ARRY — Q2 2026 Financial Report Analysis

Overview

Array Technologies makes solar trackers: steel racking that holds solar panels and slowly turns them east to west during the day to follow the sun, which gets more power out of the same panels than a fixed mount. Its customers are mostly large utility-scale solar farms in the US. In the second quarter of 2026 (April–June), revenue fell 6% to $342.1 million, but that headline hides two very different businesses. The US-focused "Array Legacy" segment (which now includes APA Solar, acquired in August 2025) grew revenue 10% and lifted its gross margin. The international STI segment (mainly Spain and Brazil) lost 69% of its revenue and almost all of its profit. Net income fell 44% to $24.3 million, and because $15.9 million of that went to preferred shareholders, profit available to ordinary shareholders was only $8.4 million, or $0.05 per share, down from $0.19.

At a glance

• Gross margin 29.1%, up from 26.8%. Gross margin is the share of revenue left after the direct cost of making and delivering the product. The US business charged about 25% more per unit shipped, more than offsetting higher costs per watt.
• Order book: a record $2.5 billion, up 37% year on year (company-reported "executed contracts and awarded orders"), with over $500 million of new orders in the quarter. Demand for future quarters is building even as current revenue dips.
• $121.3 million of operating cash flow in the quarter, about five times net income. Much of it came from collecting tax-credit rebates owed by suppliers and from higher accrued expenses, not just from profits.

Results summary

Operating margin is operating income (profit after running the business, before interest and tax) divided by revenue.

Two segments moving in opposite directions

US (Array Legacy). Per the 10-Q, revenue growth was "primarily driven by an increase of approximately 25% in ASPs, partially offset by a 12% decrease in volume." ASP (average selling price) is revenue per megawatt shipped. These figures include APA, which was not in last year's numbers, so some of the price increase likely reflects product mix rather than like-for-like price rises; the filing does not split it out. Cost per watt (CPW) also rose 21%. One visible piece is outbound freight in this segment, which rose to $24.1 million from $9.9 million a year earlier. Price rose faster than cost, so gross margin improved to 30.7%.

International (STI). Revenue fell because volume dropped about 60% and ASPs fell about 26%. Gross margin collapsed to 5.1%. For the first half as a whole, STI had a gross loss of $1.1 million (margin -4.1%) on just $27.8 million of revenue, against $159.5 million of revenue a year earlier. In the 10-Q management points to Brazil: the real has moved sharply against the dollar, which changes the economics of local power contracts, and a state tax benefit is being phased out by 2033. The company says it is "focused on reducing costs and better aligning our organization, including the size thereof, in Brazil with the current market conditions." Six percent of first-half revenue came from outside the US.

Why profit fell while gross profit rose

Gross profit actually rose $2.5 million. The profit decline comes from further down the income statement:

• General and administrative costs rose 21% ($9.4 million), "primarily due to an increase of $9.3 million from personnel-related expenses." G&A also includes $5.8 million of acquisition-related expenses (vs $3.1 million a year ago); the company signed a deal for Affordable Wire Management (AWM) in July.
• Depreciation and amortization rose $2.4 million, all of it from APA.
• A $2.4 million charge for changes in the value of earnout and tax-receivable obligations (vs $0.2 million), mostly a $2.0 million increase in the estimated fair value of the earnout APA's sellers can earn.
• The year-ago quarter had a $14.2 million one-off gain from buying back convertible notes for less than face value. Without it, pre-tax income would have been $42.7 million last year vs $31.7 million now, a 26% decline instead of the reported 44%.

Interest costs helped: interest expense fell 34% to $5.8 million after refinancing into lower-rate debt.

What the headline numbers hide

• Preferred dividends take most of the profit. Array has $506.4 million (liquidation preference) of Series A preferred stock. Its $15.9 million quarterly dividend and accretion charge absorbed 65% of net income, which is why EPS fell 74% while net income fell 44%. This also matters for cash: under the preferred terms, after August 10, 2026 dividends can no longer accrue at 6.25%. They must be paid in cash, and any unpaid amount accrues at the cash rate plus 2 percentage points. Until now the company could let them build up rather than pay out cash.
• GAAP vs adjusted. The company's adjusted EPS of $0.24 adds back $13.0 million of acquisition-related amortization, $8.0 million of preferred accretion, $5.8 million of acquisition costs, $4.6 million of stock-based pay and the $2.4 million contingent-consideration charge, less their tax effect. Most of these are real, recurring costs of the company's acquisition strategy and its capital structure, so the gap between $0.05 and $0.24 is mostly not one-off noise.
• Cash conversion is strong but flattered by timing. First-half operating cash flow was $91.9 million on $26.3 million of net income, and free cash flow (operating cash minus capital spending) was $76.7 million. Part of it is supplier rebates: under the 45X manufacturing credit (an Inflation Reduction Act tax credit paid per unit of qualifying parts made in the US, such as torque tubes and fasteners), Array's suppliers share part of their credit with Array. Array books that as lower cost of goods sold. Short-term rebate receivables fell from $152.0 million to $51.4 million, but long-term rebate receivables rose from $10.9 million to $91.3 million. Total rebates owed fell only about $20 million ($162.9M → $142.7M); most of the move was money now expected more than a year out. Accrued expenses also rose $47 million, and receivables rose 19% since December ($271.6M → $323.4M).
• 45X benefit isn't quantified. The 10-Q says segment product costs "include 45X benefits realized" but gives no dollar amount for the quarter. That benefit is part of the margin, so investors can't tell how much of the 29.1% gross margin depends on the credit, which is not permanent: it phases out under current law.
• No help from buybacks or tax. The diluted share count rose slightly (155.7M vs 153.1M) and the tax rate was about the same (23.3% vs 23.9%). The EPS decline is fully explained by operations, the absence of last year's debt gain, and preferred dividends.

Policy backdrop

The 10-Q spends unusual space on policy, because tracker demand depends on whether solar farms get built:

• Tax credits. Under the 2025 One Big Beautiful Bill Act, the solar investment tax credit ends for projects placed in service after 2027 unless construction began before July 4, 2026. Treasury also removed the "5% safe harbor" route for proving construction started, leaving only a physical-work test. New "foreign entity of concern" rules can disqualify projects or 45X claims that rely on Chinese-controlled suppliers.
• Tariffs. Since April 6, 2026, Section 232 steel and aluminum duties apply to the full customs value of imported articles (50% for mostly-steel goods). New Section 301 tariffs of 10–12.5% on imports from 59 countries and the EU took effect July 24. Preliminary anti-dumping and countervailing duties on solar modules from India, Indonesia and Laos run from about 103% to 234%. Array doesn't sell modules, but module shortages or price spikes can delay the projects its trackers go into. Management states it does not expect the tariffs announced so far to have a material adverse effect.
• Interest rates remain a factor in customers' project timing, according to the filing.

Order book vs. revenue

The $2.5 billion order book is about six times the company's $413.7 million of remaining performance obligations (contracted revenue under GAAP, 99% expected within 12 months). The order book also includes awarded orders that are not yet firm contracts and deliveries further out. So it signals demand, not guaranteed revenue. Still, a 37% rise and a 1.5x trailing book-to-bill (orders received ÷ revenue shipped) mean orders are arriving faster than shipments. Our read, which the company does not state: some of this likely reflects developers locking in equipment for projects that had to start construction before the July 2026 tax-credit deadline.

Takeaway: Array's US business is pricing well (Legacy gross margin 30.7%, revenue +10%), and the record $2.5 billion order book supports the full-year revenue target. But very little of that reaches common shareholders: $15.9 million of preferred dividends took two-thirds of net income, and those dividends must now be paid in cash. The international STI business has shrunk to under $22 million of quarterly revenue at a 5% margin.

Outlook

Management kept full-year 2026 revenue guidance at $1.4–1.5 billion, raised the bottom of its adjusted EBITDA range to $210–230 million (from $200–230 million) and adjusted EPS to $0.68–0.75 (from $0.65–0.75), and guided Q3 revenue to $310–330 million. It expects a full-year adjusted gross margin of 27–28%.

The arithmetic implies a heavy fourth quarter. First-half revenue was $565.5 million, so the second half needs $835–935 million. After Q3's guided $310–330 million, Q4 would need roughly $505–625 million, more than any quarter so far this year. The 27–28% full-year margin target, against 30.8% adjusted in the first half, also implies lower margins in the second half. Our read: the order book makes the revenue plausible, but the targets depend on projects shipping on schedule in Q4 despite module tariffs. Things to watch in Q3: whether Legacy pricing holds as lower-margin backlog ships; whether the AWM acquisition ($153 million base price, plus up to $40 million earnout) closes as planned in Q3; how the company funds cash preferred dividends; and whether the long-term 45X rebate receivables start converting to cash.