Nextpower's Best Quarter Ever, and the Market's Worst Opinion of It
Record revenue, a $6B backlog, raised guidance — and a 32% drawdown in 90 days. The gap is margins, not demand.
NXT · Earnings Call · 2026-10-28
A record quarter the tape already voted against
Nextpower's fiscal Q2 2027 was, by its own count, the best quarter in the company's history: revenue over $1.1 billion, up 23% year over year, adjusted EBITDA of roughly $250 million, record quarterly bookings that management confirmed came in well over a book-to-bill of 1, and a backlog that crossed $6 billion. Management raised full-year revenue to $4.2–$4.45 billion, adjusted EBITDA to $890–$940 million, and free cash flow to over $500 million. The balance sheet carries no debt and, on the last filed period, effective net cash of $766 million, up 136% year over year. And yet the shares are down 32% over the last 90 trading days, and 47.5% from the May peak of $156.40 — the whole-history tape reads the last 20 weeks as a single −48% segment. That is the tension worth explaining: demand is not the problem, and neither is liquidity. The problem is what the next two quarters do to the P&L, and the market is pricing the platform pivot before it can price the platform.The margin reset is the whole story
Q2 delivered a 23% adjusted EBITDA margin. Then came the disclosure that matters:That is a step down from a gross margin that, in the July quarter, printed at 35.9%, up 3.3 points year over year. CFO Chuck Boynton was blunt about the cause: “the margin impact kind of quarter over quarter, Q2 to Q3, is really a story of those cost increases” — Chuck Boynton, Chief Financial Officer · 2026-10-28. Those cost increases are brutally specific. Dan Shugar: “diesel year to date is up roughly 80% as a result of the Gulf War” — Daniel Shugar, Chief Executive Officer and Founder · 2026-10-28 — compounded, he noted, by over 15,000 U.S. truckers disqualified on English-language requirements. Add steel, freight and logistics, and the diesel and freight complex becomes a genuine gross-margin event rather than a rounding error. This is where the company's own history becomes the sharpest contrast. In the prior call, the margin beat had a different author: “the real kind of overall beat on margins was we had pretty significant IEEPA recoveries” — Chuck Boynton, Chief Financial Officer · 2026-07-30. The tariff recovery tailwind that flattered fiscal Q4 2026 and FQ1 2027 is simply absent from this transcript — no IEEPA refunds, no tariff recoveries, no offset. The tailwind quietly left the stage while a headwind walked on. On the global tape, this is not a Nextpower story alone: High fuel costs rocketed into the market-wide top keywords back in the June quarter, so the company is absorbing a genuinely macro freight and fuel shock — it just happens to be absorbing it into a margin line the market had been taught to treat as structural.For full year 2027, we continue to expect adjusted gross margins in the low 30s and adjusted EBITDA margins in the low 20s, while in the back half of the year we expect adjusted gross margin and adjusted EBITDA margin to be in the high 20s and high teens respectively.
The platform is real — and aimed at the market's most crowded trade
Here the bulls have a case, and it is not narrative. Non-tracker products went from 14% to roughly 22% of revenue. AI data center demand is a brand-new keyword for this company — and it maps to actual dollars: energy storage contributed about $100 million of revenue and more than $20 million of EBITDA in its first full quarter, including a behind-the-meter project for a Tier 1 hyperscaler. Notably, the storage economics beat the deal model: “At the initial announcement of the acquisition, we did outline a model where the operating margins or EBITDA margins would be in kind of the mid-teens. So this is, you know, a bit higher” — Chuck Boynton, Chief Financial Officer · 2026-10-28. eBOSS booked a record $100 million-plus in a quarter; the PowerMerge product has over 2 gigawatts of firm orders; foundations set a record; and a 1.1-gigawatt inverter framework across five projects turned the power-conversion ambition from a slide into an order book. The FCC ban and fiat/cybersecurity concerns, flagged a year ago, have become a tailwind rather than a hope. But note the timing risk. The global tape has already soured on exactly this basket: AI data center is a 90-day decliner, down about 5%, with six names up and fifty down — after a 360-day run of +53%. Nextpower is leaning into data-center-adjacent power electronics in the quarter that the market began voting against the theme. That does not make the strategy wrong; it makes the multiple vulnerable, and it explains why a record quarter can be sold. Shugar's framing of why it matters is the least promotional part of the call: “if you have these loads like a data center with learning models, the building can go from, you know, 0 to 100% in fractions of a second” — Daniel Shugar, Chief Executive Officer and Founder · 2026-10-28.What management stopped saying — and where the details got thin
The most instructive signals are the omissions and the deflections. "Flight to quality" — a staple for several quarters — has gone quiet, dropping out of the vocabulary. The Zimmermann PV Steel acquisition, which closed after quarter-end, was repriced down to €230 million all-cash and re-guided to roughly $100 million of revenue and $10 million of EBITDA for the balance of the year. Howard Wenger's explanation is worth reading carefully:That is a polite way of saying the diligence number came in below the announcement number. It is small, and management insists the deal is accretive out of the gates — but it is a mark-down on the M&A thesis, not a mark-up, and it lands in the same quarter the company is asking investors to trust the new-product margin ramp. And the ramp is expensive. R&D has roughly doubled year over year, $45 million against $935 million of revenue, with roughly $50 million of power-conversion P&L impact and $40 million of CapEx still ahead. Both analysts who asked about FY28 margins were deferred to the November 16 Capital Markets Day — twice. The buyback, meanwhile, is framed defensively, as dilution offset rather than as an opportunity to retire stock at 30 times earnings. Which is the crux of the whole file. Roughly 30 times trailing net income is a multiple that requires the durable advantage story to compound without interruption. Instead, investors got record bookings alongside a two-quarter margin trough, a diluted M&A price, and a new growth vector aimed at a theme the tape is currently short. The tracker business is fine — better than fine: record bookings and a $6 billion-plus backlog are real. But a compounding business with a compressing multiple is a different investment than the one that tripled from 2023 to May. November 16 is now the only data point that matters.during that interval, we looked very closely at their backlog, their forecasts, their pipeline, and we conformed it to the way we look at things and how we put forecasts together.