The two companies that make the power electronics inside a rooftop solar system — the boxes that turn direct current from the panels into usable alternating current — are being priced as one story, and they are not one story.

SolarEdge, which sells DC-optimised inverter systems to installers, distributors and engineering contractors from Herzliya, Israel, delivered on 5 August the best quarter it has reported in three years. Revenue of $346.2m rose 19.6% year on year and 11.5% sequentially. Gross profit nearly tripled. Reported gross margin went from 11.1% a year ago to 27.5%, a sixth consecutive quarter of expansion, and operating margin narrowed from -39.9% to -4.6%. Non-GAAP operating income of $10.2m was its first profit in nearly three years.

The stock fell 28.1% that day on roughly 13.3m shares, about five times normal volume. The reason was the outlook: third-quarter revenue of $310–340m, whose $325m midpoint sat roughly 12% below the analyst consensus of about $368–372m. Management attributed the sequential decline to European seasonality of about $15m, continued softness in US residential, and the absence of the usual third-quarter uptick. Two further details matter: reported gross margin included $13.3m of tariff refunds under the International Emergency Economic Powers Act, with another $11.5m received in July that is not assumed in the guide — flattering the margin by roughly four points — and US residential revenue of $154.9m actually fell 2% sequentially while European revenue of $154.4m rose 36% and more than doubled year on year.

Verdict on SolarEdge: the business CONTRADICTS the move. Revenue is accelerating, margins are expanding, and consensus 2027 revenue of $1.495bn (+11.7%) is rising, not falling. A 12% cut to one quarter's revenue path is real, but it is one quarter.

Enphase is the mirror image

Enphase, the Fremont, California maker of semiconductor-based microinverters that convert power at each individual solar module, plus batteries and monitoring software, has the demand problem SolarEdge only partly has. Revenue fell 19.6% year on year to $291.9m in the second quarter, after 20.6% and 10.3% declines in the two prior quarters. The cause is policy: the Section 25D federal residential solar credit, worth 30% of system cost to homeowners who buy their own systems, expired outright at the end of 2025 rather than stepping down, and BloombergNEF data projects 2026 US rooftop installations at their lowest since 2020 — though California is still set to grow 17% and Florida 62%.

Yet Enphase's gross profit rose 2.7% and operating income 39.2% year on year. Non-GAAP gross margin reached 46.8%, up from 43.9%, and third-quarter revenue is guided to $290–320m — of which roughly $75m is safe-harbour shipments, buyers pulling forward purchases to lock in credits, not end demand. Verdict: INCONCLUSIVE. Shrinking sales, expanding profits, and a quarter of the guide borrowed from the future.

What you pay now

SolarEdge has no earnings anchor — trailing price-to-earnings is -7.0x. On sales, the right lens for a loss-maker, it trades at 1.45x trailing and 1.44x forward, against 2.94x when this desk last examined it in May at a $3.76bn market value versus $1.93bn today. It holds $601.6m of cash against convertible notes due 2029 carried at $331.6m, generated $3.1m of free cash flow in the quarter and expects positive free cash flow for the year.

Enphase, at a $5.53bn market value, trades at 41.0x trailing and 20.6x forward earnings — but its forward price-to-sales of 4.67x sits above trailing 4.16x, because forward revenue is smaller. The earnings multiple compresses on cost cuts and tax credits, not growth, on a 2.8% free cash flow yield. Brokers cut targets after the print — Susquehanna to $39, Citi to $40, Wells Fargo to $44 — bracketing the current price.

Valuation verdict: SolarEdge, a possible dislocation; Enphase, a justified de-rating.

On the tape, the pair did not move together at all. Over the 30 days to 7 August Enphase fell 2.7% while SolarEdge fell 39.4%, and Enphase was flat across the three sessions that took SolarEdge down 34.9%. Enphase's 50-day average crossed below its 200-day on 30 July, the session after its own results; SolarEdge's had not yet registered its collapse a week later, a lag in the averages rather than evidence of a broadening decline.

The setup

Where it stands — SolarEdge's fundamentals improved while its shares halved their sales multiple; Enphase's shares held while its revenue shrank a third straight quarter.

Would confirm — SolarEdge third-quarter revenue printing at or above the $340m top of guidance with non-GAAP gross margin inside 22–26%.

Would invalidate — SolarEdge free cash flow turning negative for the full year, or European revenue falling back below $120m.

Watch next — Third-quarter results from both companies in late October 2026, and Enphase's fourth-quarter guide net of safe-harbour shipments.

Valuation — SolarEdge 1.45x trailing / 1.44x forward sales versus 2.94x in May; Enphase 41.0x trailing / 20.6x forward earnings.