Executive Summary / Key Takeaways

• Array Technologies stands at a critical inflection point where 120% volume growth in its core US tracker business and a rapidly shifting product mix toward higher-margin offerings are creating the conditions for margin stabilization, despite near-term compression from tariff and commodity headwinds
• The company's strategic acquisition of APA Solar in August 2025 provides vertical integration into engineered foundations and fixed-tilt systems, expanding its addressable market while eliminating costly steel interfaces that burden competitors
• A durable regulatory moat has emerged from Array's 93% domestic content capability and 40GW+ US manufacturing footprint, positioning it to capture IRA/45X credits while import-dependent rivals face escalating tariff pressures
• Financial performance demonstrates operational leverage with Q3 2025 delivering 70% consolidated revenue growth, $222 million in cash, and net debt leverage of just 2.1x, though STI international segment challenges and margin pressure from legacy contracts remain material risks
• The investment thesis hinges on successful execution of three variables: accelerating adoption of OmniTrack/SkyLink/Hail XP products beyond 40% of the order book, effective tariff pass-through on 70-75% of contracts, and seamless APA integration to realize promised synergies

Setting the Scene: The Solar Tracker Consolidation Play

Array Technologies, incorporated in 1987 and headquartered in Albuquerque, New Mexico, has evolved from a pure-play solar tracker manufacturer into an integrated utility-scale solar solutions provider. The company operates through two distinct segments: Array Legacy Operations, which encompasses its core US tracker business and the newly acquired APA Solar, and STI Operations, which handles international markets outside the United States. This bifurcated structure reflects a decade-long transformation that began with the 2022 acquisition of Spanish tracker company STI and culminated in the 2025 APA Solar deal, marking Array's first expansion beyond core tracker components into engineered foundations and fixed-tilt mounting systems.

The solar tracker industry sits at the intersection of two powerful trends: the relentless cost decline of utility-scale solar, which remains the fastest-growing and lowest-cost electricity source, and the increasing complexity of deploying projects on challenging terrain and under extreme weather conditions. Single-axis trackers typically generate 15-25% more energy than fixed-tilt systems, creating a compelling value proposition for developers seeking to maximize returns. However, the market has become brutally competitive, with Nextracker (NXT) commanding 40-50% global market share through scale and innovation, while smaller players like FTC Solar (FTS) and Soltec fight for survival. Array's patented DuraTrack design, which uses one motor to drive multiple rows, represents a fundamental architectural difference from competitors' one-motor-per-row approach, delivering what management claims is superior reliability and lower installation costs.

The regulatory environment has become a defining variable. The One Big Beautiful Bill Act (OBBB), signed in July 2025, introduced foreign entity of concern (FEOC) limitations on ITC credits and eliminated the 5% safe harbor for utility-scale projects, leaving only the physical work test for construction commencement. Simultaneously, Section 232 tariffs on steel and aluminum have doubled material costs, while new ADCVD tariffs on solar components from Southeast Asia have created a compliance minefield. These headwinds have paradoxically strengthened Array's competitive position, as its long-standing US-centric supply chain and 93% domestic content capability transform from a cost structure into a strategic moat.

Technology, Products, and Strategic Differentiation: The Integrated Foundation Advantage

Array's technological differentiation extends beyond its patented DuraTrack architecture to a portfolio of products designed for specific customer pain points. OmniTrack, introduced in September 2022, has rapidly captured over 20% of the order book by late 2024 by enabling deployment on uneven terrain with significantly reduced grading and civil works requirements. SkyLink, launched in Q3 2024, eliminates trenching through wireless string-level connectivity, while Hail XP, introduced in May 2025, offers a 77-degree stow angle that management claims is optimal for extreme weather protection. Together, these three products represent nearly 40% of the current order book, signaling a successful product cycle that commands premium pricing.

The APA Solar acquisition fundamentally alters Array's value proposition. For approximately $166 million in cash plus earnouts, Array gained engineered foundation capabilities that eliminate the heavy steel interface traditionally required between foundations and trackers. By adapting the A-frame to become the base for the tracker, Array removes a large, expensive component while creating "an incredible set of economics for customers" that brings engineered foundation costs down to standard pile pricing. This vertical integration not only expands Array's addressable market into fixed-tilt systems but also creates bilateral commercial synergies, as APA can now offer Array's tracker portfolio to its foundation customers and vice versa. The deal is expected to be EPS accretive in its first year, with inherent tax advantages from the 45X credits available to domestic manufacturers.

SmarTrack, Array's IP-protected software platform, represents an underappreciated revenue stream with over five gigawatts deployed and a target of ten gigawatts by year-end. The platform enables automated hail alert response, snow response, backtracking , and diffuse optimization, creating recurring revenue potential and higher-margin software sales. Unlike competitors' manual stow systems that require human intervention, Array's automated capabilities proved their value during 2024's severe hailstorms, where competing trackers suffered significant damage. This software layer creates switching costs and provides data-driven insights that enhance customer retention.

The domestic manufacturing footprint provides a regulatory moat that competitors cannot easily replicate. With over 50 US suppliers and 40GW+ annual capacity, Array can deliver 100% domestic content trackers that qualify for Table 1 IRA benefits. The new Albuquerque facility, which broke ground in 2024, further strengthens this position while the CPQ (Configure Price Quote) program uses advanced algorithms to evaluate supply and logistics options in real-time, inclusive of tariffs. This agility allows Array to optimize between domestic and international sourcing, ensuring the lowest landed cost while maintaining compliance.

Financial Performance & Segment Dynamics: Operational Leverage Emerges

Q3 2025 results demonstrate the power of operational leverage in Array's model. Consolidated revenue increased 70% to $393.5 million, driven by a 120% surge in Array Legacy Operations to $353.4 million, partially offset by a 44% decline in STI Operations to $40.1 million. The Legacy segment's volume growth of 122% was the primary driver, with the APA acquisition contributing approximately $17 million in revenue during its partial quarter. This top-line acceleration came despite a 19% decrease in average selling prices due to commodity price declines at contract execution, highlighting the company's ability to win market share through volume.

Gross margin compression tells a more nuanced story. Legacy Operations gross margin fell to 28.9% from 41% in the prior year, a 1,210 basis point decline that management attributes to three factors: the roll-off of prior-year 45X amortization benefits, commodity inflation relative to ASP increases, and approximately 110 basis points of tariff drag. However, sequential improvement of 30 basis points in adjusted gross margin suggests stabilization, driven by a higher mix of domestic projects and ASP improvements. The cost per watt increased 19%, with 6% from tariffs and 13% from rising commodity costs, yet the company maintained positive operating leverage as SG&A expenses declined to 9.9% of revenue from 15.5% in Q3 2024.

STI Operations' deterioration reflects macroeconomic headwinds rather than competitive weakness. Revenue declined 44% due to a 61% volume drop, partially offset by 39% higher ASPs and favorable foreign currency impacts. Brazil remains particularly challenged, with interest rates at 15% (the highest since 2006), real devaluation, and new tariffs on solar components creating project delays rather than cancellations. Management expects these headwinds to persist for three to four more quarters, though the segment's 10% year-to-date revenue growth suggests underlying resilience in other international markets like Australia and Europe.

The balance sheet provides strategic flexibility. With $222 million in cash and $145 million available under the undrawn revolver, total liquidity exceeds $365 million. Net debt leverage of 2.1x trailing twelve-month adjusted EBITDA is conservative, particularly after the Q2 2025 refinancing that eliminated all senior secured debt. The company repurchased $100 million of its 2028 convertible notes at a 20% discount, generating a $20 million gain and reducing annualized cash interest expense by $9 million. These capital markets transactions extended average debt maturity by approximately two years while the capped call transactions on the new 2031 notes effectively elevate the conversion price from $8.12 to $12.74, providing substantial dilution protection.

Cash flow generation remains robust despite acquisition-related investments. Nine-month operating cash flow of $58.1 million funded $179.4 million in investing activities, primarily the APA acquisition and Albuquerque facility construction. The company posted $227.4 million in surety bonds without adverse liquidity impact, demonstrating financial capacity to support large-scale projects. Management's confidence that operating cash flows will be sufficient to meet liquidity needs for the next 12 months and beyond appears well-founded.

Outlook, Management Guidance, and Execution Risk

Management's 2025 guidance reflects both optimism and prudence. Revenue is now expected between $1.25 and $1.28 billion, representing a $60 million increase to the midpoint and implying full-year growth of approximately 37% over 2024's $916 million. The APA acquisition contributes roughly $50 million to this outlook, with the remainder driven by organic volume growth. Adjusted gross margin guidance of 27-28% acknowledges continued pressure from tariff pass-through accounting, APA gross margin dilution, and delayed international project commissioning that pushes high-margin software revenues into future periods.

The fourth quarter is explicitly framed as a "trough quarter" affected by lower revenue volumes and reduced P&L leverage, consistent with historical North American seasonality. However, management notes that the absence of STI Brazil's countercyclical construction activity—historically a Q4/Q1 contributor—means the business is returning to a more normalized flow driven by domestic project timing. This transparency about seasonality helps investors model quarterly progression without extrapolating Q4 weakness into structural concerns.

Looking to 2026, management expresses "high optimism" based on a robust order book and improving book-to-bill momentum. The early-stage project pipeline has achieved double-digit expansion year-to-date, with over 50% of the order book now representing direct relationships with utilities, independent power producers, and developers. This shift toward Tier 1 customers reduces execution risk, as these entities have already safe-harbored projects through 2029-30 and possess stronger balance sheets than traditional EPC intermediaries.

Key execution variables will determine whether this optimism materializes. First, tariff pass-through must succeed on the 70-75% of contracts that allow direct recovery. While management states tariffs are now incorporated into upfront quotes, the 110 basis point drag in Q3 demonstrates the timing mismatch between cost incurrence and price realization. Second, the APA integration must deliver promised procurement efficiencies and cross-selling opportunities. Early signs are positive, with seven open requisitions for sales design engineers to handle inbound quotation requests for integrated solutions, but the $9.1 million in direct transaction costs and $2.5 million in deferred consideration expense in Q3 show integration is still ramping.

Third, product mix must continue shifting toward higher-margin offerings. OmniTrack, SkyLink, and Hail XP already represent 40% of the order book, but their margin contribution is obscured by legacy low-margin volume commitment agreements (VCAs) that continue to ship through Q1 2026. The Q2 reconfiguration of a large fixed-price VCA, while reducing backlog, improved overall margin profile by removing sub-market pricing on projects that slipped to 2027. This proactive descoping demonstrates management's willingness to sacrifice volume for profitability, a discipline that should support margin expansion as the legacy VCA rolls off.

Risks and Asymmetries: What Could Break the Thesis

Three material risks threaten the investment case, each with distinct probability and impact. The most immediate is regulatory uncertainty around the One Big Beautiful Bill Act's implementation. While management believes key tax credits (ITC, PTC, 45X) remain intact, the elimination of the 5% safe harbor and new FEOC limitations create project delays as developers await Treasury guidance. The executive order initiating potential safe harbor changes by mid-August 2025 introduced additional uncertainty, though the subsequent Notice 2025-42 provided clarity. If developers cannot satisfy the physical work test, Array's 2026 pipeline could face pushouts rather than cancellations, compressing near-term revenue without affecting long-term demand.

The second risk is margin compression from failed tariff recovery. While 70-75% of contracts allow pass-through, the remaining 25-30% exposes Array to cost inflation. Steel prices peaked 35% higher since January 20, 2025, and currently sit 17% above baseline, while aluminum tariffs reached 50% for Canadian imports. If competitors absorb these costs to gain share, Array may face pricing pressure that prevents full recovery. The Q3 gross margin of 28.9% already reflects 110 basis points of tariff drag; a deterioration beyond 200 basis points would challenge the 27-28% full-year guidance and signal competitive weakness.

The third risk is persistent STI underperformance. Brazil's combination of 15% interest rates, currency devaluation, and new tariffs has created a multi-quarter slowdown. While management describes this as delays rather than cancellations, the 44% Q3 revenue decline and 61% volume drop suggest structural challenges. If European markets follow a similar path or if Array cannot diversify into Middle Eastern opportunities announced in H1 2024, the international segment could become a persistent drag on consolidated growth and margins, limiting overall earnings power.

Asymmetries exist to the upside. If regulatory clarity accelerates safe-harboring activity, Q4 2025 and Q1 2026 could see demand pull-forward that exceeds management's "normalized flow" expectations. The integrated foundation solution, with designs complete and tooling underway for a H1 2026 soft launch, could capture share from competitors unable to match the cost structure. Most significantly, if tariff pressures force smaller competitors like FTC Solar or Soltec to exit certain markets, Array's domestic manufacturing advantage could translate into 5-10 percentage points of market share gains in the US, amplifying the volume growth already evident in Q3.

Competitive Context and Positioning

Array's competitive positioning can only be understood through the lens of its domestic manufacturing moat. Nextracker, the global leader with 40-50% market share and $3.2-3.4 billion in FY2025 revenue, operates with a more modular design and global supply chain that delivers superior margins (32% gross) but greater tariff exposure. Array's 28.9% Q3 gross margin trails Nextracker, but its 93% domestic content and ability to offer 100% US-made trackers provide a differentiation that matters increasingly to utility customers seeking to qualify for domestic content bonuses. When customers don't require domestic content, management notes that importing components can still be optimal, but the trend toward onshoring favors Array's established network.

FTC Solar represents the agility threat. With $26 million in Q3 revenue (156% growth) and improving margins, FTC's automation-focused Voyager system targets installation cost reduction of 20-30% through robotics and AI-driven controls. However, FTC's scale disadvantage—full-year guidance in the low $100 millions versus Array's $1.25 billion—and lack of profitability make it vulnerable to financing constraints. Array's $222 million cash position and positive operating cash flow provide a stability that FTC cannot match, allowing Array to invest through cycles while smaller competitors retrench.

Soltec's struggles highlight the international market's challenges. With $199.6 million in nine-month revenue (10% growth) but negative margins and elevated debt, Soltec's European and Latin American focus exposes it to the same headwinds plaguing Array's STI segment. Array's decision to take a "cautious approach" regarding international verbal awards in its order book, keeping risky Brazilian projects off the backlog, demonstrates discipline that Soltec's financial distress may prevent it from matching. This positions Array to pick up share as weaker players exit challenged markets.

The integrated foundation solution creates a new competitive dimension. By eliminating the steel interface between foundations and trackers, Array can offer a total system cost that undercuts competitors who must source these components separately. Management claims this brings engineered foundation pricing "incredibly competitive with standard piles," effectively expanding the addressable market to projects previously deemed too expensive for custom foundations. This vertical integration is something neither Nextracker nor FTC can easily replicate, as it requires both tracker and foundation expertise—exactly what the APA acquisition provides.

Valuation Context

Trading at $7.92 per share, Array carries a market capitalization of $1.21 billion and enterprise value of $1.72 billion. The EV/revenue multiple of 1.29x stands at a significant discount to Nextracker's 3.84x, reflecting Array's smaller scale and recent margin compression. However, the EV/EBITDA multiple of 9.31x is roughly half of Nextracker's 17.6x, suggesting the market has already priced in execution risk while undervaluing the potential for margin recovery.

Cash flow metrics tell a more compelling story. Price-to-operating cash flow of 10.45x and price-to-free cash flow of 13.71x indicate the market is valuing Array as a mature industrial rather than a growth technology company. This seems misaligned with the 70% revenue growth delivered in Q3 and the 37% implied full-year growth guidance. The discrepancy likely stems from two factors: the negative book value of -$0.31 per share, a legacy of acquisition-related goodwill and intangibles, and the STI segment's drag on consolidated profitability.

Balance sheet strength provides downside protection that peers lack. With $222 million in cash, no senior secured debt, and $145 million in undrawn revolver capacity, Array has 2.5+ years of runway even if operations were to deteriorate—a scenario that appears unlikely given Q3's volume surge. The net debt leverage ratio of 2.1x trailing EBITDA is conservative, particularly compared to Soltec's distressed capital structure. This financial flexibility means Array can invest in the Albuquerque facility expansion, integrate APA, and weather regulatory uncertainty without diluting shareholders or cutting growth investments.

The valuation's key variable is margin trajectory. If Array can stabilize gross margins at 27-28% in 2025 and expand toward 30% in 2026 as legacy VCAs roll off and new products scale, the current 9.31x EV/EBITDA multiple would compress to 7-8x on forward earnings, creating significant upside. Conversely, if tariff pressures mount and STI losses deepen, EBITDA could fall below $150 million, making the multiple appear expensive. The market appears to be pricing a base case of modest growth with flat margins, ignoring the potential for the product mix shift and operational leverage to drive meaningful earnings expansion.

Conclusion

Array Technologies has reached an inflection point where volume growth, product innovation, and regulatory tailwinds converge to create a compelling, albeit execution-dependent, investment opportunity. The 120% surge in Q3 Legacy volume demonstrates that the company's core value proposition—reliable, cost-effective tracking for utility-scale solar—remains highly competitive, while the APA acquisition provides vertical integration that competitors cannot quickly replicate. The shift toward Tier 1 customers and higher-margin products like OmniTrack and Hail XP, now 40% of the order book, suggests margin compression has bottomed.

The regulatory environment, rather than a headwind, has become a structural moat. Array's 93% domestic content capability and 40GW+ US manufacturing footprint position it to capture IRA/45X benefits while import-dependent rivals face escalating tariff pressures. This advantage is not theoretical—management has already booked 100% domestic content orders for H2 2025 delivery and expects to reduce tariff-exposed bill of materials to under 14% by year-end.

The thesis's fragility lies in three variables: successful tariff pass-through on 70-75% of contracts, seamless APA integration to realize procurement and cross-selling synergies, and stabilization of the STI segment amid Brazil's macroeconomic turmoil. The balance sheet provides cushion, with $222 million in cash and no senior secured debt, but margin recovery to 27-28% in 2025 and potential expansion beyond 30% in 2026 requires disciplined execution.

Trading at 9.31x EV/EBITDA and 1.29x EV/revenue, the market has priced Array as a low-growth industrial despite 70% Q3 revenue growth. If the company delivers on its $1.25-1.28 billion revenue guidance and achieves margin stabilization, valuation multiples should re-rate toward peer levels, offering 50-100% upside. The downside is protected by financial strength and domestic manufacturing moat, while the upside is amplified by product cycle tailwinds and potential competitor exits under tariff pressure. For investors willing to underwrite execution risk, Array offers an asymmetric risk/reward profile in a consolidating industry.