Bloom Energy (NYSE:BE) Q2 2026 Earnings Call

0:00 Good day, everyone, and welcome to the Bloom Energy Second Quarter twenty twenty six Earnings Call. Just a reminder that today's call is being recorded. At this time, I would like to hand things over to Mr. Michael Tierney. Please go ahead. Thank you, and good afternoon, everybody. Thank you for joining us for Bloom Energy's second quarter twenty twenty six earnings call. To supplement this conference call, we furnished our second quarter twenty twenty six earnings press release and supplemental financial information with the SEC on Form eight ks and have posted these materials, which we will reference throughout this call to our Investor Relations website. During this conference call, both in our prepared remarks and in answers to your questions, we may make forward looking statements that represent our expectations regarding future events and our future financial performance.

0:47 These include statements about the company's business results, products, markets, customers, strategy, financial position, liquidity and full year outlook for 2026. These statements are predictions based upon our expectations, estimates and assumptions. However, as these statements deal with future events, they are subject to numerous known and unknown risks and uncertainties as discussed in detail in our documents filed with the SEC, including our most recently filed Forms 10 ks and 10 Q. We assume no obligation to revise any forward looking statements made on today's call. During this call and in our second quarter twenty twenty six earnings press release and supplemental financial information, we refer to GAAP and non GAAP financial measures. The non GAAP financial measures are not prepared in accordance with U. S. Generally Accepted Accounting Principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.

1:44 A reconciliation between the GAAP and non GAAP financial measures is included in these materials, which are available on our Investor Relations website. Joining me today on the call are KR Sreedhar, Founder, Chairman and Chief Executive Officer and Simon Edwards, our Chief Financial Officer. KR will begin with an overview of our progress and then Simon will review financial highlights for the quarter. After our prepared remarks, we will have time to take your questions. I will now turn the call over to KR. Good afternoon, everyone, and thank you for joining us. It took Bloom twenty one years to deliver its first billion dollar year in 2022. It took us another three years to double our 2022 revenue.

2:29 Now, we are guiding to double that revenue in just one year, having achieved our first $1,000,000,000 quarter. Bloom Energy's business is accelerating. We are expanding at breakneck speed and continue to grow more profitable. We have successfully demonstrated the earning power of our agile business model, doing exactly what we built it to do. And through all of it, we kept the promise that we make to our customers. Bloom will not be your bottleneck. We deliver power at AI speed and enable our customers to grow. This makes us a vital strategic partner and builds customer loyalty.

3:20 And demand is compounding. New customers are arriving at a faster pace than ever. Landing a mega customer used to take us years, a moat that protected the incumbents. Now, the proven success of our technology coupled with an increasingly urgent need for efficient, clean and reliable power has collapsed the time from first engagement to first order. Because we can book, ship and convert orders to revenue inside the same fiscal year, that demand shows up in results now, while also adding to and diversifying our backlog. Notably, just this year, several customers who had alternative solutions in place abandoned them and came to Bloom.

4:14 Once customers are in, they see the total economic value of our solution and place more orders. We have booked major customers as of today who are not in our reported backlog at the end of last year for whom we will ship some of our systems this year. These customers are now placing longer term orders leading to our backlog growing at a faster pace than revenue. Let me repeat, leading to our backlog growing at a faster pace than revenue. Bloom Energy has emerged as a standard for on-site power, as we predicted we would in our third quarter call last year.

5:01 At that time, we had just announced our first direct hyperscaler customer, Oracle, and delivered them power for a data center within fifty five days. Today, all the major U. S. Hyperscalers and over a dozen U. S. Neo clouds, AI labs, and colocation data center operators have validated and approved our power solutions for their AI factories. Our commercial and industrial business continues to grow. We are the standard for on-site power for hospitals, factories, telecom providers, university campuses, and retail stores.

5:48 But it took us nearly a decade to become the accepted solution in these verticals. Contrast that to AI data centers, where we have become a standard in less than a year. I founded Bloom on the conviction that on-site power would be essential to powering the world and ushering in the digital transformation. And we have built our company to offer the best on-site power solution that removes friction for our customers. We are clean and reliable and fast and affordable. Customers do not have to choose or compromise. And over time, we are reducing friction and turning headwinds to tailwinds.

6:36 Let's take a moment to discuss four friction points: capital, community, permitting and speed. Start with capital. For a century, the cost of power plants and the grid was spread across millions of ratepayers and amortized over decades. A new load simply plugged into surplus capacity and only paid a monthly bill, but surplus grid capacity is now gone. New data center load now means new infrastructure, heavy capital, long lead time, and rate payers who will not fund or subsidize capacity for a corporate customer. The faster, cheaper, more predictable path for that customer is Islanded On-site Power, but that solution demands either a capital budget, most end customers do not have, or a financing partner behind the power purchase agreement, and negotiating bespoke terms across financiers, developers, operators, OEMs, and end users is complicated and slow.

7:50 So we kill that friction with strong financial partners who provide our customers project capital. Brookfield anchors that financing shelf. We formed the partnership last fall at $5,000,000,000 Nine months later, in June, Brookfield expanded its commitment fivefold to $25,000,000,000 One of the largest and most experienced infrastructure investors in the world evaluated our technology, our delivery record and our pipeline, backed us with $5,000,000,000 watched us execute and then multiplied that backing by 500%.

8:37 Capital of that quality and quantity does not follow letters of intent, MOUs or press releases. It follows performance, happy customers and firm bankable orders. And Brookfield is not alone. This quarter, Industrial Development Funding, who has previously funded Bloom deployments, partnered with Oaktree, MUFG Bank, and Morgan Stanley to fund Bloom deployments, cumulatively bringing their total commitment to $2,600,000,000 and more financing partners are in the wings. Gigawatt demand needs giga dollars of capital.

9:25 We arranged that in advance. Next friction point, community. Communities have learned they cannot live with combustion. However, they've also learned they can live next to Bloom Energy servers. No combustion, negligible air pollution compared to turbines and engines, negligible water use, a power server that is aesthetically appealing and runs quieter than air conditioning equipment. No construction project is NIMBY proof, but communities welcome Bloom and that is proving to be a real competitive advantage. Our customers can get air permits with our technology faster than they can with a combustion alternative, and every month saved on permits is a month closer to power availability, which brings me to speed because time to power is really time to token revenue.

10:25 Bloom is increasingly seen as the solution that eliminates the power availability friction point for AI. Chips without power are inventory, not intelligence. Grid operators quote years, timelines on which billion dollar compute clusters go obsolete in a warehouse. Legacy suppliers celebrate backlog stretching to 2029 and beyond. We think a four year backlog is not a trophy, it's a confession of constrained supply. By contrast, Bloom meets the time critical needs of our customers and delivers power in months.

11:12 Since the beginning of the year, we have been continuously adding to our American manufacturing capacity in copy exact increments and will continue to do so ahead of committed orders. And our speed is dependable because we have built a resilient supply chain with broadly available materials by design, multiple qualified suppliers across multiple countries for every critical input, inventory ahead of the ramp, relationships forged over two decades. No single supplier and no single country determines our destiny and every part of our supply chain is prepared to scale with our growth.

12:01 When the business case is measured in months of AI compute, the fastest dependable path to power wins. We are on that path and nobody else is close. None of this is by accident. We built scale into our model years ago for a simple reason. If we were right about the market need for on-site power, the company had to be able to scale rapidly. Now, you are seeing that play out in practice. Capital, community, permitting, speed. Remove all four frictions and the market renders its verdict, supplier of choice. I choose those words deliberately because customers are choosing.

12:51 Customers who had ordered combustion turbines and reciprocating engines, cancel those orders and choose Bloom. Nibius did it this quarter. Existing customers are coming back with expansion opportunities, and the largest infrastructure investors in the world are underwriting our deployments at scale. Trusted partner to customer, to the community and to capital, the market has noticed. Customers now come to us late in their development process and ask Bloom to step in as the primary on-site power solution. The entry point differs, the outcome does not. Once they see our capability, our execution, and the total value we deliver over the life of ownership, the conversation expands from one project to a portfolio.

13:47 So let me be very clear. Bloom Energy is not dependent on one customer or one project. It is multiple customers and multiple projects across every stage of development. And because our copy exact LEGO block servers redeploy from site to site painlessly, unlike bespoke traditional equipment, every project in the portfolio is fungible. Diversity, fungibility and nimbleness allows us to navigate the fast changing AI landscape. Consequently, we have visibility and conviction in our growth trajectory for 2026 and beyond.

14:39 Let me close with how we run this company, because I know what's on your minds. Will AI investment keep growing at the breakneck pace? Our engagement with customers suggest that the pace of investment will not just continue, but accelerate. However, I do not know for sure and I will not insult you by pretending to. Henry Ford could not control that America wanted to drive. He controlled the cost, quality, and availability of the Model T. Like Ford, we are focused on managing the controllables. We drive cost down every single year, while others benefiting from these build outs talk only about raising prices.

15:31 We innovate continuously to better serve our customers and meet every commitment we make. We are experiencing the tailwinds of rapid TAM growth and increasing market share simultaneously, and we are grateful we can meet the market's demands. At the same time, we are building a durable advantage by earning the trust of both our customers and the communities. With that, let me hand it to Simon to take you through the numbers. I'll rejoin you for Q and A. Simon? Thank you, KR. Good afternoon, everyone. This is my second earnings call as Bloom's CFO and my first with a full quarter behind me.

16:20 In April, I told you why I joined Bloom, belief in the mission, the architectural shift in power, the quality of the team and the chance to help build a generational company. Three months in, that conviction has only strengthened. The demand environment is robust and we are neither gated by capacity nor our supply chain. The operating discipline is real. The factory improves every week and cost out is a rhythm here, not a program. And in finance, we have a strong foundation and my focus is on scaling our systems and processes to keep pace with our rapid growth. Before the results, let me come back to the Brookfield announcement KR discussed, a fivefold expansion of our strategic partnership as Brookfield increases its framework to finance Bloom Power projects for AI infrastructure.

17:19 A commitment of that size from one of the world's largest infrastructure investors is significant on its own. It is also the best way into our revenue model because you cannot fully appreciate what that partnership does without understanding the model behind it. And given our shareholder base has grown considerably this past year, let me take a minute to walk through how a Bloom deal works. Every Bloom deal starts with a contract with the end customer, the party that will actually use the power. That contract takes one of two basic forms, either the customer buys the equipment outright, which is a CapEx sale, or they contract for power or capacity without owning the equipment. As our 10 ks describes, the second form comes in a few flavors, a power purchase agreement price per kilowatt hour, a capacity agreement, or an equipment lease price on installed capacity.

18:16 Economically, they all work the same way. The customer pays over time rather than owning the asset. In any case, every contract carries committed commercial operation dates. Since most customers choose to pay over time rather than own, we bring in a financier, an institution like Brookfield that purchases the energy service from Bloom, owns them and delivers to the end customer under the contract we originated. So when you see the word customer in our filings, it can mean either party, the financier that buys from us and appears in our revenue and concentration disclosures or the end customer whose demand created the deal. The IDF partnership that was recently announced is another live example of that model and it was a meaningful contributor to the quarter.

19:08 Mechanically, it is our standard structure. NEVI has signed the offtake and IVF, an independent third party, is purchasing the energy service on cash terms against identified sites and delivery schedules. One feature of this model worth understanding, especially for newer investors, is that large campus deliveries are lumpy. One or two customers could lead our revenue in any given quarter and the customers rotate a different project to reach their delivery windows. The revenue can look concentrated in any single quarter. That concentration reflects delivery timing, not the composition of our backlog. The backlog spans multiple hyperscalers, neo clouds, colocation providers and commercial and industrial operators, and our contract carry payment security appropriate to the transaction size.

20:05 Now to the results. As a reminder, I will focus on non GAAP adjusted metrics. A full GAAP to non GAAP reconciliation is in the press release and the supplemental deck on our IR website. Revenue was $1,065,000,000 up 166% year over year and 42% sequentially. This was another record quarter for Bloom and the first time we exceeded $1,000,000,000 in quarterly revenue, reflecting accelerating data center delivery and disciplined execution converting signed demand into revenue. Product revenue was $935,000,000 up two fifteen percent year over year and 43% sequentially and represented nearly 90% of total revenue in the quarter.

20:59 Gross margin was 34.3%, up six zero four basis points year over year. The improvement reflected both favorable mix and margin expansion across both product and services. Product gross margin was 37.2%, up 193 basis points sequentially and up two ninety one basis points from Q2 of twenty twenty five. A word on price. We deliver value, not a commodity kilowatt. Our customers are paying for time to power and what the solution can do, whether that is following the load profile of an AI campus or being ready for carbon capture, and our pricing reflects that.

21:46 And on cost, we continue to drive product cost down across material, labor and overhead, and we are doing that while ramping up our capacity and adding new capability. Services margin was 22%, up nine seventy seven basis points year over year and our fifth consecutive quarter of double digit service margin. Service revenue is recognized ratably, net of guarantees, while the service costs are booked as incurred. For the timing of fleet maintenance, pack replacements in particular, moves the margin quarter to quarter. Underneath that timing, margins have now reached 20% plus level, driven by fleet performance, longer stack life and scale.

22:33 And we believe we will sustain them there over the long term. Blended gross margin will move quarter to quarter, driven by the pricing mix of projects delivered in any given period. Deliberate trade offs between cost optimization and expediting, where the customers' time to power is worth more than the incremental cost and the service maintenance timing I just described. Across all of it, we continue to feel good about our full year gross margin outlook of approximately 34%, which we revised up last quarter. Operating income was $240,000,000 up 737% year over year and operating margin was 22.5%, an expansion of approximately fifteen thirty six basis points.

23:23 Adjusted EBITDA was $253,000,000 approximately 24% of revenue. Non GAAP diluted EPS was $0.78 and GAAP diluted EPS was $0.62 The increase in profitability reflects both higher volume and substantial operating leverage as the business scales. To that point, the operating leverage in these numbers is notable. This is structural, not a one quarter effect. Revenue grew 166%, while operating expenses grew just 48%. The mechanics behind that should persist. The leverage comes from how we have built our cost structure. Our R and D base and our G and A infrastructure are largely fixed against a rapidly growing revenue base.

24:15 So each incremental gigawatt of deliveries carries little incremental overhead. We run our support functions the way we run our factories, using automation and analytics across SG and A, service operations, and supply chain. So those functions grow with technology rather than people. We will continue to invest across the business, including G and A and R and D, but we expect operating expense growth to remain well below revenue growth, which should drive continued operating margin expansion. Cash flow from operations was $226,000,000 an increase of $439,500,000 from the same period last year, driven by profitability and favorable working capital performance.

25:04 Free cash flow was $175,000,000 and we ended the quarter with $2,700,000,000 of cash. Generating significant operating cash flow, while growing revenue at this current rate, truly reflects the strength of the underlying business and the working capital discipline of the team. Now turning to guidance. On the strength of our year to date performance, as well as the visibility and confidence we have for our second half, we are raising our full year revenue outlook to 3,900,000,000 to $4,200,000,000 At the midpoint, that represents 100% growth over 2025 revenue of just over $2,000,000,000 Our outlook is built bottoms up in two layers.

25:52 The foundation is backlog conversion, signed commitments delivering against customer site readiness dates. The second layer is in year bookings. We intentionally reserve manufacturing capacity for time to power customers who need power in months and for whom we expect to book and convert into that capacity at rates consistent with recent experience. On gross margin, we are holding our full year margin rate at approximately 34% on a non GAAP basis. I'll also use this as an opportunity to make one point on how we run the business. When we have to choose between protecting a point of margin in a given quarter and expediting to deliver an order quickly to a customer who is going to be with us for years, we are going to prioritize the customer and the long term strategic value of that relationship.

26:44 Time to power is what our customers value most right now, and we are going to keep delivering against that. Over a full year, that discipline is fully consistent with the margin rate we are guiding to. On operating income, we are raising our full year non GAAP operating income outlook to 800,000,000 to $900,000,000 and at the updated revenue midpoint, this implies an operating margin of approximately 21%. That is a material step up from the $425,000,000 to $450,000,000 operating income guide at the beginning of the year, which represented a 14% margin at the midpoint. This is the operating leverage I described earlier flowing directly through the model.

27:31 Full year non GAAP diluted EPS outlook now expected to be $2.55 to $2.85 Finally, a word on how to read our guidance. Demand in the AI business does not follow the traditional selling cycle. Today, we see the demand, we book the order, and when the customer is ready, we ship the equipment. So both the level and shape of our outlook come from the same inputs, which are signed commitments and their schedules, our capacity and our time to power pipeline. What was once seasonality is now simply delivery timing based on customer readiness. To conclude, this was a milestone quarter.

28:20 We exceeded $1,000,000,000 in quarterly revenue for the first time, delivered record profitability, generated strong cash flows and raised our full year outlook. We are executing with discipline against the demand environment that keeps getting stronger. With that, operator, we're now ready for questions. Thank questions. Our first question comes from Mark Strouse, JPMorgan. Good afternoon. Thank you very much for taking our questions. KR, I want to go back to your comment about all of the major U. S. Hyperscalers and over a dozen other operators are now validated and approved to use your technology.

29:19 Are you able to talk about a bit more how many of those are actively using your technology today? And how many of those are kind of in your backlog or in your near term pipeline? And then I've got a quick follow-up. Thank you. Mark, as you very well know, we let our customers speak about the deployments and what they do. What I can tell you is the combination of the three things that you spoke about, Customers already using it, customers who booked orders and we have shipped units to them for whom the power will be delivered and is in construction, and customers who have given us definitive agreements. They fall in that category. We are not gonna split that up, but it is all the major as you pointed out, it's all the major US hyperscalers and over a dozen of the neo clouds and the ecosystem around it, colocation partners.

30:17 That is all true. We don't break it up. But again, let's just take a moment to think about this. Nine months ago, we announced our first direct hyperscaler customer and said, we want to enter into this market and do what we did in C and I and become a standard. It took us ten years to do that previously for commercial and industrial. And I would have I can tell you, I never thought within nine months we would become the standard. It just speaks to our value proposition in this entire industry. Okay? This is not a faster horse. This is a car, and that is why this is happening, and this is not reversible.

31:10 Thank you. Okay. Very helpful. If I can sneak one more in. I know going back to the last call, you don't want to get into specific comments on capacity anymore. But maybe just relative to the last call, I mean, given your comments today several times about things accelerating, is it safe to assume that your maybe your timeline or your magnitude of capacity that you're planning is accelerating as well? Yeah. So here's how we do the capacity planning. Right? It is very clear to us based on our commercial pipeline and our commercial orders, then our customers need their products and when they are ready to turn the units on. And as you understand, very clearly depending on whose reports you read, somewhere between thirty and forty gigawatts of new AI data center capacity is going to be turned on in 2027.

32:10 Right? And they are in various stages of development. They're all greenfield. And we have a very sophisticated algorithm that we use, to figure out how many of those projects are going to land when. And luckily for us, unlike everybody else, our units are fungible. When they're on a truck, we can redirect them to a different site if we need to. And that's how fungible our systems are. So based on that, we can predict what our capacity needs are going to be such that we never become the bottleneck to the customer. And I can tell you as we sit here today, we are confident of keeping that promise for everything we have in the order book and everything that we see coming forward.

32:59 That's all we are going to comment on our capacity. Capacity is not going to be our constraint as we see right now. Thank you. Your next question comes from Chris DeAndrinos, RBC Capital Markets. Yes. Thank you, and congratulations on the strong quarter. I wanted to ask about the supply chain here. And I guess, when you're having conversations with hyperscalers, what are they asking you and what are you telling them or responding to them, to give them confidence that you won't be the bottleneck in terms of delivering on time? Thanks. That's a very good question. Look, you are raising something very important. These are extremely sophisticated consumers and customers.

33:51 So the amount of diligence that they go through is not just about our product, not just about our performance, not just about our economic value proposition. They want to understand where we are with respect to committed orders, where we are with respect to new orders that can come online. And look, most of them, if you talk to them, are not just signing up for a single transaction. They are signing up with us for the future. They want to be a strategic partner with us for the future. They want to understand as they share confidentially with us what their capacity expansion plans are and ask us if we can meet that, and we have to walk through with them under NDA in great detail and convince them that we will be able to scale. That's when we get validated.

34:49 So to that previous question of what is all that validation mean, that's the process we go through. It's a pretty rigorous process. It's a pretty rigorous process with each of those customers. Got it. And then I guess maybe fair to say that you go through that same process with IDF and Brookfield. And then maybe just as the follow-up here on the Brookfield topic, you expanded that partnership by $20,000,000,000 How should we think about the timing to execute on that? Is there sort of a window to which you all think about being able to execute on $20,000,000,000 of transactions? Thanks. Sure.

35:34 Great. Two part question. You snuck into one question. So but I'm happy to answer both of them. They're very relevant. Right? The first part is, look, at the end of the day, the financial customers take title of our equipment. When they take title of our equipment, it is not just about can they place it in service. They care about how will it operate through the entire period to be able to deliver. So they go through additional layers of our ability to perform, our ability to be available, our ability to be available and can we upkeep that equipment for the time that is needed based on the financial model that they came up with, so they can actually get their returns.

36:26 So it is two two additional layers of detail that they would go to in their diligence and they go to the same other process that we discussed. And, you know, even even in today's world, $20,000,000,000 is a lot of money. So very obviously, they go through this process deeply with us. And again, remember this, they didn't come into it in first step. They put the $5,000,000,000 in, they watched how we perform. They watched what we are capable of. They watched the execution. And they spoke to several of our customers, The oldest of them now being more than fifteen years our customer to understand how we perform and how satisfied they are. Happy customers is absolutely essential.

37:22 So it is on the strength of all that they come and invest. As to the timing, look, think of this as a financial shelf. This shelf is now available. The pace at which it will get used up is going to depend on, the uptake of those funds. I think I can again say it's very similar to us becoming the standard for AI in less than nine months. I wouldn't have predicted nine months ago when they invested $5,000,000,000 we'll come back that quickly for the next $20,000,000,000 And this just speaks to the pace of acceleration both in AI and in our business. Thank you. David Arcaro from Morgan Stanley has the next question.

38:14 Thank you so much. Appreciate you taking my questions. There have been some project development challenges that have gotten headlines at a few large projects. I was wondering if you could characterize your financial exposure to project delays, any contractual protections that you typically have in place and alternatives, that you'd, you know, that you'd, may work on, with, with customers? Yeah. Thanks for the question. Look. I think we don't comment specifically on individual projects, as you know. But I take a step back and just think about how we contract. Right? Our contracts are structured with master service agreements, and, you know, there's flexibility for us to deploy this equipment given its copy exact nature to various customer projects.

39:04 With that said, you know, we have strong protections with our contract. And then, ultimately, our financiers also need those same protections. Right? So as you think about the way these these contracts kind of flow, to the extent that there are any project delays, the end customer is able to redeploy that equipment to other projects. But ultimately, you know, the the financier is on the hook to take delivery of the equipment from Bloom. And and the other thing, extremely important point to talk about in terms of projects because, it would be on the minds of people. We can tell you when we gave you this guidance and we and we upward revised it, right, the 2026 revenue guidance is not dependent on any single project.

39:59 Again, we have a sophisticated algorithm, and we expect certain projects to push out, certain projects to come in, certain projects to just come out of the blue and absorb it in the same year as we described in our script. So we take all that into account when you and we give the guidance. So, you know, construction projects, you know, as long as construction projects have existed, I'm sure there have been delays. Okay. I'm not a historian, but that's what I would expect. That should you know, we should bake that in, but that's not gonna affect our revenue guidance because we have a sophisticated algorithm to figure that out for the year. So our 2026 guidance is not going to have any dependence on any single project. Understood.

40:47 Yeah. Thank you both for that extra color. That's helpful. And then, know, KR, appreciate your additional comments on the supply chain and your confidence there. I was wondering if you could address your access to scandium, which has gotten a lot of attention. Is there any way you might characterize your use of scandium? How much you see as available supply and stockpile, etcetera? Look, I think we have put out a detailed blog on this topic, and we have filed the eight k. The three takeaways for you all as investors to understand are the following. There is enough scandium on the planet that can be recovered economically, viably to power the planet. That is that is what's available on the planet.

41:41 We have visibility currently based on what we are working for for 25 gigawatts of, you know, like deployments. And so, and we are not dependent on China. Those are the statements we made. That's all we are gonna say about it. Everything else is proprietary to the company. Next question? The next question is from Nick Amicucci Evercore ISI. Hey guys, how are you? Simon, sorry I am going to put you on the hot seat for a little bit. Just curious, so obviously impressive raise in guidance on a strong 2Q, but the free cash flow guide was pulled. Just wanted to get some context around that and just considering that you have $2,700,000,000 worth of cash on the balance sheet just thinking through kind of capital allocation.

42:42 Hey, Nick. Thanks for the question. So just to to set here, the hit the company has historically included a supplemental presentation that has included some metrics that are not formal guidance, and so we've just really aligned now the presentation to where we truly guide. But to come back to your question on cash, which I think is is a relevant one, we see significant conversion from operating income down to free cash flow. As you think about where we started the year with a op income guide of the midpoint of $4.50, with $200,000,000 of CFOA, We raised that to $6.75, and now we're looking at $8.50 at the midpoint. So there's about 300, there's about a $175,000,000 raise versus our prior, op income guidance, and we see a 100% of that dropping down to CFOA.

43:31 So you should kinda think about $3.75 plus as being our new baseline. But as you know, kind of we don't provide formal guidance as part of our earnings release, but I just wanna make sure that you get the comfort that we see strong conversion here. Got it. Got it. No. That that makes that makes perfect sense. And then as we think about just kind of, I guess, term AI demand and just kind of deal like why the the CapEx, you know, from every hyperscaler right now is so high. When we think about where the returns are actually going to be generated, just as we think about that and then think about your backlog and kind of the conversations you guys are having, are you starting to have any, conversations just along the lines of inference reasoning, or is it still really just kind of speed to power on the, on AI training?

44:22 Yes. So it's both. It's it's it's absolutely both. Look. Time to power is super important, number one. Okay? And I think let me try to explain time to power in a slightly different way because for many of the analysts who look at utilities as and power as well as some of our investors, it's important for you to understand. A full stack AI provider that is responsible for everything in the data center financially, The one gigawatt data center in one single year, depending on the nature of the AI customer, will deliver between 12 and $24,000,000,000 in revenue per year.

45:14 So you pull in power for them within a month, which is the tall pole, that is $1,000,000,000 of revenue that they would not have had on a 40% to 50% gross margin and a 20% to 25% net margin. So among the 35 to 40 gigawatts that needs to get deployed next year, Take a guess on how much of that those projects will get delayed because the power provider is not able to provide power on time. Okay? We are the place to go for time to power. And the math is you don't even have to do the math if we can provide that. This is why time to power is important for the large data centers.

46:04 Now as inference comes along, if the transmission distribution infrastructure in the country is having difficulty doing transmission, building highways, imagine how difficult it will be for them to upgrade distribution, which is surface streets. That's where inference power is gonna be needed. Bloom is ideally suited for that. You cannot put a gas turbine in the middle of Manhattan. So we see both opportunities as extremely robust for us, not this quarter, not next quarter, for years to come. Thank you. Your next question is from Ben Callow from Baird.

46:51 Hey, thanks for taking my questions. I have two. Maybe I don't know if you guys think about your competition and supply demand curves out there. But maybe if you do, could you give us your thoughts about where we sit just in overall new capacity coming online, whether it's reciprocating engines or it's combined cycle turbines or other versus your decision process? And then I have a follow-up, which is kind of at a higher level. I think given the huge supply demand gap right now, I think every single technology that can provide power quickly for the next few years is going to have a play. Let's just start with that.

47:46 So if engine makers, turbine makers increase their capacity, there's gonna be a need for it. If Bloom increase its capacity, there's gonna be a need for it. But let's fast forward and think through competitively at a point if a single customer has to choose between a turbine, a engine, and a fuel cell. Okay? The first thing that matters is not LCOE, which is just a absurd construct for on-site power. It is the total cost to tokens, the total cost of power to token revenue.

48:36 Bloom's ability to provide 800 volt DC power, Bloom's ability to provide reliability without overbuild, Bloom's ability to be able to locate inside a city, outside a city because we don't pollute the air, Bloom's ability to get a permit. Okay? None of the other competition. There is not a single commercial vendor today who can provide that total value proposition other than Bloom. So what we do then is we don't obsess on the competition. We obsess on the customer. Okay? Hey, KR. Just maybe from a commodity model or Chinese open source models that have, I think, people worried or uncertain, can you just talk to us about if you view that as an opportunity, either of them or a threat going forward?

49:39 Look, whether it is a Chinese, whether it's the American labs, it just doesn't matter. It is a I would say as a technology optimist, to me, it's a given that token cost and token efficiency and token's ability to do things are all going to improve. In that cost will get better, cheaper, efficiency of the token will get much better, what a token is able to do with respect to productivity will keep increasing, all of them will happen. That means the token price point will come down, but the total token usage will go up like crazy because that's G1's Paradox. And when that happens, you need more power, not less power. So if anything this is going to accelerate, if anything whatever we are predicting on AI is an underestimate not an overestimate.

50:42 Thank you. And everyone at this time, in the interest of time, we will switch to just taking one question. Our next question is from Manav Gupta, UBS. Keyur, you've built this company, started building this company twenty one years ago. You had a vision of the sell. And obviously, you've come a long way. I'm trying to understand what's the vision of the product for the next three to four years coming back to your preliminary comments such, what you can control in context of Henry Ford. So where do you see this product moving in the next three to four years? Look, I think very clearly, imagine our on-site power.

51:30 DC is going to be the primary source, whether it's data centers, it's anywhere else, it's, you know, fleet charging of electric vehicles, it is large apartment complexes and micro grids being built for residential complexes, DC is where the world is gonna go. Right? Predominantly. So DC power being generated on-site, being able to use the heat to do both the heating and the cooling, and then on top of that, on on like, top of that, decarbonization in my view is going to become super important, and Bloom is able to do carbon capture better than anybody else. Okay?

52:16 So we are going to be focused on how do we give a comprehensive solution where the fuel is getting utilized at 90 plus percent efficiency, combined efficiency. It is not polluting the air. It's not using water. The same format that a customer gets used to to power large data centers is the same format, the same technology that powers your neighborhood store, that powers your neighborhood influence data center. That is that is the vision and we want it to be like an appliance that you can plug in and get power. This is where we're gonna go. Next up, Maheep Mandloy from Mizuho Securities has the next question.

53:06 Hey, thanks for taking my questions. One just question on capacity expansion for the next few years. Like one theme we're hearing from other manufacturers across the industries is just inflation on the CapEx estimates. And just curious on your thoughts on these, I know your manufacturing equipment is different. So how should we think about that now as you expand from two gigawatts to beyond that? Thank you. Oh, thank you so much for asking that question because that's a significant distinguisher for us. Right? Our factories, the return on investment is a few months. Okay? We don't come from the old world. Okay? This is not your industrial age power company. We are we are we are relying on the technologies that made consumer electronics and semiconductor devices become better available in larger quantities to everybody on the planet and get lower in cost and provide greater value.

54:14 That's the model we are adopting. That's the model we're gonna follow. So let them deal with whatever they're dealing with. From our perspective, for us to expand capacity, the return on investment is going to be a few months and we'll keep adding capacity as long as the demand is there. Thank you. The next question will come from Sunaina Okalan from Bernstein. Maybe if I can ask about the competitive landscape and just on the follow-up on the comments that were made on the call as well as somebody's question ahead of mine. It makes sense. I think what you're saying makes sense, which is on-site power, Bloom solution, not having NOx and SOx, not using water is a superior solution. That makes sense and is clear. How are you thinking about the market share over the next maybe twelve to twenty four to thirty six months on some of the other fuel cell models that are targeting essentially the same data center space.

55:25 So I'm getting asked about molten carbonate, for instance. If you can just provide some color on the fuel cell market share, that would be great. Look. I think it's for them to tell you how many megawatts and how many gigawatts they can install. Okay? It's not for us to comment to you. Today, within the data center space, I would say we would be in the very high nineties in terms of our market share. Okay? If, like, somebody is gonna get in and think that they're going to compete with us, competition is a very good thing. Okay? Competition makes us hungrier. Competition makes us run faster. Competition makes us paranoid. And we will thrive in competition. So I welcome competition from anybody and everybody.

56:16 You, Ray. The next question will come from Colin Rusch, Oppenheimer. Thanks so much. Guess if you get into this a little bit deeper with the data centers and have those time to power advantages, can you talk a little bit about evolution of your thinking on pricing and target margins for the platform as well as just giving us a sense of how many projects you're selling into where you're displacing a different technology that was originally planned for those sites? Look, again, we don't think about LCOE price of electricity because we're not a utility. Okay. We are a strategic partner to our customers and we deliver value to them. And based on that value, they should be happy buying from us and they should be happy allowing us to capture value.

57:05 So it is it is not just a sense per kilowatt hour story for us. It's about the added benefits we bring to them. It's about a entire solution that we look at. And for us, being able to increase these margins are are by by capturing value is extremely important. And look, when you think about this, right, we are so excited about talking about growth. We forget to highlight something extremely important that's happening in the company. Okay? I remember seven years ago, most of you, the same folks, the analysts, the only thing you worried about is our service losses.

57:56 Okay? That's the only thing you worried about. And we kept telling you the technology product is going to get robust and you will see us get to the 20% gross margin that we talked to you about. So we just reported this quarter a 22% gross margin. I wanna take this opportunity to give a huge shout out to the team out here that's worked tirelessly to go make that number happen. Think about it. When we went public eight years ago, minus 21% gross margin, negative 21%. This quarter, plus 22%, 43% swing in service margin. Now let me focus on one more thing.

58:45 It's service margin is a financial metric, but the first word in that is service. Who are we serving? We're serving our customers. At the end of the day, it's happy customers that matter. So we are not just achieving that financial metric. If you look at 2025, 80% of the orders that we booked were repeat orders from customers who have given us multiple repeat orders. That speaks more loudly than anything else about how happy our customers are. So I'm very, very proud of that accomplishment. I truly believe, and I'm gonna close with this, I truly believe that that service part of the business and the service revenue and the margins is a big driver to our enterprise value, and more importantly, how we serve our customers in a proper way. Very proud of that team. I wanna give a huge shout out.

59:56 And if you combine what I just told you by looking at our backlog, the demand out there, how we fit perfectly to the needs of a future digitized world unlike previous technologies. Look at how we are executing as a team, and then combine that all together to see the trust that we are building within the communities we operate and the companies we serve. I have a lot to be grateful for and lot to be appreciative of a great Bloom team that has done a phenomenal job. Thank you all.

1:00:44 Ladies and gentlemen, this does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.