Enphase Energy surges 20% after Q4 earnings beat, upbeat guidance
Solar technology company exceeds expectations despite declining revenue, signs of demand recovery emerge
Enphase Energy shares jumped more than 20 percent in after-hours trading Tuesday after the solar technology company reported quarterly results that easily surpassed analyst expectations and provided first-quarter guidance above Wall Street forecasts.
The Fremont, California-based company reported non-GAAP earnings per share of $0.71 for the fourth quarter of 2025, beating the consensus estimate of $0.58 by 22 percent, according to the company's earnings release. Revenue reached $343.3 million, exceeding analyst projections of approximately $337 million.
The strong performance came despite a 10.3 percent year-over-year decline in revenue, reflecting broader challenges in the solar sector including high interest rates and market inventory gluts that have pressured demand throughout 2025. US revenue fell 13 percent from the third quarter, while European sales declined 29 percent due to softening demand.
However, beneath the headline decline, encouraging signs of recovery emerged. Sell-through demand in the United States increased 21 percent sequentially in the fourth quarter, reaching its highest level in more than two years, driven by increased solar and battery installations ahead of the Section 25D tax credit expiration.
"We reported quarterly revenue of $343.3 million and a non-GAAP gross margin of 46.1% in the fourth quarter of 2025," said Badri Kothandaraman, President and CEO of Enphase Energy, in the earnings announcement.
The company's ability to exceed earnings expectations despite contracting sales highlighted operational efficiency and effective cost management. Non-GAAP operating income reached $79.4 million, while free cash flow totaled $37.8 million for the quarter.
Perhaps most significant for investors was the company's forward-looking guidance. Enphase projected first-quarter 2026 revenue of $270 million to $300 million, with the midpoint of $285 million representing an 8.3 percent improvement over Wall Street's expected $263 million. The company expects to ship 100 to 120 MWh of IQ Batteries during the quarter, alongside approximately $35 million in safe harbor shipments.
Gross margin guidance for the first quarter came in at 40-43 percent on a GAAP basis and 42-45 percent non-GAAP, though the company noted approximately five percentage points of impact from reciprocal tariffs.
The earnings release and optimistic outlook follow a wave of analyst upgrades late last month. Goldman Sachs upgraded Enphase from "Neutral" to "Buy" on January 20, raising its price target from $29 to $45. Analyst Brian Lee cited growing confidence in growth prospects, robust fourth-quarter volume demand, and low channel inventories as key factors driving the upgrade.
Two days later, Citigroup upgraded the stock from "Sell" to "Neutral," increasing its price target to $37 from $31. Analyst Vikram Bagri noted that risks were increasingly skewed to the upside at current valuations, with first-quarter expectations appropriately de-risked and full-year targets appearing attainable. Bagri also pointed to stabilizing market share in California and potential benefits from new competitively priced storage product launches.
The strong after-hours rally represents a notable turnaround for a stock that has struggled significantly from its 52-week high of $70.78, closing Tuesday's regular session at $37.28. Shares remain down roughly 47 percent over the past year despite the post-earnings surge.
The company shipped approximately 1.55 million microinverters, representing 682.6 megawatts DC of capacity during the quarter, along with 150.1 megawatt hours of IQ Batteries. Enphase ended the quarter with $1.51 billion in cash, cash equivalents and marketable securities.
Institutional ownership remains high at 96.2 percent, reflecting continued strong confidence from large investors despite the stock's volatility over the past year. With 17 analysts rating the stock a "Hold" and nine recommending "Buy" or "Strong Buy," versus seven with "Sell" ratings, the consensus target price of $39.46 suggests modest upside potential from current levels.
As the solar sector works through inventory corrections and interest rates potentially moderate, Enphase's ability to deliver earnings beats while showing signs of demand recovery has investors reevaluating the company's prospects for 2026.