엔페이즈 에너지(ENPH) 2026년 3분기 실적 콘퍼런스 콜: 4분기 전망 및 2027년 성장 동력

엔페이즈 에너지(Enphase Energy)의 2026년 3분기 매출은 전분기 대비 소폭 증가했으나, 미국의 주택용 수요는 고금리와 25D 세액공제 만료에 따른 전환기의 영향으로 계속 제약을 받았습니다. 경영진은 4분기 실판매(sell-through) 감소와 의도적인 유통 채널 재고 감축을 예상하는 한편, 배터리, 상업용 에너지 시스템, 양방향 전기차(EV) 충전을 2027년 성장의 동력으로 위치시키고 있습니다.

핵심 요약

• 2026년 3분기 매출은 세이프 하버(safe harbor) 매출 8,500만 달러를 포함해 2억 9,320만 달러를 기록했습니다. 글로벌 매출과 실판매는 모두 전분기 대비 약 1% 증가했습니다.
• 비GAAP 매출총이익률은 주로 제품 믹스 영향으로 2분기 46.8%에서 45.0%로 하락했습니다. 비GAAP 희석주당순이익(EPS)은 0.41달러였습니다.
• 미국 내 실판매는 전분기 대비 5% 증가했으나, 고금리와 25D 세액공제 만료 이후의 전환기를 반영하며 전년 동기 대비 35% 감소했습니다.
• 경영진은 약 5,120만 달러의 세이프 하버 매출을 포함하여 4분기 매출 가이던스를 2억 2,500만 달러~2억 5,500만 달러로 제시했습니다. 또한 글로벌 실판매는 전분기 대비 약 10% 감소할 것으로 예상하고 있습니다.
• 엔페이즈는 계절적 비수기인 2027년 1분기를 앞두고 유통 채널 재고를 줄이기 위해 4분기 실판매보다 약 2,000만 달러 적은 물량을 출하할 계획입니다.
• 경영진은 IQ 배터리 G5(IQ Battery G5)의 뒷받침에 힘입어 2027년 주택용 배터리 출하량이 약 50% 성장할 것으로 예상하는 한편, 상업용 매출은 2026년 약 3,000만 달러에서 2027년 1억 달러 이상으로 증가할 수 있다고 보고 있습니다.

주요 재무 데이터

2,650만 달러의 투자 손상차손으로 인해 세후 기준 3분기 비GAAP 및 GAAP 희석 EPS가 각각 0.14달러, 0.15달러 감소했습니다. 엔페이즈는 분기 말 대차대조표에 2억 2,850만 달러의 생산 세액공제(PTC)를 보유하고 있으며, 연말까지 2024년 PTC와 관련해 1억 830만 달러의 환급을 받을 것으로 예상합니다.

사업 및 운영 실적

미국 주택용 및 상업용 시장

미국 시장은 3분기 매출의 80%를 차지했으며, 해외 시장은 20%를 기여했습니다. 미국 매출은 전분기 대비 약 3% 증가했고, 실판매는 5% 증가했습니다. 경영진은 미국 주택용 수요의 의미 있는 회복은 없었다고 언급했습니다.

IQ9 상업용 마이크로인버터 판매가 본격화됨에 따라 미국 상업용 실판매는 2분기 대비 약 50% 증가했습니다. 엔페이즈는 2026년 상업용 매출을 약 3,000만 달러로 예상하며, 2027년에는 1억 달러를 넘어설 수 있을 것으로 보고 있습니다. 또한 회사는 1분기에 IQ 배터리 C80(IQ Battery C80) 시범 운영을 진행하고 2분기에 양산 출하를 시작해, 2027년 상업용 배터리 판매량을 약 100MWh로 목표하고 있습니다.

롱테일(중소형) 설치 업체를 위해 설계된 선급 리스 상품인 프로펠(Propel)은 2분기 290개에서 확대되어 13개 주 및 약 350개 참여 설치 업체로 확장되었습니다. 주간 신규 체결 건수는 2분기 약 200건에서 300건을 넘어섰습니다. 경영진은 체결된 시스템이 설치됨에 따라 2027년 상반기 중에 관련 장비 매출이 보다 가시화될 것으로 예상합니다.

주택용 배터리

엔페이즈는 2026년 주택용 배터리 출하량을 약 450MWh로 예상하고 있으며, 2027년에는 대략 50% 성장한 675MWh를 목표로 하고 있습니다. IQ 배터리 G5 시범 운영은 2026년 4분기로 예정되어 있으며, 이후 2027년 1분기에 양산 출하가 이어질 예정입니다.

경영진은 소형의 적층형(stackable) G5 디자인과 개선된 원가 구조가 시장 점유율 확대를 뒷받침할 것으로 기대하고 있습니다. 이 제품은 단일 스택으로 30kWh까지 확장할 수 있어 호주와 같은 시장의 대형 시스템 수요에 대응하는 동시에 유럽 및 미국의 설치 작업을 단순화할 수 있습니다.

네덜란드에서는 2분기 102% 증가에 이어 배터리 활성화 건수가 전분기 대비 23% 증가했습니다. 엔페이즈는 기존 엔페이즈 태양광 전용 주택 약 50만 가구와 타사 태양광 시스템 설치 주택 250만 가구를 잠재적 개보수(retrofit) 시장으로 식별했습니다. 경영진은 2026년 네덜란드의 순계량제(net metering) 종료가 2027년 배터리 경제성을 개선할 것으로 기대합니다.

유럽

유럽 매출은 여름철 계절적 요인과 특히 프랑스에서의 수요 약세를 반영해 전분기 대비 약 11% 감소했으며, 실판매는 약 12% 하락했습니다. 3분기 엔페이즈 유럽 매출의 약 50%를 에너지 저장 장치(ESS)가 차지했습니다.

프랑스 배터리 활성화 건수는 전분기 대비 12% 감소했고, 마이크로인버터 활성화 건수는 24% 감소했습니다. 독일 활성화 건수는 5% 줄었습니다. 경영진은 유럽이 배터리 중심 시장으로 재편되고 있으며, IQ 배터리 G5, IQ9 마이크로인버터 및 홈 에너지 관리 시스템이 자사의 제품 경쟁력을 강화할 것으로 예상한다고 밝혔습니다.

양방향 EV 충전 및 IQ SST

엔페이즈는 교류(AC) 및 직류(DC) 양방향 EV 충전 솔루션에 대해 4분기 시범 운영과 2027년 1분기 양산 출하를 계획하고 있습니다. 경영진은 2027년에 1,500만 달러~2,000만 달러 규모의 매출 기회가 있을 것으로 추정했으며, 미국 내 3개 완성차 제조사(OEM)와 협력 중이고 유럽에서도 추가적인 프로젝트 협의가 진행 중이라고 밝혔습니다.

IQ 고체 변압기(IQ Solid-State Transformer, 이하 IQ SST)의 경우, 엔페이즈는 13.8kV AC에서 제어된 800V DC로의 변환을 실증했으며, 34.5kV 및 메가와트(MW)급 시연을 계획하고 있습니다. 회사는 하이퍼스케일러 및 글로벌 AI 컴퓨팅 기업과의 협업을 포함하여 50개 이상의 잠재 고객과 논의를 진행 중입니다.

경영진은 2027년 상반기 규제 부합 인증 작업, 하반기 고객 시범 운영, 2027년 말 또는 2028년 초 상업용 양산 개시를 예상하고 있습니다. 또한 2030년까지 연간 IQ SST 매출 10억 달러 달성을 가상의 시장 규모, 점유율 및 가격 책정을 전제로 한 잠재적 목표로 보고 있으며, 이는 현재의 가이던스나 확정된 고객 주문을 의미하는 것은 아닙니다.

경영진 가이던스

두 매출총이익률 범위 모두 상호 관세(reciprocal tariffs)로 인한 약 2%포인트의 영향이 반영되어 있습니다. 경영진은 전분기 대비 이익률 하락의 원인으로 제품 믹스, 배터리 가격 조정, 신제품 생산과 관련된 운반비 증가를 꼽았습니다.

엔페이즈의 4분기 매출 가이던스 중간값 기준 수주 잔고 달성률(booked ratio)은 약 70% 수준이었습니다. 경영진은 글로벌 실판매가 전분기 대비 약 10% 감소한 약 2억 1,000만 달러를 기록할 것으로 예상하며, 재고 감축을 위해 유통 채널로 약 1억 9,000만 달러 물량을 출하할 계획입니다.

2027년에 대해 경영진은 공식 가이던스 대신 기획 프레임워크를 제시했습니다. 이는 세이프 하버 매출을 제외한 분기별 핵심 매출 약 2억 달러에, 구체화된 성장 동력에서 발생하는 약 2억 달러를 더한 구조입니다. 이러한 성장 동력에는 주택용 배터리 성장, 상업용 사업 확장, 양방향 EV 충전이 포함되며, 프로펠(Propel)은 추가적인 상방 요인으로 작용할 가능성이 있습니다.

리스크 및 주요 관전 포인트

• 고금리 기조가 미국 주택용 태양광 및 배터리 수요에 지속적인 부담을 주고 있습니다.
• 경영진은 수요 약세와 규제 부합 지침 관련 불확실성으로 인해 2027년 주택용 시장에 대한 가시성이 제한적임을 인정했습니다.
• 2027년 1분기는 계절적 비수기가 될 것으로 예상되며, 유통업체들은 재고에 대해 신중한 태도를 유지할 수 있습니다.
• 3분기 말 유통 채널 재고는 마이크로인버터와 배터리 모두 적정 수준을 소폭 상회해 4분기에 출하량을 의도적으로 적게 가져가는 계획을 세우게 되었습니다.
• 엔페이즈는 유통업체 대상 미국 배터리 권장 소비자가격(list price)을 약 8%~9% 인하했습니다. 경영진은 수요의 가격 탄력성을 평가하기에는 아직 이르다고 밝혔습니다.
• 상호 관세로 인해 4분기 매출총이익률이 약 2%포인트 감소할 것으로 예상됩니다.
• 배터리 성장은 IQ 배터리 G5 출시 상황에 달려 있으며, 상업용 배터리, 양방향 충전 및 IQ SST는 시범 운영, 고객 검증, 규제 부합 인증 및 실행력에 지속적인 영향을 받습니다.

애널리스트 Q&A 주요 내용

경영진은 신제품이 통상적인 1분기 계절성을 일부 상쇄할 수 있다고 말했으나, 2027년 1분기 가이던스는 제시하지 않았습니다. IQ 배터리 G5와 양방향 EV 충전은 1분기에 양산에 들어갈 예정이며, 상업용 배터리의 양산 출하는 2분기로 계획되어 있습니다.

이익률과 관련해 경영진은 신규 사업 전반에 걸쳐 40%의 매출총이익률을 달성한다는 장기 목표를 재확인하면서도, 이 목표 달성에 수 분기가 걸릴 수 있다고 인정했습니다. 또한 주택용 수요가 추가로 악화될 경우 연간 계획을 조정하되, 전략적 연구개발(R&D)을 보호하면서 영업비용 규율을 유지할 것이라고 밝혔습니다.

배터리 성장과 관련하여 경영진은 해외 시장이 3세대 제품에서 전환하고 미국이 4세대에서 G5로 전환함에 따라 2~3분기의 전환 기간이 있을 것으로 보고 있습니다. 이에 따라 배터리 성장은 2027년 상반기보다 하반기에 더 강하게 나타날 것으로 예상됩니다.

IQ SST에 대해 경영진은 개발 및 지식재산권(IP)이 엔페이즈의 자금으로 조달되고 엔페이즈의 소유로 유지된다고 설명했습니다. 고객과의 논의는 현재 주로 기술적 요구사항, 테스트 계획 및 제품 아키텍처에 집중되어 있으나, 비즈니스 논의 역시 진행 중입니다.

실적발표 콘퍼런스 콜 전문

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전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good afternoon, and welcome to the Enphase Energy's Third Quarter 2026 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Zach Freedman. Please go ahead.

Zachary Freedman

Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's third quarter 2026 results. On today's call are Badri Kothandaraman, our President and Chief Executive Officer; Mandy Yang, our Chief Financial Officer; and Raghu Belur, our Chief Products Officer.

After the market closed today, Enphase issued a press release announcing the results for its third quarter ended September 30, 2026. The -- during this conference call, Enphase management will make forward-looking statements, including, but not limited to, statements related to our expected future financial performance, market trends, the capabilities of our technology and products and the benefits to homeowners and installers or operations, including manufacturing, customer service and supply demand, anticipated growth in existing and new markets, including the TPO market, the timing of new product introductions and enhancements to existing products and regulatory tax tariff and supply chain matters.

These forward-looking statements involve significant risks and uncertainties and our actual results and the timing of events could differ materially from those -- these expectations. For a more complete discussion of the risks and uncertainties, please see our most recent Form 10-K and 10-Qs filed with the SEC. We caution you not to place any undue reliance on forward-looking statements and undertake no due to your obligation to update any forward-looking statements as a result of new information, future events or changes in expectations.

Also, please note that financial measures used on this call are expressed on a non-GAAP basis unless otherwise noted and have been adjusted to exclude certain charges. We have provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release furnished with the SEC on Form 8-K which can also be found in the Investor Relations section of our website.

Now I'd like to introduce Badri Kothandaraman, our President and Chief Executive Officer. Badri?

Badrinarayanan Kothandaraman

Good afternoon, and thank you for joining us today to discuss our third quarter 2026 financial results. We reported quarterly revenue of $293.3 million and shipped 1.42 million microinverters and 129.9 megawatt hours of batteries. Our Q3 revenue included $85 million of safe harbor revenue. We exhibited the quarter with channel inventory a little above normal for batteries and micro inverters.

On a GAAP basis, we delivered gross margin of 43.3%, operating expenses of 41.1% and operating income of 2.2%, all as a percentage of revenue. On a non-GAAP basis, we delivered gross margin of 45%, operating expenses of 26.7% and and operating income of 18.3%, all as a percentage of revenue. Mandy will cover the financials later in the call.

Our customer service NPS was 79% in the third quarter compared to 80% in the second quarter, while the average call wait time was approximately 1.9 minutes. Our AI assistant has been rolled out to all our homeowners worldwide and we are now rolling it to Enphase installers in this quarter to help them manage their fleet.

Let's cover operations. In the third quarter, we shipped approximately 1.4 million U.S.-made micro inverters and battery inverters from our U.S. manufacturing facilities and booked the associated 45x production tax credits. We also shipped 63.8 megawatt hours of IQ batteries from our Texas manufacturing facility in the third quarter.

We offer IQ batteries that meet domestic content and to regulations, helping lease and BPA customers qualify for ITC bonuses.

Let's now cover revenue and regional performance. Our global Q3 revenue increased approximately 1% compared to Q2. Our global sell-through also increased by 1% compared to Q2. This fell short of our original expectation for sell-through growth of approximately 10%, which contributed to us delivering revenue towards the lower end of our guidance.

Our revenue mix was 80% from the U.S. and 20% from international markets. In the U.S., revenue increased approximately 3% sequentially. Safe harbor revenue was $85 million in Q3 compared to $84.8 million, our U.S. sell-through in Q3 increased by 5% compared to Q2, a more modest increase than expected, primarily due to the impact of interest rates on the residential solar market.

On a year-over-year basis, our Q3 26 sell-through declined 35% compared to Q3 reflecting pressure from higher interest rates and the transition following the expiry of the 25 D tax credit. Third-party market report suggests overall U.S. residential solar permits were also down approximately 35% year-on-year for Q3 '26.

With our results in line with these reports, we believe we continue to hold our market share reflecting balanced exposure across channels, including TPOs. Our U.S. commercial sell-through grew approximately 50% in Q3 and compared to Q2 as sales of IQ 9 commercial microinverters ramped.

Our current commercial volumes are mostly channel-based with larger direct opportunities emerging for 2027. In Europe, revenue decreased approximately 11% sequentially in the third quarter, while sell-through also declined approximately 12%, in part due to summer seasonality and a modestly weaker demand environment, particularly in France.

Europe is evolving into a battery led market with approximately 50% of our revenue in the region coming from storage systems in Q3. In Netherlands, our battery activations increased 23% in Q3 compared to Q2, a counter-seasonal increase building on the 102% growth in Q2 versus Q1. hormone events have become a successful selling tool for us.

In France, however, battery activations went down by 12% compared to Q2. while microinverter activations fell 24%, reflecting summer seasonality and macroeconomic uncertainty that we continue in the short term.

In Germany, overall activations were down 5% as compared to Q2.

Let's now cover the outlook for the fourth quarter. We expect revenue for the fourth quarter between $225 million and $255 million, including approximately $51.2 million of safe harbor revenue. For batteries, we expect shipments of 100 to 120-megawatt hours. We are currently about 70% booked to the midpoint of our revenue guidance.

Our global sell-through has remained relatively flat over the first 3 quarters of 2026. We are not seeing any meaningful recovery in the U.S. demand. We do expect the global sell-through to decline approximately 10% sequentially in Q4, which is approximately $20 million.

With Q1 '27 expected to be seasonally slow, we anticipate distributors will remain cautious about building inventory heading into the new year. Accordingly, we plan to ship approximately $20 million below sell-through in Q4 to further reduce channel inventory. While the near-term market environment remains challenging, I am very excited about the growth drivers we have established and would like to spend the rest of my remarks on how we see Enphase growing in 2027 and beyond.

I will walk through 5 growth drivers. First, residential batteries, second, recovering our U.S. residential solar business driven by Propel; Third, our commercial solar and battery business. Fourth by directional EV charging and fifth, AI data centers with our IQ Solid State transformer.

Let me start first with where we are today. In 2026, we expect that approximately 72% of our revenue would have come from residential solar, 21% from residential batteries and 7% from commercial solar, EV charging and other.

Now let me walk through each of our growth drivers. Our first growth driver is residential batteries. Global adoption continues to accelerate driven by demand for energy resilience, self-consumption and VPP. In the U.S., third-party reports estimate Enphase's residential battery market share at proximately 15% to 20%. And with approximately 50% share of the U.S. solar inverter market, we see a significant opportunity to achieve a similar market share in residential batteries over time.

A key catalyst will be our next-generation IQ battery G5, our fifth generation product. This is because the installers have been asking us for a compact stackable AC comparative battery that scales up to 30-kilowatt hours in a single stack with higher energy density, faster installation and an improved cost structure.

Beyond new solar installations, we also have a substantial retrofit opportunity across approximately 3 million Enphase solar households in the U.S. many of whom could benefit from backup power, energy independence and VPP income. We expect the IQ Battery G5 pilots in the fourth quarter and volume shipments next quarter, Q1 '27.

We are also seeing VPPs move from small pilots towards large-scale commercial opportunities. Major utilities and hyperscalers are engaging with us on programs that compensate homeowners for making their batteries available to support the bid. This is particularly compelling in communities near data centers where distributed batteries can help grow -- help manage growing electricity demand while providing financial benefits to homeowners.

We expect utility programs to contribute to growth in 2027 with larger utility and data center-driven VPP opportunities developing in 2028 and beyond. In Europe, our largest near-term opportunity is the Netherlands, where approximately 0.5 million existing Enphase solar-only customers represent nearly a $2 billion battery retrofit opportunity with net metering ending at the end of this year, 2026, the economics of adding storage have become increasingly attractive.

We are reaching these customers directly through homeowner events, e-mails and webinars. Beyond our installed base, approximately 2.5 million Dutch homes with non-Enphase solar systems also represent another substantial opportunity. Our universal AC covered battery architecture allows us to serve this huge market, which we are targeting through social media campaign. We expect a strong growth in battery activations seen, which was seen throughout 2026 to accelerate further in 2027.

We are also excited about Australia, where the median residential battery installation is about 30 to 40-kilowatt hour. Until now, we have not been well positioned to compete in this high-capacity market with our third-generation battery, our Gen 5 or the fifth generation battery changes that with up to 30-kilowatt hour per stack, combined with improved cost structure, G5 gives a tremendous opportunity to penetrate Australia's 12 gigawatt hour per year market.

Putting it all together, we expect residential battery shipments of approximately 450-megawatt hours in 2026, and we believe we can grow this business approximately by 50% and in 2027 with a highly competitive product, millions of existing solar customers, expanding VPP opportunities and access to new international markets we see a substantial multiyear growth opportunity ahead on residential backing.

Our second growth driver is the recovery of the U.S. residential solar market. Propel is central to how we see that happening for Enphase. The expiry of the 25-day tax credit removed a meaningful portion of the cash and loan market, which has historically been the core of our long-tail installer business.

In today's high rate -- high interest rate environment, a third-party ownership offering with 48-day tax credit is a practical thought for many of these homeowners. Propel a prepaid lease offering from sole source solutions that combines Enphase equipment loan financing by Tridem Financial and national distribution through Green Tech Renewables is purpose built for long tail installers.

Propel is now available in 13 states and installer participation has grown to approximately 350 as compared to 290 in Q2. Weekly originations of Propel have increased to over 300 compared to approximately 200 in Q2 with a battery attachment at roughly 1% a Sol source recently announced $300 million in capital raised to support its growth and important milestone in today's environment. Sol source is actively working to secure additional capital to support the next phase of expansion into new markets.

We expect the growth in propel originations to translate into higher Enphase equipment sales as these systems get installed in the first half with growing installer participation, strong battery attach and opportunities to expand into additional states, Propel can become a meaningful driver of our U.S. residential solar and battery business in 2027.

Our third growth driver is our commercial business. U.S. commercial solar has been one of the most resilient segments of the market in 2026, with permit activity up approximately 13% year-to-date. We expect strong fundamentals to continue into 2027, supported by rising electricity rates and investment tax credits. The recently announced FCC restrictions are new foreign-produced inverters create a significant competitive advantage for Enphase as a U.S.-based manufacturer with domestic manufacturing capabilities.

Our 3-phase microinverter portfolio spans 208 volt to 480-volt applications, including the IQ 9F 3P, our highest power 548-watt GaN-based microinverter. Beyond expanding our distribution channel business, we are pursuing several large national accounts that could meaningfully accelerate growth in 2027. We are also excited about our entry into the U.S. small commercial storage market with the IQ battery C80, a fully integrated 480-volt AC copper system delivering 80-kilowatt towers of energy and 40 kilowatts of continuous power.

A key application here is demand charge reduction, where the battery discharges during seek demand periods to lower electricity bills. It also supports time of use, solar self-consumption and grid services. Customers can scale up to 2-megawatt hours of capacity by combining 25 battery units, each with 80-kilowatt hours of storage. The battery will be manufactured in the U.S. and designed to make fiopregulations and qualify for domestic content incentives. We opened preorders in August and have seen encouraging initial demand.

We expect to sell approximately 100-megawatt hours of commercial batteries in 2027. We expect it to do pilots in Q1 '27 and volume shipments in Q2 2017. Putting it all together, we anticipate our commercial revenue in 2026 will be approximately $30 million. We believe it could grow to over $100 million in 2027. Over time, we expect to target 40% market share of the U.S. small commercial market, which across solar and batteries could represent an approximately $250 million annual revenue business for Enphase.

Our fourth growth driver is bidirectional EV charge, which brings Enphase directly into the automotive market. EVs, carry batteries 5 to 10x the size of a typical home battery with bidirectional charging, the vehicle becomes part of the home energy system, providing backup power, time of use optimization and VPP participation.

Our IQ bidirectionally be charging solution is built on our GaN power platform and will support both AC and DC bidirectional charging architectures. Our DC solution integrates the bidirectional inverter directly into the charger, while our AC solution combines our standard unidirectional AC charger with an additional V2X kit to enable bidirectional functionality.

The DC solution will support both volts as well as 800 words vehicle architectures with up to 11.5 kilowatts of bidirectional power. We expect pilots in this quarter and volume shipments in Q1 '27. We are collaborating with 3 top global auto OEMs in the U.S. to bring these solutions directly to their battery EV and plug-in hybrid EV customers.

We believe our bidirectional charging solutions offer some of the simplest, lowest cost installations in the market backed by our best-in-class quality and customer service. We believe this expansion into the automotive market also creates a compelling cross-selling opportunity as every EV customer could also become potential customer for Enphase solar and battery systems.

For bidirectional EV charging, we anticipate a $15 million to $20 million revenue opportunity in 2027. We have a substantially larger growth opportunity in 2028 and beyond with the potential to generate over $100 million in annual revenue as they ramp combined with our cross-selling opportunities, we see multiple avenues for additional growth from this business.

Our fifth and final growth driver is IQ SST, which brings Enphase's power conversion expertise into the rapidly expanding AI data center market. IQ SSD is designed to convert 13.8 kV or 34.5 kV medium voltage directly into regulated 800 BDC through our modular single-stage architecture.

We are targeting approximately 98.5% efficiency fine ninth reliability and sub-millisecond response times. By eliminating multiple power conversion stages, we believe IQ SST can fundamentally improve the efficiency, reliability, cost and simplicity of AI data center power infrastructure. We recently achieved a major technical milestone successfully demonstrating 13.8 kV AC to 800 BDC conversion in our Austin laboratory we expect to demonstrate 34.5 kV capability very soon in the fourth quarter.

We are also preparing megawatt scale full system demonstrations this quarter, both at our Austin facility as well as at the national lab with customer participation in both locations. These are important steps towards validating our technology at scale and operating conditions required by AI data centers.

Our customer engagement is accelerating. Since our last update in July, our pipeline has expanded significantly to more than 50 potential customers. Of note, we are developing specific IQ SSD solutions for the AI data center needs of 2 global technology leaders, a hyperscaler and a global AI computing leader. These collaborations are helping shape our product road map and system architecture. We remain on track for customer pilots in 2027, followed by initial commercial shipments in 2028. By 2030, we believe IQ SST has the potential to become a $1 billion annual revenue business for Enphase in the data center market alone.

Three things stand out from our customer discussions. First, reliability is paramount. Our distributed architecture built on more than 2 decades of microinverter experience offers inherent redundancy and fault isolation, providing a powerful foundation for the reliability requirements of AI data centers; second, our successful 13.8 kV demonstration and upcoming 34.5 kV validation gives us increasing confidence in our ability to meet customer development time lines. Third, our U.S. manufacturing capabilities and supply chain readiness are important competitive advantages as customers prepare for large-scale deployments.

We recognize the substantial engineering qualification and execution work ahead but we also recognize the magnitude of this opportunity, and we are executing with the agency to make this vision a reality.

Let me conclude. We do not believe today's financial results reflect the full potential of where Enphase headed in 2027 and beyond. We are working with determination to build a stronger, more diversified company with 5 powerful growth drivers, residential batteries, driving residential solar with prepaid leases commercial solar and batteries, bidirectional EV charging and solid state transformers for AI data centers.

What makes these opportunities especially compelling is that they are all built on the same foundation. Our world-class power electronics technology. Our unique single-stage power conversion architecture, our custom-designed ASICs, state-of-the-art magnetics, proprietary predictive control software, an industry-leading GaN technology. All of these give us the ability to deliver smaller, more efficient more reliable and lower cost power conversion solutions across multiple markets.

We remain confident in the long-term recovery of residential solar, while prepaid leases can help drive adoption in the near term via propel while -- and rising utility rates will help. So will expanding virtual power lines. And finally, the homeowners growing desire for energy independence will support the market over time. But we are not waiting for that recovery we are building new businesses entering new markets and positioning Enphase for a much larger future.

We believe these opportunities have the potential to more than double the size of our company over time.

With that call with that, I will turn the call over to Mandy for her review of our financial results. Mandy?

Mandy Yang

Thanks, Badri, and good afternoon, everyone. I will provide more details related to our third quarter of 2026 financial results as well as our business outlook for the fourth quarter of 2026. We have provided reconciliations of these non-GAAP to give financial measures in our earnings release posted today, which can also be found in the IR section of our website.

Total revenue for Q3 was $293.2 million. We ship approximately 655.2 megawatts DC of microinverters and 129.9 megawatt hours of IQ batteries. Q3 revenue included $85 million of safe harbor revenue. As a reminder, we define safe harbor revenue as any sales made to customers who plan to install the inventory over more than a year. Non-GAAP gross margin was 45% in Q3 compared to 46.8% in Q2.

The decrease was primarily due to product mix. gross margin was 43.3% in Q3 compared to 60% in Q2. Q2 gross margin was positively impacted by 15.6 percentage points for the EPA tariff refunds received. Reciprocal tariffs negatively impact our gross margin by 1.3 percentage points in Q3. Non-GAAP operating expenses were $78.4 million for Q3 compared to $79.8 million for Q2.

Operating expenses were $120.7 million for Q3 compared to $123.5 million for Q2. GAAP operating expenses for Q3 included $39.4 million of base compensation expenses and $2.9 million of acquisition-related expenses and amortization.

On a non-GAAP basis, income from operations for Q3 was $53.6 million compared to $56.7 million for Q2. Our GAAP basis Income from operations was $6.5 million for Q3 compared to $51.5 million for Q2.

On a non-GAAP basis, net income for Q3 was $54 million, compared to $61.5 million for Q2. This resulted in non-GAAP diluted earnings per share of $0.41 for Q3 compared to $0.46 for Q2. Tenet income for Q3 was $23.4 million compared to $36.1 million for Q2. This resulted in give diluted earnings per share of $0.17 for Q3 compared to $0.27 for Q2.

We incurred $26.5 million of impairment in investments, which reduced third quarter non-GAAP and GAAP diluted earnings per share by $0.14 and $0.15, respectively, net of tax. We exited Q3 with a total cash, cash equivalents and marketable securities balance of $931.8 million compared to $937.7 million at the end of Q2.

In Q3, cash provided by operations was approximately $90,000, while capital expenditures were $11.5 million, resulting in negative free cash flow of $11.4 million. The negative free cash flow primarily reflected negative working capital changes, including the timing of safe harbor revenue prepayment and PTC monetization.

As of September 30, 2026, we had approximately $228.5 million of PTCs on our balance sheet. This consisted of $108.3 million related to U.S. main micro inverters shipped in 2024 and $120.2 million related to shipments during the first 9 months of 2026. We expect to receive the refund from the IRS for the $108.2 million of 2024 PTC by the end of the year.

As a reminder, in April, we announced a tax credit transfer agreement to sell $150 million of 2026 PTCs to a leading financial institution with 4 quarterly payments from April 2026 through January 2027. As of September 30, we had monetized $75 million under the agreement. Subsequent to the quarter end, we monetized an additional $37.5 million, bringing year-to-date 2026 PTC monetization to $112.5 million.

Now let's discuss our outlook for the fourth quarter of 2026. We expect Q4 revenue to be in the range of $225 million to $255 million, including shipments of 100 to 120-megawatt hours of IQ battery. We anticipate recognizing approximately $51.2 million of safe harbor revenue in Q4. We expect GAAP gross margin to be within a range of 38% to 41%, and and non-GAAP gross margin to be within a range of 40% to 43%.

Both ranges include approximately 2 percentage points of reciprocal tariff impact. The lower sequential margin outlook is primarily due to product mix, better price adjustments and increased freight costs associated with our new product production. Non-GAAP gross margin excludes stock-based compensation expenses and acquisition-related amortization.

We spend our GAAP operating expenses to be within the range of $119 million to $123 million, including approximately $43 million estimated for stock-based compensation expenses and acquisition-related amortization. We spent our non-GAAP operating expenses to be within the range of $76 million to $80 million. We remain focused on cost discipline, aligning our spending with the revenue environment and prioritizing resources toward our highest impact opportunities.

Throughout this process, we will protect the customer experience and continue investing in innovation, including IQ SST and other strategic growth priorities.

With that, I will open the line for questions.

Operator

[Operator Instructions]. The first question will come from Brian Lee with Goldman Sachs.

질의응답

Brian Lee

Badri, I know there are some moving pieces here, but could you clarify. I think you said 4Q guidance includes a $20 million under shipment, so without that, I guess the math implies revenue would be flat at the midpoint ex safe harbor from 3Q to 4Q. I guess is that right?

And then with the $20 million under shipment, how does that impact kind of opportunity if $210 million is sort of the normalized midpoint for 4Q. Is that down another 10% to 20% on normal seasonality into 1Q? Or -- just how should we think about the revenue range of outcomes for 1Q given the undershipment and also the interplay with some of the new product and new end market opportunities you have heading into 2027?

Badrinarayanan Kothandaraman

Yes. Brian, thank you. So let me just give you the full color. Basically, what we have -- what we said is that our global sell-through in the first 3 quarters of this year has been kind of flat at roughly roughly $230 million a quarter. That's the global filter. What we are seeing right now for Q4, what we said is we are seeing we anticipate a 10% reduction in that file. So you can do the math, that's about $210 million of sell-through -- global sell-through expected in Q4.

Now we all know that Q1, there is seasonality. So therefore, distributors are going to not talk a lot of inventory in Q1 because of seasonality. And we want to get ahead of that by basically under shipping $20 million from that $210 million number. So basically $190 million into the channel. So that's what we are talking about.

And big picture for 2027, the way you should think about it is excluding safe harbor, our core revenue has been approximately $200 million per quarter in the last 2 to 3 quarters, approximately $200 million. So you take $200 million multiplied by 4 for 2027. And then you add the $200 million of growth drivers that we gave you, which comprises of -- we said that the battery number goes from 450-megawatt hours to 675-megawatt hours.

We talked about commercial going from $30 million to $100 million. We did not quantify Propel, but that would be -- that could be some upside. We then talked about bidirectional EV charger, adding a modest $15 million to $20 million because we have the top 3 OEM partnerships. So -- while we are not guiding for 2027, that's a framework that we are thinking about, like $200 million core plus these growth opportunities.

Now with regarding your specific question coming into Q1, Q1 is, of course, going to be seasonally down. We have all seen that. However, what is good in the growth vectors that I outlined. We have 5 growth vectors. Many of them are actually going to start in late Q4, early Q1. Like for example, our fifth generation battery is going to do pilots in Q4 and introduced very early Q1.

Our commercial battery is going to do a significant number of pilots in Q1 our bidirectional charger is going to do pilots in Q4 and volume production in Q1, Propel is an ongoing business. So we have some growth drivers there for Q1.

So while I'm not going to give you guidance, that's the way you can think about Q1 is there is some seasonal offset in the core business plus Enphase specific growth vectors where we are not depending on the market to come back, but these are additional revenue drivers.

Brian Lee

Super helpful. And maybe just focusing on one aspect of the growth, if we kind of look at the different drivers you mentioned, the 50% growth in battery storage megawatt hours in 2027, that seems to be probably the single biggest year-on-year delta for potential revenue growth. What -- I guess, what's the cadence of that? How much visibility do you have? I mean it's pretty heady growth, is a lot of that in the second half of '27? And then any pipeline leads kind of you can speak to for visibility into that level of growth into next year?

Badrinarayanan Kothandaraman

Yes, I mean, the product, we expect this to be a transformational product. First of all, just so you have the backroom Europe, Australia, international regions will be going from the third-generation battery to the fifth generation battery. While the U.S. will be going from the fourth generation battery to the first generation battery.

The single biggest driver. The single biggest driver for our fifth generation battery is one box on the wall, one box on the wall. So for example, with our third-generation battery if you need 3 boxes on the world for a 15-kilowatt hour, it will be 1 year.

And the other big thing is because the energy density is so much better we are able to reduce the cost structure. If we are able to reduce the cost structure, we can compete at a good price, maintaining gross margin. So therefore, we are extremely excited about Australia. Australia, for example, the median median kilowatt hours is approximately 30 to 40-kilowatt hours, and we can address it with 1 or 2 stacks.

So therefore, the form factor becomes amazing. And Similarly, we can address Germany, for example, with just 1 stack. In places like Netherlands, we are going to go into turbocharge, which is come 2027, batteries are going to become the norm because Dutch are going to see their builds start to increase. There, we have 0.5 million homes where we can really drive adoption of the battery, and we are driving the adoption of the third-generation battery today, and that will become even better with the fifth generation battery.

So similarly, in France, we have 0.5 million or 400,000 homes in France, where we apply the same concept. So while for us, we are going to start ramping in Q1, meaning pilots in Q4, volume shipments in Q1, as you know, there will obviously be a transition there with -- it will take usually a couple of quarters for the batteries to transition from the generation, the new generation may even take 3.

So therefore, you would expect naturally in the back half to be a nice growth compared to the first half.

Operator

[Operator Instructions]. The next question will come from Philip Shen with ROTH Capital Partners.

Philip Shen

We published yesterday that the '27 outlook for resi solar could actually be down year-over-year. I wanted to see if you could kind of comment on the overall market sentiment as well. It seems like first half next year with seasonality, Q1 is going to be be lower, certainly versus Q4? And could you -- I wonder if it could even be weaker.

And then Q2 could be weak as well, given the delay on the treasury department issuing fee guidance? And so -- can you comment on what you see for the market overall? And if you see potentially even some downside risk to your $200 million per quarter baseline?

Badrinarayanan Kothandaraman

In general, I'm commenting on today's market, you're correct. Today's market is weak due to the higher interest rates and due to a compliance issue or guidance not being very clear and so there is reduced visibility. So you're correct about that. It's difficult for us to difficult for us to see how 2027 is, which is why I focused on our growth drivers, which are independent of the market.

And for us, I will go back to the to the same growth drivers. I mean, those growth drivers, for example, the battery will help us get additional market share in all regions. Starting with the U.S., Europe, new market share, for example, in Australia as well as Europe increasing market share in the U.S., that's what we are targeting.

The next one is Propel. Propel is going from strength to strength. Last time we talked about 200 originations. Now Propel is in 13 states, 300 origination, over 300 originations a week. And of course, Propel has raised its first round of funding. And every time they go to additional states they will need new rounds of funding. That's always -- that's something they have to execute on.

But if they execute on that, Propel is clearly demonstrating growth. And the -- from originations to it showing up in PTO usually takes 3 to 4 months for us. And so all of those, we expect to start seeing the results of all of those in 2027. And the next one is commercial. So commercial, again, is independent of what we are talking about, the residential weakness.

In commercial, we have -- this year, we have introduced 2 good products. They are the 3-phase 480 volts and 3 Phase III words IQ427watts and 548 watts, all gallium nitride. Why are we going to do well in commercial? Same principles. We have a, we do U.S. manufacturing we comply to FAC regulations. We have domestic content per panel monitoring is a very big deal for the commercial asset turns.

Most of the time, that's the differentiator and, of course, our high quality. Now what we are doing there is to have a full-fledged commercial energy management system, which means what commercial solar and commercial storage. Commercial storage is -- I would almost say it's a niche market in the U.S. There aren't clear enough clear players like residential solar or utility scale solar. It's a good opportunity for us.

And there, once again, an 80-kilowatt hour battery extendable to 2-megawatt hours solving real problems of demand charge. Demand charge is the single biggest application. They're in addition to the usual VPP self-consumption type of use. For example, one of our opportunities is utility company in Texas who wants to put these commercial batteries in a distributed way front of the meter. So we are entering -- of course, the business here will -- the growth here will be measured, commercial take is a design-in product. It will take time. But that's completely different vector we are talking about, commercial solar plus commercial batteries.

And the fourth one is bidirectional EV charge. By directional EV charger Again, I'm very excited to highlight that we have 3 big automotive OEMs who have recognized that our product the Enphase product, both AC [ BiDi ] product as well as BC Bidi product is 1 of the easiest, easiest to use, easiest to install. Easy in terms of installation cost, et cetera, and just works. So we have been -- in the last year, we have been doing lot of pilots with those EV OEMs.

So we are very excited about that. And that product is coming imminently with pilots in the current quarter and going on. And then the last one I talked about at length is SST. SST for us is we got to do a few things in SST. SST -- we showed the 13.8 kV demonstration, although it is not full megawatt scale, but that was a proof of concept. Very soon, we are going to show proof of concept of 34.5%.

And then towards the end of the year, we are going to show megawatt scale megawatt scale demonstration of the SST. The moment we do that, we are then going to go into compliance. So once we go into compliance, and finish compliance successfully, we will do DVTs or pilots with end customers. So that's the path there. So I know it's a long answer I gave you, but many of our vectors are about diversification and reducing the reliance on the residential market.

Philip Shen

Got it. Next one here is related more to pricing and margins. We recently published also that you may have lowered some pricing on batteries, ADLP, the authorized distributor list price. And I think in Mandy's comments, you talked about battery price adjustments contributing to the lower sequential margin outlook. I was wondering if you can talk about how much did you lower that battery price by? And then going forward, is that another lever that you -- or is that a lever that you might pull again maybe through '27. And what's really the right margin we should be thinking for a normalized level as we get through '27?

Badrinarayanan Kothandaraman

Right. We -- this change was done a couple of months ago where we basically reduced the list price of our batteries in the U.S. by approximately, I would say, by approximately 8% to 9% to distributors. That's what we did. And -- to answer your question on, do we see more price reductions.

The whole point why we have been working on our fifth generation is an we understand the battery business is a tough business. We understand that consumers expect better pricing over time. Hence, we embarked on the fifth generation product, the fifth generation product uses 100 amperes, users an energy density that is -- I won't say exactly double, but almost double of what we have with respect to the fourth generation product. You should look at the form factor of our first generation. It is very compact, enabling one box on the wall, which means most installations can fit into one stack.

So the whole point is to make our cost a lot more competitive, so that we can participate in segments where we couldn't participate before, for example, in Australia, for example, in certain parts of Europe. So we are looking forward to do that. You asked what does that mean for gross margin? The way I always think about there may be hiccups in the short term on gross margin, but the company's model the company's target is always 40%.

That's the way to think about it. So any business that we get into, we make sure we have a 3-year line of sight to achieving 40%. It might take 1 to 2 quarters sometimes or a little more, but our target is 40%.

Operator

The next question will come from Eric Stine with Craig Hallum.

Eric Stine

Just wanted to confirm, obviously, you are talking about pretty significant storage growth. But just thinking about last quarter, seems to me that you were maybe more optimistic about storage and the outlook going forward. So first, I guess, maybe confirm that? And if that is the case, I mean, is France, the main culprit there because the other end markets you're talking about, I don't think your optimism has changed at all versus last quarter.

Badrinarayanan Kothandaraman

Yes. I think in general, in the short term, we are seeing weaknesses in the U.S. primarily due to interest rates in the short term. And that's my comment on the U.S. weakness and hence, our guidance is appropriately this time between 100 and 120. But like what I said, our -- what we are looking at is to introduce our fifth generation product, which will make us -- which will make us competitive everywhere.

We are looking to take market share in the U.S. Right now in the U.S., we have 15% to 20% depending on the third-party reports. If you look at them, we have 15% to 20% market share. It's a too-hard phrase the U.S., and we would like to basically increase market share are like how we have on the solar inverter side in the U.S.

But we do see tremendous opportunity in Netherlands come 2027. Our optimism there has not changed. In terms of France, we do see, again, a huge opportunity for us to market to our own homeowner base of 400,000, and I already talked about Australia. So there is some short-term hiccups here in the U.S., but with our fifth-generation battery, we should start to grow again.

Eric Stine

Yes. Okay. And then just to clarify on EV charging the collaboration with I think you said 3, and I'm just curious, for those 3 in the U.S., I believe in the past, you've also talked about one in Europe.

Badrinarayanan Kothandaraman

All 3 are in the U.S. right now. And there is one in Europe, which is ongoing.

Operator

The next question will come from Colin Rusch with Oppenheimer.

Colin Rusch

I just want to follow up on the pricing question on batteries. Can you talk about how much elasticity you've seen with those price declines in terms of being able to move product to your distributors and then through the channel?

Badrinarayanan Kothandaraman

Yes. since we did the action only a couple of months ago, it is too soon for us to comment on the elasticity. Let me leave it at that, Colin.

Colin Rusch

Okay. And then in Europe, in the Netherlands has been this big opportunity to sell into that market, and it seems to not be materializing in the way that everyone had hoped it might. Can you just talk about where the friction is? Is it a price issue? Is it a customer education issue? Is it a financing issue? I just want to get a sense of what -- where the real friction point is.

Badrinarayanan Kothandaraman

Customers aren't going to react until they see their electricity bill. And they're going to start seeing their electricity will go up quite a bit in 2027. Just a note for you is our activations, our activation for batteries have grown about 102% from Q1 to Q2. and grown by 23% from Q2 to Q3.

We just held a roundtable last week with a lot of Netherlands installers. And everyone is extremely excited and going into 2027. All of them expect the volumes to go up. What are we doing about it? The multiple angles. We are conducting 6 homeowner events a week, 6 homeowner events a week, which means from we invite homeowners, about 150 come -- we give them a presentation for an hour. We talk about -- we talk about the value of a battery post in 2027 post NIM. And then we see a nice conversion there.

We also have our inside sales people in the room. They are taking the orders. And sometimes, we do these events with installers. Sometimes, we just do it. So 6 home order events a week times 13, 78 homeowner events. Each homeowner event is about 150 people. Obviously, there is some yield there. So that's 1 act 1 avenue of growth.

Then we take the leads from that, and we essentially funnel it to our installers. We funnel it our installers, and that increases the loyalty a lot because they not only get free leads from us. They also are running a business, and therefore, they tend to use Enphase for their business as well as for the leads that we give them.

Then the second one is actually webinars. Webinars have been again huge source of leads for us. That, again, we are doing a live webinar. That's also done frequently every week. The other opportunity is -- I mean, the other opportunity, which is -- which we plan to take advantage of going into 2027 is because our battery is an AC coupled battery.

We have a huge opportunity to take the 2.5 million non-Enphase solar homes. So there is 8 million homes in Holland or the Netherlands 8 million homes. Of that, there is 3 million homes with solar, of that, there is 0.5 million Enphase homes with solar. So you have a balance of 2.5 million homes with non-Enphase solar. And we are basically actively targeting that, and we expect the demand from that also to add up soon.

So the vectors were as in Netherlands are continue continue the homeowner events, establish a direct relationship because they all know in phase well. And therefore, if they know that a huge company is behind it, they -- and they understand it is a premium and phase is a premium player. They do want the premium support experience.

So we plan to do that. We plan to do webinars. We plan to go after the non-Enphase homes because our technology is AC-coupled. And then Gen 5 is now coming. Gen5 will take the number of boxes on the ward to one. And so that will make the cost structure better, will be easier to install installer doesn't need to have multiple points on the wall. It will be stackable, easy to install. Yes. So we are incredibly excited about Netherlands.

Operator

The next question will come from Mark Strouse with JPMorgan.

Mark W. Strouse

Badri, the last few years, you've been very disciplined with your focus on operating margins. Not looking for 2027 guidance, but just kind of targets over the near term. To the extent that the residential business weakens further, how we should think about pro forma OpEx as a percentage of sales in the context of all of these growth initiatives that you're trying to ramp at the same time?

Badrinarayanan Kothandaraman

Right. Enphase has always been disciplined when it comes to gross margin, the same thing when it comes to OpEx, the same thing. So we are going to be looking at our annual operating plan as we go into 2027. And and we are not going to be afraid to make all of the necessary changes in order to be profitable. And no matter what you can count on Enphase to innovate, spend the correct dollars on innovation, like assist, like commercial battery, like fifth generation battery going to a 6-generation battery and so on.

We are all seeing AI help us in productivity as well. So the answer is we will continue to be disciplined and we will continue to be profitable.

Mark W. Strouse

Okay. Okay. Understood. And then just a follow-up on the -- I believe you mentioned a possibility for about $1 billion in revenue from SST by 2030. And -- can you just give a bit more color on how you're coming up with that metric? Is that a top-down view with an assumed market share? Is it some kind of risk-adjusted bottoms-up you? Anything there would be helpful.

Badrinarayanan Kothandaraman

I'll have Raghu elaborate on how SST is going conversation with customers and then answer your question as well.

Raghuveer Belur

Yes. So we are making a lot of progress on SSDs. You saw the announcement that we made this morning. about 13.8 kV product working and generating 800 volts PC. The core of our SSD, just to remind everybody is that power module. It's basically a large microinverter that uses our -- use the technology that we have worked on for the last 20 years and 9 generations of products, 5 generations of ASIC. And it's basically a large microinverter. That's what we do, and it's our core core competency and core expertise, we are actually on our third revision of that product.

So we already have 3 cycles of learning underneath our belt. And what we have done, just to the technology itself, it's a very high frequency, single-stage power conversion, custom ASIC, predictive control and GaN, including BDS can or bidirectional gain. We have been -- we have shown it working at 13.8% for us to go to 1 from 13.8% to 34.5%. We go from -- we just take additional number of power modules or microinverters.

One another key element of the device that's really interesting in there that we have spent a lot of time on and we have a lot of IP is that high-frequency transformer. -- because our high frequency transformer needs to be what's called partial discharge PDF or partial discharge free to operate at 34.5%. So a lot of work has gone on there.

We have demonstrated 13.8%, well show 34.5% shortly as well as demonstrate $34.5 million at scale. And then we'll do that both at our Austin lab as well as at another national lab. And all of this is in discussions with hyperscalers and other big players in the ecosystem. So they're very familiar with what we are doing. They like our approach. They see the benefits of the modularity in terms of the reliability that we do.

We have undersubscribed all our our modules by 6%. We have a very fast response time, which means we could potentially eliminate that low-voltage battery that's in the system. 85% of the supply chain for our power module is the same as our microinverters that we have today. So from a FIACcompliance standpoint, which is a huge deal because SST will get classified as it's an inverter-based resource and will get classified as critical infrastructure.

So we have a FIAC compliant or meet regulations. And U.S. manufacturing, it leverages the same manufacturing line that we have for our microinverters today. So we already have an established manufacturing line to build these power modules, which go into our IQ SSD. So we are having very good conversations, 50-plus engagements with customers, including hyperscalers and large ecosystem players there, and they are, in fact, guiding us towards what exactly they would like to see in the product.

Of course, OCP is coming out with their specifications as well in terms of the SSD requirements. As far as the total addressable market is concerned, you do see a lot of variability there in terms of the size of the market. We had said 11 gigawatts by 2030. Obviously, we think that's a very conservative number. When we talk to some of our hyperscaler customers, one hyperscaler as an example, itself is talking about in the tens of gigawatts. So it can vary anywhere between 11 to 30 gigawatts or even higher than 30 gigawatts. So we looked at those numbers.

We took what we assume would be a reasonable market share and at a price that we think is the right price and came up with that $1 billion number by 2030.

Operator

The next question will come from Dylan Nassano with Wolfe Research.

Dylan Nassano

Just want to dial in a little more on Europe to better understand kind of what's happening on the ground there? I mean I know you specifically called out France, I think, is being a little bit softer. But just trying to understand why core resi solar in Europe isn't kind of acting stronger here given -- I mean we're tracking energy prices are still relatively elevated. Yes, just any thoughts there would be helpful.

Badrinarayanan Kothandaraman

Yes. The Europe usually in Europe, summer seasonality is quite high. And that's what we saw. That's what we are reporting. We saw our sell-through basically was approximately, I mean, a little over 10%, I think, 12% down. And I think that was in line with the past seasonality. Europe, there was a small time during Q1 and Q2 where the war basically accelerated energy, the need for energy independence. So we saw a spike. That acceleration seems to have worn off.

Now it's back to regular demand. And for us, the big opportunities in Europe are with batteries. And with our -- what we sell today is our third-generation battery. We sell today, our focus countries are Netherlands, France, Germany and U.K. These are our focus countries. We believe all of them can be changed dramatically with our first iteration battery. And our opinion is that once we get the battery, then solar will automatically come attached. We also have a beautiful home energy management system in Europe, which is ability to work with third-party EV chargers, including ours as well as third-party heat pumps.

So really for us is with Q9 micro inverters with the fifth generation battery with a full-fledged home energy management system and now soon to be added by directional charging, we have a complete best-in-class ecosystem will follow.

Dylan Nassano

Got it. And then just a quick follow-up on the bidirectional EV charger. We noticed that there were some announcements recently with automotive companies kind of coming out with the next generation of more affordable bidirectional EVs. Just any thoughts there on how your product kind of compares or is positioned relative to a bidirectional EV.

Badrinarayanan Kothandaraman

Yes. I mean that's what we are talking about. There is 2 types of bidirectional EV chargers, DC based bidirectional EV charger and an AC based by directional EV charger. We will have solutions for both, and they will be shipping in volume in Q1 '27. Our engagement with the top 3 OEMs in the U.S. are basically for both some engagement, meaning one engagement is on BC. And the other 2 engagements are on both AC and DC. So for us, it is a huge opportunity there.

Our product works very well already with most EVs even unofficially it works, but we will not claim any compatibility unless that OEM, green and certifies the same. So what we do in America is that's why it may be a little slow the top 3 OEMs. For example, OEM one is introducing a car with bidirectional capability. We start testing that like 9 months ago.

And in that way, we can certify that our bidirectional chargers are compatible, and they will have to certify that, not us. And we are well underway with these 3 OEMs. And the installation is going to be very simple and sleek. We have the meter color which we have now -- we have over -- if I remember right, over 65 utilities. Yes, I may be getting that wrong. We have the metric color qualified by these utilities. And all we need is a meter collar and the DC by directional charter. -- components. And in fact, you won't even see the meter color because it is hidden behind the meter.

So you have our inverter and it can do B2, which means it can function like a generator, which is in the case of a blackout, the relay in the meter collar opens and the car is powering the home. You can also obviously make it do vehicle to grid, subject to the utility approval where the car can feed the grid in times of need. That DC bidirectional chargers in the U.S. has got 11.5 kilowatts of power, plenty, plenty enough, so we anticipate interesting combinations.

We anticipate people to buy this DC bidirectional charger and then add solar, for example. So there is -- like what I stated in my prepared remarks, we see a very good cross-sell opportunity. But first things first is essentially release and work with the OEM, with the approval of the OEM launch the bidirectional chargers 1 by 1 of each of their models and you will see press releases that will come.

Operator

The next question will come from Corinne Blanchard with Deutsche Bank.

Corinne Blanchard

Maybe shifting gears for Intevia, can you talk about your view about the midterm election since maybe some investors have become a little bit more optimistic on some of the conversation going on to maybe see potential tax credit extension. So just wondering what you guys think and how that could maybe be a positive as well going into 2027.

Raghuveer Belur

Yes. This is Raghu. Without commenting on getting into the details of the politics of it. But yes, there is discussion. Actually, some of the discussion is bipartisan in terms of extension of some of the investment tax credits for sure as well as some of the production tax credits as well. So I think there is a broad view that the election results may help renewables in general, but be specific, these particularly these 2 tax credits, it seems like has bipartisan support.

So I think we'll wait to see what the outcomes are, but it seems like we are going to see good support for extensions and because it makes sense.

Corinne Blanchard

And maybe just to continue on that one. Would that change anything in terms of your strategy for maybe bringing more manufacturing footprint in the U.S. Or would you rather stay put, given the current domain context in the U.S. market and just wait maybe a few more quarters to see how that evolves.

Badrinarayanan Kothandaraman

Yes. I mean we have all of the capacity we need. And when, for example, the SST starts ramping, we can easily scale that, we can easily scale that. Our capacity here is quite good. So we won't hesitate we won't hesitate to scale levers manufacturer. And there's no obstacles to that right now.

Operator

The next question will come from Julien Dumoulin-Smith with Jefferies

Unknown Analyst

This is Carter on for Julien. Just a follow-up on SST. You called out a leading hyperscaler as well as a global AI computing leader, specifically in the release. Just curious if there's any color on those relationships, specifically feedback you've gotten so far. But are they working with you exclusively on SST. So you have really just any color on those, those ones you called out in the release.

Raghuveer Belur

Yes. We won't go into any details there. That's the extent of what we are saying. But in general, they are working closely with us. We have shown them the power modules. They have seen -- they have even visited our Austin lab and seeing how we are progressing, and we are keeping, obviously, everybody up-to-date on how the development is progressing. So the 13.8 kV announcement this morning was a pretty exciting announcement.

And for us, when we think about going from $13.8 million to $34.5 million, we use the same power module. It's not like we are changing our power module. And of course, the fact that we are using GaN is very interesting to them because of the reliability of -- particularly because of the reliability of Gan.

But more importantly, it's also about the reliability of the entire system. So it's the reliability at the component level, within the power module. But the way our SST is constructed itself gives us some intrinsic, the modularity of the power module gives us big advantages as well.

So when you think about -- we hear this discussion a lot around GaN versus silicon carbide. For us, GaN was a natural organic fit for us. We have and wide bandgap technologies in general. But for us, because of the reliability that GaN has particularly in terms of AT surge robustness, the withstand capability the BDS support that GaN has, which also gives us additional withstand GaN is commodity product, very large, very high volume. It's very -- from a manufacturing point of view, again, is very easy to manufacture because it is GaN on top of silicon.

So it's a small IP layer on top of mostly silicon. And what GaN also allows us to do is to run the controller at higher and higher frequency and because we run it at higher frequency, we get the response time that we need we get benefit in terms of the magnetics being much smaller. So it is a really good choice for us to go to with GaN in particular.

So to summarize, really working closely with the hyperscalers have been really informative for us because we are working very closely. And they, in fact, inform us a lot on our product development and exactly how they would like to see the evolution of the product in terms of both the technology, the performance, et cetera.

And the nice thing about the power module that we have, the GaN-based power module is it gives us a lot of flexibility in terms of meeting their specific requirements, whether that is in size or dimensions or support for a low-voltage battery, the seat of the battery to match the state of the battery, et cetera. So it's been -- it was -- it's been very, very good for us to be working with demanding customers like these because they just make you better.

Great. Just from a timing standpoint, if you guys are doing megawatt-scale demos by the end of this year, then you go into a compliance period, when could we start to see pilot announcements into 27? I guess I'm thinking like how long that compliance period would end or would last.

Unknown Executive

Yes. I think the compliance will start with the demonstrations this year, exactly like you said. We expect that in the second half, we should start -- we should be through our compliance by the first half of year and then heading to pilots in the second half. We should be realistic about that because some of the U.S. standards are still an outline of investigation. So we need to work closely with you all get through that. If you look at something like UL-2877or3347A. So we've got some work to do there.

But again, we expect that the first half of the year will be focused around getting through compliance and then depending on how that goes, depending on how some of the early testing with the hyperscaler goes, we will enter the pilots in the second half of the year and then close to the end of the year and early 2028, we go into commercial production. I think it will all be gained by those 2 elements.

Now I think we will be, from a manufacturing point of view, I expect that we'll be ready to meet that time line. In fact, in discussing with all these larger customers, it seems like it aligns well with their time line. So I think we are in a good place from that point of view.

Operator

The next question will come from Sunaina Ocalan with Bernstein.

Sunaina Ocalan

I really appreciate the color on the previous answer. Maybe if I can just follow up to that. Can you comment on what the commitments are from the hyperscaler and the other company? Are they essentially technical evaluations? Or are there some form of risk sharing funded development with you? And maybe if I can follow up, what -- are they the same architecture on both sides? Or -- do they require different designs from your part?

Raghuveer Belur

This is our own development. But we do talk to them about testing, test plans, et cetera. talk to them about what their specific requirements are. But all of the development is ours, the IPs are, everything is Enphase driven. And it is -- at this stage, while, yes, there are discussions on the business aspects of it, of course.

We do, at this stage, given where we are the 13.8% announcement this morning and 34.5 shortly, we are actually keeping it a little bit more technology focused but there is definitely discussions on the business aspect of things as well.

Operator

The next question will come from Jonathan Kees with Daiwa Capital Markets.

Jonathan Kees

Great. I wanted to, I guess, ask a couple here, 1 on the financials. Q4 was a negative free cash flow, cash burn was Q3 -- I'm sorry, with Q4, you've got lower revenues. Can you kind of indicate what are the puts and takes there in terms of working capital for Q4, I guess that impacted the Q3 numbers in terms of the cash burn there.

And then I also want to ask about France. I mean you talked about some weakness there, but also the potential still the strong possibility there including like your embedded base of like 400,000 residential customers there. have the riots had any impact? I mean, I would think they would kind of slow deter the installers from -- and even the reach-out sessions, in site sessions to increase the word in terms of G5 and other products that you have for these customers?

Badrinarayanan Kothandaraman

Mandy will answer the question on free cash flow and working capital. Go ahead.

Mandy Yang

Sure. So Q4, as we expect to get the 2024 tax refund, as I say, in remarks, right, $108 million related to our 2024 PTC. We expect to get a sizable free cash flow in Q4.

Badrinarayanan Kothandaraman

Good. And France, the weakness in France is because France had a feed-in tariffs before and that feed-in tariff is going to 0. But that's an opportunity as well because now the entire system sale is a solar plus battery sale. So France is evolving from -- was pure solar, but now solar plus battery sale. And we have a lot of plans for France. We used to dominate the French market in terms of solar before. Now that market is slowly eroding and becoming a solar plus battery market.

So there are 2 things we are doing. End of this year, we are introducing a product called like 9, that's a 548-watt microinverter, the highest power product that is available in residential solar period, and that will go to France first at a very attractive price point.

The second, of course, is the Gen 5. So basically, we are catering to exactly creating a best-in-class solar plus battery system, and that will have a good adding, we are very well known in France. Our brand is very well known. So we also plan to ramp up social media in order to take advantage of this and focus on IQ 9 and Gen 5 based energy management systems.

Jonathan Kees

So you've seen no disruptions from the recent ridding then in France?

Badrinarayanan Kothandaraman

Yes. I mean those are short term, we don't -- no negligible.

Operator

The next question will come from Maheep Mandloi with Mizuho.

Maheep Mandloi

Yes. And maybe some clarification earlier on Brian's question then. Could you just talk through the seasonality you expect in the charters in 2027, especially on the $200 million opportunity. How should we kind of think about that? And like does that ramp up in Q1? Or is it more the second half for next year?

Badrinarayanan Kothandaraman

Yes, I answered that, that also, basically, the way you think about it is $200 million a quarter of core plus $200 million total of growth drivers, which I actually outlined. Many of those growth drivers are going to take into effect by Q1. Like for example, the fifth-gen battery is going to pilot in Q4, take into effect Q1 similarly the bidirectional product. Commercial battery is going to pilot in Q1, take into effect in Q2. So we expect a few of those growth drivers to affect us in Q1. And that will counter the typical seasonality that we have.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Badri Thandaraman for any closing remarks.

Badrinarayanan Kothandaraman

Thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.