Quarter 1
Q2 2026 Earnings Call — May 7, 2026
Analyst: Questions, I guess, on hyperscaler MSAs. I'm not sure how much you can provide, but I would love to maybe get some detail around quantification of the size of the deals, how many megawatts, over what years, and is it over multiple sites that are already identified? Maybe just if you could elaborate a bit more on kind of the scope of these two MSA deals and how meaningful they are in terms of quantitative impact.
Executive: Yes. So I'll tell you, the majority, or the great majority of our pipeline is supported by deals that are behind these two MSAs. And these deals will, and that pipeline is several different data centers around that they have around the US mostly. So that's what it is. In terms of financial, you know, and our current pipeline is 12 gigas, so that gives you a sense. We're not providing the financial numbers around it, as it's too early and we're competing, as you know. So we are not providing those numbers today. But my expectation is that as we end the fourth quarter and bring, hopefully, a good number of these projects, and I can offer numbers including everything, and though not necessarily be providing commercial, I will provide you more financial metrics of this.
Analyst: OK, fair enough. Yeah, we'll look forward to that. And then maybe just zooming out a little bit, because this is a new business for you and obviously very, very high growth potential. What's sort of the deployment schedule? I guess, can you help us kind of visualize as you go into some of these, whether they're RFPs or bake-offs, what's the timeline for submitting your design and your proposal to when one is finalized and then when you get a PO to when you're going to deliver to site? What are the sequence of events and how long is that?
Executive: They are in a hurry, generally. Most of these projects, as I said, the pipeline we have, we believe will convert into orders during the year, within a year. So quicker than generally when a pipeline that comes into our things and very, very tight schedules for delivery that we can meet because we've been working on our speed for some time. So I cannot give you today a specific rule. This is what I want, but generally I'll say a lot faster than the conversion rate we have for our order from pipeline to orders and a lot faster of the conversion rate from orders to revenue than what we do in our normal utility and developer, especially with these two hyperscalers. The case of the developers, it's a little bit different. Those are more project-type. They're looking for pyramids and stuff. So those will probably take a little longer.
Analyst: OK, understood. Maybe last one, if I could squeeze it in, just on the gross margin bounce back. I know that's been a focus for you guys for a little while, so nice to see it back to the range. Even on the lower volume here in 2Q, that was a pretty impressive gross margin rebound. What does that maybe entail for the back half of the year? Is there volume leverage and some of the efficiencies from this quarter that can spill over? Is there any potential upward bias to margins as you move through the rest of the year?
Executive: I'll give Ahmed to...
Ahmed: Hey, Brian. So in terms of the gross margin, you're right, an 11% gross margin we earned, which is higher than what we had in Q1. In year to go, we just reaffirmed our guidance where we said 11% to 13%. So we will be somewhere in the middle of that range for year to go. I think at least that is our goal is about 12%. So we will definitely be better than what we earned in Q2.
Analyst: OK. Thanks, guys. I'll pass it on.
Executive: Thank you, Brian. Good morning.
Analyst:
Our next question comes from Dylan Nassano from Wolf Research. Please go ahead.
Dylan Nassano (Wolf Research): Hey, Dylan. Good morning. I just wanted to check on the broader data center pipeline. Any updated thinking there in terms of how much of that kind of fits your previous criteria of Pipeline versus leads? And then I noticed there's this six gigawatt hour kind of target for what gets included. Just how did you come up with that number? Any thinking around there would be helpful. Thanks.
Executive: I'll tell you that there are numbers for our pipeline and leads. Our pipelines went up like 30% from last quarter. We concentrated a lot on the hyperscalers, and so a good driver of that has been the hyperscalers, who are roughly at 12 gigas. And our leads are three times that. No, generally the same, essentially the same as we had last quarter. We converted some into pipeline, and we were able to replenish it. That's the rule. The six gigas, I don't know what you're referring to, Dylan. I'm sorry.
Dylan Nassano (Wolf Research): It's on slide six at the bottom. It says classified assistance, six gigawatts hours or more.
Executive: Let me check. But in any event, strong growth. A great opportunity here, and I think that by concentrating on hyperscale, if I can, you know, while we get the point on this, we are in a market segment that we expect will transact faster and that we will convert into execution quickly.
Dylan Nassano (Wolf Research): Yeah, Dylan, that's six gigawatt hours. It's not a pipeline. That's how we classify an LDES project, so anything over six gigawatt hours.
Executive: OK. Sorry. Yeah, that's for long duration storage.
Dylan Nassano (Wolf Research): OK. Yeah, yeah, those are long duration stories, so they need to be more than six hours, you know, to be long duration as a definition of long duration for us.
Executive: For us, yeah. So six and more.
Dylan Nassano (Wolf Research): OK, that makes sense. Yeah, I didn't know what it was. Sorry for that. Yeah, my mistake. And then just to follow up on the quarter, I mean, it looks like revenue was kind of lower than analyst expectations, even kind of including this $80 million. So I just wanted to check. Was there any other seasonality in the quarter beyond or other disruptions beyond the shipping stuff that you guys noted?
Executive: No, there was none. I think if you recall when we gave our guidance, Q4, we did see about one-third of our revenue in the first half and the rest. Given, frankly, we don't give quarterly guidance, I think that was the only reason why there's a difference. But overall, from an internal perspective, as I mentioned, you know, the $80 million of this shipping delay was the only reason why we were lower on the revenue for Q2, but the shipment we have already received, so we feel pretty good on the year to go. And if I can add one point, our indication of where we see revenue divided among quarters is more indicative. So you can model it and stuff, but we don't run the company on a quarterly basis, to be very clear. We run it on a yearly basis. That's why we intend to meet our yearly numbers. We try clearly to what we indicate to meet it, but we do not provide quarterly guidance. I know it creates some confusion, but it's a way of trying to help you model and at the same time give the flexibility to manage things effectively and efficiently within the company.
Analyst: Sounds good. Thank you.
Executive: Thank you, Dylan.
Analyst:
Our next question comes from Joseph Osha from Guggenheim Partners. Please go ahead.
Joseph Osha (Guggenheim Partners): Hey, Joe. How are you?
Executive: Just fine. How are you? Thanks for taking my question. I wanted to drill down a little bit on two product details. Julian, you said that hyperscalers and data center more broadly tends to be more about product quality or power quality. Is the implication then that we're seeing a shorter duration configuration, say, you know, an hour or two as opposed to four? That's my first question. And the second question, just to confirm, you know, thinking about the inverters, are you generally being asked to deliver a response time of 10 milliseconds or less? Those are my two questions. Thanks.
Executive: Yeah. And the first one, they tend to be shorter duration. You're right. So they, they are a, you know, say, we don't provide anything smaller than two hours, so it's two hours is what we do, and that's where the market is trading, but they tend to be shorter than that. Even though our main point to the data centers, and we engage with them, and they develop in hyperscale, is that the great beauty of our technology, compared to other technologies that are trying to resolve this, is that we can stack business models on top, and we can do quality of power, help them with, you know, doing some of the work of resolving some of the deficiencies of interconnection or backup. We can help them on some on voltage. We can help them on many, many fronts. So that's, I think that as they're looking at the asset, they are expanding also their view of what this can do. That was on that point. On the second one, generally I will say that, sorry, the second one, can you repeat? We're not providing the actual number, but it's very short. That's the way I would put it. We're not providing the actual number because it is proprietary to the solution and to the people we're working with, but it is very, very short. significantly shorter than 100 milliseconds we tend to do for transmission systems and European qualifications.
Joseph Osha (Guggenheim Partners): And just to follow up on that very quickly, that would probably, I assume, create the need for inverters with, you know, wideband gap MOSFETs and some of the exotic stuff.
Executive: Yeah, yeah. You need inverters that can provide that capability. That capability is very much dependent on the inverter you use. We work with inverter companies that do it. We have done this in Europe for many years, so we know exactly who do this, how they do it, and their strategy very well. So we have that. And our advanced controls work very well with these inverters and have the processing time to ensure the whole system responds on that, not behind the inverter as it's supposed to.
Joseph Osha (Guggenheim Partners): OK. Thank you, guys.
Executive: Thank you very much.
Analyst:
Our next question comes from John Windham from UBS. Please go ahead.
John Windham (UBS): Hey, good morning. Nice result. I was wondering if you could talk about the U.S. storage market continues to grow at a rapid pace. Are you able to provide us sort of where you are on being able in sort of capacity in gigawatt hours to provide over the next 12 months? And then just sort of thoughts on the roadmap to keeping up with the market growth over the next two or three years?
Executive: Yeah. Yeah, we see the U.S. market growing, expanding significantly. So that's great. What we have, we have, as you know, we have our domestic products, our flagship solution in the U.S. We have the ASC capacity. We enter with another supplier for additional capacity, and we are looking at additional capacity for the 28 going forward. So we have enough capacity to cover the pipeline we see and the conversion rate we expect. We don't provide specifically the numbers, but it's multi-giga capacity, and we have seen no problems getting the – and we are putting the whole infrastructure that delivers that multi-giga operating in the U.S. with a domestic content offering. We can also import equipment if we need to, but our preference is to do the domestic content solution.
John Windham (UBS): Perfect. Thank you. And maybe just a quick follow up. There's been a lot of commentary on the gross margin. But historically, some of the issue has been that operating OPEX as a percentage of revenue has basically been offsetting the positive gross margin. So just your thoughts on internal initiatives to get the OPEX number down to drive bottom line profitability and free cash flow? Thanks.
Executive: Yeah, the operating cost out of percentage of revenue is essentially a function of growth, of growth over the top line. So if you follow it carefully, you'll see that our operating revenue goals, you know, it's very much followed. Our costs are very, very stable, and, you know, how much of our cost represents out of our revenue depends on how much we can grow revenue. So we have seen, and we have an operating leverage that we believe that we can grow this company, that we can keep our costs down at half the rate of growth of our top line, which adds tremendous value. And you'll see it when you look at the numbers, it's very, very clear. It's an operating leverage formula. Unfortunately, as you know, last year we didn't grow. So that's where the operating revenue, the percentage of revenue, of cost of revenue was a little higher than what we expected. A goal is that we basically create the operating leverage, and we do have that. As the revenue grows, we will maintain that cost discipline, and the cost will be increasing at less than half of the growth in our revenue, as Julian just mentioned. So I think that's our key focus from my perspective.
Analyst: Thanks so much.
Executive: Thank you.
Analyst:
Our next question comes from Amit Sarkar from BMO Capital Markets. Please go ahead.
Amit Sarkar (BMO Capital Markets): Hey, Amit. How are you?
Executive: I'm very well. Thank you, Julian. Thanks for taking my questions. It looks like ASPs, if we'll get revenue and kind of your revenue recognition megawatts for the quarter, we're up pretty nicely quarter over quarter. And I was just wondering, was there a lot more EPC work this quarter, or is this kind of maybe the level we should be thinking about for the balance of the year for modeling purposes?
Executive: Yeah, thanks, Amit. This number, as you said, moves up and down quarter after quarter based on the mix of the cells. So I wouldn't read too much on it. We are designed to meet our financial objectives independent of where the ASPs go up or down. And our planning assumptions are they will continue coming down. And we are designed to make money and make it successful. And I'll say even more, every time we have seen ASPs come down, what happens is that demand expands at a rate that is much bigger than the reduction in revenue that comes out of the lower ASPs. We, you know, I wouldn't rate too much on it. I know that's something that you care about a lot. I mean, the analysts care a lot about, but it is not a big driver of our business financial results.
Amit Sarkar (BMO Capital Markets): Great. And then I know you had mentioned earlier in answering one of the kind of questions before about kind of your 12 gigawatts. And I think you said that the vast majority of that is data center related. Is that right? You know, is it a little bit over half or is it substantially all of that 12 gigawatt pipeline is data center related?
Executive: Yeah. So we have a 12 gigawatt pipeline of data. All of it is data center related. What I said that a great majority was connected to the two MSAs that we just signed. The 12 gigawatt hours, all of it is data center related, of which the great majority, more than 60, or a good portion of it, I want to give a number, comes from and supports these two MSAs, which is high.
Amit Sarkar (BMO Capital Markets): Understood. Thank you so much.
Executive: Thank you.
Analyst:
Our next question comes from David Arcaro from Morgan Stanley. Please go ahead.
David Arcaro (Morgan Stanley): Hey, thank you. Good morning. I was wondering, are there other MSA opportunities that you're currently working on? Is that something that you would expect most hyperscalers to be pursuing on the storage front?
Executive: Yeah, we're looking at it. These are the two that had more urgent needs, but we're looking to work with all of them. So we believe their problems are similar and that we can meet their needs with our capabilities. So we hope to work with all of them.
David Arcaro (Morgan Stanley): Yeah, makes sense. Are there any active now or any sense of timing as to when those opportunities might pop up? It seems like they're all very active on the data center side of things. And I imagine looking at storage. So is that also, you know, a near-term opportunity?
Executive: I think that it, well, I cannot give you a real sense of time, you know, when they will happen. I think it depends on where they are and what they're doing. I mean, the two that we have signed are people who are very clear on what they need. They're in a hurry to win, and they seem to be ahead of the market, if you ask me. So, you know, but... We're working with everybody. We are contacting all of them, working with them, and the chess is to our head.
David Arcaro (Morgan Stanley): Got it. Okay, great. And then the 50% proportion of new customers I thought was notable. I was just wondering, could you give any characteristics of kind of who those customers are? What type of customers they are? Is it the traditional profile of developers and utilities that you would see or any specific locations? I'm curious if it's a new profile.
Executive: This is a result of the great work that Jeff Monday, who joined us as our VP of Growth, has done since he arrived. He really had invested significantly in business development, identified all these customers, which are, you know, I'll say, were not the typical we used to work with before, but are the developers or utilities that we have not contacted in the past, and now we have made significant progress. And this is a global effort that we're doing, not only in the U.S., but outside of the U.S. But I will say that, as we said during the call, these are customers that are within our normal or our core customer segments, you know, utilities and developers globally. But great kudos to our sales organization that has really invested into developing and bringing these new customers into the mix.
Analyst: Right. Okay. Understood. Thanks so much.
Executive: You're welcome.
Analyst:
Our next question comes from Ben Callow from Baird. Please go ahead.
Ben Callow (Baird): Hey, thanks for fitting me in here. Just back on data centers, hey, good morning. Could you just talk a little bit, you know, because of the specific product they're looking for and the size, if you could talk about just pricing and margin, how we should think about that on these bigger deals?
Executive: Sure. And then also, my second question, just outside of the U.S. where you see pockets of demand, and then just remind us how margin compares internationally versus the U.S. Thanks very much, guys.
Executive: In terms of data centers, I would say, as we said, duration shorter. And I'll say the margin is in line with our guidance of 10 to 15. That's what we'll say. So generally, that's what it is. And both of their needs are quality of power, which we do this for grids globally. We're doing it for them here, and I think it works well. So in terms of margins, margins change market for market. It depends on the competitive environment. We go within our 10 to 15 range, but there are markets that are a little bit more or that go through more competition than others. I will say that, you know, markets like the U.S. and the U.S. is probably a little bit on the high side, the U.K. on the lower side, you know, and then, so it changes a little bit on, no, it changes market per market, but our 10 to 15 range works for all these markets.
Ben Callow (Baird): OK, thank you.
Analyst:
Our next question comes from Maheep Mandloy from Mizuho. Please go ahead.
Maheep Mandloy (Mizuho): Hey, Maheep.
Executive: Hey, Maheep.
Maheep Mandloy (Mizuho): Uh for the uh best industry or is it high c rate discurances on the supply side if you uh need to make any changes on the cell sourcing for that right we we make any battery great you know as well we make any battery great so you know we the batteries is a commodity whatever they need i think the main driver is ncd ensure and that comes out our package our capability so no real need on on clearly LFP, nobody goes to the MNC for many reasons, but brand or supplier is not relevant for them. Whatever battery we put in our systems, we can make it do great things.
Maheep Mandloy (Mizuho): And then separately, like, we saw some battery suppliers proposing high-seeded batteries which go inside the data center for 800-volt DCs. Is that something of interest? Are you exploring or looking at outside the data center?
Executive: So, thanks. Yeah, yeah. We're looking at the, you know, our product roadmap includes not only this, many other elements that we're looking at to continue improving our offering to data centers and to ProSolutions. One option is this. I see rates, batteries that will go into that. I think there's some limitations, but it's part of our roadmap that we have for whether it will happen or not. We'll see. But it's not anytime soon.
Maheep Mandloy (Mizuho): Thank you.
Executive: Thanks.
Analyst:
Our next question comes from Moses Sutton from BNP Paribas. Please go ahead.
Moses Sutton (BNP Paribas): Thanks for squeezing me in. Congrats on the great update. As these data center opportunities convert into reality, how do we think about the ratio watt for watt, meaning the watts of load to the watts of storage? We've seen examples out there of, you know, a gigawatt data center might need 800 megawatts of batteries and examples that could be a fifth of that, right, depending on their need. So what do these projects start to look like right now as we're connecting sort of a data center TAM in gigawatt terms to the storage opportunity view that you're converting against?
Executive: Too early to give you a rule of thumb that we can calculate. We clearly have some views, but it's too early to give you, too premature to give you a rule of thumb. How do you think a gigawatt will take this amount of water? So we will, over time, I think that we'll be able to develop that as it becomes more clear. But today, that we cannot do. But we have, as I said, a 12 giga pipeline ahead of us, which we want to convert into orders, a good portion of it, within the next 12 months. So that's what, you know, that's what we're concentrating on. And as we learn more about this and we see how the industry develops, we'll provide you a rule of thumb that will give you a better sense of the whole market.
Moses Sutton (BNP Paribas): Got it, got it. That's helpful. We'll look forward to that. And then on the MSAs, what's the nature of the exclusivity from what you've won? Are there multiple vendors? I couldn't tell if you were answering that in some of the earlier questions. So for those hyperscalers, are you one of a few players? Are you exclusive? Is that a geographical exclusivity? How do we think of that?
Executive: One of a few players. One of a very, very limited number of players. But this is a competitive process. These are not directed, at least not yet. Maybe we'll be able to take them there at some point. They're very limited players and a competitive process.
Executive: Thank you, everybody, for participating today. We'll be available. Chris will be available. I'll be available to answer any questions you may have. Bye-bye.
Executive: Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.
Quarter 2
Q1 2026 Earnings Call — February 5, 2026
open the call for questions. Thank you.
At this time, we'll conduct a question and answer session.
As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 1-1 again. Please stand by. We'll compile the Q&A roster. And
our first question comes from the line of George . Your line is now open. Hi. Good morning, everyone, and thank you so much for taking my question. Good morning, George. So maybe just to focus for a second on AESC, and I know you're in the process of resolving the ownership stake, but can you just help guide us as to what resolution will look like? Because there are several potential outcomes to this. So just help us understand how you're framing this for us. Thank you. Great. Thank you, Arch. Our main objective in our relationship with AESC is ensuring that we have access to PFP-compliant sales at competitive terms. That's our main objective. That's our priority number one. As part of that, we've been working with them on ensuring that they meet all the different conditions of the OBBA, OBBBBA. In terms of ownership, which is your specific question, we made them a proposal Our understanding today is that they will resolve that problem in some other form. So we got assurances from them that they will meet the conditions of the law, that they will resolve that problem, and they will resolve it without the need for us to get involved in the ownership structure of that plan.
So, you know, for us, you know, as you know, we have been working with them for many years. We trust them very much. things they're going to do and you know we're working with them and waiting for them to give us more light today they have not communicated to us the details of the expect to do it but we're very confident they will meet the deadlines of the law and the conditions you know in terms of the other ones related to material assistance and ip and all of that we as part of our process where we have all that information that's why it's the ownership where we still need to wait but And I will make a point that I think is very, very important if you let me, which is a side point here. The market for sales in the U.S. is expanding like crazy. We have all these EV battery lines that are converted into now into us. So we're seeing for the first time, you know, plethora of projects of people offering all types of things. So we are, if you tell me, we will see here in the U.S. something similar what we saw in China two years ago, you know, or three years ago when all these EV lines converted into us.
We're very excited about what the prospects for a company with our structure and our strategy will do in the U.S. during the next couple of years. So, you know, I think this is a great time. This is a great opportunity. We are very confident on AFC, and we are very, very optimistic about the future for the market for battery storage in the U.S. due to how the market is changing the dynamics. We saw what happened in China. last couple of years with the Chinese, when the EV demand came down and how that allowed for our markets to grow and brought in more suppliers, better quality. It really changed how the pet market changed. So we're excited about this time. If I may ask a follow-up segue into what the competitive environment looks like. And I would imagine some of these data center bake-offs, Some of the big hyperscalers don't want to use one of their competitors as a supplier, but are you seeing any increased competition from the likes of Ford, who's doing the exact thing that you mentioned, converting some of their cell supply into energy storage-related cells? So help us understand what the landscape currently looks like, particularly in data. Thank you.
I think the competitive landscape has changed today. There have been other people, but some... But I don't think the competitive landscape has changed at all. What we have seen is a significant diversification of battery cell suppliers. It probably will change over time. I don't disagree that it might change. Some people might decide to do different things. But what we have today is not real changes in the competitive environment, but a real change in the way they supply for battery cells in the market, especially for the second half of 2016. You know, and I agree, you know, there will be new entrants. This market is exciting. You know, it's growing crazy. There will be new entrants in the market. And we compete in the world with the, you know, with the Chinese state, you know, with our Chinese competitors who are the support of their government. So here competing against some of these players, I don't think it will be more difficult than what we do globally. So, you know, we like competition. It's a great driver of of our innovation and gives me wake up – allows me to wake up early. Let me put it away. I sleep very well. But wake up early, excited about what we're doing.
So excited about the prospects for the U.S. market. This is going to be, you know, the golden years of battery storage are coming. Thank you. Thank you, George. Thank you. We'll move it for our next question.
Our next question comes from the line of Brian Lee of Goldman Sachs. The line is now open. Good morning. Good morning. How are you doing? Good. Thank you for taking the questions. Um, I guess just starting on, uh, the data center related pipeline, you know, the 36 gigawatt hours, it's, it's pretty impressive. Google again, quarter on quarter. Um, I guess the focus and the execution question now is, you know, uh, First, how much have you actually converted to backlog? And is there any of that in the 750 million bookings you reported this quarter? And then secondly, it's a big number, 36 gigawatt hours. Can you just kind of give us a sense of the outlook in conversion ratio, timing that you're targeting? Maybe when do we really start to see this move into bookings and PML impact for you? Yeah, great. I mean, to tell you the truth, there's no – these are the new type of use cases, no? We have served data centers with a – behind, you know, in front of the meter solutions with the renewal companies. Those were not included in these services. These are, you know, behind the center or dedicated lines to data centers. So it's behind the meter or dedicated lines to data centers.
So it's slightly different than what we have done global, just the first part. Answering your question concretely, we have not converted into backlog any of the new data center targets. That's today. This is a new market segment for us. These are markets that we have not served directly before, before September or before a couple of months ago, we were serving this company indirectly. There's a new market segment. We are engaging with them, but it's very, very difficult for us at this stage. to give you a clear, you know, view of how much of that will convert and how will it work over time. However, we do, when we looked at the pipeline and we looked at what we are, the maturity of the project that we're working with, we should expect something happening, you know, in the second half of the year, but, you know, say fourth quarter, third or fourth quarter of the fiscal year, of the calendar year. That's what we should expect to do some conversion of this. We clearly would love to do it earlier. And this is coming to such an important segment that as we learn more about it, we'll probably communicate more.
But as of this stage, unfortunately, you know, we are learning how to do this, working with them for the first time. As you can imagine, some of these companies have been, you know, are very, very, you know, their supply chain teams are very detailed and they're really, There's a lot of value involved, big projects. So it's a lot of work we're going through that, you know, our teams are selling, you know, learning and working very well. But today we do not have an actual number that I can share with you. What's exciting about this, if I can give you, Brian, the point, is how fast it's growing, you know? That's today what we are communicating. This is going very fast. You know, we think we have a competitive advantage. We look at the other technologies. We believe we can do better than anybody else. And we're working very hard using – it goes very much to our capabilities of how to interconnect, you know, the things that – where we excel. So that's what we're so excited about. But today, as it is a new market segment, we cannot provide more clarity on it. Absolutely. No, that's great, Carlos. Maybe just two quick follow-ups on the guidance.
One, on the $20 million of incremental costs here related to the two projects, can you elaborate on kind of what those costs exactly were and then how you plan to recover those costs through the course of the year, the $20 million? And then secondly, Julian, obviously you're pretty bullish on the outlook for energy storage, whether they go to center or not. And you're saying that the guide is fully covered by backlog. So, you know, with pipeline and bookings continuing to grow, maybe it's a little bit too early. It's only fiscal Q1. But how would you characterize the upside potential to your kind of 2026 guidance outlook here starting off the year? Thank you, guys. I will go with the guidance for the year, and then Ahmed can give you details on the gross margin on the two projects I had. Well, I'll tell you on the guidance, you know, our approach, to our performance that we wanna, we're working towards meeting our guidance, we're committed to meeting our guidance, that's where you should expect from us. And that we, most of what we wanna like to provide you the better opportunity will be for 27 hours. That's what we wanna do.
So if you ask me today, our order intake for this quarter will be the lowest one of the year. It will be the low point of the year and we should be able to go and deliver better order intake that will provide stronger visibility for 27 and that's how we expect to drive and giving you a quarter to quarter you know appointment we want to keep this year where it is or in line with our guidance hopefully you know the top or whatever but not not we do not want to exceed we don't we do we are look we're working towards making 27 to making 27 you know, good news to the market. That's what we're working on. Today we cannot provide guidance on 27, but we will, that's what we're working on, and that's the way you should think about our company. So on the 20, on the- Sure. Hey, Brian. So the $20 million impact, so this is, the impact is at two projects, non-US projects. Two different countries, different technologies, different stages of completion. And the change is essentially the change in scope of the project in both cases. One is the scope change in equipment, and the other one is in the schedule.
So I think our plan is to basically, as we have done in the past, is whenever these changes happen, we always recover those under the contract from our customers. And that is what we plan on doing. during the rest of the year. So feel pretty good that we can recover this impact. Okay, helpful. Thanks, guys. I'll pass it on. Thank you, Ryan. Thank you. One moment for our next question.
Our next question comes from the line of Dylan Asano of Wolf Research. Your line is now open. Good morning, David. Thanks for taking my question. Just wanted to check. So Tesla mentioned on their earnings call that they foresaw some mega pack margin pressure this year. They named some things like competition tariffs and the like. So just wanted to check. Have you seen any kind of intensification on any of these issues recently or you feel like you've already accounted for this all in your current outlook? Yeah, I mean, yes, we also saw that. We don't see any major competitiveness, no real changes. Unless Tesla is referring to us, maybe. That's the only thing I can think of. They're saying that, hey, we're too fluent, I mean. But in terms of tariffs and all of that stuff, I think we are very much online. So we are confirming our guidance with a view that there's no real change. So we are not very clear what they were referring to. Got it. The competitive environment, which has always been very, very intense, not any different. And the tariffs have been very stable. So we don't expect any major changes in 26 numbers.
There's some movement, not real movement, so we're confident in what we're confirming to us. Got it. Thanks. Appreciate that. And then for my follow-up, just kind of given some of the margin headwinds this quarter, can you kind of confirm that if you do end up being the acquirer of the ASC facility that, you know, you feel good about kind of the, uh, your liquidity situation and no need for any kind of external capital to... Yeah, no, from ASC perspective, we already talked about in the last call, you know, we have affected that in our forecast that we shared in the last quarter outlook for the year. So I feel pretty good. Well, as I said, I don't think we don't expect that they will resolve this issue some other way. That's our understanding. Got it. Thank you. Thank you. One moment for our next question.
Our next question comes from the line of Julian DeMunion-Smith of Jeffery. See, the line is now open. Hey, good morning, team. Can you guys hear me okay? Yeah. Hey, Julian, how are you? Hey, pleasure. So maybe just to follow up on the data center opportunity here, I wanted to press a little bit further. How are you thinking about your products fitting into what the data center community wants, especially when it comes to ramp time, interactivity? Again, I get that the product could work, but how do you think about it fitting into your product roadmap, if you think about this? Again, there's probably an iterative nature of what they're looking at versus what you're providing here. Can you speak to that a little bit and then separately relate it How do you think about setting expectations to include explicitly data centers into your pipeline and backlog specifically? In terms of our product roadmap, I think as we have communicated, there are different needs that we're meeting. I will say in the great majority of needs, there's no real change. And we have a very strong competitive advantage. Why? Denses products. You know, very safe. We are designed...
The risk of a terminal runaway is very limited. Reliability, we have our reliability last year was close to 99. Very few people can do this. So we've done very, very well. Cyber security, nobody, we've been working very, very strong. So we're very, very happy on that part. Therefore, one of the needs, which is the quality of power, they need response time of below 10 milliseconds. And we have a roadmap to deliver that part. But when I looked at the pipeline, that's one of the areas where we are competing with other technologies. And we're not necessarily the first. That's not what's driving the contracting we see today. There are some projects that are connected to that, but that's not what's driving it. We want to serve it. We want to do it. We're offering this high, very, very quick response time. But just to be clear, today it is more connected to speed to power and to bring your own generation, you know, applications than necessarily to quality of power, you know? So we're very, very, you know, we're very confident. We're also, you know, we're not a competitor of the data center.
We've been very, you know, historically a company that has been very customer-centric, so we And these are big buyers, so we are adapting the way we contract, the way we think to them. So I think that we are in a very, very good position. In terms of how to, you know, as I said, unfortunately, on your second question, on our ability to give you a proper guidance on when will things will go into the pipeline and when we'll convert it into a backlog, it's a new customer segment. So for us, we're learning, you know, we We are moving forward and I think we're getting better and better every day. And my sales team is really excited about this. And we brought in Jeff, who's doing a great job on this. But today, you know, it's very difficult to commit to this. Additionally, as you know, I have to be very careful with my competitive information. So we will try to provide you as much information as we can without necessarily playing our card or what we're doing. Because, you know, there are a lot of people trying to do this job. and we don't want to provide them with competitive information. So that's where we are.
We're excited about the growth, excited about how we fit into it, excited about the way we approach our customers that will work very well with customers, and our product will do a wonderful job, and hopefully we will see more and more coming up. And as this market segment develops for us, we should be able to provide you more clarity. Got it. All right. Just maybe not quite ready. And then on AESC, just to clarify earlier, you would not expect an ownership outcome. This is more of a contracting relationship. And ergo, perhaps we could see other potential counterparties that you'd be negotiating with for your domestic cell supply? I will say we have an MSA. The MSA will say we respect it. But, you know, we were looking, we have made a, We provided ASC an opportunity for us to take ownership on it, which they now have resolved with that. So our contract will not change at all. We will be an off-taker. Our technologies are very much intertwined, and we understand that the solution that ASC is working on, which I don't have the details, will not affect in any way any of the issues we have.
We were trying to resolve this issue for them, so we had given them that, which was a good offer, but clearly they have something better, some other solution that is much more attractive. So we'll be an offtake. We'll continue being an offtake facility as we move forward. Right. And you could add a second offtake just to expand your data. Oh, we already, remember, last quarter we already added a second offtake, and as I told you, you know, So we already are working with some of the EV lines that are converted into VEST. And that market is getting, you know, very, very exciting. This is no different than what we saw in China two years ago or three years ago when you had all that EV capacity that suddenly didn't know where to go. So I think this is, you know, it's a good opportunity. Yeah. Awesome. All right, guys, I'll leave it there. Thank you. Thank you. One moment for our next question.
Our next question comes from the line of Mark Staus of J.P. Morgan. Your line is now open. Hey, good morning. Thanks for taking our questions. Julian, I just wanted to go back to something you said in the prepared remarks. When you're talking about some of the data center opportunities not being in the pipeline, Are you saying that that would be in addition to the 36 gigawatt hours that you're specifically calling out for data centers? Are you saying some of the 36 gigs of data center pipeline is not included in your $30 billion kind of overall pipeline? And then maybe just some color on kind of what delineates what goes in and what stays out. Yeah, good. So the 36 gigawatt hours we have there are projects we're working on. someone in the pipeline, someone, some of them are leads. We're giving you a number because that compares to the 30 gigas we gave you last quarter. In order to get into our pipeline, we need to ensure that we believe there's more than a 50% probability of the project occurring within the next two years. So some of these projects, you know, these are new things.
So we are trying to, and we're very careful because we want to be sure that what comes into our pipeline That drives another set of decisions internally on how we invest manager. So we're very careful looking at this. As these things coming in very, very quickly, we're looking at them and deciding which go into a pipeline. Some of them will probably not become part of our pipeline over time, but the ones that come into our pilot because are the ones who are gonna be investing money and providing offers and doing the engineering and working on them. So that's it. The 36 gigas, If they were all to convert into a pipeline, it's an upside to the pipeline we have today, to the 30 billion pipeline we have in front of us. Okay. All right. That's helpful. Thank you. On the long duration side, don't think this as a complaint. 30, 34 gigawatt hours is a very big number, but it is down from what you were talking about last quarter. So I just want to ask, Ask kind of what's going on there quarter over quarter. No, that's a good point. Last quarter, we talked about what we believe the time was. The rest of the market was 60 gigas, of which we had a small portion.
We put our things to look at that. And these are now, these 30 gigas are projects that we are either in pipeline or in fleet. People that were working on preparing the engineer, looking at it, identifying. So the numbers are different. The other one was more of a time. I'm sorry that I saw that in a few notes that we created that confusion. The 60 gigawatts last time was a more total addressable market that we saw at the time. That included projects that were in markets that we do not serve or customers we don't work with or things like that. So now the 30 are projects that have the potential to become part of our pipeline because they are in markets we serve and customers we like to work with and we're just going over the work on how much of it we believe has a 50 percent chance of really – and the 50 percent chance looks at interconnection, land rights, ensuring that that thing is actually a project that has not a pie in the sky. Great. Okay. Thank you. And I'm sorry for the confusion at that point. I read that in a couple of notes, and we probably were not clear enough the last time that the 60 was a time. not projects and leads that we're working on. Thank you.
One moment for our next question.
Our next question comes from the line of Tempo Gozai of Bank of America. Your line is now open. Good morning, Ahmed. Morning. Thanks for taking this question here. Just given your commentary on strengthening the domestic supply chain and modules all out but ahead of plan, Can you give us a sense of the mix of U.S.-made versus imported cells that's kind of embedded in your 26th delivery plan? And specifically, how much of that supply is kind of already on hand or contracted for the year? And then I have a follow-up. Yeah, okay. I'll have Ahmed walk you through the number. The mix is – hi. Good morning. So mix is roughly half and half, I think, is the domestic versus import. Yeah. Okay. And your second question was? Sorry, I missed that. That's fine. And then I asked how much of that supply is already on hand or kind of contracted for the year? So we have secured 100% of our domestic and international needs for this year. Okay.
And then secondly, just to draw on that, right, as we kind of think about this gross margin or structural gross margins, can you help us frame, you know, the gross margin delta between, you know, systems that are built with non-PFE US-made cells versus, today's imported mix under the current 48% tariff load? So I think we look at, frankly, from our perspective, is blended trade. I mean, the guidance we have given is 10% to 15%. It all depends on the project scope. Sometimes we have EPC, sometimes we don't. So I think net-net, that is what we are looking at between 10% to 15% margins. Regardless of where the cells come from, regardless, like when it's non-PFE and with the tariffs, with extra tariffs. Yeah. I think, I mean, it could be, you know, depending upon situation, you know, so I think, but net-net, that's where we land in that range. Thank you. Thank you. One moment for our next question.
Our next question comes from the line of Ben Calo of Bayer. Your line is now open. Hey, good morning. Thanks for taking my question, guys. My question is around leverage, but I want to get at it from volume. Could you talk to the amount of volume, because you have this massive pipeline that you could execute on. Just how do you think about your contract manufacturers and your own supply chain? people and capital constraints that you guys have. If you want to go up to, say, 10 gigawatts a year or something like that, what is the process for that and how much flexibility do you guys have to ramp and execute that? And then specifically outside of manufacturing and your contract manufacturers, on the liquidity side, because we did see you do a capital raise for working capital. And as these numbers get bigger, I know you have a billion dollars in liquidity plus, but that might not be enough as we start talking bigger numbers. So if we could just address that. Thank you. So I will address the supply chain, and I will ask Ahmed to talk about working capital and capital, you know, the capital plan.
A supply chain, the way we work, is we have a long-term plan of volume that, you know, has a base case, that has an upside case, and it has a, you know, hit it out of the park case. And we serve those needs with different sources of, you know, suppliers that work either way, you know, so we have base suppliers that support our normal work, upside suppliers that have attrition capability, and we also identify players of which we can play. So we feel very comfortable. We have the supply chain to go even beyond what, you know, what we are, our upside cases that we communicate to significantly above that. So it is a work of working with our suppliers with, you know, building a little bit of spare capacity, providing suppliers that have for some capacity they can deliver. So it's a little bit of a renegotiation starting. And it has been working well. And my ambition will be to use it. You know what I mean? To be able to use it today. And we believe that the world we're entering into, this might be probably an option that will happen. In terms of capital, I will ask Ahmed to Sure. So I think you're right.
We have a billion dollar liquidity, which we believe is sufficient to support our current plan. And I mean, in terms of the additional capital needs, I mean, Julian talked about today, you know, significant opportunities we see. And those opportunities will require additional capital, you know, once they materialize, I think. And then we will be frankly opportunistic, you know, to see what happens. how we can raise that capital. But at the end of the day, we will be very mindful of creating value for our shareholders. I think that's our job as a management. And then just a follow-up on the leverage side, could you just talk about what type of scale and translate in that operating leverage? the current gross margin, if that's what we should expect, even if, you know, as your volume grows, or does that gross margin get bigger? Is there any leverage there? And then how that translates into operating margin. If you can give me any framework there, Kelso. Yeah, I'll tell you.
The way we've been communicating, I mean, the way we think about this, actually, is that you should assume that our gross margins stay the same and our ability to grow are a bit that will come out of our operating leverage. And how do we think about it? and to tell you, A, that our top line growth, our overhead would only grow at half and no more than half of the growth of our top line growth. So, you know, say if we grow at our, you know, top line growth goes at 100, our overhead will grow at less than 50%. And that's where the operating leverage is, and that's what you should think about. If you believe that we can grow, let's say, at 100, then that operating leverage gives you significant appetite Thank you. Thank you. One moment for our next question.
Our next question comes from the line of Vikram Bagri of Citi. Your line is now open. Hi. Good morning, everyone. A lot of discussion about competition and you highlighted significant opportunities as well. I wanted to ask, how important is it for you to be vertically integrated given the rising competition? How are the M&A opportunities that you see today? And then finally, could you share the threshold of return for you to make an acquisition, whether it's a ESC or someone else? How do you look at the possibility of M&A in terms of accretion or return on invested capital? What's that threshold? So how do we think about vertical integration? We are very much integrated with our suppliers because our suppliers sell back to us. our designs, our IPs, our, that's how that would work. Very much they were using our own engineering is what's driving our supplier base. So generally our contractor manufacturers are allowing us to have a competitive cost with access to the technology we need. So we don't really see a strong need for vertical integration. Things change that you could think about it, but today we don't see any strong need to do it.
We can work with contractor manufacturers that integrate our technology into hardware and our software into hardware that we can then convert into product at a very, very competitive price. So we're happy on that. In terms of any acquisition, generally, it'll have to be accreted for us. So that's how we looked at it. You know, when we were doing, evaluating the potential acquisition of AAC or participating in that deal, you know, we have to be accruing. So it has to make sense. So, you know, and the accretion needs to create, you know, needs to reflect the additional risk that you take when you integrate vertically. Because what the great capability we have is that we are very agile. We can have three or four different battery manufacturers integrated into our system that we have developed our Smart Start that it can integrate any battery. I'll te