Executive Summary / Key Takeaways

• Energy Vault is strategically pivoting towards owning and operating energy storage assets (Build, Own, Operate - BOO) to complement its traditional build and transfer (EPC) and licensing models, aiming for more predictable, high-margin recurring revenue streams.
• This strategic shift, alongside declining battery prices, has impacted near-term recognized revenue in 2024, but the company is executing on significant owned projects like Cross Trails (now operational) and Calistoga, targeting substantial long-term project EBITDA ($30M annually from first three, $100M target from seven).
• The company's unique multi-technology approach (battery, gravity, hybrid) and proprietary VaultOS software provide a competitive moat, enabling differentiated solutions and higher efficiency, particularly in long and ultra-long duration applications and complex hybrid systems.
• Financial performance in Q1 2025 showed revenue growth and significantly improved gross margins (57.1%), while disciplined cost management is targeting a substantial reduction in operating expenses (40% from 2023 levels by H2 2025).
• Project financing and ITC monetization are expected to significantly bolster the balance sheet in the coming quarters ($45M expected in Q2/Q3 2025), providing capital for the BOO strategy without equity dilution, supporting the 2025 revenue guidance of $200M-$300M.

Setting the Stage: A Strategic Evolution in Energy Storage

Energy Vault Holdings, Inc. operates at the forefront of the rapidly evolving grid-scale energy storage market, a critical component in the global transition to renewable energy. The industry landscape is dynamic, driven by increasing demand for reliable power, grid resiliency needs exacerbated by severe weather events, and the accelerating power requirements from sectors like generative AI and data centers. While the conventional battery storage market can be highly commoditized, Energy Vault has carved out a distinct position through a multi-technology approach and a strategic evolution in its business model.

From its origins, co-founded by Bill Gross, Robert Piconi, and Andrea Pedretti, Energy Vault demonstrated a capability for rapid execution, deploying its first gigawatt hour of projects within 10 to 18 months and achieving swift commissioning times. This early success, marked by consistently positive unit economics, laid a foundation of operational credibility. However, recognizing the inherent lumpiness and volatility of a pure EPC (build and transfer) model, the company has strategically shifted to incorporate licensing and, most significantly, a Build, Own, and Operate (BOO) model. This pivot is designed to capture more predictable, higher-margin revenue streams over the long term, leveraging the company's accumulated expertise in system design, integration, commissioning, and maintenance.

Technological Differentiation: A Multi-Tech Moat

Energy Vault's competitive edge is significantly shaped by its diverse technological portfolio, extending beyond conventional lithium-ion batteries to include proprietary gravity-based storage and hybrid systems, all orchestrated by its VaultOS energy management software.

The company's gravity energy storage technology, including the EVx (tower-based), EVy (slope-based), and the new EV0 (modular pumped hydro) systems, offers distinct advantages, particularly for long and ultra-long duration applications. The Rudong EVx system in China, for instance, has demonstrated initial round trip efficiency (RTE) in the 80% to 85% range. Management highlights this as unprecedented for non-lithium-ion mechanical or thermodynamic storage, positioning it as one of the most efficient long-duration technologies globally. The EV0 modular pumped hydro technology, being deployed in Sardinia, Italy, leverages existing infrastructure like mine shafts and uses low-cost, modular components, enabling rapid deployment and scalability in diverse topographies.

Beyond gravity, Energy Vault is a proficient integrator of battery energy storage systems (BESS), demonstrated by its rapid deployment of over a gigawatt hour across various projects using different battery suppliers (e.g., Samsung SDI (006400.KS), BYD (1211.HK), REPT). This technology-agnostic approach allows the company to select the optimal battery chemistry and supplier for specific project needs. Furthermore, Energy Vault is pioneering hybrid solutions, such as the Calistoga Resiliency Center, which combines green hydrogen and lithium-ion storage. This system is designed to provide ultra-long duration backup power, a capability critical for grid resiliency during extended outages and a solution that differentiated Energy Vault in the procurement process.

Central to all of Energy Vault's offerings is its VaultOS software platform. This AI-enabled energy management system is productized and capable of orchestrating diverse energy assets, including multiple storage technologies (battery, hydrogen, gravity) and generation sources (wind, solar, fossil). VaultOS provides advanced asset management, predictive analytics, and economic dispatch capabilities, allowing systems to participate optimally in volatile power markets. This software layer is a key differentiator, enabling Energy Vault to offer integrated, high-performance solutions and potentially serve as a standalone offering for customers managing complex energy portfolios.

The "so what" for investors is clear: Energy Vault's multi-technology platform and sophisticated software provide a competitive moat in an increasingly commoditized market. While competitors like Fluence Energy (FLNC) and Tesla (TSLA) are dominant in battery storage (estimated 15-20% and 25-30% market share respectively, compared to NRGV's estimated 5-10% overall grid storage share), NRGV's unique offerings position it strongly in the growing long and ultra-long duration segments. The high RTE of gravity storage and the flexibility of hybrid systems offer performance advantages (e.g., Rudong's 80-85% RTE vs. typical battery RTEs of 85-90% but for shorter durations; Calistoga's multi-day capability vs. typical 2-4 hour battery systems). While NRGV's upfront costs for specialized tech may be higher in some cases, the potential for lower operating costs over the long term (e.g., gravity systems) and enhanced revenue capture through optimized dispatch via VaultOS contribute to attractive project economics.

Competitive Positioning and Strategic Response

The energy storage market features a diverse set of players. Beyond battery specialists like Fluence and Tesla, large energy companies like AES Corporation (AES) and NextEra Energy (NEE) participate, often leveraging their scale and regulatory advantages. NRGV competes by focusing on areas where its technology and strategic flexibility offer an edge.

In the commoditized battery space, NRGV differentiates through its technology-agnostic integration expertise and the sophistication of its VaultOS software. While Fluence and Tesla have established scale and supply chain advantages, NRGV's ability to work with multiple battery suppliers and integrate them seamlessly with other technologies and generation sources provides flexibility. The company's focus on rapid commissioning, highlighted by customers, is a key operational strength compared to some competitors.

In the long and ultra-long duration market, NRGV's gravity and hybrid solutions directly address needs that conventional batteries struggle to meet economically. While pumped hydro is a long-standing competitor, NRGV's modular gravity systems offer greater siting flexibility. The Rudong RTE data provides a quantifiable performance metric that supports the viability of gravity storage against other mechanical or thermal long-duration technologies.

The strategic pivot to the BOO model is a direct response to the competitive landscape and market dynamics. By owning assets, Energy Vault moves up the value chain, capturing higher-margin, predictable revenue streams (target project EBITDA margins of 70-85%) that are less susceptible to the lumpiness of EPC projects and the price volatility seen in equipment markets (like the significant decline in battery prices in 2024). This contrasts with competitors primarily focused on equipment sales or EPC services. The BOO strategy leverages NRGV's core strengths in project execution and software optimization to enhance asset returns (targeting low double-digit unlevered IRRs).

Customer and supplier dynamics also shape NRGV's positioning. The company's ability to step in and manage a supplier bankruptcy on a project in 2024, ultimately leading to follow-on business with the same customer (Jupiter Power), demonstrates operational resilience and customer focus. The India licensing agreement with SPML Infra (532423.BO) is another strategic move, leveraging a local partner's infrastructure and market presence to deploy NRGV's battery technology architecture in a high-growth region, diversifying revenue streams beyond direct project execution.

Overall, Energy Vault positions itself as a provider of comprehensive, multi-technology energy storage solutions capable of addressing complex grid needs across various durations. Its competitive strategy is to leverage technological innovation and flexible business models, particularly asset ownership, to capture value in specific market niches and build a more stable, profitable financial profile over time, contrasting with the scale-focused or single-technology approaches of some larger rivals.

Financial Performance and Strategic Execution

Energy Vault's recent financial performance reflects its strategic transition and the dynamic market environment.

For the full year 2024, revenue finished at $46.2 million, slightly below the lower end of the company's guidance range ($50M-$100M). Management explicitly attributed this miss, and the significant reduction from the prior 2025 outlook of ~$450M, to two primary factors: the conscious decision to retain approximately $100 million worth of projects on the balance sheet under the BOO strategy instead of recognizing immediate EPC revenue, and the substantial decline in lithium-ion battery prices which reduced the overall dollar size of projects. While this impacted top-line revenue in 2024, the strategic rationale is to build a foundation for higher long-term profitability and predictable revenue.

Despite the lower revenue base in 2024, gross margins improved significantly to 13.4% for the full year (up from 5.1% in 2023), driven by a favorable revenue mix including higher-margin O&M services and SaaS license revenue. Q3 2024 saw particularly high gross margins (40.3%) on a minimal revenue base, while Q4 2024 margins (7.7%) were impacted by unfavorable equipment delivery mix. Q1 2025 continued this trend of strong gross margin performance, reaching 57.1%, benefiting from the start of Australian projects and the India license agreement.

Disciplined cost management has been a key focus. Adjusted operating expenses decreased by 19% year-over-year in 2024 to $64.5 million. Management is targeting further significant reductions, aiming for a quarterly adjusted OpEx run rate of $12 million to $14 million, representing a 15% to 25% reduction from the Q1 2025 level ($16.2M) and approximately a 40% reduction from the end of 2023 levels by the second half of 2025. This focus on efficiency is contributing to improving EBITDA. The adjusted EBITDA loss narrowed to $57.9 million in 2024 (within guidance) and further improved to a loss of $11.3 million in Q1 2025, stemming from gross margin improvement and reduced operating costs.

Liquidity and cash flow are critical for funding the capital-intensive BOO strategy. The company ended 2024 with over $30 million in cash and no debt, below prior expectations due to customer payment timing and delayed project financing closure. However, the strategic focus on project financing is now yielding results. The Calistoga Resiliency Center project financing closed in April 2025, returning $28 million to the balance sheet, including ITC monetization. The company is actively seeking financing and ITC monetization for the Cross Trails project and expects approximately $20 million from project financing and $12 million from ITC sale. Overall, the company expects approximately $45 million more in cash from project financing and ITC sales in Q2 and Q3 2025. This is projected to increase the cash balance to $50 million-$60 million by the end of Q2 2025 and $60 million-$75 million by the end of Q3 2025. The company's ability to secure these financings and monetize ITCs is crucial for funding its growth strategy in a non-dilutive manner, leveraging its $1 billion+ bonding capacity.

Operational milestones underscore the execution of the BOO strategy. The Cross Trails BESS in Texas (57 MW/2 hour), the first fully owned asset, achieved commercial operation ahead of schedule in June 2025 and is participating in the market. The Calistoga Resiliency Center is undergoing commissioning and is expected to be operational from June 1, 2025. The acquisition of the 1 GWh Stoney Creek BESS in Australia under a 14-year LTESA further expands the owned asset portfolio. These first three owned projects are expected to deliver approximately $30 million in annual recurring project EBITDA over 15+ years, with the total portfolio of seven target owned projects aiming for approximately $100 million in recurring annual EBITDA long term.

Outlook and Risks

Energy Vault is reaffirming its 2025 revenue guidance of $200 million to $300 million. This outlook is supported by the growing backlog ($648M as of Q1 2025, up 49% year-to-date), the ramp-up of work on contracted projects in Australia and the U.S., equipment deliveries, and the initial contributions from the newly operational owned assets (Calistoga, Cross Trails). Revenue is expected to be back-end loaded, ramping up in the second half of 2025.

The guidance incorporates the strategic shift to BOO and the impact of lower battery prices, which explain the difference from prior, higher revenue outlooks. Management views this as a necessary trade-off for building a more profitable, predictable business over the long term. The targeted OpEx reductions are expected to continue improving adjusted EBITDA throughout the year.

The recent pause in U.S.-China tariffs presents potential upside, as it may reignite discussions for $200 million to $250 million worth of U.S. battery projects that were previously paused. However, the company is not changing its guidance based on this potential upside yet. Energy Vault is largely shielded from U.S. tariff risk on its current backlog (90% not impacted) due to geographic diversity (Australia, India licensing) and asset ownership. The company has also secured up to 2 GWh of capacity for 2026 delivery from non-China supply chains if needed.

Key risks include the potential for renewed tariff escalations impacting U.S. demand, continued volatility in energy markets affecting project economics and timing, and execution risk associated with commissioning new technologies and large-scale projects. Supplier issues, as experienced in 2024, can also impact project timelines and margins. The capital-intensive nature of the BOO strategy requires continued access to project financing and successful ITC monetization, although management is confident in the market for attractive projects. The company's investment in Core Power, which faced equity challenges for its factory build-out, highlights the risks associated with early-stage technology investments.

Conclusion

Energy Vault is undergoing a significant strategic transformation, shifting its focus from a pure project delivery model to one that emphasizes owning and operating energy storage assets. While this pivot, coupled with market dynamics like declining battery prices, has impacted near-term recognized revenue, it is foundational to building a business with more predictable, high-margin recurring revenue streams over the long term.

The company's differentiated multi-technology approach, encompassing battery integration, innovative gravity solutions, hybrid systems, and the orchestrating VaultOS software, provides a competitive advantage in addressing complex grid needs across various durations, particularly in the growing long and ultra-long duration segments. Recent operational milestones, including the commercial operation of the Cross Trails BESS and the commissioning of the Calistoga Resiliency Center, demonstrate execution on the BOO strategy, which is expected to generate substantial long-term EBITDA.

With project financing efforts gaining traction and expected to significantly strengthen the balance sheet, Energy Vault appears positioned to fund its strategic growth initiatives. The reaffirmed 2025 guidance reflects a realistic outlook given the strategic transition and market environment, while ongoing cost reductions aim to improve profitability. Despite facing risks from market volatility and geopolitical factors, Energy Vault's unique technological capabilities and evolving business model offer a compelling investment thesis centered on capturing value in the energy storage market through strategic asset ownership and technological leadership.