Can Plug Power's Cost Discipline Deliver Long-Term Margin Growth?

Plug Power Inc. PLUG has made significant progress in cost-cutting initiatives and improving margins. The company’s gross margin improved from negative 92% in the second quarter of 2024 to negative 31% in the second quarter of 2025. The results were driven by 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.

Also, Plug Power expects to save around $200 million annually by retiring its older power purchase agreements (PPAs), which should strengthen its cash flow. PLUG expects further savings from the new hydrogen supply agreements in the second half of 2025. The company is also reducing inventory, which will free up more than $100 million in cash in 2025. These actions provide essential liquidity as PLUG continues to build new hydrogen plants and expand its electrolyzer capacity.

However, Plug Power continues to face cash burn and debt management challenges 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 and is focusing on disciplined capital allocation and operational efficiency to mitigate these pressures. Rising demand for electrolyzers in the green hydrogen market, as well as the Quantum Leap program, could help PLUG turn revenue gains into long-term profitability.

Margin Performance of PLUG’s Peers

Among PLUG’s major peers, Flux Power Holdings, Inc.’s FLUX total cost of sales was $11 million, up 12.2% year over year in the fiscal fourth quarter of 2025 (ended June 2025). However, Flux Power’s gross profit surged 34.5% year over year. Flux Power’s gross margin improved 760 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 gained 77.4% in the year-to-date period compared with the industry’s growth of 30.7%.

From a valuation standpoint, Plug Power is trading at a forward price-to-earnings ratio of a negative 9.40X against the industry average of 26.13X. 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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