Electrical Balance of System Components

# Executive Summary * Geopolitical tensions and evolving trade policies, including tariffs and "Buy America" provisions, are fundamentally reshaping the Electrical Balance of System Components (EBOS) supply chain, creating significant cost headwinds for some while simultaneously favoring domestic manufacturers. * An unprecedented surge in global electricity demand, primarily driven by the proliferation of AI data centers and the accelerating energy transition, is fueling robust, double-digit top-line growth for well-positioned EBOS suppliers. * Macroeconomic pressures, such as elevated interest rates, inflationary raw material costs, and labor shortages, are constraining project development and profitability across the sector, leading to a divergence in financial performance. * Market leadership is increasingly defined by technological innovation, with companies investing heavily in integrated hardware and software platforms, automation, and proprietary solutions designed to enhance efficiency and reduce on-site labor requirements. * A clear bifurcation in competitive strategy is emerging, with firms adopting models ranging from integrated technology platforms to specialized, high-value component innovation and foundational infrastructure supply. * Capital allocation strategies reflect these divergent approaches, with growth-oriented firms prioritizing substantial R&D and strategic M&A, while more mature, cash-generative businesses focus on significant shareholder returns through buybacks and dividends. ## Key Trends & Outlook The Electrical Balance of System Components industry is being fundamentally reshaped by geopolitical tensions and trade policies, which are creating significant cost pressures and competitive shifts. Tariffs are having a direct impact, with Nextracker citing an approximate 300 basis points impact in Q2 FY26, and Atkore facing challenges from expanded aluminum tariffs (25% to 50%) and increased tariffs (50%) on steel conduit imports from Mexico and Canada, which led to a decline in imported steel conduit volumes by "well over 20%, maybe getting up to 30% down for the quarter" in Q3 2025. This pressure forces companies to re-evaluate global supply chains, creating immediate margin risk for those reliant on imports. Conversely, policies like "Buy America" and U.S. EXIM Bank domestic content mandates provide a powerful tailwind for companies with significant U.S. manufacturing footprints, such as Atkore, particularly in steel conduit, and Shoals, which benefits from mandates for domestic content in international projects. This dynamic is happening now and is the primary driver of strategic decisions around supply chain localization. While long-term demand is exceptionally strong—fueled by data center power needs expected to more than double from 46 gigawatts in 2024 to over 92 gigawatts by 2030—near-term project economics are challenged by macroeconomic headwinds. High interest rates increase the cost of capital for large solar and Battery Energy Storage Systems (BESS) installations, while volatile commodity prices are creating significant pricing pressure. This is evidenced by Atkore's $100.5 million decrease in average selling prices in Q3 2025, which contrasts sharply with the demand-driven +32.9% YoY revenue growth at Shoals in Q3 2025 and +42% YoY revenue growth at Nextracker in Q2 FY26. The key opportunity for outperformance lies in technological innovation that addresses industry constraints. Companies like Nextracker and Shoals are differentiating through integrated platforms, AI, and proprietary systems that reduce the need for skilled labor, a critical bottleneck. The primary risk remains margin compression from the combination of import tariffs on one side and intense pricing pressure on the other, particularly for less-differentiated products. ## Competitive Landscape The Electrical Balance of System Components market exhibits a varied structure; while some segments like solar trackers show concentration, with Nextracker holding a commanding 26% global market share in 2024, the broader EBOS landscape remains competitive, with players adopting distinct strategic approaches. Some firms, exemplified by Nextracker, are building integrated technology platforms. Their core strategy involves moving beyond selling a single component to provide a comprehensive, integrated system of hardware, software, and services that optimizes the entire solar power plant. This approach creates a strong competitive moat through system-level integration, captures more value, and builds stickier customer relationships, with differentiated technology like its TrueCapture energy yield management system and investments in AI and robotics allowing for premium positioning. Nextracker's strategy explicitly involves expanding into a "comprehensive solar technology platform" by acquiring and integrating eBOS (Bentek Corporation), foundations (Ojjo and Solar Pile International), and AI/robotics (OnSight Technology, Amir Robotics, and IP from SenseHawk) alongside its core tracker technology. In contrast, other companies, such as Shoals Technologies Group, focus on innovating high-value, proprietary components to solve specific industry problems. Their core strategy is to address a particular high-cost challenge with a proprietary, patented product that is difficult to replicate, emphasizing product leadership in a defined niche rather than platform breadth. This allows them to command high gross margins due to strong intellectual property protection and a clear value proposition, such as reducing expensive skilled labor. Shoals' proprietary Big Lead Assembly (BLA) system, a plug-and-play cable and cabinet solution, is designed to simplify installation and reduce labor, enabling the company to achieve an industry-leading 37.0% gross margin in Q3 2025. Finally, foundational infrastructure suppliers like Atkore provide essential, high-volume electrical and infrastructure products that are fundamental to any project. Their core strategy is to be a scaled, efficient provider of products such as metal and plastic conduits, electrical cable, and metal framing. This model benefits from economies of scale, an extensive distribution network, and strong brand recognition. Atkore leverages its extensive domestic manufacturing footprint and efficient distribution network as a key advantage against import competition, particularly benefiting from "Buy America" policies in its steel conduit business. Ultimately, the key competitive battlegrounds in the Electrical Balance of System Components industry are technology integration, supply chain resilience, and the ability to effectively navigate complex trade policies. ## Financial Performance Revenue growth bifurcates sharply across the Electrical Balance of System Components industry, ranging from robust double-digit expansion to significant contraction. This divergence is driven directly by end-market exposure and the impact of prevailing trends. Growth is concentrated in companies that are pure-plays on the surging demand from solar and data centers. Nextracker's +42% YoY revenue growth in Q2 FY26 exemplifies the powerful tailwind from the renewable energy buildout and the proliferation of AI data centers. In contrast, companies with greater exposure to broader construction and industrial markets are facing significant pricing pressure from volatile commodity prices and import competition, leading to revenue contraction, as demonstrated by Atkore's -10.6% YoY net sales decline in Q3 FY25. {{chart_0}} Profitability also shows a clear divergence, largely based on technological differentiation and pricing power. Premium gross margins are commanded by companies whose proprietary technology provides a clear and defensible value proposition, such as reducing high-cost skilled labor, allowing them to insulate themselves from intense pricing pressures. Shoals' 37.0% gross margin in Q3 2025 is a direct result of its proprietary, labor-saving Big Lead Assembly (BLA) system and its focus on integrated solutions. This contrasts with the margin pressure faced by Atkore, which is navigating lower average selling prices and anticipating approximately $50 million in unmitigated headwinds for FY26, primarily from lower selling prices and expanded aluminum tariffs. {{chart_1}} Capital allocation strategies reflect a clear split between investing for hyper-growth and returning capital to shareholders. Companies at the forefront of the technology race are aggressively reinvesting capital into R&D and strategic acquisitions to solidify their market leadership and expand their platforms. Nextracker's tripling of its R&D budget in the last two to three years to approximately $100 million and its acquisition of Origami Solar for approximately $53 million exemplify this growth investment strategy. Meanwhile, more mature, cash-generative businesses facing cyclical headwinds are prioritizing shareholder returns through substantial buyback programs and dividends. Atkore's over $1.3 billion in share repurchases since 2021 and its growing quarterly dividend of $0.33 per share highlight a focus on returning capital to shareholders. Balance sheets across the Electrical Balance of System Components industry are generally strong and healthy. The industry's robust secular growth drivers are enabling healthy cash generation, allowing companies to maintain solid financial positions. This financial strength provides the flexibility to navigate macroeconomic uncertainty, fund growth investments, and weather cyclical pressures. Nextracker provides a clear example of this financial strength, reporting $845 million in cash as of September 26, 2025, with no debt, and total liquidity of nearly $1.8 billion, including a recently renewed $1 billion unsecured revolving credit facility. {{chart_2}}