Executive Summary / Key Takeaways

• Bloom Energy is strategically positioned to become the global standard for on-site power generation, driven by the unprecedented demand from the AI super cycle and the limitations of traditional grid infrastructure.
• The company's proprietary solid-oxide fuel cell technology offers significant differentiators, including multi-fuel flexibility, high power density, load-following capabilities without batteries, and near-zero emissions, making it purpose-built for critical, high-density power applications like AI data centers.
• Bloom has demonstrated strong financial momentum, achieving record revenue in Q3 2025 of $519.0 million, its seventh consecutive quarter of service profitability, and positive cash flow from operations, reflecting disciplined execution and continuous cost reductions.
• Strategic partnerships with industry giants like Oracle and Brookfield Asset Management , alongside a planned doubling of manufacturing capacity to 2 gigawatts by the end of 2026, underscore Bloom's readiness to capitalize on accelerating market demand.
• While facing competitive pressures and geopolitical risks, Bloom's technological advantages, diversified customer base, and the favorable impact of the One Big Beautiful Bill Act's Investment Tax Credits position it for continued profitable growth.

The Dawn of On-Site Power and Bloom's Vision

The global energy landscape is undergoing a profound transformation, marked by a surging, unprecedented demand for electricity. This paradigm shift is fueled by the rapid expansion of Artificial Intelligence (AI), robotics, automation, and the widespread electrification of transportation. Traditional centralized grid infrastructure, often operating with decades-old assumptions of shrinking demand, is proving ill-equipped to meet this escalating need at the required "AI speed." This mismatch has created an immense opportunity for distributed, on-site power solutions, a vision Bloom Energy Corporation has steadfastly pursued since its inception in 2001.

Founded by K.R. Sridhar, whose work on oxygen-producing machines for NASA laid the technological groundwork, Bloom Energy's mission is to make clean, reliable energy affordable and accessible globally. The company's core business revolves around designing, manufacturing, selling, and installing solid-oxide fuel cell systems for on-site power generation. Early in its history, Bloom established its credibility by securing "lighthouse" customers in demanding sectors like telecommunications, including AT&T (T), Verizon (VZ), and T-Mobile (TMUS), ultimately deploying over 100 megawatts of on-site power. This success cemented Bloom's reputation as a go-to on-site power choice for these industries.

Today, the scale of the power challenge is staggering. A Berkeley Lab report from late 2024 indicated that nearly 2,300 gigawatts (GW) of generation and storage capacity were actively seeking grid connection, almost double the U.S. current installed capacity. Hyperscalers alone are projected to spend over $500 billion on capital expenditures in 2025, necessitating more than a "sizable nuclear power plant's worth of baseload" every month. This environment has rendered on-site generation a necessity, not a luxury, for major power users.

Technological Supremacy: Engineering the Digital Age's Power

At the heart of Bloom Energy's investment thesis is its proprietary solid-oxide fuel cell technology. The Bloom Energy Server is a power generation platform that converts various fuels—natural gas, biogas, hydrogen, or blends—into electricity through an electrochemical process without combustion. This non-combustion approach yields significant advantages over traditional mechanical, combustion-based power generation.

Bloom's fuel cells have undergone continuous innovation, achieving "double-digit year-over-year cost reductions" for over a decade while simultaneously improving performance. These advancements have resulted in systems that "produce 10x more power in the same footprint than they did 10 years ago," are more reliable, and more efficient. Crucially, Bloom's systems emit "near-zero criteria pollutants" and use "no water during steady state operation," making them environmentally superior to conventional alternatives.

A key differentiator, especially for the burgeoning AI data center market, is Bloom's ability to provide "islanded microgrid solutions" that can "load follow" without the need for batteries. This is a critical advantage given the variable and high-density power demands of AI chips and the supply chain challenges associated with batteries. Furthermore, Bloom's architecture is "purpose-built" for the future of AI infrastructure, being ready for an "800-volt DC architecture" that the laws of physics dictate for next-generation AI chips with higher power density. The company's modular, "LEGO block" design ensures scalability without additional risk; in fact, "the more LEGO blocks you have, the more reliable our system gets."

Bloom's R&D efforts are continuous, leveraging "4.5 trillion data points from the field" and "digital twins" with AI-assisted execution to constantly improve product performance and reduce costs. Emerging attributes like Combined Heat and Power (CHP) solutions, which can utilize waste heat for cooling, offer the equivalent of "not needing 20% of your power in a data center," significantly enhancing efficiency and reducing operating costs. The company also views Carbon Capture Utilization and Storage (CCUS) as a "huge opportunity" for deeper decarbonization, providing an economically viable pathway to net-zero emissions. These technological advantages form a robust competitive moat, enabling Bloom to offer superior value, command better pricing, and secure a leading position in critical power markets.

Strategic Execution and Market Penetration

Bloom's strategy is a deliberate "playbook" of establishing credibility with "lighthouse accounts" and then expanding within those verticals and geographies. This approach has been particularly effective in the AI ecosystem, where Bloom is embedded in seven distinct channels:

• Hyperscalers: A partnership with Oracle (ORCL) to power AI data centers saw Bloom deliver power ahead of schedule, in 55 days against a 90-day commitment.
• Electricity Providers: A landmark 1 GW supply agreement with American Electric Power (AEP) (AEP) in 2024 included an initial 100 MW order, with AEP deploying Bloom systems for Amazon Web Services (AWS).
• Gas Providers: Bloom has secured a deal with a major gas provider to convert gas to electricity with Bloom fuel cells for a third hyperscaler.
• Co-location Providers: Collaborations with companies like Equinix (EQIX) have resulted in over 100 megawatts deployed across data centers in multiple states.
• Neoclouds: Bloom systems are generating on-site power for CoreWeave at a high-performance data center in Illinois.
• Data Center Developers: Developers are increasingly filing permits for Bloom-powered projects.
• Infrastructure Owners: Brookfield Asset Management (BAM), a major AI infrastructure investor, announced a $5 billion strategic partnership with Bloom in August 2025, making Bloom the preferred on-site provider for Brookfield's vast portfolio and a financier for Bloom-sourced AI opportunities.

Beyond AI, Bloom's Commercial & Industrial (C&I) segment is experiencing robust activity, particularly in large-load advanced manufacturing, AI-related hardware, and essential services like hospitals. These customers are proactively seeking on-site power to mitigate domestic power shortages, unpredictable prices, and potential deprioritization. The ability to offer "islanded power" without batteries is a significant draw.

Internationally, Bloom's business in South Korea remains steady, and the company is strategically targeting new markets in Europe (Italy, Germany, UK) and Asia (Taiwan), where grid constraints, rising power costs, and a reliance on natural gas create fertile ground for its solutions. This geographic and sectoral diversification enhances Bloom's resilience and growth potential. The company's "time to power" capability—delivering fully functional power solutions in months—is a critical competitive advantage, especially when utilities inform customers of multi-year interconnection delays.

Financial Momentum: From Losses to Sustainable Growth

Bloom Energy has demonstrated significant financial momentum, transitioning from a history of operating losses and negative cash flows to a path of sustainable profitability. The company achieved its "fourth consecutive quarter of record revenue" in Q3 2025, reporting $519.0 million, a 57.1% increase year-over-year. For the nine months ended September 30, 2025, total revenue reached $1.25 billion, up 38.3% from the prior year.

Product revenue, the largest segment, grew by 64.4% in Q3 2025 to $384.3 million, and by 45.5% for the nine-month period to $892.8 million. This growth was driven by stronger demand and improved pricing, particularly from the Brookfield joint venture. Product gross profit for Q3 2025 was $134.5 million, representing a 35% gross margin, reflecting increased demand, better pricing, and ongoing efforts to reduce material, labor, and overhead costs through manufacturing efficiency and automation. Installation revenue also saw substantial growth, increasing by 105.2% in Q3 2025 to $65.8 million, with a gross margin of 9%.

A notable achievement is the service business, which recorded its "seventh consecutive quarter of profitability" in Q3 2025, with a gross profit of $6.8 million and a 12% gross margin. This consistent profitability, including double-digit margins in Q2 and Q3 2025, is a testament to improved fuel cell reliability, reduced replacement unit costs, and the optimization of field performance through AI and machine learning.

Despite an increase in total operating expenses by $55.4 million in Q3 2025, primarily due to higher employee compensation (including stock-based and variable compensation), consulting, and R&D costs, Bloom generated $19.7 million of positive cash flows from operations in Q3 2025. For the nine months ended September 30, 2025, net cash used in operating activities was $304.1 million, largely due to working capital changes including increases in accounts receivable, contract assets, and inventory. The company ended Q3 2025 with $627.0 million in total cash on its balance sheet.

In 2024, Bloom achieved positive free cash flow for the first time since 2019, with $92 million from operations less $59 million in CapEx. The company also proactively managed its debt, refinancing $112.8 million of 2.50 Green Notes in May 2025 and settling the remainder in August 2025. The enactment of the One Big Beautiful Bill Act (OBBBA) in July 2025, which restored a 30% Investment Tax Credit (ITC) for fuel cell property, further enhances the economic viability of Bloom's solutions for customers, with management confirming that customers can avail of 40% or 50% ITC through 2028 via safe harbor provisions.

Competitive Arena: Outpacing Alternatives

Bloom Energy operates in a competitive landscape characterized by both direct fuel cell rivals and indirect traditional power generation alternatives. In the direct fuel cell market, competitors like Plug Power , Ballard Power Systems (BLDP), and FuelCell Energy (FCEL) offer various fuel cell technologies. Bloom's solid-oxide technology stands out for its superior fuel flexibility, capable of utilizing natural gas, biogas, or hydrogen, which provides a distinct advantage over primarily hydrogen-focused offerings like those from Plug Power (PLUG). This flexibility mitigates supply chain vulnerabilities and enhances adaptability in diverse energy environments.

Bloom's operational execution and efficiency also provide a competitive edge. Its systems are designed to be "purpose-built" for data centers, eliminating the need for "band-aids" like multiple AC-to-DC converters or specialized equipment to suppress harmonics that mechanical combustion engines or turbines often require. This translates to lower costs, increased reliability, and a reduced carbon footprint for customers. Compared to microturbines or reciprocating engines, which represent the true competition for 100-200 megawatt on-site solutions, Bloom's systems offer significantly lower operating costs due to higher fuel efficiency (consuming 15-20 percentage points less fuel). Furthermore, Bloom's "no air pollution" characteristic makes it "easier to permit" in populated areas, directly addressing a major hurdle for combustion-based alternatives.

While some analysts, like Dimple Gosai of Bank of America (BAC), suggest intensifying competitive pressure from established players such as Caterpillar (CAT), Cummins (CMI), Rolls Royce (RYCEY), and GE Vernova (GEV), Bloom's management asserts that the sheer "supply-demand mismatch is so large that everybody who has a solution that's viable today has a market out there." However, Bloom's unique value proposition, particularly its modular, fault-tolerant architecture that enhances reliability with scale, and its ability to provide "time to power" in months, positions it favorably against competitors with longer lead times or less adaptable solutions. The company's readiness for 800-volt DC architecture also gives it a significant technological lead in future AI data center power needs.

Indirectly, Bloom competes with traditional grid power, solar, wind, and even emerging small modular reactors (SMRs). However, for the immediate and mid-term demands of AI, solar and wind cannot provide the necessary dispatchable baseload power, and SMRs are realistically "not going to move the needle" in the next six to eight years due to long development and deployment timelines. This leaves combustion engines as the primary alternative, against which Bloom offers a "better product, more reliable, faster, quieter, cleaner."

Outlook and Risks: Fueling Future Growth

Bloom Energy's outlook for 2025 is optimistic, with management expecting the year to be "better than our previously stated annual guidance on our financial metrics." The company has reiterated its 2025 guidance: revenue in the range of $1.65 billion to $1.85 billion, non-GAAP gross margin of approximately 29%, and non-GAAP operating income of approximately $150 million. Management also anticipates positive cash flow from operations at a similar level to 2024 and comparable capital expenditures. These projections are underpinned by assumptions of continued robust demand, sustained double-digit product cost reductions, and the strategic benefits of its diversified growth strategy.

To meet accelerating demand, Bloom plans to double its factory capacity from 1 gigawatt to 2 gigawatts by the end of 2026, an expansion expected to support "about 4x our 2025 revenue." This capacity growth is projected to be highly capital-efficient, costing approximately $100 million spread over quarters. The company remains committed to its "margin and profit guidance for 2025," despite potential headwinds from tariffs, by leveraging its "cost reduction is in our DNA" culture.

However, the investment thesis is not without risks. Bloom's increasing dependence on the continued adoption of AI tools and the resulting growth in AI data centers introduces a degree of unpredictability, as the pace of AI expansion is inherently difficult to forecast. The One Big Beautiful Bill Act (OBBBA) introduced Foreign Entity of Concern (FEOC) requirements for tax credits, which, while not expected to immediately impact Bloom's qualification, could influence future supply chain decisions. The development of the hydrogen market ecosystem remains nascent, with limited infrastructure and regulatory clarity, which could affect the adoption of Bloom's hydrogen-fueled solutions. Lengthening sales cycles for complex projects, global supply chain tightness, and geopolitical tensions also pose potential challenges. Furthermore, the company faces the ongoing risk of increased product failure leading to higher service expenses or warranty claims, and is involved in legal proceedings that could have an adverse impact.

Conclusion

Bloom Energy stands at a pivotal moment, poised to become the global standard for on-site power generation in an era defined by unprecedented energy demand from the AI super cycle. Its proprietary solid-oxide fuel cell technology, with its multi-fuel flexibility, high efficiency, and environmental advantages, is purpose-built to address the critical need for reliable, rapidly deployable power. The company's strategic focus on "lighthouse" customers across seven AI ecosystem channels, coupled with robust growth in its Commercial & Industrial segment and targeted international expansion, demonstrates a clear path to market leadership.

Financially, Bloom has achieved significant milestones, including consistent service profitability and positive cash flow from operations, reflecting a disciplined approach to cost reduction and operational excellence. The planned doubling of manufacturing capacity and the favorable impact of Investment Tax Credits further solidify its growth trajectory. While competitive pressures from both direct and indirect rivals persist, Bloom's technological differentiators, such as load-following without batteries and readiness for advanced DC architectures, provide a compelling competitive edge. The company's ability to offer "time to power" solutions is a critical advantage in a market where speed is paramount. Investors should recognize Bloom Energy's strong technological foundation, strategic partnerships, and proven execution as key drivers for its continued ascent in the evolving energy landscape.