Stem (NYSE:STEM) executives used the company’s fourth-quarter and full-year 2025 earnings call to highlight what CEO Arun Narayanan described as a “transformative year” in which the business shifted further toward software and services, delivered its first full year of positive adjusted EBITDA, and generated positive operating cash flow.
2025 results: higher software mix, profitability milestones
Management said Stem delivered on its 2025 guidance “across every metric,” with full-year revenue rising 8% year over year to $156 million. Narayanan noted that more than 55% of revenue came from software and services during the year, which he said demonstrates progress in the company’s transition to a software-centric model.
Stem also reported year-end annual recurring revenue (ARR) of $61 million, up 16% year over year. Narayanan said the company expanded gross margins and reduced operating expenses during 2025, producing three consecutive quarters of positive adjusted EBITDA and “our first ever full year positive adjusted EBITDA” of about $7 million. Musfeldt said full-year operating cash flow was $7 million, also a first for the company, and cash ended the fourth quarter at $49 million, up from $43 million at the end of the third quarter.
Margins and cost discipline
Musfeldt said Stem delivered record gross margins for the year, reporting full-year 2025 GAAP gross margin of 38% and non-GAAP gross margin of 46%. For the fourth quarter, the company reported GAAP gross margin of 49% and non-GAAP gross margin of 45%.
He attributed the year’s margin performance to decreased battery hardware sales, a favorable mix of software and services revenue, and improved Edge hardware margins. He also emphasized operating expense reductions, saying full-year 2025 cash operating expenses were down 41% from 2024 and fourth-quarter cash operating expenses were down 50% year over year. Musfeldt characterized the changes as “permanent structural efficiency,” while noting the company continued product development and expanded into new markets.
PowerTrack platform updates and product launches
Narayanan said the company continued to deepen and expand its PowerTrack platform in 2025 with improvements to stability, performance, and customer experience. He said Stem added 6 gigawatts (GW) of solar assets, bringing the total under management to 36 GW, and added $7 million in PowerTrack ARR to reach $41 million.
He also highlighted two product launches in 2025:
- PowerTrack EMS: Launched in September 2025, which Narayanan described as a solution for utility-scale projects. The company announced a new engagement with Everyray, a German clean energy developer and EPC, for a 100 MWh deal. Commercial operations for those deployments are expected to begin in summer 2026.
- PowerTrack Sage: An AI-powered assistant that Stem deployed in the fourth quarter to more than 80 customers in a beta trial. Narayanan said feedback has been “overwhelmingly positive” and that general availability is expected at the end of the month. He said Stem plans a “light version” rollout across the full PowerTrack customer base, with premium tiers to follow for deeper automation and analytics at an incremental cost.
Narayanan also pointed to fourth-quarter momentum in utility-scale bookings, saying they increased 10% sequentially and that nearly all fourth-quarter utility-scale bookings were tied to international solar projects.
Managed services and DevCo update
Stem executives also discussed managed services performance. Narayanan said the managed services business delivered a solid fourth quarter, including a new “brownfield” agreement under which Stem will operate and optimize a four-site energy storage portfolio for a Southern California utility. Services include real-time asset monitoring, enrollment and dispatch into California demand response programs, and performance reporting, among other functions.
In the fourth quarter financial breakdown, Musfeldt said managed services revenue rose 51% year over year, driven in part by one-time performance-based revenue tied to exceeding asset operational targets. He also said PowerTrack software revenue increased 14% year over year and Edge hardware revenue grew 21% year over year.
Project and professional services revenue increased significantly year over year in the fourth quarter, which Musfeldt said was driven by approximately $11 million of one-time DevCo revenue recognized during the period. Excluding DevCo, he said fourth-quarter project and professional services revenue was up 27% year over year. Musfeldt added that as of year-end, Stem had sold or written off all project assets associated with DevCo and “do not intend to make any further investments in DevCo assets moving forward.”
2026 priorities and outlook
Looking ahead, Narayanan framed 2026 as an “optimization year” focused on margin expansion and operating leverage, while selectively investing to support scale in 2027 and beyond. He outlined three priorities: driving operational leverage, strengthening the core business (including PowerTrack’s commercial and industrial solar monitoring footprint in the U.S. and managed services for storage), and building a foundation for accelerated growth in utility-scale markets and international expansion.
Musfeldt provided full-year 2026 guidance ranges, including:
- Total revenue: $140 million to $190 million
- Core revenue (software, services, and Edge hardware): $130 million to $150 million
- Battery hardware resale revenue: up to $40 million (opportunistic and “not a strategic priority”)
- Non-GAAP gross margin: 40% to 50%
- Adjusted EBITDA: $10 million to $15 million
- Operating cash flow: $0 million to $10 million
- ARR: $65 million to $70 million
During the Q&A, Narayanan described PowerTrack EMS as a utility-scale offering with a longer lifecycle, including pipeline build, customer engagement, commissioning, and then revenue recognition. He said contracts can include a mix of hardware, software, and services, each with different recognition timelines. He reiterated expectations that meaningful revenue conversion from PowerTrack EMS bookings should begin toward the end of 2026 and into early 2027.
Asked about the potentially larger battery resale contribution embedded in 2026 guidance, Narayanan said the company has de-emphasized OEM hardware resale but still pursues opportunities where it can help customers “meaningfully” without using up the balance sheet, describing Stem as a trusted advisor. Musfeldt added that gross margin performance will depend on revenue mix and that higher battery resale would pressure margins toward the low end of the guided range.
In closing remarks, Narayanan said the company completed a business transformation, executed a financial turnaround, and launched new products in 2025, while positioning its longer-term goal as becoming “the operating system for new energy projects” across solar, storage, and hybrid assets.
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.
-logo-1200x675.png&h=45&w=95&zc=2){kind=logo}
