ORMAT Technologies (ORA) Q3 2025: Energy Storage Revenue Doubles, Backlog Climbs 79% as EGS Pilots Advance

2025-11-04 | By EarningsIQ Research

ORMAT Technologies delivered a multidimensional quarter, with energy storage revenue surging 108% and product backlog up 79%, while advancing partnerships in Enhanced Geothermal Systems (EGS) and securing new international licenses. Margin pressure in electricity was offset by robust gains in storage and products, prompting a guidance raise. With pilot EGS projects underway and PPA negotiations with hyperscalers nearing completion, ORMAT’s strategy pivots to innovation and scale for the AI-driven energy transition.

Summary

  • Storage and Product Momentum: Energy storage and product segments drove outsized growth and improved profit mix.
  • EGS Partnerships Signal Future Scale: SLB and Sage collaborations position ORMAT for next-generation geothermal leadership.
  • PPA Pipeline and Guidance Raise: Near-term PPA signings and increased outlook reflect expanding demand visibility.

Performance Analysis

ORMAT’s third quarter saw a decisive shift in business mix, as energy storage revenue more than doubled and the product segment delivered 66.6% growth, offsetting modest gains in the core electricity segment. Gross margin contraction in electricity (down to 25.4% from 30.2%) was largely attributed to temporary operational disruptions—including enhancement work at Stillwater, storm-related grid outages in Imperial Valley, and curtailment in the US—while Puna complex in Hawaii faced lower energy prices. In contrast, the energy storage segment’s gross margin soared to 39.4%, fueled by seasonally strong performance at the Bottleneck facility and higher merchant prices in the PGM region.

Net income and adjusted EBITDA both tracked higher year-over-year, with cash flow robust enough to fund reinvestment and shareholder returns. Product backlog reached $295 million, up 79% year-over-year, underpinned by a major $86 million contract win. Tax equity and transferable credit monetization exceeded expectations, providing additional liquidity and supporting an active capital program across storage and geothermal expansion.

  • Segment Divergence: Storage and product segments now represent the primary engines of growth, while electricity faces near-term margin headwinds.
  • Backlog Visibility: Elevated backlog and new contract wins anchor future product segment revenue above historical norms.
  • Capital Flexibility: Cash generation and tax equity proceeds support self-funded growth, with minimal need for external equity.

ORMAT’s ability to reallocate capital and operational focus toward higher-margin, faster-growing segments is evident, positioning the company for a more resilient and diversified earnings base as the energy transition accelerates.

Executive Commentary

"These achievements are reflected in a 17.9% increase in revenue, a 13.3% increase in operating income and a 9.3% growth in net income attributable to the company's stockholders. Our strong results were primarily driven by sustained improvements in both our energy storage and product segments, which contributed to higher revenues and enhanced profitability."

Doron Bashar, Chief Executive Officer

"Gross profit for the third quarter was $64 million, up 8.8% from $58.9 million in the third quarter of 2024, resulting in a consolidated gross margin of 25.6% versus 27.8% last year. The increase in gross margin was a result of improvement in our storage and product segment partially offset by lower performance of our electricity segments."

Ozzie Ginsberg, Chief Financial Officer

Strategic Positioning

1. Energy Storage Scale and Profitability

ORMAT’s energy storage business is now a material growth vector, with revenue up 108% and gross margin nearly doubling year-over-year. Recent commissioning of the Lower Rio facility and strong seasonal performance at Bottleneck have structurally elevated segment profitability. Safe harboring of batteries and project pipeline flexibility mitigate supply chain and regulatory risk, ensuring continued expansion despite industry-wide dependence on Chinese battery sources (Foreign Entity of Concern, FEOC, risk).

2. Product Backlog and International Expansion

Product segment backlog reached $295 million, driven by a significant Asia contract and new geothermal licenses in Indonesia. The conversion of New Zealand’s Topu project to product revenue, and BOT (Build-Operate-Transfer) projects in Indonesia, reinforce a shift toward international diversification and engineering, procurement, and construction (EPC, turnkey infrastructure delivery) revenue streams.

3. Enhanced Geothermal Systems (EGS) Pilots

Two major EGS partnerships—SLB and Sage Geosystems—anchor ORMAT’s innovation strategy, targeting scalable geothermal solutions that can address the surging power needs of AI data centers and the broader energy transition. The SLB pilot at Desert Peak, Nevada, will leverage both companies’ expertise, with the aim of commercializing EGS technology at scale. The Sage partnership provides a parallel path, piloting advanced pressure geothermal technology. If successful, these pilots could unlock hundreds of megawatts of future capacity, fundamentally altering ORMAT’s long-term growth trajectory.

4. PPA Negotiations and Market Demand

ORMAT is in advanced negotiations for 250 megawatts of PPAs with hyperscalers, reflecting the rising demand for renewable baseload from data centers. PPA (Power Purchase Agreement, long-term electricity sale contract) pricing remains robust, with recent contracts above $100 per megawatt-hour, and early recontracting trends emerging as offtakers seek to lock in supply amid tightening market conditions.

5. Capital Allocation and Funding Model

Strong cash flow and tax equity monetization (over $167 million expected for 2025) allow ORMAT to self-fund its capital program, including $100 million in electricity segment investments and $34 million in storage construction for Q4. The sale of the New Zealand project in 2026 will further boost liquidity. Management sees no need for external equity in the near term, with debt levels stable and most financing at fixed rates.

Key Considerations

ORMAT’s Q3 reflected a pivot toward high-growth, high-margin segments, underpinned by innovation, backlog expansion, and disciplined capital management. The company is strategically positioning itself at the intersection of the AI energy demand boom and the global renewable transition.

Key Considerations:

  • Storage Margin Inflection: Sustained high margins in storage segment signal durable profitability, though seasonality and merchant price volatility remain watchpoints.
  • EGS Pilot Risk and Reward: EGS pilots represent a high-variance bet—success could unlock transformative growth, but technical and water loss challenges remain.
  • Electricity Margin Headwinds: Temporary disruptions and curtailments dragged segment margins, but management expects recovery as issues resolve and no major curtailments are planned for 2026.
  • Backlog and International Diversification: Product backlog growth and new licenses in Indonesia and Asia reduce reliance on US market and add future revenue visibility.
  • PPA Pricing and Recontracting: Strong PPA pricing and early recontracting trends support forward revenue stability, especially as AI and data center demand intensifies.

Risks

ORMAT faces several material risks, including FEOC-driven supply chain uncertainties for storage, potential for further operational disruptions in the electricity segment, and the inherent technical risk in EGS pilot projects. Regulatory changes, grid interconnection delays, and merchant price volatility could also impact segment performance. While management has proactively safe-harbored storage projects and built backlog, any prolonged margin compression or pilot setbacks could alter the growth narrative.

Forward Outlook

For Q4 2025, ORMAT guided to:

  • Electricity segment revenue of $700 to $705 million for the full year
  • Product segment revenue of $190 to $200 million
  • Energy storage segment revenue of $70 to $75 million

For full-year 2025, management raised guidance:

  • Total revenue of $960 to $980 million (midpoint up 10.2% YoY)
  • Adjusted EBITDA of $575 to $593 million (midpoint up 6.2% YoY)

Management highlighted:

  • Continued strength in storage and product segments driving the outlook raise
  • Anticipation of finalizing hyperscaler PPAs in the coming months, which could further expand future revenue visibility

Takeaways

ORMAT’s Q3 marks a structural pivot toward growth and innovation, with storage and product segments now outpacing legacy electricity in both growth and margin. The company’s capital model and backlog expansion provide a buffer against short-term headwinds, while EGS pilots and AI-driven demand offer asymmetric long-term upside.

  • Storage and Product Outperformance: These segments now anchor ORMAT’s growth, providing resilience against volatility in the electricity portfolio.
  • EGS and Innovation as Growth Catalysts: Partnerships with SLB and Sage position ORMAT as a leader in next-generation geothermal, with the potential to unlock large-scale, high-margin projects.
  • AI and Data Center Demand Tailwind: Imminent PPA signings and robust pricing reflect a structural demand shift, with ORMAT well positioned to capitalize as the energy transition accelerates.

Conclusion

ORMAT’s third quarter demonstrated a decisive shift in business mix, margin structure, and strategic ambition. With storage and product segments delivering robust growth and EGS pilots progressing, the company is positioned at the forefront of both the AI energy demand wave and the next era of geothermal innovation. Continued execution on backlog, partnerships, and capital discipline will be key to sustaining this trajectory.

Industry Read-Through

ORMAT’s results and strategy provide a roadmap for the broader renewable and storage sectors, highlighting the importance of segment diversification, backlog-driven visibility, and innovation partnerships in capturing AI-driven demand. The company’s ability to monetize tax credits and leverage international EPC opportunities underscores evolving business models in the energy transition. For peers, ORMAT’s EGS pilots and robust PPA pipeline with hyperscalers signal an urgent need to invest in scalable, baseload renewable solutions as data center loads reshape the grid. The FEOC battery supply chain challenge remains a sector-wide risk requiring proactive mitigation.

ORA Utilities Renewable Energy Energy Storage Geothermal EGS AI Demand Backlog