FuelCell Energy (FCEL)

Carbonate fuel cell technology developer FuelCell Energy (NASDAQ:FCEL) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 97.3% year on year to $46.74 million. Its non-GAAP loss of $0.95 per share was 41.7% above analysts’ consensus estimates.

Company Overview

Founded in 1969, FuelCell Energy (NASDAQ: FCEL) is a leading manufacturer and developer of carbonate fuel cell technology for stationary power generation.

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 of FuelCell Energy include Bloom Energy Corporation (NYSE: BE), Plug Power (NASDAQ:PLUG), and Ballard Power Systems (NASDAQ: BLDP).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, FuelCell Energy’s 18.6% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. FuelCell Energy’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.3% over the last two years was well below its five-year trend. We also note many other Renewable Energy businesses have faced declining sales because of cyclical headwinds. While FuelCell Energy grew slower than we’d like, it did do better than its peers.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. FuelCell Energy’s backlog reached $1.24 billion in the latest quarter and averaged 8.9% 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 FuelCell Energy’s products and services but raises concerns about capacity constraints.

This quarter, FuelCell Energy achieved a magnificent 97.3% year-on-year revenue growth rate, but its $46.74 million of revenue fell short of Wall Street’s lofty estimates.

Looking ahead, sell-side analysts expect revenue to grow 35.7% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and implies its newer products and services will spur better top-line performance.

FuelCell Energy has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a negative 19.4% gross margin over the last five years. That means FuelCell Energy lost $19.43 for every $100 in revenue.

This quarter, FuelCell Energy’s gross profit margin was negative 11%. The company’s full-year margin was also negative, suggesting it needs to change its business model quickly.

FuelCell Energy’s high expenses have contributed to an average operating margin of negative 123% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, FuelCell Energy’s operating margin decreased by 52.6 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. FuelCell Energy’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q2, FuelCell Energy generated a negative 204% operating margin.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although FuelCell Energy’s full-year earnings are still negative, it reduced its losses and improved its EPS by 7.2% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For FuelCell Energy, its two-year annual EPS growth of 22.9% was higher than its five-year trend. Its improving earnings is an encouraging data point, but a caveat is that its EPS is still in the red.

In Q2, FuelCell Energy reported adjusted EPS of negative $0.95, up from negative $1.94 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects FuelCell Energy to improve its earnings losses. Analysts forecast its full-year EPS of negative $6.12 will advance to negative $4.71.

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.

FuelCell Energy’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 136%, meaning it lit $135.68 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that FuelCell Energy’s margin expanded by 31.4 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

FuelCell Energy burned through $124.7 million of cash over the last year. With $190.8 million of cash on its balance sheet, the company has around 18 months of runway left (assuming its $136.8 million of debt isn’t due right away).

Unless the FuelCell Energy’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of FuelCell Energy until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

It was good to see FuelCell Energy beat analysts’ EPS expectations this quarter. We were also glad its backlog outperformed Wall Street’s estimates. On the other hand, its revenue missed and its EBITDA fell short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. It seems that expectations were low, and the stock traded up 9.3% to $4.60 immediately following the results.

Updated: December 4, 2025 at 10:30 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in FuelCell Energy.

FuelCell Energy is a pretty decent company if you ignore its balance sheet. First off, its revenue growth was exceptional over the last five years and is expected to accelerate over the next 12 months. And while its declining operating margin shows the business has become less efficient, its rising cash profitability gives it more optionality. On top of that, its projected EPS for the next year implies the company’s fundamentals will improve.

FuelCell Energy’s forward price-to-sales ratio is 1x. Certain aspects of its fundamentals are attractive, but we aren’t investing at the moment because its balance sheet makes us uneasy. Interested in this company and its prospects? We recommend you wait until its debt load falls or its profits increase.

Wall Street analysts have a consensus one-year price target of $7.84 on the company (compared to the current share price of $8.06).