10-Q: Fluence Energy Reports Wider Loss, Order Intake Plunges

Fluence Energy, Inc. reported a significant increase in net loss and negative cash flow for the nine months ended June 30, 2025, despite a quarterly revenue increase, as new energy storage orders sharply declined amidst tariff uncertainties.

Summary

• Total revenue for the three months ended June 30, 2025, increased by 25% to $602.5 million, compared to $483.3 million in the prior year period.
• Total revenue for the nine months ended June 30, 2025, decreased by 17% to $1.22 billion, compared to $1.47 billion in the prior year period.
• Gross profit for the three months ended June 30, 2025, increased by 7% to $89.1 million, but gross profit margin decreased to 14.8% from 17.2%.
• Gross profit for the nine months ended June 30, 2025, decreased by 17% to $152.9 million, with gross profit margin remaining flat at 12.5%.
• Net income for the three months ended June 30, 2025, was $6.9 million, up from $1.1 million in the prior year period.
• Net loss for the nine months ended June 30, 2025, increased by 146% to $92.1 million, compared to a net loss of $37.4 million in the prior year period.
• Basic loss per share for the nine months ended June 30, 2025, was $0.51, compared to $0.20 in the prior year period.
• Adjusted EBITDA for the three months ended June 30, 2025, increased by 75% to $27.4 million.
• Adjusted EBITDA for the nine months ended June 30, 2025, was a loss of $52.7 million, a significant increase from a loss of $8.8 million in the prior year period.
• Net cash used in operating activities for the nine months ended June 30, 2025, was $411.3 million, a substantial shift from $69.2 million provided in the prior year period.
• Free Cash Flow for the nine months ended June 30, 2025, was negative $421.3 million, compared to positive $64.3 million in the prior year period.
• Energy Storage Products and Solutions contracted (order intake) decreased by 56% to 0.7 GW for the three months ended June 30, 2025, and by 49% to 1.9 GW for the nine months ended June 30, 2025.
• Deployed energy storage capacity increased to 6.3 GW (16.7 GWh) as of June 30, 2025, up from 5.0 GW (12.8 GWh) as of September 30, 2024.
• Contracted backlog for energy storage products and solutions increased to 8.2 GW as of June 30, 2025, up from 7.5 GW as of September 30, 2024.
• Pipeline for energy storage products and solutions increased to 35.7 GW (114.3 GWh) as of June 30, 2025, up from 25.8 GW (80.5 GWh) as of September 30, 2024.
• Inventory, net, significantly increased to $654.3 million as of June 30, 2025, from $182.6 million as of September 30, 2024.
• Accounts payable decreased to $255.6 million as of June 30, 2025, from $436.7 million as of September 30, 2024.
• Deferred revenue increased to $545.2 million as of June 30, 2025, from $274.5 million as of September 30, 2024.

Sentiment

Score: 3

Explanation: The company's financial performance for the nine-month period shows significant deterioration, marked by a widening net loss and substantial negative cash flow from operations. A nearly 50% decline in new energy storage orders is a major concern for future revenue. While some operational metrics like deployed capacity and overall backlog are positive, the core business's ability to secure new contracts is faltering. High inventory levels and decreased accounts payable also point to working capital strain. The ongoing legal proceedings and regulatory uncertainties (tariffs, FEOC) add considerable risk and unpredictability to the outlook.

Positives

• Quarterly revenue increased by 25% year-over-year, driven by increased volumes of Gridstack solutions projects.
• Net income for the three months ended June 30, 2025, improved significantly to $6.9 million from $1.1 million in the prior year.
• Adjusted EBITDA for the quarter ended June 30, 2025, increased by 75% to $27.4 million.
• Deployed energy storage capacity (GW and GWh) showed strong growth, indicating successful project completions.
• Energy storage products and solutions contracted backlog increased by 9% to 8.2 GW.
• Energy storage products and solutions pipeline increased by 38% to 35.7 GW, suggesting future potential.
• Services assets under management and contracted backlog both increased, indicating growth in the services segment.
• Digital contracts assets under management and contracted backlog also increased, showing expansion in software offerings.
• A new $150.0 million supply chain financing arrangement was entered into, enhancing liquidity options.

Negatives

• Net loss for the nine months ended June 30, 2025, significantly widened to $92.1 million from $37.4 million in the prior year period.
• Total revenue for the nine months ended June 30, 2025, decreased by 17% year-over-year.
• Gross profit for the nine months ended June 30, 2025, decreased by 17%, aligning with the revenue decline.
• Gross profit margin for the three months ended June 30, 2025, decreased to 14.8% from 17.2% due to a net decrease in gross margins on Gridstack solutions projects.
• Adjusted EBITDA for the nine months ended June 30, 2025, was a loss of $52.7 million, a substantial increase from the prior year's loss.
• Net cash used in operating activities for the nine months ended June 30, 2025, was a significant outflow of $411.3 million, a sharp reversal from cash provided in the prior year.
• Free Cash Flow for the nine months ended June 30, 2025, was negative $421.3 million, indicating substantial cash burn.
• Energy Storage Products and Solutions contracted (order intake) decreased by 49% for the nine months ended June 30, 2025, signaling a slowdown in new business acquisition for the core segment.
• Inventory, net, increased significantly by $471.7 million to $654.3 million, indicating a large build-up of materials.
• Accounts payable decreased significantly by $181.1 million, suggesting cash outflows to suppliers.
• The company's top two customers accounted for approximately 40% of total revenue for the nine months ended June 30, 2025, indicating customer concentration risk.

Risks

• Uncertainty and potential adverse impacts from changes in government incentives and regulations, including the Inflation Reduction Act (IRA) and the One Big Beautiful Bill Act (OBBBA), particularly regarding domestic content bonus credits and Foreign Entity of Concern (FEOC) requirements.
• Risk that U.S. domestic suppliers may be unable to meet FEOC requirements, potentially impacting eligibility for tax credits and the company's ability to compete.
• Limited availability of U.S. suppliers for certain components, posing a risk if domestic suppliers cannot meet FEOC concerns or if substitute sources are not found timely or competitively.
• Adverse impacts from changes in the global trade environment, including new tariffs (e.g., Section 301 tariff increase on lithium-ion non-EV batteries from China to 25% effective January 1, 2026) and retaliatory tariffs.
• Paused and delayed customer contracting activity due to tariff-related uncertainty, potentially leading to reduced revenue and order cancellations.
• Ongoing anti-dumping/countervailing (AD/CV) proceedings regarding Chinese graphite active anode material (AAM) imports, which could result in significant tariffs (preliminary CV duty rate of 11.58%, preliminary AD tariff of 93.5% to 102.72%).
• Relatively limited operating and revenue history as an independent entity in a nascent clean energy industry.
• Anticipated increasing expenses and challenges in maintaining prolonged profitability.
• Fluctuations in order intake and results of operations across fiscal periods.
• Potential difficulties in maintaining and establishing expected mass manufacturing capacity, and risks related to delays, disruptions, and quality control problems in manufacturing operations.
• Risks related to quality and quantity of components provided by suppliers, supplier concentration, and limited supplier capacity.
• Changes in the cost and availability of raw materials and underlying components.
• Significant reduction in pricing or order volume or loss of one or more significant customers.
• Intense competition in the energy storage sector from companies like Tesla, Wartsila, Sungrow, and Contemporary Amperex Technology Co., Limited.
• Risks associated with engineering and construction, utility interconnection, commissioning, and installation of energy storage solutions, including cost overruns and delays.
• Lengthy sales and installation cycles for energy storage solutions.
• Risks related to defects, errors, vulnerabilities, and/or bugs in products and technology.
• Estimation uncertainty related to product warranties, with potential for material adjustments if actual failure rates or replacement costs differ from estimates.
• Exposure to fluctuations in currency exchange rates.
• Amounts included in pipeline and contracted backlog may not result in actual revenue or translate into profits.
• Uncertainty regarding the outcome and financial impact of legal proceedings, including the 2021 overheating event, 2023 project-related litigation (Fluence vs. Diablo Energy Storage, LLC), SEC investigation, securities class actions, and shareholder derivative actions.
• Indebtedness and liabilities, particularly the $400.0 million 2030 Convertible Senior Notes, could limit cash flow and impair ability to satisfy obligations.
• Higher interest rates could increase the cost of refinancing indebtedness and debt service obligations.
• Conditional conversion feature of the 2030 Convertible Senior Notes, if triggered, could adversely affect liquidity if settled in cash.
• Potential dilution from issuance or sale of Class A common stock or rights to acquire shares, including upon conversion of convertible notes.
• Counterparty risk with respect to capped call transactions related to the convertible notes.

Future Outlook

The company anticipates continued growth in electricity demand globally, which is expected to drive demand for energy storage solutions. It aims to capitalize on this by leveraging global scale, technology leadership, product development, and market share, focusing on standardized offerings and regional organizational structures. The company is ramping up domestic manufacturing facilities in Arizona, Texas, Tennessee, and Utah, and utilizing a domestic inverter supplier in South Carolina to benefit from U.S. government incentives like the ITC and AMPC, especially under the modified provisions of the OBBBA. However, the outlook is subject to economic uncertainties, supply chain disruptions, geopolitical conflicts, and the evolving regulatory landscape, including the impact of tariffs and the implementation of FEOC restrictions, which have already caused delays in customer contracting activity.

Management Comments

• We believe Fluence is well-positioned to continue to capitalize on the utility-scale battery storage market as we continue to deliver solutions that address the complex needs of a transforming energy landscape.
• We have and intend in the future to further develop and innovate to provide energy storage solutions and digital software offerings that aim to solve our customers energy challenges and expand our services with additional value-add offerings.
• We are also focused on expanding our business with standardized offerings that are optimized for each of our sales channels and continuing to move towards a more localized, regional organizational structure to better support customers and sales channels, improve logistics, and enhance market focus.
• The Company continues to ramp up use of domestic manufacturing facilities in Arizona, Texas, Tennessee, and Utah, as well as our domestic inverter supplier in South Carolina for our customers and projects in the United States.
• We believe we are well positioned to benefit from both the ITC provisions (including the revised domestic content bonus credit thresholds) and the AMPC, via our battery module manufacturing at our U.S. contract manufacturing facility, our supply agreement for U.S. manufactured battery cells, our supply agreement for U.S. manufactured inverters, and our complete U.S. supply chain of modules, cells, inverters, battery pack, enclosures, and thermal management systems.
• We are actively implementing our risk mitigation strategy with our U.S. suppliers utilizing the AMPC and working with such suppliers to achieve compliance with the OBBBA conditions for the AMPC, including the FEOC restrictions, by the applicable compliance deadlines.
• We have experienced paused and delayed customer contracting activity in response to the tariff-related uncertainty, including as a result of the mutual agreement by the Company with certain customers in the United States to (i) defer entry into new energy storage solutions contracts and (ii) pause active, currently signed contracts under project execution and we may see further impacts to customer contracting activity if there continues to be uncertainty relating to tariffs.
• We are currently assessing the ultimate impact these AD/CV tariffs could have on our suppliers, our business, our suppliers pricing decisions, and are waiting for the final determination from the DOC to be issued later this calendar year.
• We believe our existing cash and cash equivalents, which includes proceeds from our IPO, cash flows from operations, sales of accounts receivable under MRPA, and proceeds from the issuance of the 2030 Convertible Senior Notes, our supply chain financing arrangements, and availability under our 2024 Revolver will be sufficient to meet our expense and capital requirements for at least the next 12 months.

Industry Context

The utility-scale battery storage industry is experiencing unprecedented growth driven by global renewable energy transitions, grid resilience focus, and supportive regulatory frameworks. BloombergNEF projects global utility-scale market (excluding China) to add approximately 2,660 GWh between 2024 and 2035. The cost of lithium-ion energy storage hardware has generally declined, making the market more addressable, though short-term price fluctuations have occurred. Increased electricity demand, fueled by new data centers, AI, manufacturing, and electrification, is expected to further boost energy storage demand. The industry is heavily influenced by government policies like the U.S. Inflation Reduction Act (IRA) and the recently enacted One Big Beautiful Bill Act (OBBBA), which provide significant tax credits but also introduce complex domestic content and Foreign Entity of Concern (FEOC) requirements. The sector is highly competitive, with new entrants continuously emerging, and faces challenges from global trade policies, including new tariffs on imports from China and ongoing anti-dumping/countervailing duty investigations on key materials like graphite anode material.

Comparison to Industry Standards

• The global utility-scale market, excluding China, is estimated by BloombergNEF to add approximately 2,660 GWh between 2024 and 2035, indicating a robust growth trajectory for the industry that Fluence Energy operates within.
• Fluence Energy's deployed capacity of 6.3 GW (16.7 GWh) as of June 30, 2025, demonstrates its significant presence in the market, comparable to leading players like Tesla, Wartsila, Sungrow, and Contemporary Amperex Technology Co., Limited (CATL).
• The company's focus on domestic manufacturing facilities in Arizona, Texas, Tennessee, and Utah, along with a U.S. inverter supplier in South Carolina, aligns with broader industry trends and government incentives (IRA, OBBBA) promoting localized supply chains, potentially offering a competitive advantage over competitors heavily reliant on foreign imports, especially given new FEOC restrictions.
• The decline in lithium-ion battery pack costs in fiscal years 2023 and 2024, as noted by the company, reflects a general industry trend that makes energy storage solutions more economically viable, though the company acknowledges the risk of price increases as seen in fiscal year 2022.
• The company's competitive factors, such as safety, reliability, cost of ownership, and ability to issue performance guarantees, are standard benchmarks for success in the energy storage market, where differentiation is crucial due to increasing competition.

Corporate Governance

Legal Proceedings

• A 300 MW energy storage facility, for which Fluence was the technology provider, experienced an overheating event on September 4, 2021. The customer alleges Fluence is liable, but Fluence denies liability, and no formal legal proceedings have commenced yet, though litigation is reasonably possible. The financial impact cannot be estimated.
• Fluence filed a complaint in October 2023 against Diablo Energy Storage, LLC, seeking approximately $37.0 million for nonpayment related to an energy storage facility. Diablo Energy Storage, LLC filed a cross-complaint in November 2023, seeking a minimum of $25.0 million in damages and disgorgement of $230.0 million, alleging a deficiency in Fluence's contractor license. Fluence denies these allegations and intends to vigorously defend.
• The SEC is conducting a formal investigation into the company's financial reporting, initiated in response to a short-seller report published on February 22, 2024. The company is fully cooperating and does not expect the total potential cost to be material to its financial condition.
• Two putative federal securities class action complaints (Abramov v. Fluence Energy, Inc. et al. and Kramer v. Fluence Energy, Inc. et al.) were filed in March and April 2025, respectively, and consolidated in May 2025. These actions allege violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5, seeking unspecified damages. The company denies the claims and intends to vigorously defend.
• Two shareholder derivative complaints (Elmajian v. Nebreda et al. and Al Amad v. Nebreda et al.) were filed in March and April 2025, respectively, and consolidated in April 2025. These actions allege claims under Section 14(a) of the Securities Exchange Act of 1934 and breaches of fiduciary duties, seeking damages. Proceedings are stayed until the resolution of the consolidated securities class action. The company believes the claims are without merit and intends to vigorously defend.

Related Party Transactions

• AES Grid Stability holds 51,499,195 shares of Class B-1 common stock, and Siemens beneficially owns 51,499,195 shares of Class A common stock.
• Revenue from related parties was $35.6 million for the three months ended June 30, 2025, and $273.4 million for the nine months ended June 30, 2025, a significant decrease from prior year periods.
• Cost of goods and services from related parties was $45.9 million for the three months ended June 30, 2025, and $72.8 million for the nine months ended June 30, 2025, a significant increase from prior year periods.
• The company provides consulting services to AES, generating $1.6 million in revenue for the three months ended June 30, 2025, and $7.0 million for the nine months ended June 30, 2025.
• Receivables from related parties totaled $158.4 million as of June 30, 2025, a decrease from $362.5 million as of September 30, 2024.
• AES and Siemens Corporation have issued guarantees of $50.0 million each, totaling $100.0 million, to the original supply chain financing bank on the company's behalf.
• The company has an obligation under the Tax Receivable Agreement to pay Founders 85% of realized tax benefits from tax basis increases, with an estimated $117 million in future payments from redemptions, though the remaining liability is not recognized as probable of payment as of June 30, 2025, except for $0.3 million realized.

Stakeholder Impact

• Shareholders: Face increased net losses and negative cash flow, potential dilution from convertible notes, and uncertainty from legal proceedings and regulatory changes (tariffs, FEOC), which could negatively impact share price and investment value.
• Employees: Impacted by changes in personnel-related expenses, including stock-based compensation, and potential restructuring efforts (severance costs mentioned).
• Customers: May experience project delays or cancellations due to tariff uncertainty and regulatory changes (OBBBA, FEOC), affecting project timelines and costs. The company's ability to provide domestic content products and qualify for tax credits is crucial for customer project viability.
• Suppliers: Face uncertainty and potential increased costs due to new tariffs and AD/CV proceedings, particularly those supplying components from China. The company's supply chain financing programs offer some flexibility but are dependent on the company's financial health and guarantees.
• Creditors: The issuance of $400.0 million in convertible senior notes increases the company's indebtedness. The 2024 Revolver and other debt agreements contain covenants that could restrict operations and impact the company's ability to make payments.

Next Steps

• Continue to evaluate the evolving economic environment and take action to mitigate impacts on business, consolidated results of operations, and financial condition.
• Further develop and innovate energy storage solutions and digital software offerings to solve customer energy challenges and expand value-add services.
• Expand business with standardized offerings optimized for sales channels and continue moving towards a more localized, regional organizational structure.
• Continue to ramp up use of domestic manufacturing facilities in Arizona, Texas, Tennessee, and Utah, and domestic inverter supplier in South Carolina.
• Actively implement risk mitigation strategy with U.S. suppliers to achieve compliance with OBBBA conditions for AMPC, including FEOC restrictions, by applicable deadlines.
• Assess the ultimate impact of AD/CV tariffs on suppliers and business, awaiting final determination from the DOC by December 5, 2025.
• Defend vigorously against the securities class action and shareholder derivative actions, believing the claims are without merit.
• Monitor the implementation and interpretation of forthcoming guidance related to the OBBBA and FEOC requirements from the U.S. Department of Treasury.

Key Dates

Recommendation

The substantial increase in net loss and significant negative cash flow from operations for the nine-month period, coupled with a nearly 50% decline in new energy storage product orders, indicates a concerning deterioration in core business performance. While deployed capacity and overall backlog show growth, the core business's ability to secure new contracts is faltering. High inventory levels and decreased accounts payable also point to working capital strain. Furthermore, ongoing legal proceedings and the uncertain impact of new tariff policies and FEOC restrictions introduce considerable operational and financial risk, making the stock a high-risk investment with significant downside potential.

Keywords

Energy Storage, Battery Storage, Grid-Scale Storage, Renewable Energy, SEC Filing, 10-Q, Financial Results, Quarterly Report, Lithium-ion Batteries, Tariffs, Inflation Reduction Act, OBBBA, FEOC, Supply Chain, Order Intake, Backlog, Cash Flow, Net Loss, Convertible Notes, Fluence Energy