EnerSys Locks Down Defense-Focused Lithium Campus as Growth Bets Mature

Q1 FY27 delivers record results with tariff refunds and 45X tailwinds, but the real signal is the $650M Greenville lithium plant.

ENS · Earnings Call · 2026-08-13

The DOE Grant Changes the Lithium Calculus

Back in February, management said they were “very encouraged” about discussions with the DOE and the overall administration (“We are very encouraged, I'll just say that, of where we're at in our discussions with the Department of Energy and the overall administration.” — Shawn O'Connell, President and Chief Executive Officer · 2026-02-05). By May, they were still waiting on final word, though they noted the support hadn’t wavered (“we continue to have direct conversations with the administration. And we haven't seen, you know, in our talks with the DOE, any wavering at all of their support of the lithium plant.” — Shawn O'Connell, President and Chief Operating Officer and Incoming CEO · 2025-05-22). Now it’s done. The company secured approximately $150 million in DOE support toward a $650 million facility in Greenville, South Carolina. The plant will produce high-energy-density cells for “manned platforms, soldier power, space and autonomous systems,” and specifically to support the “electrification of the battlefield.” Management framed this as a narrow, high-value niche—not a broad commercial lithium expansion—and expects a mid-20s IRR.

In July, we reached an important milestone with the U.S. Department of Energy, securing financial support for our refined defense-focused lithium cell manufacturing plant in Greenville, South Carolina, which will also serve as a campus for our lithium and advanced technologies center of excellence.
Shawn O'Connell, President and Chief Executive Officer · 2026-08-13

This is a fundamentally different asset than the one originally envisioned a year ago. As CEO Shawn O’Connell explained, the plant is purpose-built for defense applications where FEOC compliance and U.S. sourcing are paramount. That allows EnerSys to capture premium pricing and avoid the brutal economics of commodity lithium. The campus also leaves room for expansion into other end markets, including data-center battery backup units, which the company has previously said it would consider.

Data Center and A&D: The Growth Engines

The near-term growth story is already playing out. Data-center orders were up over 80% year-on-year, and management highlighted that the new lithium plant will eventually supply cells for a new generations of products, including rack-scale battery backup. The lithium offering (DataSafe Noir) has received strong customer enthusiasm, with 100 systems already shipped to supply chain partners and 500 units in active quotation. In A&D, counter drone and missile-defense powering drove 24% revenue growth in the Precision Power segment. Aerospace and defense is a particularly valuable angle. As the company’s A&D business grows, it differentiates EnerSys from industrial-battery peers. The company now produces nine chemistries of lithium across six U.S. facilities, and the Greenville plant will add a closed-loop drone powering ecosystem.

Financial Strength and Guidance

The quarter was also a cash flow monster. Free cash flow of $218 million (or $123 million excluding 45X cash) gave a conversion rate of 140% even after removing the $115 million federal tax refund. That funded $50 million of buybacks and a 10% dividend increase. Net debt fell to $522 million, a leverage ratio of 0.8x EBITDA. Gross margin of 29.4% in the reported quarter, up 110 bps excluding items, shows the operating leverage emerging as data centers and services scale. For Q2, EnerSys guides to adjusted EPS of $3.15–$3.25, including $42–$47 million of 45X benefits. Ex-45X, that’s $1.95–$2.05, up roughly 25% year-on-year. The company expects margin expansion to lead in the first half, with top-line growth accelerating in the second half as material handling recovers. Of course, the weak spot remains industrial mobility, where material-handling orders were down high-single digits. Management cites the typical lag between forklift truck orders and battery orders, and points to Hyster-Yale’s “strongest booking quarter in three years” as a leading indicator. The tariff refunds, while one-time, also demonstrate the company’s ability to navigate trade policy uncertainty.

What Changed?

The headlines are strong, but the most material news is the DOE grant. It converts a speculative lithium expansion into a de-risked, high-return growth project tied to national security. The company is now investing $500 million of its own cash into a facility that will not only serve defense but could also open new commercial markets. With the stock still 21% below its June peak, the market has yet to fully price in the incremental earnings power from these bets.