Solar tracker company Nextracker (NASDAQ: NXT) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 42.4% year on year to $905.3 million. On the other hand, the company’s full-year revenue guidance of $3.38 billion at the midpoint came in 0.7% below analysts’ estimates. Its non-GAAP profit of $1.19 per share was 17.4% above analysts’ consensus estimates.
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Nextracker (NXT) Q3 CY2025 Highlights:
- Revenue: $905.3 million vs analyst estimates of $833.2 million (42.4% year-on-year growth, 8.6% beat)
- Adjusted EPS: $1.19 vs analyst estimates of $1.01 (17.4% beat)
- Adjusted EBITDA: $223.5 million vs analyst estimates of $196.1 million (24.7% margin, 14% beat)
- The company lifted its revenue guidance for the full year to $3.38 billion at the midpoint from $3.33 billion, a 1.5% increase
- Management slightly raised its full-year Adjusted EPS guidance to $4.15 at the midpoint
- EBITDA guidance for the full year is $795 million at the midpoint, below analyst estimates of $802.3 million
- Operating Margin: 20%, in line with the same quarter last year
- Free Cash Flow Margin: 18.9%, down from 22.3% in the same quarter last year
- Backlog: $5 billion at quarter end, up 8.7% year on year
- Market Capitalization: $12.95 billion
Company Overview
With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dhabi solar farm project, Nextracker (NASDAQ: NXT) is a provider of solar tracker systems that help solar panels follow the sun.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Nextracker’s 24.7% annualized revenue growth over the last five years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
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. Nextracker’s annualized revenue growth of 27.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. 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 $5 billion in the latest quarter and averaged 56.7% 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 magnificent year-on-year revenue growth of 42.4%, and its $905.3 million of revenue beat Wall Street’s estimates by 8.6%.
Looking ahead, sell-side analysts expect revenue to grow 4.1% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Operating Margin
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 17.1%. 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 11.5 percentage points over the last five years, as its sales growth gave it immense operating leverage.
In Q3, Nextracker generated an operating margin profit margin of 20%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Nextracker has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 11.5% over the last five years, quite impressive for an industrials business.
Taking a step back, we can see that Nextracker’s margin expanded by 15.9 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.
Nextracker’s free cash flow clocked in at $171.4 million in Q3, equivalent to a 18.9% margin. The company’s cash profitability regressed as it was 3.4 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends trump temporary fluctuations.
Key Takeaways from Nextracker’s Q3 Results
We were impressed by how significantly Nextracker blew past analysts’ EBITDA expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its full-year EBITDA guidance slightly missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 10.1% to $99.50 immediately after reporting.
Sure, Nextracker had a solid quarter, but if we look at the bigger picture, is this stock a buy? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
