Stem (NYSE:STEM) reported second-quarter results that highlighted continued profitability progress, higher software and edge-hardware revenue, and expanding utility-scale energy-management-system deployments internationally. The company reaffirmed its full-year 2026 guidance, while management said it is tracking toward the high end of its adjusted EBITDA range.
Chief Executive Officer Arun Narayanan said the quarter marked Stem’s fifth consecutive period of positive adjusted EBITDA and its second consecutive quarter of record non-GAAP gross margin. He attributed the performance to the company’s software-centric transformation, a revenue mix weighted toward software services and edge hardware, and continued cost discipline.
Revenue Mix Drives Higher Margins
Total second-quarter revenue was $34 million, down 12% from $38 million a year earlier. Chief Financial Officer Brian Musfeldt said nearly all of the decline reflected lower battery hardware resale revenue, which fell to $300,000 from $5 million in the second quarter of 2025.
Excluding battery hardware resales, software services and edge-hardware revenue totaled $33 million, up 1% year over year. PowerTrack software revenue increased 11% to $11 million, while edge-hardware revenue rose 22% to $15 million. Project and professional-services revenue was $2 million, down 6%, while managed-service revenue fell 34% to $6 million compared with an unusually strong prior-year quarter in which Stem brought about 100 megawatt-hours online in a single quarter.
GAAP gross margin rose to 41% from 33% a year earlier, while non-GAAP gross margin reached a record 55%, compared with 49% in the prior-year period. Management said the increase was driven by the greater contribution from higher-margin software services and edge hardware and reduced exposure to lower-margin battery hardware resale activity.
Musfeldt said battery hardware resales are expected to rise in the second half, which should reduce the overall gross-margin percentage but increase gross-margin dollars. The company expects PowerTrack margins to remain around 75% and edge-hardware margins to remain in a range of 45% to 47%, according to Musfeldt.
Profitability and Cash Flow Improve
Adjusted EBITDA was $6 million, or an 18% margin, up 63% from $4 million in the second quarter of 2025 and more than double the first-quarter result. For the first half of 2026, adjusted EBITDA was $8 million, compared with a $1 million loss in the first half of 2025.
Cash operating expenses were sequentially flat and down 11% from a year earlier, the company said. Narayanan said Stem has maintained expense discipline while using artificial intelligence to drive efficiency.
Operating cash flow turned positive at $300,000 in the second quarter, improving from negative $8 million in the first quarter and negative $21 million in the second quarter of 2025. Stem ended the quarter with $38.4 million in cash and cash equivalents, up from $36.6 million at the end of the first quarter.
During the quarter, the company raised approximately $6 million through its at-the-market equity sales program at an average stock price of roughly $9.75, Musfeldt said. The proceeds were designated for general corporate purposes.
Bookings, ARR and International EMS Expansion
Bookings reached $37 million, up 39% sequentially from $27 million in the first quarter and about 7% from $34 million a year earlier. Contracted backlog increased 18% sequentially to $27 million, while contracted annual recurring revenue, or CAR, increased 3% to $69 million.
Annual recurring revenue increased 2% sequentially to $62.4 million. PowerTrack ARR rose 3% sequentially and 13% year over year to $42.8 million, while managed-services ARR was roughly flat at $19.6 million. Solar operating assets under management increased 2% sequentially to 38.3 gigawatts, and storage operating assets under management rose 6% to 1.8 gigawatt-hours.
Narayanan said Stem added approximately 0.8 gigawatts of solar assets under management during the quarter. The company also continued integrating raicoon, the automated fault-detection and event-management technology it acquired in April, into the PowerTrack platform. Stem expects to provide a more substantive update on that integration during its third-quarter call.
Internationally, Stem brought PowerTrack EMS to Latin America through the Granja Solar project in Chile. The platform will serve as the primary control system for a 420-megawatt-hour battery storage system being added to an existing 135-megawatt solar facility.
The company also secured a project in Hungary, where Solarmarkt Group and EPC partner Pannonwatt selected PowerTrack EMS as an integrated energy-management, power-plant-control and SCADA platform for two 80-megawatt-hour battery systems at two existing 60-megawatt solar sites. Commercial operation of the fully hybridized assets is expected in fall 2026.
PowerTrack EMS now has bookings across six countries and three continents, management said. Stem’s Everyray project in Germany, announced in March, is now live. The company also said PowerTrack EMS received The smarter E AWARD 2026 in the Smart Integrated Energy category.
Guidance Reaffirmed
Stem reaffirmed its full-year 2026 outlook, including total revenue of $140 million to $190 million. Software services and edge-hardware revenue is expected to be $130 million to $150 million, while battery hardware resale revenue is projected at up to $40 million and is expected to be concentrated in the second half.
- Total revenue: $140 million to $190 million
- Software services and edge-hardware revenue: $130 million to $150 million
- Non-GAAP gross margin: 40% to 50%
- Adjusted EBITDA: $10 million to $15 million
- Operating cash flow: $0 to $10 million
- Year-end ARR: $65 million to $70 million
Musfeldt said Stem expects to trend toward the lower end of its battery hardware resale outlook, which should support results near the upper end of the company’s non-GAAP gross-margin range. He also said the company is tracking toward the high end of its adjusted EBITDA guidance.
Looking beyond 2026, Narayanan said Stem is focused on utility-scale growth in the U.S. and international markets through PowerTrack EMS, PowerTrack SCADA and PowerTrack PPC offerings. He said the company sees particular opportunities in Latin America, including Chile and Colombia, as well as in Europe through its Berlin office.
About Stem (NYSE:STEM)
Stem, Inc is a technology company specializing in AI-driven energy storage and optimization solutions for commercial, industrial and utility customers. The company delivers integrated hardware and software systems that enable clients to manage energy consumption, reduce peak demand charges and provide ancillary services to the power grid. By combining battery storage hardware with advanced machine-learning algorithms, Stem helps organizations align energy usage with cost-saving opportunities while supporting grid reliability and renewable integration.
At the core of Stem’s offering is its Athena software platform, which uses real-time data and predictive analytics to forecast energy needs and automatically dispatch stored energy when it is most valuable.
