Bloom Energy (BE.US) Q3 conference call: Surge in AI power demand brings opportunities to expand production and increase investment, but cash and balance sheets remain steady

The Zhitong Finance App learned that Bloom Energy (BE.US) announced financial results for the third quarter of 2026 after the US stock market on Thursday. According to the data, the company's revenue for the quarter reached US$1,236 million, a year-on-year increase of 138.1%, a record quarterly high; GAAP's net profit attributable to common shareholders was US$250 million, with a net loss of US$23.09 million for the same period last year, turning a loss into a profit.

In terms of earnings per share, Bloom Energy's third-quarter GAAP diluted earnings per share were $0.78, with a loss of $0.10 per share for the same period last year; non-GAAP adjusted earnings per share were $0.94, up from $0.15 in the same period last year.

In terms of profitability, the company's GAAP gross margin reached 33.8% in the third quarter, up from 29.2% in the same period last year; non-GAAP adjusted gross margin was 34.5%, up from 30.4% in the same period last year. GAAP operating profit reached US$225 million, or only US$7.8 million in the same period last year; non-GAAP adjusted operating profit reached US$286 million, far higher than US$46.2 million in the same period last year.

Bloom Energy's significant performance growth reflects the continued expansion of market demand for its on-site power generation solutions. As demand for power in artificial intelligence (AI) data centers grows rapidly, companies are paying more attention to reliable, scalable, and rapidly deployable power supply solutions, creating growth opportunities for the company's solid oxide fuel cell business.

Looking ahead to the full year of 2026, Bloom Energy raised its revenue forecast from US$3.9 billion to US$4.2 billion to US$4.4 billion to US$4.6 billion. The median value of the new guidelines increased by about 122% over the full year of 2025. At the same time, the company raised its full-year non-GAAP operating profit forecast from $800 million to $900 million to $960 million to $1.03 billion, and raised its non-GAAP adjusted earnings per share forecast from $2.55 to $2.85 to $3.40. The full year non-GAAP gross margin target remained at around 34%.

Bloom Energy said the company will continue to invest in capacity and business expansion to meet growing market demand. As AI infrastructure construction drives up electricity demand, the company expects its on-site power generation technology to play an increasingly important role in enterprise energy supply.

The core view of Bloom Energy's management is that the surge in electricity demand brought about by AI is driving on-site power generation from supplementary solutions to important power infrastructure choices, and Bloom hopes to use this to become a core beneficiary of the transformation of the industry structure.

The CEO mainly explained the company's long-term strategy and market opportunities: traditional power grids are difficult to quickly meet the growing power needs of AI data centers and other industries, and Bloom's fuel cell on-site power supply solution is expected to expand coverage in hyperscale cloud service providers, industrial and commercial enterprises, utility companies, critical infrastructure and international markets with deployment speed, reliability, and environmental advantages. CCS, 800VDC power supply, and cogeneration provide the company with the possibility to further expand its market.

The CFO proved from a financial perspective that growth was being transformed into profitability: third-quarter revenue increased 138% year over year, operating profit increased by more than 500% year over year, and operating profit margin rose to 23.1%; the company raised its full-year guidance for the third time while continuing to invest and expand production, and maintained a positive free cash flow from the beginning to date and a cash reserve of 2.5 billion US dollars.

Key variables worth paying attention to include whether backlog orders can continue to be converted into actual delivery and revenue, whether production expansion can keep up with customer demand, whether profit margins can continue to increase after business scale is expanded, whether working capital and cash flow can remain stable, and whether new business opportunities such as CCS, 800VDC, and utility partnerships can gradually be converted into actual orders and revenue.

Here are the details of Bloom Energy's third quarter earnings call.

I. Executive speeches

1. K. Sridhar - Co-founder, CEO and Chairman

Hello everyone. At the end of September, as we set yet another quarterly record, I celebrated Bloom's 25th anniversary and the milestone of the company being included in the S&P 500 Index. At the time, along with many manufacturing team members, I sounded the opening bell at the New York Stock Exchange.

Over the past quarter century, our mission has remained the same: to provide clean, reliable, convenient, and affordable electricity for everyone. After all, in modern society, electricity is critical to the economy and health, human dignity, and a happy life.

The last time Bloom sounded the opening bell on the New York Stock Exchange was 8 years ago to celebrate the company's initial public offering (IPO). At the time, the market saw us as a niche electricity supplier. Today, the market sees us as the standard solution in field power supply and a key force driving the AI revolution.

I'm confident that when we look back at today eight years from now, we'll recognize that Bloom led the first major structural transformation in the power industry's 150-year history. Fuel cell-based on-site power supply will become a priority choice for power supply in all industries and regions, and an important complement to power grids. Countries with inadequate grid infrastructure will move directly to distributed on-site power supply, just as some developing countries skip fixed phones and go directly to mobile phones.

Hyperscalers (Hyperscalers) were the first customer groups to embrace on-site power delivery. They need rapid access to large-scale power supplies, and some single data centers consume more electricity than even the total electricity consumption of some small states. However, the original purpose of the power grid was to evenly supply electricity to a large number of users distributed over a large area. Faced with the highly concentrated and large-scale power demands of data centers, the power grid is already overwhelmed. The problem is further exacerbated by mandatory cost-plus rate design and utility franchise regulations. These systems are not designed to incentivize regulated utility companies to innovate or become more efficient.

In the 20 years before the rise of artificial intelligence, demand for electricity remained relatively stable, leading to insufficient investment in power infrastructure and delays in implementing many much-needed upgrades. The speed and scale of the AI revolution has exposed the shortcomings of the power grid. Hyperscale cloud service providers scramble to find any available grid power, and soon realised that deploying on-site power themselves was the future direction.

Bloom quickly became the standard solution. Our solutions are friendlier and safer for the surrounding community. Redundant, fault-tolerant, and distributed architectures provide higher availability, ensure a continuous supply of power, and enhance the system's ability to withstand natural disasters, cyber attacks, and physical attacks. At the same time, our solution does not require backup generators. We all have advantages in terms of total cost of ownership, safety, access to electricity, speed of deployment, and sustainability, and have a clear path to net zero emissions.

Today, the same factors driving hyperscale cloud service providers to adopt on-site power are driving a broader segment of the electricity market to shift to on-site power. According to our recent electricity survey of more than 200 businesses in 15 different segments in the US, a quarter of all commercial and industrial facilities in the US are expected to rely entirely on on-site electricity supply by 2030; by 2035, this ratio is expected to rise to 35%.

Why is this trend happening? In the future, electrification, digitalization, population growth, and automation will drive factories and enterprises to consume large amounts of electricity, while requiring extremely reliable electricity supply. In fact, the International Energy Agency (IEA) predicts that global electricity demand will increase by 40% by 2035. Whether it's rapidly expanding the scale of power supply or meeting centralized loads with high reliability, the existing power grid is not up to the task; it is facing the same difficulties as its difficulties in meeting the power supply needs of artificial intelligence factories.

Bloom will be the solution of choice in this huge market. We will be a leader in driving the electricity market to meet new global demand. In the next ten years, the global electricity market is expected to expand from about 3 trillion US dollars now to about 6 trillion US dollars, and will continue to grow every year.

So 25 years after our establishment, our journey has only just begun. Today, our growth is accelerating. The market has a deeper understanding of the value we create, and the Bloom brand has been widely recognized. In the 2026 first quarter earnings call, we expected full year revenue to increase 60% year over year. Now, we have raised this performance guideline, and we expect the year-on-year revenue growth rate for the whole year to exceed 120% in the median range.

Our customer project reserves continue to grow, and the backlog of orders continues to expand faster than revenue growth; at the same time, our customer base, the industry sectors we serve, and the geographical area we cover are also becoming more and more diverse.

We're delivering on our promises to our customers. Just 15 months ago, we announced our first project with Oracle and delivered electricity to their Utah site in less than two months. Today, we're achieving the same goal at the Nebius project in New Jersey. It took us less than three months from signing the contract to getting approval from the planning committee for the fuel cell project. Two months after approval, the first batch of power modules was ready for customers to use.

Our business base in this important market segment is strong and growing rapidly. Communities and policy makers recognize that our solutions are clean, quiet, and the best choice for providing stable on-site power.

For example, in Virginia's 2026 energy plan, Governor Abigail Spanberger explicitly mentioned non-combustible fuel cells and said — I quote her: “Compared to traditional gas generation, these technologies generate significantly lower local emissions, thereby reducing the impact on the health of nearby communities.”

This is important because Virginia is not an ordinary jurisdiction. Most of the world's data centers are located in this state. At the same time, Virginia is also the epicenter of strained relationships between data centers and surrounding communities. At a time when the data center industry and its communities are at a critical time, we appreciate Governor Spanberger's recognition of the value of Bloom's non-combustible solutions.

Here are five commercial developments for the quarter, which reflect how we are expanding our potential market size.

First, the US Army has conditionally granted long-term leases to our partner Indelible, allowing them to build and operate commercial power generation projects within US Army facilities to generate electricity using Bloom Energy Server. The project aims to improve power safety using our distributed on-site power delivery architecture. We believe that providing safe and reliable electricity to critical military and civilian infrastructure, such as military bases, water treatment plants, hospitals, and airports, is an important growth opportunity.

Second, the AEP revealed that it will deploy 700 megawatts of Bloom Energy Server equipped with carbon capture and storage (CCS) capabilities to provide Google with near-net-zero emissions of electricity. This will be a groundbreaking project. Unlike turbines and engines, Bloom's technology makes large-scale carbon capture and storage a viable solution. We believe CCS is critical to achieving decarbonization goals and could provide Bloom with a $1 trillion market opportunity.

Third, as we have told you before, we are expanding our business layout in the Rocky Mountains, the Midwest, and the Great Lakes region. Today, our value proposition is competitive even in the US states with the lowest electricity prices. In Texas, for example, we will be delivering our first devices this quarter.

Fourth, we view the utility company partnerships we are building as an important channel to help the US continue to move forward in the context of power shortages. More and more utilities are recognizing that deploying a clean baseload generation asset, such as Bloom Energy Server, into their distribution networks is a faster and more economical way to meet customers' growing power needs while enhancing the stability and reliability of distribution networks. I anticipate significant progress in the business associated with utility companies, and this type of cooperation is commonly known as front-of-the-meter (front-of-the-meter) arrangements.

Finally, fifthly, we see that many international markets are showing strong interest in deploying Bloom systems to meet rapidly growing electricity demand. We're working with potential local partners in some of these markets. We look forward to announcing some new results of cooperation to you soon.

All in all, Bloom is the solution of choice for community-friendly on-site power delivery, which can be quickly deployed while being clean, reliable, and competitive. Our on-site power solutions have been used in multiple scenarios, including powering gigawatt-scale artificial intelligence factories, megawatt-scale inference data centers, factories, commercial enterprises, and mission-critical infrastructure such as hospitals, telecom hubs, and basic public services.

Demand for Bloom's on-site power supply business is growing in both the US and international markets, and we are building strong partnerships. Combined with future growth opportunities such as CCS and 800 volt DC power supply technology, this growth potential means that Bloom is expected to occupy a significant share of the expanding electricity market.

This judgment makes us more clear about the future direction of development. To seize this once-in-a-century opportunity, we must scale up and execute efficiently. I have full confidence in the team and know they are ready for this challenge.

Next, I left the meeting to Simon and asked him to introduce specific financial data.

2. Simon Edwards — Chief Financial Officer

Thanks KR and good afternoon everyone. As a reminder, today I'm going to focus on non-GAAP adjusted financial measures. Reconciliation tables between GAAP and non-GAAP measures are included in our earnings press releases and supplementary materials.

Bloom once again set a record for results in the third quarter. Revenue reached US$1.24 billion, up 138% year on year; operating profit reached US$286 million, growing faster, with a year-on-year increase of more than 500%. With strong performance this quarter, we raised our full-year revenue, operating margin, and earnings per share guidance for the third time this year.

Before we dive into this quarter's data, let's take a look back at what we've achieved so far this year. Since the beginning of this year, revenue has reached $3.05 billion, which is 50% higher than our total revenue for 2025. The operating profit for the third quarter alone has already surpassed the operating profit for the full year of last year. This shows that the operating leverage effect inherent in our business model is showing in financial results.

The operating margin for the quarter increased to 23.1% from 8.9% in the same period last year. Revenue increased 138% over the same period, while operating expenses only increased 26%.

As KR said, to seize this once-in-a-century opportunity, we must not only scale up, but also execute efficiently. We will continue to invest in innovation and engineering development roadmaps, growth plans, and the infrastructure needed to support the expansion of our business.

Since the beginning of this year, capital expenditure has been $231 million. We are investing in expanding production capacity to support future growth and funding these investments through operating activities. Although our investment amount has reached about four times the full year of 2025, our cash balance remains roughly at the beginning of the year.

Our profit margin structure allows us to invest in scaling up our business while maintaining a strong balance sheet. This is the financial model we deliberately designed and implemented, and it is currently working as planned.

Now let's take a look at the specific data for this quarter. As previously mentioned, revenue for the quarter was US$1.24 billion, up 138% year over year and 16% month over month.

Product revenue was US$1.07 billion, up 179% year on year and 15% month-on-month. This was the first time that our quarterly product revenue exceeded US$1 billion, accounting for 87% of total revenue. Product revenue is recognized when control is transferred to the customer, so it directly reflects the size of the system delivered and approved by the customer during the quarter.

Service revenue was US$67.6 million, up 15% year on year, and basically the same from month to month.

Installation revenue was $84.9 million, up 29% year over year and 66% month over month. The scope of installation work for different customers and projects varies, and related revenue will be gradually recognized as the work progresses. Therefore, installation revenue and product revenue will not change simultaneously every quarter, and installation revenue will also fluctuate as the schedule and mix of customer projects changes.

Next, let's talk about profit margins. The product's gross margin for the quarter was 38.4%, up 250 basis points year over year and 120 basis points month over month. It is worth noting that this quarter we are not only increasing the production capacity of the new production line, but also speeding up delivery. This indicator directly reflects our pricing capabilities and the cost reductions we continue to drive in the production of our products.

Service gross margin was 21.4%, up 700 basis points year over year, and surpassed 20% for the second consecutive quarter.

The total gross margin was 34.5%, an increase of 412 basis points over the previous year. Profit margins for both product and service businesses have increased, but this increase was partially offset by the share of installation revenue in the revenue mix and the time it took to confirm it. Considering changes in the revenue mix from quarter to quarter, we chose to manage and provide guidance on gross margins on a full year basis.

Operating expenses for the quarter were $141 million, reflecting our continued investment in engineering R&D roadmaps, growth plans, and infrastructure.

Operating profit was US$286 million, up more than 500% year over year and 19% month on month. The operating margin was 23.1%, up 60 basis points from month to month.

The adjusted EBITDA was US$299 million, equivalent to 24% of revenue, an increase of 1,286 basis points over the previous year.

Non-GAAP diluted earnings per share were $0.94 compared to $0.15 for the same period last year. GAAP diluted earnings per share were $0.78, compared to a loss of $0.10 per share for the same period last year.

Next, let's talk about cash flow. The quarter's operating activities used $27 million in cash. Net profit was offset by an increase in working capital, which mainly came from inventory, contract assets, and accounts receivable. This reflects that while supporting significant business growth, we are also building inventory ahead of time for future deliveries.

As I said before, product revenue is recognized when control is transferred to the customer, and invoicing is carried out according to contractually agreed milestone points, which may fall in different quarters. As a result, cash recovery may be later than revenue recognition; this time difference will be reflected in contract assets and receivables until billing is completed and payments are collected.

The timing for large-scale project delivery and associated cash recovery will vary from quarter to quarter, but these differences will gradually balance out over time. We anticipate continuing to invest in working capital to support future growth and scale up our business in sync with our customers.

Capital expenditure for the quarter was US$153 million, with a cumulative total of US$231 million since the beginning of this year, mainly to invest in machinery and production capacity to support the expansion of our existing Fremont and Newark plants.

By increasing production capacity in stages, we can arrange capital expenditure according to actual observed demand, rather than drastically expand ahead of demand ahead of schedule.

Free cash flow for the quarter was negative $181 million, or $181 million in cash use; free cash flow since the beginning of this year was positive $42 million. By the end of the quarter, we had $2.5 billion in cash.

Finally, Bloom was included in the S&P 500 index this quarter. We believe this inclusion reflects the company's achievements in terms of business size, profitability, and performance stability. We also welcome the resulting broader shareholder base.

Next, let's talk about performance guidelines. We raised our full-year revenue outlook to US$4.4 billion to US$4.6 billion, with a year-on-year growth rate of about 122% in the median range of the corresponding guidance range.

This increase reflects our performance in the third quarter and a further increase in our mastery of customer delivery schedules for the fourth quarter. Our quarterly performance pace depends on customer preparation and delivery times, so we manage the business and provide performance guidance on a year-round basis.

As with the previous upward guidance this year, our performance outlook is based on two levels. The first level is the backlog of orders, and we evaluate the on-site preparation and conversion time of customer projects one by one. The second tier is judged based on probability-weighted project reserves and includes customers who need to receive electricity this quarter.

Currently, there is still one quarter left in the whole year. The delivery time for a few projects around the end of the year will determine where the final performance falls within the guidance range.

We maintain our previous non-GAAP gross margin outlook of approximately 34%. This level is higher than 30% in 2025, and higher than our initial estimate of around 32% at the beginning of this year. This judgment reflects our expectations for the fourth quarter revenue mix and profit margins for each business line.

We also raised the non-GAAP operating profit guidance to $960 million to $1.03 billion. Based on the median value of the guideline range, the operating profit margin was 22%, and the operating profit margin corresponding to the median value of our February initial guidance was 14%.

Currently, our guideline for non-GAAP diluted earnings per share is $3.10 to $3.40.

Finally, in summary, we are creating record results, raising our full-year outlook, and making the necessary investments to seize the huge market opportunities right now. At the same time, we are expanding our profit margins and maintaining a solid balance sheet.

II. Q&A session

1. J.P. Morgan Analyst Mark Strouse

KR, I'd like to ask you about the company's recent decision to expand its real estate layout in Fremont. You spent a lot of time on the conference call discussing various ways to expand the size of your potential market. But I wonder why you chose to make this decision at this time?

Additionally, you mentioned that the current manufacturing layout can support more than 5 gigawatts of output per year. So, should we think now that when the new facility is put into operation, the annual production capacity will exceed 10 gigawatts?

K. Sridhar

Thanks for asking this question, Mark.

One thing is very clear to us. In this uncertain world, some things are absolutely certain. The use of electricity, the demand for electricity, and the demand for electricity will all increase dramatically. This is not only because of artificial intelligence, but also because many market segments in the digital age require electricity.

This trend will not only happen within the US. We're already beginning to see the same trend in Asia, Europe, and the rest of the world. The factors driving the increase in demand for on-site power supply rather than grid power supply are various sources of demand other than data centers that require their own electricity.

This includes resilience and safety. In a variety of situations around the world, some critical facilities increasingly require reliable, safe, and on-site electricity. When these factors are taken into account, the conclusion is obvious. In fact, we've always been aware of this.

Judging from the timeline, 5 GW is just a milestone in a long development process. We have clearly seen that we are getting close to this goal, so we need to be prepared for future developments. That's why you're seeing us act now.

We will never use a stepwise approach to dramatically increase production capacity all at once. We will gradually adjust production capacity according to demand, just like adjusting an analog knob to keep production capacity in sync with demand.

We are neither expanding ahead of schedule, nor slow to the point of becoming a bottleneck for customers to get electricity. It is through this process that we manage production capacity.

We won't give a specific timeline, but we have strong confidence in it. The feedback from the market has also been positive enough to give us a reason to start preparing for demand beyond the 5 GW milestone. That's why we took this action. Hope this answered your question.

Mark W. Strouse

Next, I'd like to quickly ask Simon a question.

Regarding the full-year gross margin guidance, despite the increase in revenue expectations, you are still maintaining the original guidelines. I think you just mentioned that at least part of the reason is the income mix. Can you further explain what other factors are there?

Also, I know you haven't provided any performance guidance for 2027, but from a direction perspective, should we continue to expect a further increase in gross margin as revenue continues to grow?

Simon Edwards

OK, Mark. First, I'd like to take a step back and see how far we've come. The total gross margin was 28.7% in 2024 and 30.3% in 2025, and reached 34.5% in the third quarter of this year.

So I think we've proven that profit margins can continue to increase as the scale of the business continues to expand.

In this process, I am very satisfied with the current gross margin performance of the product. As I mentioned in my prepared statement, our pricing remains strong, and ongoing cost reduction measures are reflected in financial data.

At the same time, we need to strike a balance between increasing profit margins and seizing immediate market opportunities. As KR said, we are increasing the capacity of the new production line and speeding up delivery to meet the customer's time requirements. I think this will have some short-term costs.

Additionally, we are advancing a number of engineering, procurement, and manufacturing cost reduction programs. It will take some time for these measures to be gradually reflected in the cost of sales.

As for next year, which you asked, I would suggest looking at this from the perspective of long-term development. We know that scaling up comes with start-up costs, and we've taken this into account in our relatively prudent gross margin guidelines.

As these projects enter the production phase, production lines become more mature, and capacity utilization increases, we expect to reap more benefits from scale effects.

I'd also like to add that in the first six months since I joined the company, I was very impressed by the team's progress at the operational level and how that progress was reflected in financial data.

2. Evercore ISI analyst Nick Amicucci

Simon, I'd like to know more about the performance of free cash flow. Operating activities used $27 million in cash this quarter, and your profit margins increased significantly. Can you further explain what influencing factors, offsetting items, or one-off factors are among them?

Simon Edwards

OK, Nick. The first thing I want to emphasize is that we really see this business as a business that can finance itself. In other words, the operating performance of a business can finance the investments needed to drive growth.

I want to emphasize this in particular because it's very important to us. It can reduce our dependence on external capital, significantly reduce execution risks, and also give us the flexibility KR mentioned earlier to invest according to customer needs.

Therefore, I would suggest looking at this issue from the perspective of cash generation capacity throughout the year, rather than simply extrapolating from the performance of a given quarter.

We truly believe that as the business continues to grow, we will be able to become a company with positive free cash flow and able to fund our own growth.

Back to the first part of your question, we used cash in our operations this quarter, but that doesn't mean a trend has begun. Since the beginning of this year, cash flow from operating activities has remained positive even as we increase our operating investments in people and capacity building.

Additionally, as I mentioned in my prepared statement, we have provided the working capital required for some of our clients' project deployments.

We are able to fund capital expenses from the beginning of this year to date while continuing to increase our operating investment, which fully demonstrates the capital efficiency of our business. If we consider the return on capital expenditure investments, we are very satisfied with the current development trajectory.

Nicholas Amicucci

KR, I'd like to ask more questions about utilities.

You mentioned growing demand and growing partnerships between you and utility companies. Looking at the situation in the past, you seem to be providing more behind-the-meter (behind-the-meter) solutions; but now it seems that your solutions are becoming more complementary.

Taking into account the information that has been published so far, we see that fuel cells have been incorporated into integrated resource planning (IRP) in various jurisdictions. I'd like you to be more specific about how big do you think the potential market for this opportunity is, particularly in the regulated utility sector?

K. Sridhar

Nick, that's a great question.

First, let's look at it from the customer's perspective. Here I want to differentiate between two types of customers: the end customer, that is, the user who pays the electricity bill; the other is the utility company that provides services to these users.

If we optimize our solutions for these two types of customers at the same time, the more they see us as a power distribution asset, and the more beneficial they are to both parties by deploying our systems to reduce total costs while continuing to serve their own customers.

This is more beneficial to electricity users and helps utility companies to apply to policymakers to include expenses to purchase Bloom Energy Server into the regulatory asset base and include these devices as transmission assets and distribution assets in their transmission and distribution systems.

What are the consequences of this? Utility companies can deploy our equipment in front of meters and distribute electricity according to load growth. They don't have to wait for a customer to request an order.

They can procure based on plans and anticipated needs, as they do now with integrated resource planning (IRP), without having to target a specific customer in advance.

Why are they doing this instead of buying centralized power generation assets? Because transmission and distribution infrastructure and the associated costs, bottlenecks, and construction time required are no longer suited to their needs. They are slowly becoming aware of this.

If customers switch to a metered power supply scheme, utility companies may lose customers and the corresponding regulatory asset base. If they lose their customer and regulatory asset base, they will have to raise costs for other electricity users. It's not what state governments want to see, nor is it what end users want.

As a result, in this era, we are able to provide a truly valuable asset to the entire industry. As regions become aware of this, you will see this model spread across multiple regions.

Our team has been doing a great job explaining to utilities the benefits of on-site power as a grid supplement. We're always pointing out the shortcomings of the power grid. Now that utilities have finally been given more space from regulators to include such assets in their plans, they are actively seizing this opportunity.

We believe this will be a major business driving the company's growth in the future.

3. Morgan Stanley analyst David Arcaro

KR, you have many potential opportunities in the future, including carbon capture, cogeneration, and opportunities arising as the entire industry switches to 800 volts DC power. I'd like to ask you to tell us about the current developments in these future businesses, including how business opportunities are being formed and how you have observed market adoption in the short term.

K. Sridhar

Thanks for asking this question, David.

I can't fully express how excited I am about the 700 MW carbon capture project announced by the AEP. The project will provide near-net-zero emissions electricity to a hyperscale cloud service provider. This customer is Google.

This solution will be able to provide on-site electricity in a timely manner, while achieving reliable power supply, no air pollution, no water usage, and close to net zero emissions. What could be a better solution than this?

I think investors on the conference call need to understand one key point: Currently, combustible technology cannot provide an economical and scalable path for carbon capture.

In commercial applications, Bloom's technology has a unique advantage because it can provide higher concentrations of carbon dioxide and facilitate carbon capture. This is the beauty of Bloom's technology, and the key to our ability to achieve multiple benefits simultaneously. Our solutions benefit both the financial interests of our customers and the environment.

Therefore, I believe that when the world is ready to speed up decarbonization, one of the fastest ways to decarbonize is to use our technology to produce large amounts of reliable and environmentally friendly electricity using natural gas as fuel.

When the world is ready for this, I think this market will be over $1 trillion in size. This is my judgment on its market potential.

As for the 800 volt DC power supply, this is almost a self-explanatory choice. According to a published report, a gigawatt data center using an 800 volt DC power supply architecture can save more than 5 billion US dollars in the first five years of operation compared to using the current power supply architecture, which originated in the industrial age and is out of date.

800 volt DC power supply will become a trend no matter what. We don't need to push the market for this transformation to happen. But if that is the case, why do they have to go through all the power conversion processes in the middle and spend an additional 5 billion US dollars as a result?

I am very confident that we will see this architecture adopted when server racks with 800 VDC power are launched.

We are communicating with all hyperscale cloud service providers. They have shown great interest in this field. This trend will occur as data centers are built using 800 volt DC power as standard. The question is not whether it will happen, but rather how long after. As for the exact timing, the customer is in a better position than me to make a judgment.

Regarding heat recovery, or combined heat and power generation (CHP), we are fully convinced that the heat generated by on-site power generation can be used for cooling. If this heat were to be thrown away directly, it would be a waste of resources that could meet cooling requirements and reduce electricity requirements by 20%. Cogeneration is therefore a natural complement to all our solutions.

Whether you supply AC power to the data center or 800 volts DC, with or without carbon capture, this doesn't change. Cogeneration is an obvious choice.

Another interesting aspect of cogeneration: most industrial applications require heat or cooling capacity in the form of steam, and we think the commercial and industrial (C&I) sector will be a huge growth direction for the company. These customers will be using cogeneration.

Therefore, I believe that cogeneration will be an important growth driver for the company and will also create value for commercial and industrial customers.

The advantage of this technology is that it uses the same platform as our existing business. That's why we keep telling you: Bloom provides a platform, not a single product. We can provide any one or more solutions on the same platform according to customer needs.

4. Chris Dendrinos, capital market analyst at the Royal Bank of Canada

Congratulations on your strong quarterly results.

I'd like to ask about how long it takes to supply electricity. Looking back, you mentioned in your prepared statement that it only took less than two months to deliver electricity to Oracle a year ago. As demand grows and the company expands, is it still less than 90 days from project launch to power supply? Or have delivery times been extended due to a very strong backlog of orders?

Also, can you further explain how fast power is being supplied to the Nebius site? I remember you mentioned that the first batch of power supply modules is about to be put into use, but what is the corresponding power supply scale in megawatts?

K. Sridhar

Thank you, Chris. That's a great question.

We are ready to power the Nebius data center. We keep our promises, and we've actually kept our promises to them. We won't be the bottleneck for them to launch their entire 300 MW data center.

We're ready and ready to power. However, you should understand how data centers are built. The data center cannot be built from scratch to 300 megawatts in a day; rather, it is built in stages and modules.

Their first module is almost ready, and we're ready to power the first module. No matter how many modules they build next, we'll prepare ahead of time, before each module needs power, to ensure we don't become a bottleneck for them.

As for the construction and commissioning time of the rest of the data center, it is up to the customer to explain it; we will not comment on this.

But back to the broader question you asked. Just earlier today — I remember probably today, or yesterday, Berlin time — Nvidia's CEO said at the GTC conference in Berlin that every quarter of a gigawatt data center is delayed, it means losing $10 billion in revenue.

In other words, a 100 megawatt data center would lose $1 billion in revenue if delayed for a quarter. This loss far exceeds any other value a power supply module can bring.

Currently, there is no field power supply technology that is cleaner than ours and at the same time can obtain air emissions permits faster. There is no other technology that can provide customers with electricity faster.

Additionally, we are able to provide complete future adaptability, as well as all the added value mentioned in the previous questions. That's why we're optimistic about this market segment and what it means for Bloom.

Christopher Dendrinos

I'd like to ask Mark again about expanding the production capacity layout just now. Are there opportunities for you to further increase automation? What do you think of the opportunities in manufacturing and the cost savings that automation can bring?

K. Sridhar

I think everyone who has visited our factory has heard what our general manager Brad Fields said. He's amazing, and his usual words are also very impressive.

He'll remind everyone that many years ago, when we were only able to produce 100 megawatts of electric reactors a year, we needed about 600 employees working around the clock, 7 days a week, 24 hours a day.

Today, when our production capacity reaches 1 gigawatt per year, the line still only needs 600 employees per year. This means a tenfold increase in production capacity.

By the time production capacity reaches 5 gigawatts, the line will still require only 600 employees.

This shows that cost reduction and efficiency improvements have been incorporated into Bloom's DNA, and we are continuing to innovate.

So, of course, the answer is yes. We not only benefit from artificial intelligence because AI companies are our customers, but in many other areas, including automation.

5. UBS analyst Manav Gupta

KR, I'd like to go back to the last earnings call. You said something very insightful at the time: Using leveled cost of electricity (LCOE) for on-site power supply is not a reasonable measure; the data center is really concerned with the total cost.

Can you help us better understand the difference between LCOE in the eyes of data centers and the actual cost of electricity delivered to them? How should you understand that the price of the actual power supply includes higher costs and that your solution is actually more efficient?

Also, I'd like to quickly inquire about the report you mentioned that was published on September 15 or 16. This is a great report because it explains how much you can save by switching to your solution. I remember you said that a 1 GW facility with your solution can save up to 9% of costs.

One last question. I promise this is the last one. We know that your solutions have lower nitrogen oxide (NOx) and sulfur oxide (SOx) emissions, but we think you also have an advantage when it comes to saving water. Your solution uses less water than your competition, which can be a major advantage over the competition. Can you further explain some of these questions?

K. Sridhar

OK, Manav, thank you. You asked a lot of questions, and I'll try to remember and answer as many of them as I can.

Let's start with the water issue. We have done the relevant calculations before. If you compare the amount of water used by a gigawatt power plant using combustible technology and our technology, the difference between the two is not even reflected within the rounding error to the second decimal place.

If a data center were to reach 1 gigawatt, the amount of water consumed by using combustible technology over the entire life cycle would be enormous.

For example, if a combined cycle gas turbine (CCGT) with wet cooling is used, a 1-gigawatt data center could use 25 billion gallons of water over its entire life cycle.

That's a huge number. In comparison, our plan uses 1.4 million gallons of water.

So from a water perspective, compared to 25 billion gallons, our water consumption is not even a drop in the ocean. This is how we look at the water problem.

Next, let's talk about your proposed cost advantages compared to grid power supply.

From the power grid to the server rack, electricity needs to go through multiple links. First, the electricity provided by the grid is not completely clean — I'm not talking about environmental cleanliness here, but rather the degree of cleanliness in terms of voltage and power quality. UPS can improve power quality and improve power supply reliability.

After that, the electricity also needs to be converted to the required voltage and DC form. These steps all increase the cost from grid power to rack power.

Also, inside the server frame, since grid power supply technology cannot quickly adjust the load up and down, the turbine cannot quickly adjust the output power up and down, causing additional loss of efficiency. To avoid damage to the turbine, engine, or battery system at the other end, the data center consumes only a portion of its electricity.

However, when using fuel cells, this is not necessary.

So for data centers, the really important cost indicator is the relationship between the total cost of electricity and the final number of tokens delivered. In other words, what really matters is the electricity cost corresponding to each token.

We need to start from LCOE to calculate the actual grid power cost delivered; then deliver the electricity cost from the grid to calculate the power supply cost for the server rack; and finally calculate the power cost corresponding to each token from the power supply cost of the rack.

Combining all of these factors, when measured in terms of total cost, we are an overwhelming cost leader and can provide the lowest total cost.

The market is now gradually understanding this.

6. Ben Kallo, analyst at Baird

I have two questions, try to keep them short.

The first question concerns the expansion of production capacity that Mark just mentioned. As you mentioned earlier, production capacity may increase by 250 million to 300 million watts each quarter, or 250 to 300 megawatts. I want to know how we view this pace of expansion as you enter next year and gradually approach the 5 GW production capacity target? Are there supply restrictions that require our attention?

The second question concerns the international market. We've seen some news reports that some data center developers may be turning to the international market. If this is true, how should you seize the opportunities it brings? In terms of water use, noise, and SOx and NOx emissions, do your strengths apply equally to the international market?

K. Sridhar

Thank you, Ben.

Regarding the first question, I want to make it clear that we have never provided specific quarterly or yearly capacity growth figures.

As we said before, production capacity is like an adjustable knob, and we will increase or decrease it according to actual demand. Combined with all the factors I've just introduced, I don't think there's any reason for us to reduce production capacity in the near future. Instead, we will continue to increase production capacity.

The exact amount of increase depends entirely on load requirements. This is the first point.

Second, with regard to the international market, keep in mind that if using the Bloom system can significantly reduce the actual cost of delivering electricity for each token, this means that less fuel is consumed to generate the same number of tokens.

In most international markets, gas prices are much higher than in the US, so the advantages we bring will expand further.

For these reasons, the international market is really very attractive to us. We are looking at opportunities for international expansion. As I said in my prepared statement, please look forward to some good news from us in the near future.

7. BMO Capital Market Analyst Ameet Thakkar

Congratulations on your strong quarterly results and raised full-year outlook. I just have one question.

KR, you've talked about scale a few times today. I would like to know how many megawatts is currently the largest Bloom system deployed at a single site in the US? And how should we compare that to the scale of the upcoming project to be deployed in Wyoming or New Jersey?

K. Sridhar

We are now at the 100 megawatt level. The project in Wyoming is also in the 100 megawatt class and is approaching the gigawatt level as the scale of the project reaches 700 megawatts.

As a result, our smallest system is only 150 kilowatts and can power a small Home Depot store; our largest system is approaching the gigawatt level.

I'd also like to say that every customer is important to us, and we work hard to make all of them happy.

8. Mizuho Securities analyst Maheep Mandloi

I just have one small problem. You mentioned in your prepared statement that the backlog of orders is growing faster than revenue.

Given your revenue growth of around 140% year over year, I'd like to know how to understand the increase in backlog orders. Can we use this revenue growth rate as a reference framework for judging the growth of backlog orders this quarter?

K. Sridhar

Maheep, thanks for asking this question.

Fortunately, you won't have to wait too long to get the answers. As we enter the fourth quarter, we are entering a new year, and we will give clear guidelines at that time.

Over the past few quarters, we have proven that we are very strict in providing guidelines, and that the figures we have given can actually be fulfilled. Therefore, we will provide you with the appropriate data.

However, I can say that our growth momentum is steady and strong. Please expect us to achieve steady growth. I won't give further specific directional ranges. I'm sorry.

9. Bernstein analyst Sunaina Ocalan

In conjunction with AEP's deal with Google, I'd like to know about your communication with other hyperscale cloud service providers. Can you tell me about relevant developments?

Also, is carbon capture and storage increasingly seen as an option in communication with these customers? From your perspective, what impact will this have on the final cost of electricity delivery?

I understand that your solution provides a purer carbon dioxide stream, and I hope you can talk more about this.

K. Sridhar

This is a very good question.

Yes, currently all of our hyperscale cloud service provider customers are showing strong interest in carbon capture options. We believe carbon capture will become extremely important over time.

I think soon almost all customers will at least start purchasing systems with carbon capture reserve capabilities. In this way, when the supporting infrastructure in their area is equipped with carbon dioxide pipelines and can transport carbon dioxide to storage wells, they can connect to related facilities.

This is the first point.

Second, we believe that for most hyperscale cloud service providers, if they can get zero-carbon electricity, then it's a reasonable range to incur an additional 10% to 15% of the cost. In other words, even if there are no mandatory regulations, they may voluntarily choose this option as long as they can provide zero-carbon electricity at this cost.

Bloom is able to provide a complete solution including carbon capture and sequestration within this cost range. This is why I say that we are currently the leading carbon capture and storage platform in terms of both economy and technological maturity.

10. Oppenheimer analyst Colin Rusch

My question is in two parts.

The first section deals with the growth of contract assets and how you anticipate turning these contract assets into billable items and ultimately recovering cash.

The second part deals with commercialization strategies for carbon capture businesses. We are confident that you can have a substantial impact in this area. I'm wondering if you expect to commercialize the carbon capture business by selling Energy Server, or maybe launch a new solution to expand the market opportunities that existing servers can provide?

Simon Edwards

OK, Colin, I'll answer the first part first.

Regarding contract assets, I expect these assets to gradually revolve around. In other words, even if the balance of contract assets may continue to grow, what is really important to us is that these assets can continue to revolve, as we continue to reach the contractually agreed billing milestones and recover cash.

I want to emphasize this in particular because this is an important detail.

Overall, as the business grows, I expect we will continue to be able to manage working capital. But right now, our primary concern is to ensure that both accounts receivable and contract assets can be turned around smoothly.

K. Sridhar

Colin, my answer about how to commercialize the carbon capture business should come as no surprise to you.

Bloom has always followed the same principle in its business model and product design: providing solutions according to the needs of the end customer.

If the end customer is a gas company or oil and gas company with the ability to carry out carbon capture, then they can integrate relevant solutions into our system and achieve commercial monetization through carbon credits and revenue streams from customers.

We can also work with our partners to provide a complete end-to-end solution and agree on how to distribute the resulting benefits.

In some cases, end customers may need to hold their own carbon credits, so they can keep those credits to themselves. In return, they can pay us based on implied electricity costs or capital equipment costs, plus a profit margin.

We're all open to these different models.

This is the strength of our business model: we create a space of choice for our customers. We think the same way of thinking about all of our businesses. At the end of the day, our job is to serve our customers and meet their needs, and there are many ways to achieve this goal.

Now that time is over, I'd like to take this opportunity to make a summary.

Despite all the positive things you have just heard, I also want to acknowledge that we are currently living in an unsettling time. Like all of you, I see that there is a lot of uncertainty in the world, and the market is also full of volatility.

However, it is in times like these that we should remind ourselves why we have every reason to be optimistic about our shared future.

On a personal level, I feel very lucky to work at Bloom. For me, it's an island full of stability, certainty, and a sense of purpose.

Let me explain why. Where I grew up, there was a shortage of electricity. I know how it feels to not be sure that you can use electricity anytime. I have experienced firsthand how insufficient electricity supply can inhibit economic activity, damage human health, and hinder social prosperity.

In today's digital world, electricity is even more important than when I was a kid.

Future electricity demand is bound to continue to grow, and this growth is long-term and structural. There's no doubt about that. Demand for electricity will rise substantially over the next few years, and this is something we can be sure of.

Bloom has built a platform that can provide electricity in a clean, reliable, and scalable way to customers in need.

We've proven time and time again that we can not only deliver these solutions, achieve profits, and generate returns for shareholders, but also scale up the business through a self-financing model.

Our future is bright. I am so grateful to be working with such a strong team and to be involved in such a far-reaching mission. It keeps me motivated and allows me to clearly see Bloom's bright future.

Thank you all for supporting Bloom. I wish everyone all the best for today.