Financial results

Fluence reported revenue of $464.9 million for the three months ended March 31, 2026, an increase of 7.7% from $431.6 million in the same quarter of fiscal year 2025. On a six-month basis, first-half revenue reached $940.1 million, compared to $618.4 million in the prior corresponding period. Energy storage solutions accounted for $433.6 million of Q2 revenue, with the remaining $31.3 million coming from services and digital products.

GAAP gross profit was $46.6 million, representing a 10.0% margin, modestly above the 9.9% recorded in Q2 FY2025. On an adjusted basis (excluding stock-based compensation and depreciation and amortisation from cost of goods sold), gross profit was $51.5 million, yielding a margin of 11.1%. That figure compares with 10.4% in the prior-year quarter and represents a meaningful recovery from the 5.6% adjusted gross margin posted in Q1 FY2026.

The adjusted EBITDA loss for the quarter narrowed to $9.4 million, an improvement of $21 million versus the $30.4 million loss recorded in Q2 FY2025. Chief Financial Officer Ahmed Pasha attributed the improvement to higher gross margins, lower general and administrative expenses, and a $6 million gain from unwinding a foreign exchange derivative. That derivative gain offset a $6 million loss recorded on the same instrument in Q1, leaving the net year-to-date FX impact at zero. The GAAP net loss for the quarter was $29.2 million, compared with $41.9 million in Q2 FY2025.

The rolling 12-month adjusted gross margin now stands at 12.4%, marking two consecutive years of double-digit adjusted gross margins on a trailing basis. Fluence has moved from a rolling margin of negative 4.5% in Q4 fiscal year 2022 to consistently generating double-digit returns on that measure since mid-fiscal year 2024.

Operational highlights

Order momentum was the clearest operational highlight of the quarter and the period since. In Q2 alone, Fluence booked $574.3 million of new orders across solutions, services, and digital, comprising 2.3 GWh of energy storage solutions, 2.1 GWh of services, and 1.1 GW of digital. Including more than $600 million signed in the third quarter to date, year-to-date order intake through May 6, 2026 reached approximately $2.0 billion. That figure compares with approximately $1.0 billion over the same period in fiscal year 2025.

Approximately 50% of orders signed in fiscal year 2026 to date came from customers that had not previously contracted with Fluence. President and CEO Julian Nebreda described this as an early result of expanded commercial efforts, including a Vice President of Growth role. The new customer wins are concentrated within Fluence’s established utility and independent power producer segments, but also include the emerging hyperscaler category discussed further below.

Cumulative deployed capacity reached 7.4 GW (19.2 GWh) as of March 31, 2026, up from 6.8 GW (17.8 GWh) at fiscal year-end. Services assets under management grew to 6.3 GW, with a contracted services backlog of 7.7 GW. Annual recurring revenue (ARR) from software subscriptions and long-term service agreements reached $157 million at quarter-end, up from $148 million at the start of the fiscal year.

Fluence also announced that its first Smartstack project reached substantial completion and commenced commercial operations during the quarter. Smartstack is the company’s newest BESS platform, featuring a split architecture that separates control systems from battery packs, the highest energy density in Fluence’s product line (delivering over 500 MWh per acre), and the ability to accept a broad range of cell chemistries including pouch cells. Management cited more than 98% reliability for Smartstack and described a growing Smartstack backlog, though no specific figures were disclosed.

Hyperscaler breakthrough

The strategic development that generated the most attention on the earnings call was the execution of master supply agreements with two unnamed major hyperscalers. These agreements establish Fluence as a pre-qualified supplier, enabling the hyperscalers to issue purchase orders for individual projects without repeating a full vendor qualification process each time. The agreements followed competitive selection processes: one began with 26 vendors, with Fluence the first to complete all qualifications; the other involved technical and commercial requirements that many competitors struggled to meet.

The use case driving hyperscaler demand is quality of power rather than energy shifting. AI data centres experience extreme and rapid fluctuations in power draw as computing workloads surge, and battery energy storage systems can smooth those fluctuations, protecting both the grid connection and on-site equipment. Nebreda confirmed during the Q&A session that the systems involved are shorter-duration configurations (approximately two hours) and require response times significantly below 100 milliseconds, a capability Fluence has developed through years of operating fast-response grid systems in European markets.

The data centre pipeline grew more than 30% quarter-over-quarter to approximately 12 GWh as of the earnings call. Management noted that a great majority of this pipeline is connected to projects behind the two newly signed MSAs. An initial purchase order from one of the two hyperscalers is expected within the third quarter of fiscal year 2026, with Nebreda indicating that the broader pipeline could convert into a significant volume of orders over the following twelve months.

Margins on data centre projects were described as consistent with a range of 10% to 15%, in line with the company’s wider adjusted gross margin expectations. Domestic content compliance was not a primary requirement for either hyperscaler at the time of MSA signing, though Nebreda noted that management is actively highlighting its value as both a financial and branding opportunity for customers with predominantly United States-based operations.

Domestic supply chain

A material development on the supply side was the resolution of the ownership question around Fluence’s Tennessee cell manufacturing partner. AESC, which had operated the Smyrna, Tennessee battery cell facility since 2025, sold a majority interest in that facility to Fixed Energy, a subsidiary of Lombard Capital. The ownership transfer was completed on March 31, 2026, coinciding with the end of the quarter. Fluence moved quickly to establish a supply agreement with the new owners, and the facility continues to produce cells that qualify for tax credits under the One Big Beautiful Bill Act.

Fluence confirmed that a second domestic cell supplier has been secured for fiscal year 2027. Additional supply options are being evaluated for fiscal year 2028 and beyond, including planned conversions of electric vehicle battery manufacturing lines to battery energy storage system cells and a second production line at the Smyrna facility. The company stated its current domestic cell capacity is sufficient to support its near-term contracted backlog and order pipeline.

The complete United States domestic supply chain now spans cells in Tennessee, modules in Utah, enclosures and battery management systems in Arizona, chillers and HVAC equipment in Houston, inverters in South Carolina, and communications equipment in Georgia. Management has described this end-to-end footprint as a structural competitive advantage, particularly as Section 45X Advanced Manufacturing Production Tax Credit content restrictions ratchet upward from 60% non-PFE content in 2026 to 85% by 2030.

Balance sheet and liquidity

Total cash (cash and cash equivalents plus restricted cash) was $412.9 million at March 31, 2026, down from $714.6 million at the September 30, 2025 fiscal year-end. The cash position fell over the first half as the company built inventory to support second-half deliveries; management specifically cited a $220 million inventory investment during Q2 alone. Inventory on the balance sheet reached $764.2 million at quarter-end, up from $455.0 million at fiscal year-end. An additional approximately $100 million of inventory investment is planned during the third quarter.

Total liquidity (cash plus restricted cash plus available capacity under working capital facilities) stood at approximately $900 million at March 31, 2026. Pasha stated that liquidity is expected to return to the $900 million level by fiscal year-end as the inventory converts to deliveries, revenue, and collections. Management confirmed that existing liquidity is sufficient to fund all capital commitments under the fiscal year 2026 plan without requiring additional external financing.

The company’s $400 million in 2030 Convertible Senior Notes remained in place, with a net carrying value of $391.7 million at March 31, 2026. Per Fluence’s fiscal year 2025 annual report (Form 10-K), the notes carry a 2.25% coupon and an initial conversion price of approximately $21.35 per share. With the stock trading at $24.16 on the day of the earnings call, the notes sat above their conversion price, a dynamic investors will be watching as the stock price evolves.

Outlook and guidance

Management reaffirmed all three elements of fiscal year 2026 guidance without modification. Revenue is expected in the range of $3.2 billion to $3.6 billion (midpoint $3.4 billion), implying approximately 50% growth over fiscal year 2025. Adjusted EBITDA is targeted at $40 million to $60 million (midpoint $50 million). Annual recurring revenue is expected to reach approximately $180 million by fiscal year-end, up from $148 million at the close of fiscal year 2025.

Revenue phasing remains approximately 30% in the first half and 70% in the second half, consistent with prior guidance. Within the second half, roughly 30% is expected in the third quarter and the remainder in the fourth. Pasha confirmed that all equipment has been ordered and production is tracking to plan, giving the company high confidence in its delivery commitments. The guidance midpoint of $3.4 billion is fully covered by contracted backlog as of the end of Q2.

The key catalysts to watch in the coming quarters are the conversion of the first hyperscaler MSA into a purchase order during Q3, the pace at which the broader 12 GWh data centre pipeline matures into contracted backlog, and whether the second-half revenue ramp progresses as planned. With approximately $2.5 billion of revenue expected in Q3 and Q4 combined, and inventory already in place to support a significant portion of those deliveries, the operational execution required over the next five months will be the primary measure of fiscal year 2026 success.