Stem, Inc. Earnings Call: Growth Amid Challenges

Stem, Inc. ((STEM)) has held its Q3 earnings call. Read on for the main highlights of the call.

Stem, Inc. recently held its earnings call, showcasing a mixed sentiment with notable achievements and some areas of concern. The company reported significant revenue growth and positive adjusted EBITDA, highlighting a successful strategic transformation with a focus on software. However, there were issues such as decreased project revenue, lower bookings, and potential gross margin compression. Despite these challenges, Stem expressed confidence in its refined guidance and international expansion efforts.

Revenue Growth

Stem, Inc. reported a robust revenue growth in the third quarter of 2025, with total revenue reaching $38 million, marking a 31% increase year-over-year. The company’s Annual Recurring Revenue (ARR) also saw a 17% year-over-year growth, reaching $60 million. This strong performance underscores the company’s effective strategies in enhancing its revenue streams.

Positive Adjusted EBITDA and Operating Cash Flow

The company achieved its second consecutive quarter of positive adjusted EBITDA, alongside generating a positive operating cash flow of $11 million. This marks a significant milestone for Stem, indicating a solid financial footing and effective cost management strategies.

Software-Centric Strategy Success

Stem’s strategic transformation towards a software-centric approach is yielding positive results. The company reported growth in software and services revenue, which has contributed to improved profitability metrics. This shift is a testament to Stem’s ability to adapt and thrive in a competitive market landscape.

PowerTrack EMS Launch

The launch of PowerTrack EMS for hybrid and stand-alone storage projects has expanded Stem’s total addressable market. This new offering has been well-received by customers, indicating a promising avenue for future growth and market penetration.

International Expansion

Stem is making significant strides in its international expansion efforts, particularly in European markets. The establishment of new operations in Berlin and leveraging regional expertise are key steps in broadening the company’s global footprint.

Guidance Improvement

The company has refined its full-year guidance, tightening ranges for total revenue to $135 million-$160 million and raising expectations for non-GAAP gross profit. This improvement in guidance reflects Stem’s confidence in its business stability and forecasting accuracy.

Decreased Project and Managed Service Revenue

There was a noted decrease in project and professional service revenue year-over-year, attributed to one-time revenues in the previous year. This decrease highlights the challenges Stem faces in maintaining consistent revenue streams from these segments.

Lower Bookings

Bookings for the quarter were $30 million, a decline from the previous quarter. This drop is largely due to the timing of bookings from low-margin battery hardware resales, presenting a challenge for Stem in managing its sales pipeline.

Potential Gross Margin Compression

Stem anticipates a slight compression in Q4 gross margins due to a mix shift with higher sales of battery hardware. This potential compression underscores the need for careful management of product mix and pricing strategies.

Operating Cash Flow Guidance

The company’s operating cash flow is expected to be towards the lower end of the guidance range, influenced by the timing of working capital movements. This cautious outlook reflects the complexities in cash flow management.

In summary, Stem, Inc.’s earnings call presented a mixed picture of strong revenue growth and strategic successes, tempered by challenges in project revenue and bookings. The company’s refined guidance and international expansion efforts are promising, indicating a positive outlook despite some hurdles. Overall, Stem’s strategic transformation and focus on software continue to drive its growth and profitability.