Bloom Energy

Bloom Energy's second-quarter revenue rose to $1.065 billion, up 166% year on year, while non-GAAP gross margin of 34.3% rose 604 basis points. Management lifted full-year guidance for revenue and non-GAAP operating income to midpoints of $4.05 billion and $850 million, respectively.

Why it matters: Bloom Energy's earnings print once again soared as it continues to benefit from time to power data center constraints. Whereas traditional gas power equipment takes years to deliver, Bloom can deliver its solid oxide fuel cell systems in months. This time arbitrage helps results. Still, we expect that some of these time to power constraints will eventually begin to ease for certain turbines, though the timing here is highly uncertain and depends on the manufacturing capacity of traditional equipment manufacturers. Evidence that a lot of upside is baked into Bloom's stock price can be gleaned from its reaction to a recent report on its scandium supply and the source of its supply. We don't have visibility into these questions, but we also don't think management has provided satisfactory answers to them.

The bottom line: We lift our fair value estimate for no-moat-rated Bloom Energy to $97 per share from $70 previously. Most of the change was due to our long-term view on the benefits from operating leverage, though higher guidance and a higher implied multiple from a revised discount rate drove the change. We retain our Extreme Uncertainty Rating as there are too many open questions related to Bloom's operations, including what could read like inconsistent statements on its supply chain, availability of critical supply, and a high concentration of sales booked to a related party in Brookfield. Even with the fair value change, we remain on the lower end of valuations from analysts as we think this is a name that's at best priced for perfection, and at worst, has become disconnected from fundamentals at times. At current prices, the stock now trades in 3-star territory.

We lift our fair value estimate for Bloom Energy to $94 per share from $70 previously. Most of the change was due to our long-term view on the benefits from operating leverage, though higher guidance and a higher implied multiple from a revised discount rate drove the change.

Bloom’s largest profit driver is revenue growth and gross margins for its core power generation segment (sale of Energy Servers). We forecast a revenue compound annual growth rate of approximately 59% over the next three years on a higher shipment forecast. We expect gross margins to rise to over 40% by the end of our forecast, driven by fixed-cost leverage on higher shipments as well as improved service margins.

Operating leverage from a higher revenue base, given Bloom’s operating expense profile, is another material driver of our valuation. We expect non-GAAP operating expenses to decline as a percentage of revenue from 21% in 2024 to under 15% by 2026 as Bloom scales faster than we initially expected.

We don't believe Bloom Energy possesses an economic moat. Bloom has a relatively long record in solid oxide fuel cells, but we see a plethora of viable solutions from competing technologies.

Bloom’s identity is as an innovative products company. Its primary product—the Bloom Energy Server—provides 24/7 baseload power for commercial and industrial customers using its SOFC technology. The company commercialized its first-generation Energy Server in 2008, creating a relatively long record compared with fuel cell peers. However, commercial shipments continue to be quite limited compared with the broader stationary power generation industry. Since 2008, Bloom has shipped 1.5 gigawatts of Energy Servers, including approximately 500 megawatts in 2025. This volume positions Bloom as a leading SOFC company, but it pales in comparison with broader stationary power. As such, we believe Bloom has an advantage today in SOFC technology but not in the broader stationary power market, where we see competition from linear generators (baseload applications) and polymer electrolyte membrane fuel cells (backup applications).

Bloom’s solution exhibits an element of switching costs for customers, but not enough to warrant a moat. Customers typically purchase their systems via a long-term contract through a third party, with contracts as long as 15 years. This provides Bloom with upgrade potential as new product generations are introduced with repeatable service revenue (Bloom observes a 100% attachment rate of service contracts). Despite high service contract attachment, service profitability has been limited in the past (2025 service gross margin was 10% versus 35% product gross margin).

An additional consideration in our moat rating is Bloom's concentrated end markets. Energy Server sales have essentially been derived from four or five US states and South Korea to date. While rising demand from data centers is poised to diversify demand sources, it also brings about concentration risk, given the size of data center opportunities relative to Bloom's scale.

Bloom is well positioned to meet the time to power needs of data center customers.

Bloom has made strides in extending the life of its fuel cells, which should improve its service margins in coming years.

Bloom's fuel cell technology benefits from long-term cost reductions, which should enable greater cost-competitiveness with natural gas turbines.

Bloom's long-term sales trajectory is highly dependent on data center customers.

The company has a limited profitability record and faces execution risk with scaling its manufacturing.

Bloom's fuel cells remain more expensive than natural gas turbines.