Enphase Earnings: Demand Rebound Remains Elusive

Morningstar’s Metrics for Enphase Energy

• Fair Value Estimate: $50.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Enphase Energy’s Earnings

Enphase Energy ENPH reported first-quarter revenue of $356 million and gross margin of 47%, both near the midpoint of guidance. Second-quarter revenue is expected to be flat sequentially, while gross margin is expected to decline to 44%.

Why it matters: Guidance for flat sequential revenue, which includes $40 million of one-time safe harbor orders, was below our expectations as end market demand remains sluggish across much of the United States and Europe.

• We are delaying our prior expectations for a rebound in US residential solar in 2025, in part due to financial troubles with large financer Sunnova Energy NOVA, which is affecting market activity.
• The sequential decline in gross margin is largely attributable to tariff-related impacts on batteries, which are expected to reduce gross margins by 200 basis points in the second quarter. Enphase’s tariff exposure consists primarily of Chinese battery cells, with its microinverters largely immune to tariff impacts.

The bottom line: We are reducing our fair value estimate to $50 per share from $60 as a result of lowering our medium-term revenue and gross margin forecasts. We view shares as fairly valued.

• We attribute the weak share price reaction (down 14% at the time of writing) to the delayed end market demand rebound and less to near-term tariff impacts.

Between the lines: Enphase’s battery supply chain has been heavily dependent on China, which the firm estimates supplies 95% of LFP chemistry battery cells.

• In the near term, the firm is expecting to bear the brunt of the tariff impact, passing along only a small portion of tariff costs on to customers. It expect tariffs to impact gross margins by 200 basis points in second-quarter 2025, increasing to 600 to 800 basis points in the third quarter.
• The impact won’t last long. Enphase is aggressively diversifying its sourcing for battery cells and expects to have the vast majority of its supply coming from non-China sources by the second quarter of 2026.