Stem Achieves First Profitable Year as Software Pivot Drives Record Margins
Key Takeaways
- Stem (STEM) reached a critical financial milestone in Q4 2025, reporting its first full year of positive adjusted EBITDA and operating cash flow.
- The results highlight a successful strategic pivot toward high-margin software and services, which now account for over half of total revenue.
Mentioned
Key Intelligence
Key Facts
- 1Stem reported its first full year of positive adjusted EBITDA ($7M) and operating cash flow ($7M).
- 2Stevanato Group revealed that GLP-1 drugs now contribute 20% of total revenue, growing at 50% YoY.
- 3Riskified achieved a massive 65% YoY revenue growth, reaching $344.6M for the full year.
- 4SES AI reported $21M in 2025 revenue, a tenfold increase from the previous year.
- 5Wallbox reduced adjusted EBITDA losses by 51% despite an 11% decline in total revenue.
- 6Alto recorded $7.5M in 45Z tax credits for 2025, with projections to double that in 2026.
| Metric | |||
|---|---|---|---|
| FY2025 Revenue | $156M | $21M | ‑145.1M |
| Revenue Growth | +8% | +900% | -11% |
| Adj. EBITDA | $7M (Positive) | -$52.6M (Loss) | -‑29.5M (Loss) |
| Gross Margin | 38% | 53.8% | 38.3% |
Who's Affected
Analysis
The fourth-quarter earnings cycle for late 2025 has revealed a stark divergence between companies successfully transitioning to software-centric models and those still grappling with hardware-heavy legacy structures. At the forefront of this shift is Stem, Inc., which reported a landmark fiscal year. By delivering $156 million in total revenue and achieving its first full year of positive adjusted EBITDA at $7 million, Stem has validated its long-term strategy of de-emphasizing low-margin battery hardware resale in favor of its PowerTrack software and managed services. This transition pushed GAAP gross margins to a record 38%, a significant leap that underscores the scalability of energy AI platforms compared to physical infrastructure.
Stem’s success is mirrored in other pockets of the technology and energy sectors where recurring revenue is becoming the primary engine of growth. SES AI, for instance, reported a staggering tenfold increase in full-year revenue to $21 million, driven by its expansion into Energy Storage Systems (ESS). While SES AI remains in a high-growth, high-loss phase—reporting an adjusted EBITDA loss of $52.6 million—its liquidity position of $200 million and strategic contracts with automotive giants like Honda and Hyundai suggest a clear path toward the same software-and-service maturity that Stem is now demonstrating. The energy sector's evolution is further evidenced by Alto, which saw a $63.5 million improvement in net income, largely due to the integration of 45Z tax credits and a shift toward premium-priced renewable fuel exports.
More concerning is the trajectory of MicroVision, which saw revenue collapse from $4.7 million to just $1.2 million for the year.
However, the transition has not been seamless across all industries. The electric vehicle (EV) charging and Lidar sectors continue to face significant headwinds. Wallbox reported an 11% decline in annual revenue, hampered by a 40% drop in the U.S. EV market and the expiration of federal incentives. Despite this, Wallbox managed to improve its adjusted EBITDA by 51% through aggressive cost-cutting and a 16% growth rate in North America, suggesting that even in depressed markets, operational discipline can mitigate top-line volatility. More concerning is the trajectory of MicroVision, which saw revenue collapse from $4.7 million to just $1.2 million for the year. The company is now undergoing a painful restructuring, with anticipated charges of up to $12 million in 2026 as it attempts to pivot toward security and defense applications.
What to Watch
In the broader enterprise software and healthcare sectors, specialized high-value solutions are outperforming generalist platforms. Stevanato Group has become a primary beneficiary of the GLP-1 weight-loss drug boom, with those products now accounting for 20% of total company revenue and growing at a 50% clip. This high-margin mix shift allowed Stevanato to expand gross margins by 160 basis points despite currency headwinds. Similarly, Riskified demonstrated the power of AI-driven scale, posting 65% revenue growth and achieving GAAP net income of $5.8 million. Riskified’s ability to increase merchant adoption of multiple products—now at 50% of its client base—highlights a growing trend where platform stickiness is becoming the ultimate defense against macroeconomic uncertainty.
Looking ahead, investors should monitor the 'software-ization' of industrial sectors. As seen with Fuel Tech’s $100 million data center pipeline and Red Violet’s record 83% gross margins in entity resolution, the market is increasingly rewarding companies that can decouple revenue growth from physical headcount or hardware units. The common thread among the winners this quarter—Stem, Riskified, and Stevanato—is a clear focus on high-moat, high-margin niches that are insulated from the pricing pressures currently plaguing legacy semiconductor and hardware firms like Magnachip.
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|---|---|
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