Enphase Energy, Inc.: Form 10-Q for the period ended Sep 30, 2026

Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations and involves risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “aim” or “continue” or the negative of these terms or other comparable terminology. Such statements, include but are not limited to statements regarding: our expectations as to future financial performance, including revenue, cost of revenue, expenses, liquidity, cash requirements, and our ability to maintain and grow our profitability; the capabilities, performance and competitive advantage of our technology and products and planned changes; the timing of new product releases, and the anticipated market adoption of our current and future products; expectations regarding the development of our 1.25 megawatt (“MW”) IQ® Solid-State Transformer (“IQ SST”) product for data centers; our expectations regarding, and our ability to meet, demand for our products; our business strategies, including anticipated trends and operating conditions; growth of and development in markets in which we target, and our expansion into new and existing markets; our performance in operations, including our supply chain management and manufacturing operations and timelines; our product quality and customer service; our expectations regarding qualification of our products for domestic content credit under U.S. tax laws and our ability to meet Foreign Entity of Concern (“FEOC”) requirements for our U.S. products; our expectations regarding macroeconomic events and geopolitical developments, including the effects of tariffs, which may impact our business operations, financial performance and the markets in which we, our suppliers, manufacturers and installers operate; our expectations regarding potential growth through engagement in the third-party ownership (“TPO”) market; expectations regarding the increased variability in the timing of revenue recognition and cash flows related to safe harbor agreements; expectations regarding our commercial microinverter products; market risks associated with financial instruments and foreign currency exchange rates; and the importance of government incentives for solar products, including the impact of recent changes in the tax laws, rules and regulations. You should be aware that the forward-looking statements contained in this report are based on our current views and assumptions, and are subject to known and unknown risks, uncertainties and other factors that may cause actual events or results to differ materially. For a discussion identifying some of the important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see below, those discussed in the section entitled “Risk Factors” herein and those included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed on February 17, 2026 (the “Form 10-K”). Unless the context requires otherwise, references in this report to “Enphase,” “we,” “us” and “our” refer to Enphase Energy, Inc. and its consolidated subsidiaries.

Business Overview

We are a global energy technology company. We deliver smart, easy-to-use solutions that manage solar generation, storage and communication on one platform. Our intelligent microinverters work with virtually every solar panel made, and when paired with our smart technology, result in one of the industry’s best-performing clean energy systems. As of September 30, 2026, we have shipped approximately 90.8 million microinverters, and more than 5.3 million Enphase residential and commercial systems have been deployed in over 165 countries.

The Enphase® Energy System brings a high technology, networked approach to solar generation plus energy storage, by leveraging our design expertise across power electronics, semiconductors and cloud-based software technologies. Our integrated approach to energy solutions maximizes a home’s energy potential while providing advanced monitoring and remote maintenance capabilities. The Enphase Energy System uses a single technology platform for seamless management of the whole solution of IQ® Microinverters, IQ® Batteries, IQ® Load Controllers, and IQ® EV Charger, allowing rapid commissioning with the Enphase® Installer App, consumption monitoring with our IQ® Combiner™ device with our Enphase IQ® Gateway™ device, and our Enphase® App, a cloud-based energy management platform. System owners can use the Enphase App to monitor their home’s solar generation, energy storage and consumption from any web-enabled device. Unlike some of our competitors, who utilize a traditional inverter, or offer separate components of solutions, we have built-in system redundancy in both photovoltaic generation and energy storage, eliminating the risk that comes with a single point of failure. Further, the nature of our cloud-based, monitored system allows for remote firmware and software updates, enabling cost-effective remote maintenance and ongoing utility compliance.

We sell primarily to solar distributors who combine our products with others, including solar module products and racking systems, and resell to installers in each target region. In addition to our solar distributors, we sell directly to select large installers, original equipment manufacturers (“OEMs”) and strategic partners. Our OEM customers include solar module manufacturers who integrate our microinverters with their solar module products and resell to both distributors and installers. Strategic partners include a variety of companies, including industrial equipment suppliers, module companies, energy suppliers and developers of third-party solar finance offerings (such as TPOs). We also sell certain products and services to homeowners primarily in support of our warranty services and legacy product upgrade programs, via our online store.

Events Affecting our Business and Operations

As we have a growing global footprint, we are subject to risk and exposure from the evolving macroeconomic environment, including the effects of military conflicts (including the Iran conflict), increased global inflationary pressures, tariffs and interest rates, fluctuations in foreign currency exchange rates, potential economic slowdowns or recessions, geopolitical pressures and potential regulatory changes, including the unknown impacts of current and future trade regulations. We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results.

One Big Beautiful Bill Act. In July 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted, introducing material changes to clean energy tax credit programs that are significant to our business and may impact our financial condition, results of operations and future prospects.

The OBBBA scales back the Investment Tax Credit (the “ITC”) available under Section 25D of the Internal Revenue Code of 1986, as amended (the “Code”), for residential solar and storage systems purchased through cash or loans. Under the new law, the Section 25D credit expired on December 31, 2025. In addition, the OBBBA imposes new timing requirements for eligibility under Section 48E of the Code, which governs ITCs for leased solar and storage systems. Specifically, solar-only projects that did not commence construction within 12 months of the OBBBA’s enactment must be placed in service by December 31, 2027 in order to remain eligible for the credit. Energy storage projects are not subject to this placed-in-service deadline; however, the ITC for storage systems will begin to phase down in 2034 — decreasing to 75% in 2034, 50% in 2035 and phasing out entirely by 2036.

The OBBBA also amends the domestic content bonus credit rules for Section 48E projects. Projects commencing construction after June 16, 2025 must meet a 45% domestic cost threshold, up from 40%.

Additionally, the OBBBA introduces new compliance requirements under the FEOC provisions for both Section 48E of the Code and the Advanced Manufacturing Production Tax Credit (“AMPTC”) under Section 45X of the Code. These provisions establish an escalating threshold of non-FEOC content that must be met by solar and storage projects beginning construction in 2026 and by manufactured components produced beginning in 2026.

In August 2025, U.S. Treasury Department and the Internal Revenue Service (“IRS”) issued revised “beginning of construction” guidance for clean energy tax credits that only applies to Section 48E projects above 1 MW.

In February 2026, the U.S. Treasury Department and the IRS issued guidance under the OBBBA’s FEOC provisions applicable to Sections 48E and 45X of the Code, including rules and interim safe harbors for determining whether projects or manufactured components receive material assistance from prohibited foreign entities. Treasury and the IRS have indicated that additional proposed regulations and safe harbor tables are expected, including guidance addressing ownership, effective control, debt, licensing arrangements and anti‑circumvention matters, which could make the compliance requirements more restrictive over time.

These legislative and regulatory developments have affected our eligibility for certain tax credits, the attractiveness of our offerings to solar and storage system lease providers, and demand for our products. In addition, if we are unable to satisfy the revised domestic content or FEOC requirements, our ability, or the ability of our customers, to qualify for such incentives could be impaired, which could adversely affect our revenue, gross margins, business operations and competitive position.

In March 2026, we entered into an agreement for the sale of $235.0 million of AMPTC we generated during 2025 at 93% of face value, resulting in a discount of approximately $16.5 million. We also incurred approximately $2.5 million in transaction-related fees.

In June 2026, we entered into an agreement for the sale of up to $150.0 million of AMPTC we generated during 2026 at 93% of face value. Of the $150.0 million, we sold $75.0 million of AMPTC generated in the first and second quarters of 2026 for approximately $69.8 million and incurred approximately $0.7 million in transaction-related fees.

Trade Tariff Uncertainties. The impact of new or existing tariffs, trade restrictions or retaliatory actions on us, the solar industry and our customers continues to create uncertainty and adversely affect our business operations. On February 20, 2026, the United States Supreme Court issued a decision invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Following this ruling, the U.S. Court of International Trade directed U.S. Customs and Border Protection (“CBP”) to establish a process for the submission and review of refund claims related to eligible IEEPA tariffs. On April 20, 2026, CBP launched an online portal through which companies may submit refund requests for eligible IEEPA tariffs. We received refunds and associated interest of approximately $52.0 million during the nine months ended September 30, 2026 from CBP related to tariffs paid during fiscal 2025 and the first quarter of fiscal 2026, of which approximately $1.6 million and $47.0 million was recognized as a reduction to cost of revenues during the three and nine months ended September 30, 2026, respectively; approximately $0.1 million and $1.7 million was recognized as interest income in the nine months ended September 30, 2026, respectively; and approximately $3.3 million was capitalized as a cost of inventory as of September 30, 2026.

We have submitted additional refund claims for tariffs previously paid and continue to evaluate the recoverability of these amounts. As the approval and timing of such refunds remain uncertain and are contingent upon CBP’s review and validation process, we have not recognized a receivable as of September 30, 2026 and will not recognize such amounts until they are realized or realizable. The ultimate impact of any future approved refunds, if any, could be material.

Furthermore, following the Supreme Court's decision, the Administration imposed a temporary import surcharge under Section 122 of the Trade Act of 1974 (“Section 122”). The surcharge was initially set at 10% ad valorem on all imports, and subsequently increased to 15%, the statutory maximum, with certain exceptions for specified commodities (e.g., electronics and critical minerals) and United States-Mexico-Canada Agreement qualified products. The surcharge took effect on February 24, 2026, for a maximum period of 150 days. On May 7, 2026, the U.S. Court of International Trade held that the Section 122 proclamation was invalid. The government appealed the ruling, and the Federal Circuit issued a temporary stay pending appeal. As of the date of this filing, the appeal remains pending. On July 23, 2026, following an investigation initiated on June 2, 2026 under Section 301 of the Trade Act of 1974, the Administration announced new tariffs of 10% or 12.5% on imports from 60 trading partners. These tariffs were announced shortly before the expiration of the Section 122 surcharge on July 24, 2026. The tariffs apply to many of the countries from whom we source materials and can include some products material to our business. The evolving legal status, and expiration of the Section 122 surcharge creates additional uncertainty regarding our tariff exposure and any potential recovery of Section 122 duties paid to date. If the Section 122 proclamation is ultimately held invalid and refund mechanisms are established, we may be eligible to recover some or all of the Section 122 duties paid. However, the outcome of the appeal and the availability, timing and amount of any potential refunds remain uncertain and are subject to further judicial and administrative proceedings. No receivable for potential Section 122 tariff refunds has been recognized as of September 30, 2026.

We have moved a significant portion of our manufacturing to the United States while continuing to utilize contract manufacturing in China and India. However, certain critical components for our products are still sourced from outside the United States. For example, lithium iron phosphate (“LFP”) battery cells used in our storage products are still supplied solely by two vendors located in China. Although we are in the process of searching for other vendors outside of China for future supplies, the expertise and industry for the LFP battery cell is primarily in China, and it will require significant effort to identify alternative, qualified suppliers with the right expertise to develop our battery cells.

An escalation in trade tensions or the implementation of broader tariffs, trade restrictions or retaliatory measures on our products or components originating from countries outside the United States could adversely impact our ability to source necessary components, manufacture products at competitive cost, or sell our products at prices customers are willing to pay. Any such developments could materially and adversely affect our business operations, results of operations and cash flows.

Safe Harbor Agreements. We executed agreements year-to-date through the safe harbor deadline with TPO customers for products totaling approximately $1,081.1 million, of which $202.4 million is under the ITC Five Percent Safe Harbor method and $878.6 million is under the Physical Work Test beginning-of-construction method. These arrangements are designed to support customers’ qualification for ITC and have become an increasingly important growth channel for U.S. residential solar and battery adoption following the expiration of the residential ITC under Section 25D of the Code on December 31, 2025.

As of September 30, 2026, contract liabilities included in deferred revenues, current and deferred revenues, non-current on the condensed consolidated balance sheet includes approximately $51.7 million in prepayments or billings under the ITC Five Percent Safe Harbor method for products to be delivered in the fourth quarter of 2026, and approximately $46.8 million in prepayments or billings under the Physical Work Test beginning-of-construction method. Product deliveries and revenue recognition associated with these arrangements may occur over multiple periods through the second quarter of 2031 and are dependent on the timing of product shipment and satisfaction of performance obligations. As a result, the timing and structure of these safe harbor arrangements have contributed to increased variability in the timing of revenue recognition and cash flows between reporting periods.

Demand for Products. The prolonged softness in demand in the solar industry has continued to adversely impact certain distributors and installers, contributing to reduced liquidity, bankruptcies and business closures across the channel. These disruptions have negatively affected our revenue and profitability and could result in higher allowances for credit losses and loss from change in fair value of debt securities in the future. In Europe, the overall business environment across the region is still challenging, and is expected to remain constrained in the fourth quarter of 2026. In the United States, uncertainty arising from changes in legislation, including the elimination or reduction of existing tax credits for clean energy programs under the OBBA, as well as evolving U.S. trade and tariff policies, has contributed, and may continue to contribute, to market volatility and adversely affect customer demand for our products, our pricing and our financial performance.

Products

The Enphase Energy System is a comprehensive portfolio of solar, storage and energy management hardware, software and services designed to support residential, commercial and small utility applications. While IQ Microinverters and IQ Batteries represent the most significant components of our revenue, our offering also includes a range of balance-of-system products, grid interconnection and control devices, power management software, monitoring platforms, and other services that together enable integrated energy solutions. Our products are designed to maximize energy production, simplify system design and installation, enhance reliability, and support a wide range of grid‑connected, backup and off-grid use cases.

IQ Microinverters. We ship IQ8™ Microinverters into 60 countries worldwide. Our IQ8P™ Residential Microinverters and IQ8P-3P™ Commercial Microinverters, with peak output power of 480 W AC, are designed to maximize energy production and can manage a continuous DC current of 14 amperes, supporting higher powered solar modules through increased energy harvesting. The IQ8P-3P Commercial Microinverter is offered for commercial and industrial applications in North America, Mexico, Colombia, Panama, Costa Rica and 13 Caribbean countries. The IQ8P Residential Microinverter is offered for residential and small commercial applications in North America and for grid-tied applications in South Africa, Mexico, Brazil, India, Thailand, the Philippines, France, Spain, Switzerland, the United Kingdom, Italy, Portugal, Poland, Turkey, Colombia, Panama, Costa Rica, Vietnam, Malaysia, Australia, Fiji, North Macedonia and 13 Caribbean countries.

We began shipping our new IQ9N-3P™ Commercial Microinverter in December 2025. This is the first microinverter powered by advanced gallium nitride (“GaN”) technology and designed for three-phase 480Y/277 V (wye) grid configurations, without using external transformers. The IQ9N-3P Commercial Microinverter helps simplify design complexity, lowers installation and balance of system costs, and improves system efficiency for 480 V commercial projects.

In June 2026, we began shipping our new IQ9S-3P™ Commercial Microinverter, our most powerful microinverter, currently available across the United States. Built with GaN technology, the IQ9S-3P Commercial Microinverter supports high-wattage solar panels up to 770 W and connects directly to three-phase 480Y/277 V (wye) grid configurations without requiring external transformers. Together with the IQ9N-3P Commercial Microinverter, the IQ9S-3P Commercial Microinverter gives us a broader commercial portfolio for the U.S. 480 V three-phase market.

In June 2026, we also launched the IQ9N™ Microinverter for residential solar across the United States and key European markets, and in July 2026, we launched the IQ9N Microinverter in Australia and New Zealand. Built with GaN technology, IQ9N Microinverters help enhance energy production from the latest high-power solar panels, and support 16 A of continuous DC current and 427 VA of continuous output power. IQ9N Microinverters are backward compatible with IQ7 and IQ8 Series Microinverters and also compatible with IQ Batteries, enabling homeowners and installers to expand existing Enphase systems.

In 2025, we released a software update in our Enphase IQ Gateway device that enables homeowners with existing legacy IQ7™ Microinverter-based systems to expand their solar capacity with IQ8 Microinverters. This software facilitates seamless interoperability between legacy and current system architectures and is available in North America, Europe, Australia, South Africa, the Philippines and other key markets.

We ship our residential and commercial microinverters and domestic batteries supplied from manufacturing facilities in the United States with higher domestic content than previous models, that when paired with other U.S.-made solar equipment may qualify for the domestic content bonus tax credit under the Inflation Reduction Act of 2022.

In February 2026, we announced the introduction of Enphase Power Control™ software with our Enphase IQ Gateway device for IQ9™ and IQ8 Microinverter-based small commercial solar systems. Enphase Power Control™ software simplifies interconnections, reduces permitting complexity, and avoids costly utility upgrades, making it easier and more cost-effective to design and install small commercial microinverter systems. This software solution is designed to help installers reduce costs, simplify interconnection requirements, and enable projects that might otherwise not proceed due to unfavorable project economics.

IQ Batteries. We continue to scale our global footprint, by delivering advanced, grid-independent microinverter-based storage systems powered by our proprietary Ensemble OS™ software.

Our fourth-generation residential Enphase Energy System consists of two advanced storage solutions: the IQ® Battery 10C and the IQ® Battery 10CS. Both battery models share the same advanced architecture and integrated microinverters. Each model provides a base capacity of 10 kWh and is designed to easily scale up to 80 kWh as a homeowner's energy requirements grow. Delivering 7.1 kVA continuous output and 90 A of PowerStart™ capability per 10 kWh unit, both batteries are engineered to seamlessly support heavy household loads like HVAC units and pool pumps, without requiring additional neutral-forming hardware. The primary distinction is the physical form: the IQ Battery 10C is designed to be 30% more energy-dense and occupy 62% less wall space than previous models, while the IQ Battery 10CS features a slim, split-module design that reduces cabinet depth for tight spaces. The IQ Battery 10C are now shipping in the United States, including Puerto Rico and Bermuda. Both battery models now work with existing third-party solar systems for grid-forming and grid-tied solutions, providing whole-home backup, multi-day outage resilience, and unified energy monitoring. No replacement of existing solar equipment is required.

To complete this fourth-generation residential ecosystem, our balance-of-system components provide versatile interconnection options. The IQ® Meter Collar simplifies whole-home backup by providing microgrid interconnection device functionality, while the IQ® Combiner 6C further streamlines installation by consolidating interconnection equipment into one enclosure. Together, these components are designed to simplify the entire backup installation process and enhance reliability.

In July 2026, we announced expanded support that allows homeowners across the United States and Canada with existing non-Enphase solar systems to add the IQ Battery 10C and whole-home backup, without replacing the solar equipment already on the roof. With the addition of the IQ Battery 10C, IQ Combiner 6C, and IQ Meter Collar, homeowners can keep their existing solar investment while adding Enphase storage, whole-home backup, energy management, and monitoring through the Enphase® App.

We continue to expand the deployment of the IQ Battery 5P with FlexPhase™ technology, an AC-coupled, modular 5 kWh battery with 3.84 kVA of continuous power per unit, for both single-phase and three-phase applications. This product is currently shipping to Austria, Germany, Switzerland, Luxembourg, Poland, France, Spain, Portugal, the Netherlands, Ireland, Greece, Romania, Croatia, Finland, Malta, Estonia, India, Belgium, Slovenia, Slovakia, Denmark, Latvia, Lithuania, Sweden, Hungary, Bulgaria, North Macedonia and Australia. The standard IQ Battery 5P continues to ship in the United States, Cayman Islands, Australia, New Zealand, Puerto Rico, Mexico, Canada, the United Kingdom, Italy, France, the Netherlands, Luxembourg, Belgium, Romania and India. These Enphase IQ Batteries in Europe can be installed with both single-phase and three-phase third-party solar energy inverters, enabling homeowners to upgrade their existing home solar systems with a residential battery storage solution that reduces costs while providing increased self-reliance.

Our older Enphase IQ Battery 3T and IQ Battery 10T storage systems, have a usable capacity of 3.4 kWh and 10.1 kWh for the United States, and 3.5 kWh and 10.5 kWh for Europe and other international countries. We currently ship these IQ Battery storage systems to customers in the United States, Puerto Rico, Canada, Mexico, Australia, New Zealand, Belgium, Germany, the United Kingdom, Italy, Austria, France, the Netherlands, Luxembourg, Finland, Switzerland, Spain, Portugal, Sweden, Denmark and Greece.

In October 2025, we announced support in the United States for complete off-grid system configurations that are capable of operating without a utility connection when needed. The system requires the IQ Battery 5P with embedded grid-forming microinverters, IQ8 Series Microinverters with Sunlight JumpStart™ technology and a third-party standby AC generator, which all work together to power the home.

In December 2025, we launched our PowerMatch™ technology, a battery software upgrade in Europe. PowerMatch intelligently adjusts IQ Battery output to match a home’s real-time power needs by activating only the microinverters needed, delivering more usable energy, higher efficiency, longer battery life and greater long-term savings. The efficiency gains achieved with this technology can improve battery performance by as much as 40%. In May 2026, we expanded PowerMatch technology to North America, making it available to homeowners with qualifying IQ Battery systems in the United States and Canada.

New Products in Development. In April 2026, we announced that we are developing our 1.25 MW IQ SST product for data centers, a distributed solid-state transformer platform designed to convert medium-voltage AC directly to low-voltage DC in a single stage. The IQ SST will be built as a supercluster of 342 power modules, with each module powered by our custom Kestrel ASIC and high-frequency GaN-based power platform. The architecture is designed to deliver native 800 V DC output for next-generation AI racks, sub-millisecond response to dynamic AI loads, built-in redundancy, and serviceability through hot-swappable modules, and is designed to scale to racks up to 5 MW. We expect customer pilots in 2027 and commercial shipments to begin in 2028. These timelines are subject to technical, supply chain, and customer-qualification risks, and there is no assurance that we will achieve these milestones on schedule or at all, or that our development efforts will result in commercial sales.

Results of Operations

Net Revenues

(In thousands, except percentages)

Three months ended September 30, 2026 and 2025

Net revenues decreased by approximately $117.1 million, or 29%, in the three months ended September 30, 2026, as compared to the same period in 2025, driven primarily by a 33% decrease in IQ Batteries MWh shipped, a 22% decrease in microinverter units sold and product price decreases. During the three months ended September 30, 2026, we sold approximately 1.4 million microinverter units and shipped 129.9 MWh of IQ Batteries, as compared to approximately 1.8 million microinverter units and 195.0 MWh of IQ Batteries shipped in the three months ended September 30, 2025.

Net revenues in the United States were approximately $233.5 million in the three months ended September 30, 2026, as compared to approximately $350.0 million in the same period in 2025, a decrease of $116.5 million, or 33%, primarily due to the expiration of the federal residential clean energy tax credit under Section 25D of the Code. Microinverter shipments that are associated with safe harbor transactions with customers were approximately $85.0 million and $70.9 million in the three months ended September 30, 2026 and 2025, respectively.

Net revenues from international markets were approximately $59.8 million in the three months ended September 30, 2026, as compared to approximately $60.4 million in the same period in 2025, a decrease of $0.6 million, or 1%. The decrease was primarily attributable to lower revenues in international markets outside Europe, substantially offset by higher revenues in Europe. European revenues increased approximately $6.8 million primarily due to higher demand for IQ Batteries, particularly in the Netherlands, where regulatory changes have contributed to a transition toward solar-plus-storage systems. The increase also reflected higher revenue from our EV charging products as we expanded our product offerings and sales channels.

Nine months ended September 30, 2026 and 2025

Net revenues decreased by approximately $261.6 million, or 23%, in the nine months ended September 30, 2026, as compared to the same period in 2025, driven primarily by a 38% decrease in IQ Batteries MWh shipped, an 8% decrease in microinverter units sold and product price decreases. During the nine months ended September 30, 2026, we sold approximately 4.4 million microinverter units and shipped 346.8 MWh of IQ Batteries, as compared to approximately 4.8 million microinverter units and 556.0 MWh of IQ Batteries shipped in the nine months ended September 30, 2025.

Net revenues in the United States were approximately $694.2 million in the nine months ended September 30, 2026, as compared to approximately $884.6 million in the same period in 2025, a decrease of $190.3 million, or 22%, primarily due to the expiration of the federal residential clean energy tax credit under Section 25D of the Code. Microinverter shipments that are associated with safe harbor transactions with customers were approximately $203.8 million and $165.6 million in the nine months ended September 30, 2026 and 2025, respectively.

Net revenues from international markets were approximately $173.8 million in the nine months ended September 30, 2026, as compared to approximately $245.1 million in the same period in 2025, a decrease of $71.3 million, or 29%, primarily driven by lower shipments to customers in Europe during the first half of 2026 driven by continued softening in demand. In addition, demand in certain European markets was impacted by macroeconomic conditions, regulatory and incentive framework transitions, and lower electricity prices compared to the same period in 2025, which reduced near‑term installation activity and delayed project starts.

Cost of Revenues and Gross Margin

(In thousands, except percentages)

Three months ended September 30, 2026 and 2025

Cost of revenues decreased by approximately $48.0 million, or 22%, for the three months ended September 30, 2026, as compared to the same period in 2025. This decrease was primarily driven by a 33% decrease in IQ Batteries MWh shipped and a 22% decrease in microinverter units shipped.

Gross margin decreased by 4.5 percentage points in the three months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily due to product price decreases, lower shipment volumes of IQ Batteries and microinverters that resulted in unfavorable absorption of fixed manufacturing and supply chain costs over a lower revenue base, and 1.9 percentage point impact for adjustment to record AMPTC generated in period at fair value.

Nine months ended September 30, 2026 and 2025

Cost of revenues decreased by approximately $129.1 million, or 22%, for the nine months ended September 30, 2026, as compared to the same period in 2025. This decrease was primarily driven by approximately $47.0 million in IEEPA tariff refunds, a 38% decrease in IQ Batteries MWh shipped and an 8% decrease in microinverter units shipped.

This decrease in cost of revenues was partially offset by an approximately $18.9 million loss from the sale of tax credits generated during 2025.

Gross margin decreased by 1.0 percentage point in the nine months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily due to product price decreases, lower shipment volumes of microinverters and IQ Batteries, which resulted in unfavorable absorption of fixed manufacturing and supply chain costs over a lower revenue base, 2.0 percentage point impact for adjustment to record AMPTC generated in period at fair value, and 2.2 percentage points from the sale of tax credits generated during 2025, partially offset by 5.4 percentage points from the IEEPA tariff refunds.

Research and Development

(In thousands, except percentages)

Three months ended September 30, 2026 and 2025

Research and development expense decreased by approximately $2.1 million, or 4%, in the three months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily due to actions in connection with the restructuring initiatives implemented at the beginning of 2026 that lowered personnel-related expenses as a result of a reduction in headcount by approximately $5.6 million, partially offset by approximately $3.5 million increase in equipment and professional services for IQ SST and other next generation products. The amount of research and development expenses may fluctuate from period to period due to the differing levels and stages of development activity for our products.

Nine months ended September 30, 2026 and 2025

Research and development expense decreased by approximately $7.1 million, or 5%, in the nine months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily due to actions in connection with the restructuring initiatives implemented at the beginning of 2026 that lowered personnel-related expenses as a result of a reduction in headcount by approximately $11.1 million, partially offset by approximately $4.0 million increase in equipment and higher professional services costs. The amount of research and development expenses may fluctuate from period to period due to the differing levels and stages of development activity for our products.

Sales and Marketing

(In thousands, except percentages)

Three months ended September 30, 2026 and 2025

Sales and marketing expense decreased by approximately $3.3 million, or 7%, in the three months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily due to lowered personnel-related expenses by approximately $4.3 million as a result of moving certain functions to more cost efficient regions and leveraging advanced artificial intelligence tools, partially offset by approximately $0.6 million increase in provision for credit losses and approximately $0.4 million increase in professional services and advertising.

Nine months ended September 30, 2026 and 2025

Sales and marketing expense decreased by approximately $9.3 million, or 6%, in the nine months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily due to actions in connection with the restructuring initiatives implemented at the beginning of 2026 that lowered personnel-related expenses by approximately $9.1 million as a result of moving certain functions to more cost efficient regions and leveraging advanced artificial intelligence tools, and approximately $0.8 million lower equipment costs, partially offset by approximately $0.6 million increase in provision for credit losses.

General and Administrative

(In thousands, except percentages)

Three months ended September 30, 2026 and 2025

General and administrative expense decreased by approximately $2.7 million, or 8%, in the three months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily due to lowered personnel-related expenses by approximately $3.9 million, partially offset by approximately $1.2 million increase in professional services costs.

Nine months ended September 30, 2026 and 2025

General and administrative expense decreased by approximately $6.2 million, or 6%, in the nine months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily due to actions in connection with the restructuring initiatives implemented at the beginning of 2026 lowered personnel-related expenses by approximately $7.1 million, partially offset by approximately $0.9 million increase in professional services costs and other corporate costs.

Restructuring and Asset Impairment

(In thousands, except percentages)

Three months ended September 30, 2026 and 2025

Restructuring and asset impairment credit of approximately $0.1 million in the three months ended September 30, 2026, primarily consisted of employee related benefits. Restructuring charges of approximately $1.3 million in the three months ended September 30, 2025, primarily consisted of approximately $0.7 million of contract termination charges and approximately $0.6 million of employee-related expenses.

Nine months ended September 30, 2026 and 2025

Restructuring and asset impairment charges of approximately $4.7 million in the nine months ended September 30, 2026, primarily consisted of approximately $4.4 million of employee related expenses and approximately $0.3 million of contract termination charges. Restructuring charges of approximately $7.8 million in the nine months ended September 30, 2025, primarily consisted of approximately $4.9 million of employee related expenses, approximately $1.4 million of asset impairment charges and approximately $1.5 million of contract termination charges.

Other Income (Expense), Net

(In thousands, except percentages)

Three months ended September 30, 2026 and 2025

Interest income of approximately $16.9 million increased in the three months ended September 30, 2026, as compared to approximately $15.4 million in the three months ended September 30, 2025, primarily due to interest income earned on long-term accounts receivable and outstanding refund for 2024 AMPTCs through our 2024 tax return filed in April 2025, partially offset by lower average cash, cash equivalents and marketable securities, and lower interest rates.

Interest expense, net, of approximately $0.3 million in the three months ended September 30, 2026, primarily included amortization of debt issuance costs with our 0.0% convertible senior notes due 2028 (the “Notes due 2028”). Interest expense of approximately $0.8 million in the three months ended September 30, 2025, primarily included approximately $0.8 million for the amortization of debt issuance costs with our 0.0% convertible senior notes due 2026 (the “Notes due 2026”) and the Notes due 2028.

Other expense, net, of approximately $26.6 million in the three months ended September 30, 2026, primarily consisted of approximately $26.5 million non-cash expense related to the decrease in the fair value of debt securities, approximately $0.7 million non-cash guarantee expense and approximately $0.1 million decrease in the fair value of our tax equity fund investment, partially offset by approximately $0.4 million gain on asset sale, $0.2 million of net foreign currency loss from remeasurement of monetary assets and liabilities and approximately $0.1 million tariff refund interest. Other expense, net, of approximately $3.7 million in the three months ended September 30, 2025, primarily consisted of approximately $3.2 million non-cash expense related to the decrease in the fair value of debt securities and approximately $0.5 million decrease in the fair value of our tax equity fund investment.

Nine months ended September 30, 2026 and 2025

Interest income of approximately $41.7 million decreased in the nine months ended September 30, 2026, as compared to approximately $47.4 million in the nine months ended September 30, 2025, primarily due to lower average cash, cash equivalents and marketable securities, and lower interest rates.

Interest expense of approximately $1.3 million in the nine months ended September 30, 2026, primarily included amortization of debt issuance costs with the Notes due 2026 and the Notes due 2028. Interest expense of approximately $3.7 million in the nine months ended September 30, 2025, primarily included approximately $3.7 million for the coupon interest and debt discount amortization with our 0.25% convertible senior notes due 2025 (the “Notes due 2025”), and amortization of debt issuance costs with the Notes due 2025, Notes due 2026 and Notes due 2028, and other interest.

Other expense, net, of approximately $24.3 million in the nine months ended September 30, 2026, primarily consisted of approximately $29.3 million non-cash expense related to the decrease in the fair value of debt securities, approximately $0.7 million non-cash guarantee expense, approximately $0.7 million realized loss from sale of marketable securities, approximately $0.3 million decrease in the fair value of our tax equity fund investment, partially offset by approximately $2.9 million net foreign currency gain from remeasurement of monetary assets and liabilities, approximately $1.7 million gain related to the sale of patents, approximately $1.7 million tariff interest refund, and approximately $0.4 million of gain on asset sale. Other expense, net, of approximately $12.7 million in the nine months ended September 30, 2025, primarily consisted of approximately $12.3 million non-cash expense related to the decrease in the fair value of debt securities and approximately $0.5 million decrease in the fair value of our tax equity fund investment, partially offset by approximately $0.1 million net gain due to foreign currency denominated monetary assets and liabilities.

Income Tax Benefit (Provision)

(In thousands, except percentages)

Three months ended September 30, 2026 and 2025

For the three months ended September 30, 2026, we recorded an income tax benefit of approximately $27.0 million, as compared to an income tax provision of approximately $10.4 million in the same period in 2025. This $37.3 million change primarily reflects the tax benefit related to the impairment of investments in multiple debt securities, and lower profitability in the current-year period, principally in the United States.

The income tax benefit for the three months ended September 30, 2026 was calculated using the annualized effective tax rate method and primarily reflects tax benefits associated with the impact of the AMPTC. While AMPTC is directly related to qualifying production and shipment activity and pretax income, it is treated as permanent items for income tax accounting purposes and is excluded from the annualized effective tax rate calculation. As a result, our effective tax rate for the period reflects the impact of these permanent benefits and may not be indicative of the statutory tax rate or expected annual effective tax rate.

The income tax benefit primarily includes benefits from the AMPTC and the tax benefit related to the impairment of investments in debt securities, partially offset by tax expense in profitable foreign jurisdictions and tax expense related to equity-based compensation shortfalls. We continue to apply the interim income tax methodology prescribed by ASC 740‑270.

Nine months ended September 30, 2026 and 2025

For the nine months ended September 30, 2026, we recorded an income tax benefit of approximately $7.6 million, as compared to an income tax provision of approximately $32.7 million in the same period in 2025. This $40.3 million change primarily reflects the tax benefit related to the impairment of investments in multiple debt securities, and lower profitability in the current-year period, principally in the United States, offset by the tax effects of the IEEPA tariff refund.

The income tax benefit for the nine months ended September 30, 2026 was calculated using the annualized effective tax rate method and primarily reflects tax benefits associated with the impact of the AMPTC. While AMPTC is directly related to qualifying production and shipment activity and pretax income, it is treated as permanent items for income tax accounting purposes and is excluded from the annualized effective tax rate calculation. As a result, our effective tax rate for the period reflects the impact of these permanent benefits and may not be indicative of the statutory tax rate or expected annual effective tax rate.

The income tax benefit primarily includes benefits from the AMPTC and the tax benefit related to the impairment of investments in debt securities, partially offset by tax expense in profitable foreign jurisdictions, tax expense related to equity‑based compensation shortfalls, which was generally consistent with the prior‑year period, and the tax effects of the IEEPA tariff refund. We continue to apply the interim income tax methodology prescribed by ASC 740‑270.

Liquidity and Capital Resources

Sources of Liquidity

As of September 30, 2026, we had approximately $1.4 billion in net working capital, including cash, cash equivalents and marketable securities of approximately $931.8 million, of which approximately $772.5 million was held in the United States. Our cash, cash equivalents and marketable securities primarily consist of U.S. Government agency securities and treasuries, money market mutual funds, corporate notes and bonds and commercial paper, and both interest-bearing and non-interest-bearing deposits, with the remainder held in various foreign subsidiaries. We consider amounts held outside the United States to be accessible and have provided for the estimated withholding tax liability on the repatriation of our foreign earnings.

(In thousands, except percentages)

Our cash, cash equivalents and marketable securities decreased by approximately $546.1 million from September 30, 2025 to September 30, 2026, primarily due to payoff of the Notes due 2026, investments in private and public companies, issuance of loan receivables and payments of withholding taxes related to net share settlement of equity awards, partially offset by cash generated from operations and the sale of AMPTC we generated during 2025 and in the first and second quarters of 2026.

Total carrying amount of debt decreased by approximately $630.4 million from September 30, 2025 to September 30, 2026, primarily due to the payoff of the Notes due 2026, partially offset by accretion of issuance costs.

We expect our principal short-term cash requirements (over the next 12 months) to include working capital, strategic investments, acquisitions, repurchases of common stock and payments of withholding taxes for net share settlement of employee equity awards, payments on our outstanding debt, and purchases of property and equipment. We plan to fund any cash requirements for the next 12 months from our existing cash, cash equivalents and marketable securities on hand, and cash generated from operations.

For the long-term period (beyond 12 months), we plan to continue growing cash flows from operations and sale of AMPTC to support our business operations and strategic investment plans. We regularly evaluate our liquidity position, debt obligations and anticipated cash needs. As part of this ongoing assessment, we may pursue additional financing through the issuance of equity or debt, as necessary, to support our operational and investment needs.

We anticipate that access to the debt market will be more constrained compared to prior periods due to elevated interest rates and recent policy changes to solar tax incentives following the enactment of the OBBBA. Our ability to secure debt or any other additional financing that we may choose to, or need to, obtain, will depend on various factors including our development efforts, business plans, operating performance and prevailing capital market conditions.

Repurchase of Common Stock. In July 2023, our board of directors authorized the 2023 Repurchase Program pursuant to which we could repurchase up to $1.0 billion of our common stock. Repurchases were funded from available working capital and marketable securities and were executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including under Rule 10b5-1 plans. As of September 30, 2026, approximately $268.7 million remained available for share repurchases under the 2023 Repurchase Program. In July 2026, the board of directors authorized an extension of the term of the 2023 Repurchase Program from July 26, 2026 to July 26, 2029, unless terminated earlier by the board of directors. All other terms of the 2023 Repurchase Program remain unchanged.

Convertible Notes. As of September 30, 2026, our aggregate principal convertible notes obligations were the Notes due 2028 of $575.0 million. Upon any conversion of the Notes due 2028, we expect to pay cash equal to the principal amount, and at our election, we will pay or deliver cash and/or shares of our common stock for any conversion premium.

Credit Facility. As of September 30, 2026, the Company had $24.4 million outstanding under a subordinated secured revolving credit facility provided to a privately-held company in which the Company holds a non-controlling equity interest (the “Credit Agreement”). The Credit Agreement has a maximum commitment of $30.0 million and matures on April 30, 2027. Advances under the Credit Agreement are restricted to permitted expenditures and are subject to borrowing base availability, satisfaction of conditions precedent, and lender approval mechanics. Interest accrues at 9.0% per annum on a payment-in-kind basis and is capitalized quarterly to the principal balance. Refer to Note 9, “Fair Value Measurements” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Operating Leases. We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year 2036, with the most significant leases relating to our offices in Fremont and Petaluma, California, Arlington and Austin, Texas and Bengaluru, India. As of September 30, 2026, we had total operating lease obligations of approximately $41.4 million recorded on our condensed consolidated balance sheet.

Other Material Cash Requirements. As of September 30, 2026, we had open purchase obligations of approximately $262.4 million related to component inventory that we and our primary contract manufacturers procure on our behalf in accordance with our production forecast as well as other inventory related purchase commitments. The timing of purchases in future periods could differ materially from estimates presented above due to fluctuations in demand requirements related to varying sales levels as well as changes in economic conditions.

Cash Flows. The following table summarizes our cash flows for the periods presented:

(In thousands)

Cash Flows from Operating Activities

Cash flows from operating activities consisted of our net income adjusted for certain non-cash reconciling items, such as stock-based compensation expense, discount from the sale of AMPTC generated during 2025, asset impairment, non-cash interest expense, decrease in the fair value of debt securities and tax equity fund, deferred income taxes, depreciation and amortization, amortization of premium on investments, provision for credit losses, and changes in our operating assets and liabilities. Net cash provided by operating activities increased by $54.3 million for the nine months ended September 30, 2026, as compared to the same period in 2025, primarily due to net cash proceeds of approximately $218.1 million and $69.8 million for the sale of $235.0 million AMPTC generated in 2025 and $75.0 million AMPTC generated in the first half 2026, respectively, contributing to a favorable change in working capital, partially offset by higher cash outflows from accounts payable, accrued expenses and other current liabilities.

Cash Flows from Investing Activities

For the nine months ended September 30, 2026, net cash provided by investing activities of approximately $422.2 million was primarily from the net maturities of approximately $475.8 million of marketable securities and approximately $17.6 million of repayments from a loan receivable, partially offset by approximately $45.8 million used in purchases of test, tooling and assembly equipment for U.S. manufacturing related facility improvements and information technology enhancements, approximately $24.4 million used in the net issuance of a secured revolving credit facility and approximately $1.0 million used for the issuance of a loan receivable.

For the nine months ended September 30, 2025, net cash provided by investing activities of approximately $83.3 million was primarily from the net maturities of approximately $178.8 million of marketable securities, partially offset by approximately $48.5 million issuance of loan receivables to private companies, approximately $30.9 million used in purchases of test and assembly equipment for U.S. manufacturing related facility improvements and information technology enhancements, including capitalized costs related to internal-use software, approximately $9.8 million used in an investment in a tax equity fund and approximately $6.3 million used in an investment in a debt security.

Cash Flows from Financing Activities

For the nine months ended September 30, 2026, net cash used in financing activities of approximately $652.3 million was primarily from payment of approximately $632.5 million towards the settlement of the Notes due 2026 and payment of approximately $23.9 million in employee withholding taxes related to net share settlement of employee equity awards, partially offset by net proceeds from purchases under our employee stock purchase plan of approximately $4.2 million.

For the nine months ended September 30, 2025, net cash used in financing activities of approximately $243.4 million was primarily from payment of approximately $130.0 million used to repurchase our common stock under the 2023 Repurchase Program, approximately $102.2 million towards the settlement of the Notes due 2025, and payment of approximately $16.6 million in employee withholding taxes related to net share settlement of employee equity awards, partially offset by approximately $5.4 million of net proceeds from purchases under our employee stock purchase plan.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In connection with the preparation of our condensed consolidated financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our condensed consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our condensed consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We consider an accounting policy to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the condensed consolidated financial statements. There have been no changes to our critical accounting policies as described in the Form 10-K.

Adoption of New and Recently Issued Accounting Pronouncements

For a discussion of adoption of new and recently issued accounting pronouncements, refer to Note 1, “Description of Business and Basis of Presentation,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have been no material changes in our market risk compared to the disclosures in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in the Form 10-K. Also see the section entitled “Risk Factors” in Part I, Item 1A in the Form 10-K.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2026. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), includes, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 30, 2026, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Investing in our securities involves a high degree of risk. Before investing in our securities, you should consider carefully the information contained in this Quarterly Report on Form 10-Q and in the Form 10-K, including the risk factors identified in Part I, Item 1A thereof. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” above. Our actual results could differ materially from those contained in the forward-looking statements. Any of the risks discussed in the Form 10-K, in other reports we file with the Securities and Exchange Commission and other risks we have not anticipated or discussed, could have a material adverse impact on our business, financial condition or results of operations. Except as set forth below, there has been no material change to our risk factors from those disclosed in Part I, Item 1A in the Form 10‑K.

Changes in the United States trade environment, including the imposition of import tariffs, have and could adversely affect the amount or timing of our revenue, results of operations or cash flows.

Our business is dependent upon the availability of raw materials and components for assembly. During 2025, the United States imposed significant new tariffs on nearly all products and components imported into the United States and pursued a new approach to trade policy that included renegotiating or terminating pre-existing bilateral or multi-lateral trade agreements, enacting sweeping new tariffs on all imports, and imposing additional “reciprocal” tariffs on targeted imports from specified countries. A subset of our products is sourced from China and India, and certain components necessary to manufacture our products in the United States, including our microinverters, batteries and related accessories, are imported from China, India, Taiwan, Vietnam and Japan, among other countries.

On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed by the U.S. under IEEPA were invalid. The U.S. Supreme Court did not address refunds or remedies but instead remanded the matter to the Court of International Trade to address remedies. In response, the President issued an executive order rescinding the IEEPA tariffs and directing agencies to take measures to cease collection of the tariffs. However, a presidential proclamation was issued imposing a temporary import surcharge under Section 122. The surcharge was initially set at 10% ad valorem on all imports, and subsequently increased to 15%, the statutory maximum, with certain exceptions for specified commodities (e.g., electronics and critical minerals) and United States-Mexico-Canada Agreement qualified products. The surcharge took effect on February 24, 2026, for a maximum period of 150 days and expired on July 24, 2026. On May 7, 2026, the U.S. Court of International Trade held that the Section 122 proclamation was invalid on the basis that it did not satisfy the statutory requirements of the Trade Act of 1974. The government appealed the ruling, and the Federal Circuit issued a temporary stay pending appeal. As of the date of this filing, the appeal remains pending. On July 23, 2026, following an investigation initiated on June 2, 2026 under Section 301 of the Trade Act of 1974 (“Section 301”), the Administration announced new tariffs of 10% or 12.5% on imports from 60 trading partners. These tariffs apply to many of the countries from whom we source materials and can include some products material to our business. The evolving legal status, and expiration of the Section 122 surcharge creates additional uncertainty regarding our tariff exposure and any potential recovery of Section 122 duties paid to date. The ultimate impact of these newly enacted and potential future tariffs or other restrictions on international trade will depend on various factors, including the ultimate level of tariffs, the duration such tariffs remain in place, and how other countries respond to U.S. tariffs. Due to broad uncertainty regarding the timing, content and extent of any regulatory changes in the United States or abroad, we cannot predict the impact, if any, that these changes could have on our business, financial condition and results of operations. If the Section 122 surcharge is not replaced, we may benefit from reduced tariff costs on imported components; however, any replacement tariffs imposed under alternative statutory authorities, such as Section 301 or Section 232 of the Trade Expansion Act of 1962 or Section 338 of the Tariff Act of 1930, could result in tariff rates that are equal to or higher than the former Section 122 surcharge and could remain in effect for significantly longer periods.

We have moved a significant portion of our manufacturing to the United States, while retaining limited contract manufacturing in China and India. However, certain components necessary for our products are still required to be imported from outside the United States. For example, LFP battery cells used in our storage products are still supplied solely by two vendors in China. Although we are in the process of searching for other vendors outside of China for future supplies, the expertise and industry for the LFP battery cell is primarily in China, and it will require significant effort to identify alternative, qualified suppliers with the right expertise to develop our battery cells. The resulting environment of retaliatory trade or other practices or additional trade restrictions or barriers, if implemented on a range of products or components that we source from outside the United States, could harm our ability to obtain necessary product components or to sell our products at prices customers are willing to pay, which could have a material adverse effect on our business, prospects, results of operations and cash flows.

Trade disputes, trade restrictions, tariffs and other geopolitical tensions between the United States and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns, which may also negatively impact customer demand for our products or services, delay purchases or renewals, limit expansion opportunities with customers, limit our access to capital, or otherwise negatively impact our business and operations. Ongoing tariffs, trade restrictions and macroeconomic uncertainty have contributed, and may continue to contribute to volatility in the price of our common stock.