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Sep 30, 2025
Stem Q3 2025 Earnings Report
Stem reported solid revenue growth and positive adjusted EBITDA for the third quarter of 2025, driven by its software-centric strategy and improved gross margins.
Key Takeaways
Stem delivered a strong third quarter in 2025, with revenue increasing 31% year-over-year to $38.2 million and achieving its second consecutive quarter of positive adjusted EBITDA of $2.0 million. The company's software-focused strategy is evidenced by a 17% year-over-year growth in ARR to $60.2 million and strong gross margin performance, leading to refined and de-risked full-year guidance.
Revenue increased by 31% year-over-year to $38.2 million, demonstrating solid growth.
Achieved positive adjusted EBITDA of $2.0 million for the second consecutive quarter, indicating improved profitability.
Annual Recurring Revenue (ARR) grew 17% year-over-year and 3% quarter-over-quarter to $60.2 million, highlighting the success of the software-focused strategy.
GAAP gross margin improved significantly to 35% from 21% in the prior year, and non-GAAP gross margin reached 47%, marking the third consecutive quarter of strong gross margins.
Revenue by Segment
Forward Guidance
Stem is revising its full-year 2025 guidance, reflecting increased confidence in its software-centric approach and operational discipline. The company expects revenue between $135 million and $160 million, with non-GAAP gross margin between 40% and 50%, and adjusted EBITDA between -$5 million and $5 million. Year-end ARR guidance remains unchanged at $55 million to $65 million.
Positive Outlook
- Revised revenue guidance to $135M - $160M (previously $125M - $175M), with a higher lower bound.
- Increased non-GAAP Gross Margin guidance to 40% - 50% (previously 30% - 40%), indicating improved profitability.
- Adjusted EBITDA guidance improved to $(5)M - $5M (previously $(10)M - $5M), showing a de-risked lower end.
- Software, edge hardware, & services revenue guidance increased to $125M - $140M (previously $120M - $140M).
- Year-end ARR guidance remains unchanged at $55M - $65M, indicating stable recurring revenue expectations.
Challenges Ahead
- Battery hardware resale revenue guidance reduced to up to $20M (previously up to $35M), reflecting strategic de-emphasis of low-margin hardware.
- Operating Cash Flow guidance revised to $(5)M - $5M (previously $0M - $15M), indicating potential for negative cash flow from operations.
Revenue & Expenses
Visualization of income flow from segment revenue to net income
Historical Earnings Impact
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Avg. Return Before/After Earnings
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