Plug Power Cuts Costs to Lift Margins: Will the Results be Sustainable?

Plug Power Inc. PLUG reported progress in cost reductions and margin improvement, with revenues rising 21% year over year in the second quarter of 2025. The results were driven by robust demand for its GenDrive fuel cells, GenFuel hydrogen infrastructure and GenEco electrolyzer platform.A key highlight of the quarter was PLUG’s success in narrowing losses through its Quantum Leap cost reduction program. This initiative focuses on supply-chain efficiencies, optimization of the workforce and lowering input costs. Because of this initiative, the company’s gross margins improved from negative 92% in the second quarter of 2024 to negative 31% in the second quarter of 2025.

Plug Power also expects about $200 million in savings each year as it is retiring the old power purchase agreements (PPA), which should improve cash flow. New hydrogen supply agreements are expected to bring more savings in the second half of 2025. Also, the company is reducing its inventory, which will free up more than $100 million in cash in 2025. These moves provide much-needed liquidity as PLUG continues to fund its hydrogen plant buildout and electrolyzer expansion.

However, Plug Power is burning a lot of cash and is managing debt while trying to grow its hydrogen plants and electrolyzer sales. At the same time, the company is working to improve margin performance by lowering input costs. It is targeting to improve gross margins by the end of 2025, supported by operational efficiencies, new hydrogen supply agreements and higher sales volumes in the quarters ahead.

Margin Performance of PLUG’s Peers

Among PLUG’s major peers, Flux Power Holdings, Inc.’s FLUX total cost of sales was about $11.4 million, up 9.8% year over year in the fiscal third quarter of 2025. However, Flux Power’s gross profit surged 31% year over year. Flux Power’s gross margin improved 40 basis points, driven by a decrease in warranty-related expenses. 

Plug Power’s another peer, Bloom Energy Corporation’s BE cost of revenues increased 10.1% year over year in the second quarter of 2025. However, Bloom Energy’s gross profit rose 56.3% year over year. Bloom Energy’s gross margin expanded 630 basis points to 26.7% driven by productivity gains, higher volumes and favorable pricing.

The Zacks Rundown for PLUG

Shares of Plug Power have lost 26.8% in the year-to-date period against the industry’s growth of 10.5%.

From a valuation standpoint, Plug Power is trading at a forward price-to-earnings ratio of a negative 3.54X against the industry average of 22.18X. PLUG carries a Value Score of F.

The Zacks Consensus Estimate for PLUG’s bottom line for third-quarter 2025 has remained the same in the past 60 days.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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