FLNC Q2 Deep Dive: Revenue Lags While U.S. Policy Shifts Shape Outlook

Electricity storage and software provider Fluence (NASDAQ:FLNC) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 24.7% year on year to $602.5 million. The company’s full-year revenue guidance of $2.7 billion at the midpoint came in 1.1% below analysts’ estimates. Its GAAP profit of $0.03 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Fluence Energy’s second quarter was marked by a negative market reaction as revenue growth did not meet Wall Street expectations, largely due to production delays in its U.S. facilities. Management attributed the underperformance to slower-than-anticipated ramp-up at its Arizona manufacturing plant, which disrupted the timing of customer deliveries. CEO Julian Nebreda noted, “We recorded approximately $603 million in revenue, which was below our expectations, mostly due to delays in ramping up volume at our U.S. manufacturing facility.” Despite these setbacks, the company pointed to robust international demand and progress in resolving domestic production issues as supporting factors for future quarters.

Looking ahead, Fluence Energy’s outlook is shaped by recent U.S. legislative changes and evolving tariff policies, which management believes will strengthen its competitive position in domestic battery storage. The passage of the One Big Beautiful Bill Act, which extends tax credits and tightens restrictions on foreign content, is expected to benefit Fluence’s U.S.-based supply chain. Nebreda emphasized, “We believe that these provisions enhance our competitive position as one of the few companies currently capable of delivering domestic content energy storage systems at scale.” However, the company remains cautious about margin pressures from tariffs and the pace of U.S. market recovery.

Key Insights from Management’s Remarks

Management cited delayed U.S. production ramp-up, regulatory shifts, and strong international activity as key factors impacting the quarter’s results and future guidance.

• U.S. production ramp-up delays: Revenue shortfall was primarily due to slower scaling at the Arizona facility, with management expecting to resolve these issues by year-end but unable to recapture all deferred revenue within the current year.
• Legislative and tariff environment: Recent U.S. legislation, particularly the One Big Beautiful Bill Act, introduced provisions that favor domestically produced battery storage systems and restrict reliance on Chinese components. Management views these developments as supportive of Fluence’s U.S. market strategy.
• International growth momentum: Over half of quarterly revenue came from projects in Europe and Asia, where supply chain execution and customer demand remained strong, contributing to higher-than-expected gross margins.
• Backlog expansion and diversification: The backlog reached $4.9 billion, with significant new contracts in Australia and ongoing growth in the Asia Pacific and EMEA (Europe, Middle East, Africa) regions, providing visibility into future revenue.
• Supply chain flexibility and compliance: Fluence is actively working with suppliers to meet new regulatory requirements on domestic content and foreign entity restrictions, aiming to avoid additional capital needs and maintain its compliance leadership in U.S. projects.

Drivers of Future Performance

Fluence’s forward guidance is shaped by domestic policy changes, ongoing supply chain adjustments, and the evolving mix of U.S. and international demand.

• Policy-driven market dynamics: Management expects U.S. policy changes, including extended tax credits and stricter content requirements, to drive increased domestic demand for compliant energy storage systems, supporting backlog growth but requiring ongoing regulatory adaptation.
• Margin headwinds from tariffs: Near-term margins are expected to be pressured by tariff-related costs in legacy U.S. contracts, with management indicating these effects should diminish as new contracts reflect updated pricing and cost structures. International projects are expected to maintain higher margin profiles.
• Data center and grid demand expansion: The emergence of AI and data center energy needs is creating new opportunities for battery storage solutions. Fluence is developing offerings tailored to rapid, variable power demand, which management believes will open up additional addressable markets over the next several years.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will monitor (1) the resolution of U.S. production ramp-up issues and their impact on revenue timing, (2) the pace of new contract awards in the U.S. as regulatory clarity and customer confidence return, and (3) the company’s progress in expanding direct engagement with data center operators. Continued backlog growth and successful adaptation to evolving domestic content requirements will also be key markers of execution.

Fluence Energy currently trades at $7.20, down from $9.25 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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