Shoals' ITC Victory and BESS Expansion Signal a New Growth Chapter

Record backlog, a landmark IP win, and a 5 GW TerraFlow MOU position the solar balance-of-system specialist for 2027.

SHLS · Earnings Call · 2026-08-04

The quarter in numbers

Shoals Technologies Group reported Q2 revenue of $163 million, up 47% year-over-year, within its guided range. record backlog and awarded orders reached $801.4 million, up 19%, with roughly $700 million slated for delivery in the next four quarters. Bookings were $207 million in the quarter, a solid 1.3x book-to-bill. Guidance for Q3 implies 18% top-line growth at the midpoint, and full-year revenue was reaffirmed at $600–640 million, a 30% midpoint increase. Adjusted EBITDA came in at $31.6 million, up 28%. But beyond the numbers, the quarter was defined by two strategic catalysts: a decisive IP win and a major step into long-duration storage.

A landmark legal victory

The company prevailed in its 2025 ITC case against Voltage on its patented BLA (big lead assembly) product. As CEO Brandon Moss put it: “we also prevailed in our 2025 ITC case against Voltage, this was a critical outcome for our shareholders and U.S. innovation in general.” — Brandon Moss, Chief Executive Officer · 2026-08-04 The district court case to determine damages is scheduled for Q3, a date CFO Dominic Bardos confirmed. This is a crucial development for a company that has spent heavily on litigation over the past two years. The win also strengthens the company's competitive positioning in its core utility-scale solar market, where it claims a competitive position of strength. The company has previously acknowledged that legal expenses were elevated, but this outcome removes a major overhang and could lead to damages that further de-risk the balance sheet.

BESS and data center: the next growth engine

The more exciting growth story is the BESS revenue ramp. In Q2, Shoals produced roughly $20 million of battery energy storage revenue and secured another $10 million of orders, pushing BESS backlog and awarded orders to $65 million. The most significant development, however, is the partnership with TerraFlow, a grid-scale developer of long-duration energy storage. Under the MOU, Shoals will provide its Power Hub Recombiner solution for TerraFlow's utility-scale and data center applications, with a target of up to 5 GW annually. Brandon said on the call:

We are in the process right now of starting our engineering cycle with those guys to help develop an engineered solution for deployment. I would probably model that revenue will begin in 2027. We will not see an impact in 2026.
Brandon Moss, Chief Executive Officer · 2026-08-04

This goes beyond the existing ON.energy relationship, using vanadium flow technology to address both renewable and data center energy needs. It complements the company's AirLink product, a differentiated overhead busway for data center power delivery. While AirLink revenue won't materialize until 2027, the company expects a price premium, as Moss noted: “This product will deliver substantial value to the ultimate owner and also the installer. So I would expect a price premium over other available options in the marketplace.” — Brandon Moss, Chief Executive Officer · 2026-08-04 These moves are part of a deliberate diversification strategy that already has 20% of 2026 revenue expected from new products.

Margins: a rebuilding story

Q2 adjusted gross margin was 30.6%, within management's expectations, and the company guided to sequential improvement in the back half. CFO Dominic Bardos pointed to the new factory consolidation as a key driver: “Anytime you move 3 facilities into 1, it's a complex move. And we're getting to learn the space and work on our efficiencies of production.” — Dominic Bardos, Chief Financial Officer · 2026-08-04 The company expects margin expansion from favorable product mix — with a higher share of traditional BLAO versus long-tail BLAO — and from fixed cost leverage as the mega facility ramps. Over the past six years, revenue has grown 229%, with quarters like 2026Q1 reaching $141M, but the trough in 2025Q1 ($80M) shows how lumpy this business can be. The company also noted that IEEPA tariff refunds were received in Q2 but partially offset by inventory costs; the remainder will flow through in Q3. This is a positive tailwind, though management remains prudent, keeping guidance for full-year adjusted EBITDA at $118–132 million, a 26% increase at the midpoint.

Look ahead

Shoals' outlook for 2027 is building. With record backlog, a win in court, and a pipeline of new products in BESS and data centers, the company is positioning itself for sustained growth. The key risks are execution risk in integrating the new factory and the lumpy nature of BESS bookings. But the underlying demand for electrification and AI is a structural tailwind. As Moss concluded, “The need for energy from all sources has never been as strong as it is today, and we believe Shoals is increasingly well positioned to deliver sustainable growth.” — Brandon Moss, Chief Executive Officer · 2026-08-04 In prior quarters, the company discussed the potential of new products and the factory move; now those narratives are converging with tangible results. The ITC win and the TerraFlow MOU validate that Shoals is moving from a defensive story (warranty issues, litigation) to an offensive growth story.