Shoals Grows Revenue 43.8% to $195.3 Million as Margin Slips

Shoals Technologies Group grew third-quarter revenue 43.8% year over year to $195.3 million, while gross margin fell to 31.9% from 37.0%, the company reported on November 4, 2026. Net income rose to $17.9 million from $11.9 million, and diluted earnings per share climbed to $0.11 from $0.07. The quarter also carried a merger announcement that reshapes the story entirely: Shoals has signed an Agreement and Plan of Merger and Reorganization with ARRAY Technologies.

Growth without margin is a familiar tune. The company played it well regardless.

What drove the revenue surge?

Management attributed the 43.8% revenue increase, from $135.8 million in the prior-year period, to strong underlying demand, market share capture initiatives, and a higher volume of projects in the current year. Gross profit rose to $62.4 million from $50.3 million. Income from operations reached $29.0 million, up from $18.7 million.

Adjusted EBITDA (a non-GAAP earnings measure excluding items such as interest, taxes, depreciation and litigation costs) increased to $39.8 million from $32.2 million. Adjusted net income rose to $24.5 million from $21.2 million, with adjusted diluted EPS of $0.14 against $0.13.

CEO Brandon Moss said: "We're very pleased with our strong results in the period, as productivity improvements drove both quarterly revenue and Adjusted EBITDA above our expected range." He added that the long-term health of the market "remains robust."

Why did gross margin decline?

The 5.1-point margin compression has identifiable causes. The company cited operational inefficiencies tied to the ramp-up and transition into its new manufacturing facility, unfavorable product mix within the quarter, and costs to address product quality matters, including rework and corrective actions. Incremental lease accounting amortization also played a part.

The nine-month picture is starker: gross margin fell to 30.6% from 36.6%. General and administrative expenses for the quarter rose to $31.0 million from $29.4 million, driven by a $5.4 million increase in incentive compensation and headcount, partly offset by $4.1 million lower legal spending. Interest expense rose to $3.9 million from $2.8 million.

Moss addressed the transition directly: "Our strategy is working — and the results prove it. With the move into our new facility complete, our focus today is on the customer."

How bad is the cash flow picture?

Considerably worse than the earnings line suggests. Nine-month operating cash flow was negative $5.788 million, against positive $21.154 million a year earlier. The warranty expense provision jumped to $8.947 million from $0.256 million. Inventory consumed $61.5 million of cash versus $5.5 million a year earlier.

Balance-sheet details:

• Cash and cash equivalents stood at $7.674 million at September 30, 2026
• Revolving credit debt rose to $163.75 million from $136.75 million at year-end 2025
• Inventory on the balance sheet grew to $148.3 million from $89.9 million
• Accounts receivable increased to $159.8 million from $128.8 million

Nine-month capital spending declined to $17.5 million from $25.9 million. Net income for the period rose to $29.7 million from $25.5 million, on revenue of $499.2 million versus $327.0 million.

What does the order book and outlook show?

Backlog and awarded orders totaled $791.7 million, up 9.8% year over year but down 1.2% sequentially from June 30, 2026. Backlog represents signed purchase orders or contractual minimum commitments with take-or-pay provisions (clauses requiring payment for committed purchases even if not taken); awarded orders lack signed contracts.

The company raised its full-year 2026 outlook:

• Revenue of $665 million to $685 million
• Adjusted EBITDA of $129 million to $133 million
• Operating cash flow of $55 million to $65 million
• Capital expenditures of $20 million to $30 million
• Interest expense of $11 million to $13 million

For the fourth quarter ending December 31, 2026, Shoals expects revenue of $165 million to $185 million and adjusted EBITDA of $36 million to $40 million.

What does the ARRAY merger change?

The merger agreement with ARRAY Technologies, announced in a separate release, prompted the company to cancel its solo earnings call. Shoals instead joined a joint analyst call with ARRAY on November 4, 2026, at 8:00 a.m. EDT. The company disclosed $0.7 million of transaction, integration and restructuring costs in the quarter, primarily legal, banking and advisory fees.

Regulatory and stockholder approvals remain conditions to closing, per the company's risk disclosures. Shoals, founded in 1996 and based in Portland, Tennessee, manufactures electrical infrastructure for utility-scale solar, battery storage and data center power systems.

The verdict: strong top-line momentum, genuine earnings growth, and a raised outlook, all shadowed by eroding margins, negative operating cash flow and rising debt. The ARRAY transaction now frames every forward number in this report.