Clean beat on both lines. Revenue of $1.109 billion beat the $1.065 billion estimate by 4.2%; adjusted diluted EPS of $1.31 beat the $1.10 estimate by 19%.
Guidance raised across the board: FY27 revenue to $4.2-4.45 billion from $4.1-4.4 billion, adjusted EBITDA to $890-940 million from $870-930 million, adjusted diluted EPS to $4.61-4.87 from $4.42-4.73.
Demand is the strongest line in the release: record bookings lifted backlog to over $6 billion, eBOS bookings topped $100 million, and storage and other complementary offerings were about 22% of Q2 revenue.
Profitability did not keep pace. Revenue rose 22.5% year on year but adjusted EBITDA rose only 11.7%, to $250 million from $224 million; adjusted EBITDA margin fell to 22.5% from 24.7% and GAAP gross margin to 31.1% from 35.9% in Q1.
The one thing that matters: Nextpower is converting record demand into revenue, but each extra dollar is earning less. Gross margin fell 4.8 points sequentially, and the guide calls for Q3 growth of only about 10% after 22.5% in Q2.
Key metrics
Metric
Reported
Prior year
Change
Adjusted EBITDA
$250 million
$224 million
—
Adjusted EBITDA Margin
22.5%
24.7%
—
GAAP Gross Margin
31.1%
32.4%
—
Backlog
over $6 billion
—
—
Adjusted free cash flow
approximately $135 million
—
—
IRA 45X vendor rebates and tariffs, net included in results
approximately $99 million
$67 million
—
Guidance changes
Item
New guidance
Prior guidance
FY2027 Revenue
$4.2 to $4.45 billion
$4.1 to $4.4 billion
FY2027 Adjusted EBITDA
$890 to $940 million
$870 to $930 million
FY2027 Adjusted Diluted EPS
$4.61 to $4.87
$4.42 to $4.73
FY2027 GAAP Diluted EPS
$3.62 to $3.87
$3.42 to $3.64
Q3 FY27 revenue growth
approximately 10% year over year growth
—
Q3 FY27 adjusted EBITDA margin
roughly 1 to 2 percentage points below Q4 FY27
—
Quality of earnings
Cash backs the earnings. Q2 operating cash flow of $158 million was close to GAAP net income of $165 million, and adjusted free cash flow was about $135 million.
The gap between adjusted and GAAP is wide and growing with M&A. Adjusted net income of $202 million against GAAP $165 million excludes $29.9 million of stock compensation and $9.0 million of intangible amortization, up from $3.4 million in Q1 after the Zimmermann deal.
Some growth is acquired, and the release does not split it out. Goodwill rose to $653.6 million from $489.0 million and intangibles to $233.4 million from $78.0 million since March, but no organic revenue figure is given.
Gotchas & watch items
Tax credits do a lot of the work: about $99 million of IRA 45X rebates and tariffs, net sits inside Q2 results, flat with Q1 and against $345 million of GAAP gross profit.
Working capital is building: accounts receivable rose to $584.3 million from $417.0 million at March 31, a 40% increase, though deferred revenue also grew to $413.8 million from $307.5 million.
Cash returned is large relative to cash generated: about $162 million of buybacks in the half, against $240.1 million of six-month adjusted free cash flow, while cash fell to $1.03 billion from $1.09 billion.