Home energy technology company Enphase (NASDAQ: ENPH) reported Q4 CY2025 results topping the market’s revenue expectations, but sales fell by 10.3% year on year to $343.3 million. On top of that, next quarter’s revenue guidance ($285 million at the midpoint) was surprisingly good and 8.3% above what analysts were expecting. Its non-GAAP profit of $0.71 per share was 21.4% above analysts’ consensus estimates.

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Company Overview

The first company to successfully commercialize the solar micro-inverter, Enphase (NASDAQ: ENPH) manufactures software-driven home energy products.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Enphase’s 13.7% annualized revenue growth over the last five years was exceptional. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Enphase’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 19.8% over the last two years.

Enphase also reports its number of units sold, which reached 1.31 million in the latest quarter. Over the last two years, Enphase’s units sold averaged 23.4% year-on-year declines. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, Enphase’s revenue fell by 10.3% year on year to $343.3 million but beat Wall Street’s estimates by 1.9%. Company management is currently guiding for a 20% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 20.6% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not lead to better top-line performance yet.

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Operating Margin

Enphase has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 15.3%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Enphase’s operating margin decreased by 4.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Enphase generated an operating margin profit margin of 6.5%, down 7.8 percentage points year on year. Conversely, its gross margin actually rose, so we can assume its recent inefficiencies were driven by increased operating expenses like marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Enphase’s EPS grew at a spectacular 16.8% compounded annual growth rate over the last five years, higher than its 13.7% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Enphase’s earnings quality to better understand the drivers of its performance. A five-year view shows that Enphase has repurchased its stock, shrinking its share count by 8.6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Enphase, its two-year annual EPS declines of 17.7% mark a reversal from its (seemingly) healthy five-year trend. We hope Enphase can return to earnings growth in the future.

In Q4, Enphase reported adjusted EPS of $0.71, down from $0.94 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Enphase’s full-year EPS of $2.98 to shrink by 29.5%.

Key Takeaways from Enphase’s Q4 Results

We were impressed by Enphase’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 5.9% to $39.09 immediately after reporting.

Sure, Enphase had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).