Solar tracker company Nextracker (NASDAQ: NXT) announced better-than-expected revenue in Q1 CY2025, with sales up 25.5% year on year to $924.3 million. The company’s full-year revenue guidance of $3.3 billion at the midpoint came in 3.7% above analysts’ estimates. Its non-GAAP profit of $1.29 per share was 32% above analysts’ consensus estimates.
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Nextracker (NXT) Q1 CY2025 Highlights:
- Revenue: $924.3 million vs analyst estimates of $830.5 million (25.5% year-on-year growth, 11.3% beat)
- Adjusted EPS: $1.29 vs analyst estimates of $0.98 (32% beat)
- Adjusted EBITDA: $242.5 million vs analyst estimates of $194.8 million (26.2% margin, 24.5% beat)
- Management’s revenue guidance for the upcoming financial year 2026 is $3.3 billion at the midpoint, beating analyst estimates by 3.7% and implying 11.5% growth (vs 20.5% in FY2025)
- Adjusted EPS guidance for the upcoming financial year 2026 is $3.84 at the midpoint, missing analyst estimates by 0.8%
- EBITDA guidance for the upcoming financial year 2026 is $737.5 million at the midpoint, below analyst estimates of $759.4 million
- Operating Margin: 21.1%, down from 36.8% in the same quarter last year
- Free Cash Flow Margin: 24.6%, up from 14.8% in the same quarter last year
- Backlog: $4.5 billion at quarter end, up 12.5% year on year
- Market Capitalization: $7.77 billion
“We had a fantastic year, exceeding our financial, technology, customer satisfaction, and market growth targets,” said Dan Shugar, founder and CEO of Nextracker.
Company Overview
With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dabhi solar farm project, Nextracker (NASDAQ: NXT) is a provider of solar tracker systems that help solar panels follow the sun.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Nextracker’s 25.4% annualized revenue growth over the last four years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Nextracker’s annualized revenue growth of 24.7% over the last two years aligns with its four-year trend, suggesting its demand was predictably strong. Nextracker’s recent performance shows it’s one of the better Renewable Energy businesses as many of its peers faced declining sales because of cyclical headwinds. 
We can better understand the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Nextracker’s backlog reached $4.5 billion in the latest quarter and averaged 45% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Nextracker’s products and services but raises concerns about capacity constraints. 
This quarter, Nextracker reported robust year-on-year revenue growth of 25.5%, and its $924.3 million of revenue topped Wall Street estimates by 11.3%.
Looking ahead, sell-side analysts expect revenue to grow 6.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Nextracker has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.2%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Nextracker’s operating margin rose by 8.3 percentage points over the last five years, as its sales growth gave it immense operating leverage.
In Q1, Nextracker generated an operating profit margin of 21.1%, down 15.6 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was less efficient because its operating expenses like marketing, R&D, and administrative overhead grew faster than its revenue.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Nextracker’s EPS grew at an astounding 128% compounded annual growth rate over the last two years, higher than its 24.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into Nextracker’s earnings quality to better understand the drivers of its performance. While we mentioned earlier that Nextracker’s operating margin declined this quarter, a two-year view shows its margin has expanded by 13.3 percentage points. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
In Q1, Nextracker reported EPS at $1.29, up from $0.84 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Nextracker’s full-year EPS of $3.17 to grow 22.8%.
Key Takeaways from Nextracker’s Q1 Results
We were impressed by how significantly Nextracker blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also excited its full-year revenue guidance outperformed Wall Street’s estimates. On the other hand, its backlog and full-year EPS and EBITDA guidance fell short. Overall, this print was mixed but still had some key positives. The stock traded up 3% to $56.80 immediately following the results.
Nextracker put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
