Sunrun (RUN)

Residential solar energy company Sunrun (NASDAQ:RUN) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 34.9% year on year to $724.6 million. Its GAAP profit of $0.06 per share was 58.2% below analysts’ consensus estimates.

Company Overview

Helping homeowners use solar energy to power their homes, Sunrun (NASDAQ:RUN) provides residential solar electricity, specializing in panel installation and leasing services.

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 Sunrun include Tesla (NASDAQ:TSLA), SunPower (NASDAQ:SPWR), and Vivint Solar, which is now part of Sunnova Energy (NYSE:NOVA).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Sunrun’s sales grew at an incredible 22.3% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Sunrun’s recent performance shows its demand has slowed significantly as its revenue was flat over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its number of customers, which reached 1.14 million in the latest quarter. Over the last two years, Sunrun’s customer base averaged 13.4% year-on-year growth. Because this number is better than its revenue growth, we can see the average customer spent less money each year on the company’s products and services.

This quarter, Sunrun reported wonderful year-on-year revenue growth of 34.9%, and its $724.6 million of revenue exceeded Wall Street’s estimates by 22.4%.

Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Sunrun has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 14.9% gross margin over the last five years. That means Sunrun paid its suppliers a lot of money ($85.08 for every $100 in revenue) to run its business.

In Q3, Sunrun produced a 33.6% gross profit margin, up 14.3 percentage points year on year. Sunrun’s full-year margin has also been trending up over the past 12 months, increasing by 11.1 percentage points. If this move continues, it could suggest a less competitive environment where the company has better pricing power and leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Although Sunrun broke even this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 72.3% 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.

Looking at the trend in its profitability, Sunrun’s operating margin decreased significantly 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. Sunrun’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 Q3, Sunrun’s breakeven margin was up 24.3 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Sunrun, its EPS declined by 208% annually over the last five years while its revenue grew by 22.3%. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

We can take a deeper look into Sunrun’s earnings to better understand the drivers of its performance. As we mentioned earlier, Sunrun’s operating margin expanded this quarter but declined by 102.4 percentage points over the last five years. Its share count also grew by 98.8%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Sunrun, its two-year annual EPS declines of 42.6% show it’s still underperforming. These results were bad no matter how you slice the data.

In Q3, Sunrun reported EPS of $0.06, up from negative $0.37 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Sunrun’s full-year EPS of negative $11.19 will flip to positive $0.95.

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.

Sunrun’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 45.6%, meaning it lit $45.59 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Sunrun’s margin dropped by 18.9 percentage points during that time. Almost any movement in the wrong direction is undesirable because it is already burning cash. If the trend continues, it could signal it’s in the middle of a big investment cycle.

Sunrun burned through $865.2 million of cash in Q3, equivalent to a negative 119% margin. The company’s cash burn increased from $156.4 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Sunrun’s five-year average ROIC was negative 11.1%, meaning management lost money while trying to expand the business. Its returns were among the worst in the industrials sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Sunrun’s ROIC averaged 2.4 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

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.

Sunrun burned through $1.52 billion of cash over the last year, and its $14.69 billion of debt exceeds the $1.16 billion of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Sunrun’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 Sunrun until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were impressed by how significantly Sunrun 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 EPS missed. Overall, this print had some key positives. Investors were likely hoping for more, and shares traded down 6% to $19.14 immediately following the results.

Updated: December 3, 2025 at 10:45 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Sunrun isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its relatively low ROIC suggests management has struggled to find compelling investment opportunities. And while the company’s customer growth has been marvelous, the downside is its projected EPS for the next year is lacking.

Sunrun’s P/E ratio based on the next 12 months is 29.8x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $22.74 on the company (compared to the current share price of $17.86).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.