed the performance to the company’s software-centric transformation, a revenue mix weighted toward software services and edge hardware, and continued cost discipline.

“Halfway through 2026, I am pleased to see evidence of this transformation in the results,” Narayanan said. Revenue Mix Drives Higher Margins Total second-quarter revenue was $34 million, down 12% from $38 million a year earlier. Chief Financial Officer Brian Musfeldt said nearly all of the decline reflected lower battery hardware resale revenue, which fell to $300,000 from $5 million in the second quarter of 2025. Excluding battery hardware resales, software services and edge-hardware revenue totaled $33 million, up 1% year over year. PowerTrack software revenue increased 11% to $11 million, while edge-hardware revenue rose 22% to $15 million. Project and professional-services revenue was $2 million, down 6%, while managed-service revenue fell 34% to $6 million compared with an unusually strong prior-year quarter in which Stem brought about 100 megawatt-hours online in a single quarter.

GAAP gross margin rose to 41% from 33% a year earlier, while non-GAAP gross margin reached a record 55%, compared with 49% in the prior-year period. Management said the increase was driven by the greater contribution from higher-margin software services and edge hardware and reduced exposure to lower-margin battery hardware resale activity. Musfeldt said battery hardware resales are expected to rise in the second half, which should reduce the overall gross-margin percentage but increase gross-margin dollars. The company expects PowerTrack margins to remain around 75% and edge-hardware margins to remain in a range of 45% to 47%, according to Musfeldt.

Adjusted EBITDA was $6 million, or an 18% margin, up 63% from $4 million in the second quarter of 2025 and more than double the first-quarter result. For the first half of 2026, adjusted EBITDA was $8 million, compared with a $1 million loss in the first half of 2025. Cash operating expenses were sequentially flat and down 11% from a year earlier, the company sai...