Solar power systems company SolarEdge (NASDAQ: SEDG) reported Q2 CY2026 results exceeding the market’s revenue expectations, with sales up 19.6% year on year to $346.2 million. On the other hand, next quarter’s revenue guidance of $325 million was less impressive, coming in 12.6% below analysts’ estimates. Its non-GAAP profit of $0.05 per share was significantly above analysts’ consensus estimates.

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Company Overview

Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. SolarEdge’s demand was weak over the last five years as its sales fell at a 3.4% annual rate. This was below our standards and suggests it’s a low quality business.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. SolarEdge’s recent performance shows its demand remained suppressed as its revenue has declined by 6.1% annually over the last two years.

This quarter, SolarEdge reported year-on-year revenue growth of 19.6%, and its $346.2 million of revenue exceeded Wall Street’s estimates by 1.2%. Company management is currently guiding for a 4.5% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.9% over the next 12 months, an improvement versus the last two years. This projection is commendable and suggests its newer products and services will fuel better top-line performance.

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Operating Margin

SolarEdge’s high expenses have contributed to an average operating margin of negative 17.8% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, SolarEdge’s operating margin decreased by 19.5 percentage points over the last five years. SolarEdge’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

SolarEdge’s operating margin was negative 4.6% this quarter. The company’s consistent lack of profits raises a flag.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for SolarEdge, its EPS declined by 16.9% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

We can take a deeper look into SolarEdge’s earnings to better understand the drivers of its performance. As we mentioned earlier, SolarEdge’s operating margin expanded this quarter but declined by 19.5 percentage points over the last five years. Its share count also grew by 9.1%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For SolarEdge, its two-year annual EPS growth of 59.9% was higher than its five-year trend. Its improving earnings are an encouraging data point, but a caveat is that its EPS is still in the red.

In Q2, SolarEdge reported adjusted EPS of $0.05, up from negative $0.81 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast SolarEdge’s full-year EPS will flip from negative $0.83 to positive $0.92.

Key Takeaways from SolarEdge’s Q2 Results

It was good to see SolarEdge beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed. Overall, this print had some key positives. Investors were likely hoping for more, and shares traded down 8.3% to $44.86 immediately following the results.

Should you buy the stock or not? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).