Zacks Investment Research recently initiated coverage of Zeo Energy Corp. ZEO with a “Neutral” recommendation, indicating an earnings inflection point, though balanced by notable financial and structural risks.
Zeo Energy is a vertically integrated provider of residential solar systems and related energy efficiency solutions. Following its March 2024 business combination with Sunergy, the Florida-based company has focused on selling, designing, installing and maintaining residential solar systems, while also offering roofing services and complementary energy products. The company primarily operates in Florida, Texas and several Midwestern states, and is expanding into additional markets, including Virginia.
The investment thesis centers on improving profitability. In third-quarter 2025, Zeo Energy reported net revenues of $23.9 million, up 32% sequentially and roughly 22% year over year. Adjusted EBITDA was $2 million, against a slight loss in the prior-year period. The gross margin expanded to 57.4% from 48.8% a year earlier, driven by higher contract average selling prices and more favorable pricing agreements implemented in late 2024.
The cost of revenues declined to 42.1% of sales from nearly 50% in the prior-year period, signaling structurally improved unit economics. For a solar installer, sustained margin expansion can be more impactful than headline revenue growth, as it enhances operating leverage and supports internal cash generation. Management expects fourth-quarter revenues to be in line with the third-quarter reported level despite typical seasonal softness.
Beyond residential solar, Zeo Energy is broadening its platform. The August 2025 acquisition of Heliogen expanded the company into commercial and industrial solar generation, and long-duration storage. While Heliogen has not yet contributed revenues, the move positions Zeo Energy to address the growing demand from data centers and grid-constrained regions. Industry forecasts suggest rising U.S. electricity demand in 2026 and 2027, alongside significant solar capacity additions, creating a supportive backdrop for distributed solar and storage solutions.
The research report highlights several key factors that can drive ZEO’s growth. The company’s financing model also supports customer adoption. Fewer than 5% of customers pay cash, with most opting for third-party leases or financing arrangements, helping sustain demand even in a higher-rate environment.
However, potential investors should consider certain challenges outlined in the report. Zeo Energy recorded a $2.6-million provision for credit losses in the first nine months of 2025, underscoring receivable exposure in its contract-heavy model. A meaningful portion of revenues is tied to a related party, and the company guarantees approximately $10 million of that entity’s indebtedness, introducing governance and concentration considerations.
Amortization tied to acquired contracts has pressured reported earnings, while preferred securities carrying a 10% distribution add to capital costs. Ongoing share issuance and equity-linked transactions may also cap per-share upside.
From a valuation standpoint, ZEO trades at 1.32X trailing 12-month book value and 13.99X trailing earnings, roughly in line with historical ranges and below broader market multiples. Shares have outperformed the alternative energy sub-industry and the broader sector over the past six months.
You are encouraged to view the full Zacks research report for a comprehensive analysis of ZEO's financial health, growth initiatives and market positioning. This detailed report explores the company's operational strategies and financial performance, highlighting risks and opportunities that may impact its direction.
Read the full Research Report on Zeo Energy here>>>
Note: Our initiation of the coverage on ZEO, which has a modest market capitalization of $74.8 million, aims to equip investors with the information needed to make decisions in this promising but inherently risky market segment.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Zeo Energy Corp. (ZEO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
