Stem, Inc. Delivers First-Ever Full Year Positive Adjusted EBITDA and Transforms to a Software-Centric Model in 2025

Key Financial and Strategic Highlights for Shareholders

Stem, Inc. (NYSE: STEM), a global leader in AI-enabled clean energy software and services, reported a transformative 2025, marking its first-ever year of positive adjusted EBITDA. The company’s shift to a software-centric strategy has driven record margins, significant cost reductions, and improved overall financial health. Here’s a detailed analysis for investors and shareholders:

Financial Performance: Surpassing Guidance and Delivering Turnaround

• Full Year 2025 Financial Highlights:
  • Revenue: \$156.3 million, up 8% from \$144.6 million in FY24.
  • Software, Services, and Edge Hardware Revenue: \$141.4 million, up 25% from \$113.2 million in FY24, highlighting the successful pivot away from low-margin battery hardware sales.
  • GAAP Gross Profit: \$60.0 million, a dramatic turnaround from a loss of \$(11.1) million in FY24.
  • Non-GAAP Gross Profit: \$72.3 million (46% margin), up from \$63.7 million (35% margin) in FY24.
  • GAAP Gross Margin: 38%, compared to (8)% in FY24.
  • Net Income: \$137.8 million, compared to a net loss of \$854.0 million in FY24. This swing includes a \$220.0 million gain from debt extinguishment and absence of the large goodwill impairment in 2024.
  • Adjusted EBITDA: \$6.7 million, marking the first positive annual figure in company history (vs. a \$(22.8) million loss in FY24).
  • Operating Cash Flow: \$6.9 million, a significant improvement from \$(36.7) million in FY24.
• Q4 2025 Financial Highlights:
  • Revenue: \$47.2 million, down 15% YoY due to a strategic reduction in battery hardware sales.
  • Software, Services, and Edge Hardware Revenue: \$46.5 million, up 62% YoY.
  • GAAP Gross Profit: \$23.2 million (49% margin), up from a \$(2.5) million loss in Q4 2024.
  • Non-GAAP Gross Profit: \$20.9 million (45% margin), up from \$20.2 million (36% margin) in Q4 2024.
  • Net Loss: \$16.0 million, a dramatic improvement from a \$51.1 million loss in Q4 2024.
  • Adjusted EBITDA: \$5.5 million, up from \$4.2 million in Q4 2024.
  • Operating Cash Flow: \$8.2 million, up from \$(14.7) million in Q4 2024.
  • Cash and Cash Equivalents: \$48.9 million at year-end.

Key Operating Metrics and Business Trends

• Bookings: Full year bookings rose 14% to \$131.8 million, driven by software, services, and edge hardware. Q4 bookings were \$32.7 million, down 13% YoY, reflecting the de-emphasis of battery hardware resales.
• Contracted Backlog: \$21.3 million at 2025 year-end, up 2% YoY.
• Contracted Annual Recurring Revenue (CARR): \$67.2 million, up 4% YoY.
• Annual Recurring Revenue (ARR): \$61.1 million, up 16% YoY.
• Solar Operating Assets Under Management (AUM): 36.1 GW, up 21% YoY.
• Storage Operating AUM: 1.7 GWh, down slightly due to a managed services contract cancellation.

Strategic and Operational Highlights

• Product Launches: Successfully launched two new products, PowerTrack™ EMS and PowerTrack Sage, positioning Stem for future growth in the clean energy software market.
• International Expansion: PowerTrack™ EMS selected for two major utility-scale battery energy storage projects in Germany, expanding Stem’s European footprint.
• Key Partnerships: New agreement to operate and optimize a distributed solar and storage portfolio for a Southern California water utility, supporting operational resilience and participation in demand response programs.
• Leadership Update: CEO Arun Narayanan was appointed to the Board of Directors, increasing the board size to eight.

2026 Guidance: Strong Growth Ahead

• Revenue: \$140 – \$190 million, reflecting continued growth in high-margin software, edge hardware, and services.
• Software, Edge Hardware, & Services Revenue: \$130 – \$160 million.
• Battery Hardware Resale Revenue: Up to \$40 million, reflecting the continued strategic focus on software and services.
• Non-GAAP Gross Margin: 40% – 50% (guidance).
• Adjusted EBITDA: \$10 – \$15 million (approx. 85% YoY growth).
• Operating Cash Flow: \$0 – \$10 million.
• Year-End ARR: \$65 – \$70 million (approx. 10% YoY growth).

Critical Shareholder Information & Price-Sensitive Insights

• First Positive Adjusted EBITDA in Company History: This milestone, accompanied by strong cash flow and margin improvements, signals a significant operational turnaround. The shift to a software-driven model reduces exposure to volatile hardware markets and enhances recurring revenue streams. This could be a strong share price catalyst.
• Resolution of Past Liabilities: The company reported a \$220 million gain on debt extinguishment and indicated that it has ceased issuing risky contract guarantees, which previously resulted in large impairments and revenue reductions. This de-risking of the business model removes potential overhangs on the share value.
• Operational Discipline and Cost Reductions: Sales & marketing, R&D, and G&A costs were sharply reduced, with total operating expenses dropping from \$828.4 million in 2024 to \$115.6 million in 2025. This aggressive cost management is a key driver of the company’s newfound profitability.
• Balance Sheet Improvement: Despite a stockholders’ deficit, the company ended 2025 with \$48.9 million in cash and significant reductions in liabilities due to debt repayments and extinguishments.
• Risks & Forward-Looking Statements: The company highlighted exposure to macroeconomic risks, changes in trade policy, supply chain uncertainties, and evolving regulatory environments. Investors should monitor these external factors closely.

Concluding Takeaways for Investors

• Stem’s 2025 results mark a pivotal transformation, with the company now focused on growth in high-margin, recurring software and services revenue streams. The successful execution of its strategic shift, improved financials, and robust 2026 guidance should be considered highly price-sensitive and may have a material impact on share value.
• Investors should note the company’s strong commitment to operational discipline, risk reduction, and long-term value creation in the renewable energy software space.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. It is a summary and analysis of Stem, Inc.’s public financial disclosures. Investors should conduct their own research and consult their financial advisors before making investment decisions. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.

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