Shares of Enphase Energy (ENPH), the major US microinverter and energy storage equipment maker, were hammered on Wednesday, closing down $4.77, or 16.03%, at $24.99. The key blow to investor confidence was not the prior quarter’s results themselves but the company’s fourth-quarter guidance, which came in far below Wall Street estimates — effectively an admission that US residential solar demand shows no sign of recovering in the near term.
Enphase reported third-quarter 2026 revenue of $293.3 million, below the market estimate of $303.9 million and down about 28.5% from $410.4 million a year earlier. Adjusted earnings per share came in at $0.41, also short of the $0.51 analysts expected and well below $0.90 a year earlier. Quarterly shipments totaled about 1.42 million IQ microinverters, while battery storage system shipments reached 129.9 megawatt-hours.
What truly triggered the selloff was the fourth-quarter outlook. The company forecast revenue of $225 million to $255 million, and at the $240 million midpoint, the shortfall versus the roughly $300 million consensus exceeds 20%. Management also warned that fourth-quarter global channel sell-through would fall another roughly 10% sequentially, and said it plans to deliberately ship about $20 million less to distributors to bring inventory down before the seasonally slow first quarter of next year.
Tax Credit Exit Drains Cash-Purchase Market
CEO Badri Kothandaraman attributed the headwinds on the earnings call to “higher interest rates and the expiration of the federal 25D tax credit.” The 25D credit, a US federal tax incentive for homeowners who buy residential solar systems with cash or loans, expired on December 31, 2025. He said plainly that the policy removed “a substantial portion of the cash and loan market,” leaving third-party ownership arrangements such as leases as one of the few remaining options for homeowners in a high-rate environment.
The data confirm the structural blow. Third-quarter US revenue was $233.5 million, down 33% year over year, and the company’s quarterly report pointed directly to the 25D expiration as the main cause. US residential solar end-market sales plunged 35% from a year earlier, while global channel sell-through rose only about 1% sequentially, far below the 10% originally expected. In Europe, revenue fell 11% sequentially and end-market sales dropped 12%, with France particularly weak, reflecting both seasonal factors and softening demand.
The CEO conceded on the conference call: “We are not seeing any meaningful recovery in US demand.” Management also expects distributors to remain cautious through the end of 2027.
The interest-rate environment is another constraint. The Federal Reserve raised rates by a quarter point on September 16 to a range of 3.75% to 4%, and the US 10-year Treasury yield reached 4.99% on October 27, 0.8 percentage points higher than at the start of the year, markedly increasing the repayment burden on households that finance solar installations. The market broadly expects the Federal Reserve to hold steady at this meeting, but expectations for another rate hike in December remain high.
Cash Flow Turns Negative; JPMorgan Cuts Price Target
Earnings quality also raised eyebrows among institutional investors. Third-quarter operating cash flow was only about $100,000, and free cash flow was negative $11.37 million. Cash and marketable securities totaled $931.8 million at quarter-end, which remains ample. In addition, a $26.5 million investment impairment dented adjusted earnings per share by about $0.14.
JPMorgan analyst Mark Strouse noted that Enphase’s fourth-quarter guidance came in far below consensus, reflecting continued weakness in US residential demand, and cut his price target to $29 from $35 while maintaining a Neutral rating. He also said the weakening in Europe is a negative signal for peer SolarEdge as well.
AI Data Centers and Commercial Storage: Betting on the Next Growth Wave
Facing a residential market winter, Enphase is pinning its growth hopes on storage and commercial markets. The company expects residential battery shipments to grow 50% from 450 megawatt-hours in 2026 to 675 megawatt-hours in 2027, with the next-generation IQ Battery G5 slated for volume ramp in the first quarter of 2027. About 3 million US households that already have solar installed, along with roughly 500,000 customers in the Netherlands who have solar panels only, are seen as potential battery attach opportunities.
In the commercial market, US commercial solar permits rose 13% in the first nine months of the year. The company targets commercial battery sales of 100 megawatt-hours and commercial revenue of more than $100 million in 2027, far above roughly $30 million in 2026.
The most closely watched initiative is the AI data center power conversion business. Enphase’s IQ SST solid-state transformer has engaged more than 50 potential customers, including a hyperscale cloud provider and a global AI computing company. Pilot programs are scheduled for 2027, with commercial shipments not until 2028, and management sees the business contributing $1 billion in annual revenue by 2030. Still, that front is far from harvest and will be hard-pressed to offset the bleeding in the residential business in the near term.
Enphase holds about a 50% share of the US residential solar inverter market but only 15% to 20% of the residential battery market. Whether its transformation succeeds will be key to whether the stock can stem its decline.
Note: Revenue and earnings per share figures in the table are adjusted numbers; fourth-quarter guidance ranges are as published by the company.
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