Nextracker (NXT)

Solar tracker company Nextracker (NASDAQ:NXT) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 42.4% year on year to $905.3 million. On the other hand, the company’s full-year revenue guidance of $3.38 billion at the midpoint came in 0.7% below analysts’ estimates. Its non-GAAP profit of $1.19 per share was 17.4% above analysts’ consensus estimates.

Company Overview

With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dhabi solar farm project, Nextracker (NASDAQ:NXT) is a provider of solar tracker systems that help solar panels follow the sun.

Renewable energy companies are buoyed by the secular trend of green energy that is upending traditional power generation. Those who innovate and evolve with this dynamic market can win share while those who continue to rely on legacy technologies can see diminishing demand, which includes headwinds from increasing regulation against “dirty” energy. Additionally, these companies are at the whim of economic cycles, as interest rates can impact the willingness to invest in renewable energy projects.

Competitors offering similar products include Array (NASDAQ:ARRY), First Solar (NASDAQ:FSLR), and SolarEdge (NASDAQ:SEDG).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Nextracker’s sales grew at an incredible 24.7% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Nextracker’s annualized revenue growth of 27.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Nextracker’s recent performance shows it’s one of the better Renewable Energy businesses as many of its peers faced declining sales because of cyclical headwinds.

We can better understand the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Nextracker’s backlog reached $5 billion in the latest quarter and averaged 56.7% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Nextracker’s products and services but raises concerns about capacity constraints.

This quarter, Nextracker reported magnificent year-on-year revenue growth of 42.4%, and its $905.3 million of revenue beat Wall Street’s estimates by 8.6%.

Looking ahead, sell-side analysts expect revenue to grow 4.1% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Nextracker has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 25.3% gross margin over the last five years. That means Nextracker paid its suppliers a lot of money ($74.75 for every $100 in revenue) to run its business.

This quarter, Nextracker’s gross profit margin was 32.4%, marking a 3 percentage point decrease from 35.4% in the same quarter last year. Zooming out, however, Nextracker’s full-year margin has been trending up over the past 12 months, increasing by 1.4 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Nextracker has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 17.1%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Nextracker’s operating margin rose by 11.5 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q3, Nextracker generated an operating margin profit margin of 20%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Nextracker has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 11.5% over the last five years, quite impressive for an industrials business.

Taking a step back, we can see that Nextracker’s margin expanded by 15.9 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Nextracker’s free cash flow clocked in at $171.4 million in Q3, equivalent to a 18.9% margin. The company’s cash profitability regressed as it was 3.4 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Nextracker is a profitable, well-capitalized company with $845.3 million of cash and no debt. This position is 6.5% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Nextracker blew past analysts’ EBITDA expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its full-year EBITDA guidance slightly missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 10.1% to $99.50 immediately after reporting.

Updated: December 4, 2025 at 10:16 PM EST

Before deciding whether to buy Nextracker or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Nextracker is an amazing business ranking highly on our list. First of all, the company’s revenue growth was exceptional over the last five years. And while its projected EPS for the next year is lacking, its backlog growth has been marvelous. On top of that, Nextracker’s rising cash profitability gives it more optionality.

Nextracker’s P/E ratio based on the next 12 months is 20.7x. Analyzing the industrials landscape today, Nextracker’s positive attributes shine bright. We think it’s one of the best businesses in our coverage and like the stock at this price.

Wall Street analysts have a consensus one-year price target of $101.42 on the company (compared to the current share price of $90.71), implying they see 11.8% upside in buying Nextracker in the short term.