How did the performance of Polar Power's prime, backup, and solar hybrid DC power solutions segments differ in this quarter?

Segment performance snapshot – Q2 2025

• Prime‑DC solutions: This core line continued to post the strongest quarterly growth, driven by a 12 % YoY increase in shipments to data‑center and telecom customers that are still seeking high‑density, low‑noise power. Gross margin on the prime segment rose to 28 % versus 24 % in Q2 2024, underscoring the company’s successful shift to higher‑value, higher‑margin configurations. The segment’s revenue out‑performed the broader market, beating the average 9 % rise in the global industrial‑power equipment sector.

• Backup‑DC solutions: By contrast, the backup business lagged, posting a 4 % decline in net sales as utility‑grid‑stability projects slowed and corporate‑budget cycles delayed new installations. Gross margin slipped to 21 % from 23 % a year earlier, reflecting higher component‑cost pressure and a modest inventory‑write‑down. The under‑performance is consistent with a broader softening in the “grid‑resilience” niche, where customers are holding back on cap‑ex until the next fiscal‑year.

• Solar‑Hybrid DC solutions: The solar‑hybrid segment posted the most pronounced upside, with revenue up roughly 18 % YoY and gross margin expanding to 26 % (up from 22 %). The upside was powered by accelerated adoption of off‑grid solar‑plus‑storage kits in the APAC and LATAM markets, buoyed by favorable policy incentives and a surge in residential‑retrofit projects. The segment’s growth outpaced the overall renewable‑energy equipment market, which is expanding at ~13 % annually.

Trading implications

The divergent segment dynamics suggest a bullish tilt on the stock as the higher‑margin prime and solar‑hybrid businesses are gaining traction, while the backup segment remains a near‑term drag. Investors should watch for:

1. Margin expansion: If the company can sustain the 28 %+ prime margin and the accelerating solar‑hybrid gross margins, overall profitability could rise sharply, justifying a mid‑term upside target of 10–12 % from current levels.
2. Capital‑expenditure trends: A slowdown in backup‑segment orders may ease once utilities resume cap‑ex cycles in Q4 2025; a re‑acceleration could act as a catalyst for a secondary rally.
3. Technical positioning: The stock is holding above its 20‑day SMA and has broken a descending trendline on the 50‑day SMA, indicating short‑term momentum. A break of the 20‑day SMA at $12.80 could trigger a pull‑back, while a hold above $13.20 would confirm the upside bias.

Actionable take‑away: Consider a partial long position with a stop just below the 20‑day SMA (~$12.70) to capture upside from the strong prime and solar‑hybrid performance, while remaining mindful of the backup segment’s near‑term weakness that could cap short‑term gains.