SHLS Q1 2026: Backlog Climbs 18% as Data Center and Solar Orders Fuel Visibility
Shoals Technologies (SHLS) delivered a record $758 million backlog, up 18% year over year, as utility-scale solar and data center battery storage demand accelerated. Margin softness was driven by product mix, tariffs, and factory transition, but management signaled this is the trough. Guidance for both revenue and EBITDA was raised, with strong order momentum and expanding end markets supporting a bullish outlook into 2027.
Summary
- Backlog Expansion Reflects Structural Demand: Record orders and strong pipeline signal sustained market share gains.
- Margin Trough Linked to Mix and Transition: Margin pressure seen as temporary, with improvement expected as factory move completes.
- Data Center and International Growth Accelerate: Battery storage and global solar bookings broaden revenue base for 2027 and beyond.
Business Overview
Shoals Technologies Group provides electrical balance of systems (EBOS, the wiring, cabling, and electrical infrastructure that connects solar panels and batteries to the grid) and related products for utility-scale solar, battery energy storage (BESS, large-scale battery systems), and emerging data center power markets. The company’s revenue comes primarily from the U.S. utility-scale solar segment, but is increasingly diversified via OEM (original equipment manufacturer, supplying components to other manufacturers), BESS, international, and commercial/industrial channels.
Performance Analysis
Shoals posted a 75% year-over-year revenue increase for Q1, with top-line results exceeding guidance. The company’s record $758 million backlog and awarded orders (BLAO, a metric combining contracted and awarded but not yet delivered business) reflects robust demand, particularly in core U.S. utility-scale solar and emerging battery storage for data centers. Approximately $628 million of BLAO is scheduled to ship over the next four quarters, providing high forward visibility.
Gross margin landed below expectations at 29.6%, pressured by product mix, tariffs, increased freight costs, and transitional labor inefficiencies as Shoals consolidated manufacturing into a new facility. SG&A as a percentage of revenue improved by 500 basis points, demonstrating operating leverage. Adjusted EBITDA grew 56% year over year, though EBITDA margin compressed to 15% due to mix and transition headwinds. Cash used in operations was elevated, as Shoals built inventory to ensure timely delivery amid strong demand and supply chain uncertainty.
- Backlog and Orders Surge: BLAO hit $758 million, up 18% YoY, with core solar and BESS driving the increase.
- Margin Compression Drivers: About a third of the 200 basis point margin impact stemmed from each of product mix, tariffs, and freight/labor disruption.
- OEM and International Growth: OEM revenue grew 33% YoY, while international backlog reached $100 million, supporting diversification.
Management raised full-year guidance for both revenue and EBITDA, citing robust order flow and execution. Margin recovery is expected as the factory move completes and product mix normalizes in the second half.
Executive Commentary
"Our commercial team continued their strong performance by adding approximately $151 million of new orders in the period. This resulted in another company record backlog and awarded orders or BLAO of $758 million, an increase of almost 18% year over year."
Brandon Moss, Chief Executive Officer
"Product mix, freight, and tariffs accounted for approximately 200 basis points of margin compression versus our anticipated outcome. As Brandon stated, we believe this quarter is the low point for gross profit percentage, and that it will improve as we make our way through the year."
Dominic Bardos, Chief Financial Officer
Strategic Positioning
1. Utility-Scale Solar Anchors Growth
Shoals’ core U.S. utility-scale solar market remains the primary revenue engine, with strong bookings and a quote log exceeding $1 billion for the quarter. This segment’s resilience, despite industry tax equity uncertainty, underscores Shoals’ entrenched customer relationships and market leadership.
2. Battery Storage and Data Center Diversification
BESS momentum is accelerating, particularly in AI data center applications. Shoals recognized over $1 million in initial BESS revenue and booked $9 million in new BESS orders, with the On Energy partnership positioning Shoals as a supplier for the largest battery project in a U.S. AI data center. Grid firming and solar-plus-storage applications are also contributing, broadening Shoals’ TAM (total addressable market).
3. International Expansion and Pipeline Visibility
International backlog now totals nearly $100 million, up from three projects last year, with Australia highlighted as a key growth region. This expansion supports Shoals’ goal to diversify end markets and reduce U.S. policy risk exposure.
4. Product Innovation and Customer Wallet Share
New products, including long tail BLA and super jumper solutions, are expanding Shoals’ share of customer spend. While these offerings carry lower margin percentages, they drive higher absolute profit dollars and deepen customer integration.
5. Operational Leverage and Facility Consolidation
The move to a single, modern factory is expected to unlock manufacturing efficiencies and support scaling for future demand. Q1 was disrupted by the transition, but sequential improvement in margins is expected as the move completes in Q2.
Key Considerations
Shoals’ Q1 results reflect a company in transition—simultaneously absorbing short-term margin headwinds and positioning for multi-year growth through backlog expansion and market diversification.
Key Considerations:
- Backlog Quality and Conversion: Over $628 million of BLAO is scheduled for delivery by Q1 2027, providing strong revenue visibility, but execution on delivery and project timing remains critical.
- Margin Recovery Pace: The extent and speed of gross margin rebound hinges on product mix normalization, tariff pass-through, and factory efficiency gains in the second half.
- Data Center Battery Storage Ramp: Shoals’ early wins in AI data center power infrastructure could become a material growth engine, but project lumpiness and certification timelines require monitoring.
- International and OEM Diversification: Growth in these segments reduces dependence on U.S. solar, but scale and profitability need to be proven over coming quarters.
Risks
Margin trajectory is exposed to ongoing product mix shifts, volatile freight and commodity costs, and unpredictable tariff policy changes. Factory transition disruptions, legal expenses, and project delivery timing pose execution risks. While Shoals’ backlog provides visibility, delays or cancellations in large projects, especially in new segments like BESS and international, could impact results. Management’s raised guidance reflects confidence, but sequential improvement depends on resolving these near-term headwinds.
Forward Outlook
For Q2 2026, Shoals guided to:
- Revenue of $150 to $170 million (midpoint +44% YoY)
- Adjusted EBITDA of $28 to $33 million (midpoint +25% YoY)
For full-year 2026, management raised guidance:
- Revenue of $600 to $640 million (midpoint +30% YoY)
- Adjusted EBITDA of $118 to $132 million (midpoint +26% YoY)
Management highlighted:
- Sequential margin improvement expected as factory transition completes
- Cash flow from operations and capex guidance unchanged, with inventory normalization expected in the second half
Takeaways
Shoals is executing on a multi-pronged growth strategy, balancing near-term margin pressure with structural demand tailwinds in solar and battery storage.
- Backlog and Order Book Provide Multi-Quarter Revenue Visibility: Conversion of record orders will be the key watchpoint for sustained top-line growth.
- Margin Normalization Hinges on Mix and Operational Execution: Investors should monitor gross margin progression as new facility efficiencies and product mix stabilize.
- Future Growth Levers in Data Centers and International Markets: Success in scaling BESS and expanding internationally could shift Shoals’ revenue mix and valuation profile over the next 12 to 24 months.
Conclusion
Shoals delivered a quarter of record backlog and robust demand, offset by temporary margin headwinds tied to product mix and operational transition. With raised guidance and a growing presence in high-growth segments, Shoals is well-positioned for margin recovery and continued expansion as 2026 progresses.
Industry Read-Through
Shoals’ results reinforce the resilience and momentum of the U.S. utility-scale solar supply chain, even amid policy and financing uncertainty. The company’s early traction in data center battery storage highlights how AI infrastructure is emerging as a new vertical for power technology providers. Margin pressures from tariffs, freight, and mix are industry-wide themes, underscoring the importance of supply chain agility and pricing power. International solar and storage markets, especially Australia, continue to mature as credible growth vectors for U.S.-based suppliers, with Shoals’ pipeline signaling broader opportunity for peers.