Shoals Technologies Group, Inc. (SHLS) | The Buildout — AI Infrastructure
The Verdict
Shoals Technologies Group designs and manufactures advanced electrical balance-of-system components that connect and control power in utility-scale solar and battery-storage projects. Its emerging data-center and mission-critical work applies the same DC power expertise, including the pre-revenue AirLink rack-power delivery product now moving toward a live proof-of-concept. The company's core intellectual property is the Big Lead Assembly, or BLA, trunk bus, which simplifies field construction and improves safety and reliability.
| Market Cap | — |
| Revenue (TTM) | $536M |
| Revenue Growth | +37.7% |
| EBITDA Margin (TTM) | 13.6% |
| Net Debt | $218M |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Record BLAO of $801.4 million at Q2-end, up 19% year over year, with $699.7 million scheduled for delivery through Q2 2027.
- Book-to-bill of 1.3x in Q2 2026 on approximately $207 million of new orders.
- BESS revenue went from roughly $1 million in Q1 2026 to roughly $20 million in Q2 2026, and BESS line capacity supports hundreds of millions of dollars of product.
- OEM revenue growth accelerated to +51% year over year in Q2 2026 from +33% in Q1.
- Quote volume exceeded $1 billion of unique projects in both Q1 and Q2 2026.
What We’re Watching
- Q3 2026 Voltage district court damages case; legal expense is not added back to adjusted EBITDA and is expected to be a drag.
- H2 2026 cash flow: full-year operating cash flow guide of $65M–$85M follows a $41.4 million Q1 outflow and only $6.8 million Q2 inflow.
- BESS BLAO rebuild: BESS backlog declined from $75 million to $65 million in Q2 even after roughly $10 million of new BESS orders.
- Gross margin recovery toward the low-to-mid 30s range; Q2 adjusted gross margin was 30.6%.
The demand side of the thesis is strengthening: record backlog, book-to-bill above 1x, and a second $1 billion-plus quote quarter support the core solar franchise. What remains unproven is the back half: sequential gross-margin recovery, H2 cash conversion, and whether BESS orders rebuild after Q2's net backlog decline. The open question is whether the newer data-center and storage story can convert concentration and lumpiness into a recurring second growth engine.
Earnings
Q2 2026 revenue was $163.4 million, up 47% year over year and within guidance. New orders were roughly $207 million, for a 1.3x book-to-bill. Adjusted gross profit percentage was 30.6%, with GAAP gross profit percentage at 30.3%. Operating cash flow turned positive at $6.8 million from a $41.4 million outflow in Q1.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $141M | $148M | $80M | +74.9% |
| Gross margin | 29.2% | 31.6% | 35.0% | -580bps |
| EBITDA | $12M | $20M | $8M | +55.3% |
| EPS | $-0.00 | $0.05 | $-0.00 | −0.4% |
| BLAO | $801.4M | $758.0M | n/a | +19% YoY |
Underlying demand remains intact, and our competitive position has strengthened.— Brandon Moss, CEO, August 4, 2026
Management tone: Management's tone on the Q2 call was steady and reaffirming after the Q1 call's expansionary message. The CEO said underlying demand remains intact; management emphasized execution on the new facility, record backlog, and a measured pace for BESS and AirLink.
Management Guidance
For Q3 2026, management guided revenue of $150M–$170M and adjusted EBITDA of $32M–$37M. Full-year 2026 guidance was reaffirmed at revenue of $600M–$640M, adjusted EBITDA of $118M–$132M, operating cash flow of $65M–$85M, capex of $20M–$30M, and interest expense of $8M–$12M. The Q3 outlook includes an expected EBITDA drag from the Voltage district court damages case.
Trajectory
Revenue moved from $140.6 million in Q1 2026 to $163.4 million in Q2 2026, up 47% year over year, driven by core U.S. utility-scale solar and a step-up in BESS revenue from roughly $1 million to roughly $20 million. Adjusted gross margin improved sequentially from 29.6% in Q1 to 30.6% in Q2, though still below the low-to-mid 30s range management has cited. The order book remains the forward indicator: BLAO rose to $801.4 million with about $207 million of new orders.
The Model
The model projects FY+1 revenue of $650 million and EBITDA of $132 million, a 20.3% margin, and FY+2 revenue of $800 million and EBITDA of $168 million, a 21.0% margin. The nearer estimate sits just above the high end of the $600M–$640M full-year 2026 revenue guide, and the FY+2 step-up depends on BESS, TerraFlow, and AirLink starting to contribute.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $475M | $650M | $800M |
| YoY Growth | — | +36.8% | +23.1% |
| EBITDA | $68M | $132M | $168M |
| EBITDA Margin | 14.4% | 20.3% | 21.0% |
Projections are the median of 5 independent model runs. The model’s revenue sits 17.2% above analyst consensus.
For Q3 2026, management guided revenue of $150M–$170M and adjusted EBITDA of $32M–$37M. Full-year 2026 guidance was reaffirmed at revenue of $600M–$640M, adjusted EBITDA of $118M–$132M, operating cash flow of $65M–$85M, capex of $20M–$30M, and interest expense of $8M–$12M. The Q3 outlook includes an expected EBITDA drag from the Voltage district court damages case.
What Could Go Right — and Wrong
- ON.energy pipeline converts into larger, recurring BESS orders and Shoals holds its place on AI-paired battery storage sites.
- TerraFlow MOU converts into firm orders, adding a second large-scale storage relationship tied to up to 5 GW annually.
- AirLink achieves a live proof-of-concept in 2026 and starts meaningful bookings in 2027.
- Gross margin recovers into the low-to-mid 30s as the Tennessee mega-facility becomes fully productive.
- H2 inventory converts to cash, delivering the full-year operating cash flow guide and reducing net debt.
- BESS orders stay episodic and BESS BLAO fails to rebuild from $65 million, making Q2's roughly $20 million revenue look one-time.
- ON.energy or the largest solar customers reduce or delay orders, given 19.1% FY2025 customer concentration.
- Facility consolidation productivity stalls and gross margin holds below 30% longer than expected.
- Nextracker/Nextpower bundling of tracker, eBOS, and foundations takes share in the core EBOS market.
- Voltage damages case or class-action settlement consumes more cash or expense than expected, pressuring already tight cash.
Looking Ahead
The next twelve months center on converting record backlog into revenue, repairing gross margin, and proving the two newer AI-adjacent products. Q3 2026 tests the guided revenue and adjusted EBITDA ranges and includes the Voltage damages case. Through Q2 2027, $699.7 million of BLAO is scheduled for delivery. International, TerraFlow, and AirLink are framed as 2027 stories, while full-year 2026 cash flow depends on an inventory-to-cash conversion in the back half.
- Q3 2026Q3 earnings report — Tests $150M–$170M revenue and $32M–$37M adjusted EBITDA.
- Q3 2026Voltage damages case — Expected completed in Q3; legal-expense drag before Q4.
- September 2026Class-action settlement hearing — Court final approval hearing; $70.0M preliminary settlement, $64.8M covered by insurance.
- H2 2026H2 operating cash flow — Tests full-year operating cash flow guide after Q1 -$41.4M outflow and Q2 +$6.8M inflow.
- 2026AirLink proof-of-concept — Live installation expected in 2026; third-party lab testing underway.
- Mid-2027Redundant facility exit — Consolidated mega-facility cost savings and margin support.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $399M | $475M | $536M | +19.1% |
| Gross Margin | 35.7% | 35.2% | 33.5% | 52bps |
| EBITDA | $64M | $68M | $414M | +7.2% |
| EBITDA Margin | 16.0% | 14.4% | 13.6% | 160bps |
| Net Income | $28M | $34M | $34M | +22.2% |
| Free Cash Flow | $72M | −$16M | $174M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)33.5%
- EBITDA Margin (TTM)13.6%
- Net Margin (TTM)6.3%
- ROIC5.8%
- FCF Conversion-106.5%
- SBC / Revenue2.0%
The Company
Shoals Technologies Group is a design-engineering company and manufacturer of advanced electrical infrastructure for mission-critical applications. Its core product is the Big Lead Assembly, or BLA, trunk bus, which simplifies utility-scale solar construction and improves safety and reliability. Around that sit recombiner platforms, combiners, disconnects, junction boxes, and the BESS Recombiner. Management frames the company as an electrical balance-of-system franchise expanding from a dominant utility-scale solar position into storage and data-center power.
The company reports one operating and reportable segment and operates four Tennessee and Alabama facilities. Its largest is the leased 638,330 square foot consolidated Tennessee mega-facility at 1500 Shoals Way in Portland, a roughly $30 million investment. Shoals is integrating three facilities into one 14-acre site, and one redundant facility is expected to exit in mid-2027. It also runs a BESS production line with capacity for hundreds of millions of dollars of product.
Business Segments
Competitive Landscape
Shoals' 10-K names principal competitors including Construction Innovation, Hikam America, Nextpower/Bentek, Premier PV, TerraSmart/SolarBOS, and Voltage. Shoals won its ITC case against Voltage, and a damages case is set for Q3 2026. The supply-chain intelligence flags Nextracker/Nextpower as the most direct strategic threat, scaling eBOS through tracker-plus-eBOS-plus-foundations bundling and power-conversion M&A. Management said in Q2 2026 that its competitive position has strengthened.
- Voltage, LLCCompetitor; defendant in Shoals' ITC patent infringement case. Shoals won the ITC ruling; damages case set for Q3 2026.
- Named in the 10-K competitor list. Supply-chain intelligence flags Nextracker/Nextpower as the most direct EBOS threat, scaling eBOS via bundling and power-conversion M&A.
- Construction InnovationNamed in filings; not discussed.
- Hikam America, Inc.Named in filings; not discussed.
- TerraSmart, LLC (formerly SolarBOS, Inc.)Named in filings; not discussed.
Supply Chain
Shoals sits between raw-material vendors and utility-scale solar, storage, and data-center electrical infrastructure. The 10-K discloses vendor concentration risk, including a Prysmian wire-quality issue. No neighbor in the source material is disclosed as naming Shoals by name.
More on SHLS: Earnings recap