The federal tax credit that covered nearly a third of the cost of an American home solar system lapsed at the end of last year, and the industry has spent 2026 discovering what demand looks like without it. Enphase's management says US permits for residential systems are running about 30% below prior-year levels. The Solar Energy Industries Association forecasts a 21% decline in the US residential market this year, and BloombergNEF expects installations of 4.1 gigawatts, the lowest in five years.

The two companies that sell the power electronics into those rooftops reported opposite quarters into that backdrop.

One is growing, one is not

SolarEdge, an Israeli maker of string inverters and per-panel power optimizers, reported June-quarter revenue of $346.2m, up 19.6% year on year and 11.5% from March. Gross margin was 27.5% against 11.1% a year earlier. Its operating margin narrowed from -39.9% to -4.6%, and non-GAAP operating income of $10.2m was the first in nearly three years. European revenue of $154.4m rose 36% sequentially and more than doubled year on year, as Dutch and German homeowners bought storage ahead of the end of net metering.

Enphase, the Fremont, California company whose semiconductor microinverters convert power at each individual solar module, reported revenue of $291.9m, down 19.6% — its third consecutive quarter of roughly that size. Its profits went the other way: gross profit rose 2.7% and operating income 39.2%, on a 60.0% gross margin. But $84.3m of the quarter's revenue was "safe harbor" — equipment bought early to lock in expiring credits — against $34.5m in March. Ex-safe-harbor, the core business fell from roughly $248m to roughly $208m. Management said US sell-through was down 34% year on year.

The multiple is on the wrong company

Neither company has clean earnings to value against, so gross profit is the honest anchor. Enphase trades at 8.58x trailing gross profit and 9.62x forward — the forward figure is higher, because consensus models fiscal 2026 revenue 19.3% below 2025 and earnings per share down 27.7%. SolarEdge trades at 6.68x trailing and 6.65x forward, essentially flat, with consensus revenue growth of 13.6% this year and 11.7% next. Both have de-rated hard from mid-May, when Enphase stood at 14.55x and SolarEdge at 16.09x.

SolarEdge holds $601.6m of cash against a $1.97bn market value, generated $3.1m of free cash flow in the quarter and guides to positive free cash flow for the year. Enphase holds $937.7m, with no convertible maturity until March 2028.

The caveat that moved the stock is real. SolarEdge guided current-quarter revenue to $310-340m against expectations near $370m, a 12% shortfall, citing European seasonality and slow US tax-equity funding held up by unresolved foreign-content rules governing which systems qualify for the surviving commercial credit.

The chart is a round trip, not a collapse

Most of the damage is one day. SolarEdge lost 28.1% on 5 August on 13.3m shares against a 2-4m norm. Exclude that three-session reaction and its 30-day return is -8.8%, against Enphase's -8.1%. Over six months Enphase is down 6.9% and SolarEdge 8.8%; both are higher over twelve. What actually happened is that a May-June rally on speculative artificial-intelligence datacenter optionality — both firms are developing high-voltage power conversion hardware, with volume revenue targeted for 2028 — nearly doubled each stock and then unwound. Enphase has risen 15.4% off its 29 July low.

The installers underneath them are in worse shape. Sunrun, the largest US residential solar lessor, added 31% fewer subscribers year on year last quarter and cut its full-year value guidance; its shares are down 46.6% in six months. Third-party leases, which still access the commercial 48E credit through 2027, are the industry's workaround, and Enphase's PROPEL financing platform is running about 200 originations a week toward a year-end target of 500.

The setup

Where it stands — SolarEdge's business is improving on every line and its multiple is a third of May's; Enphase's is shrinking while carrying the higher forward multiple. Would confirm — SolarEdge lands the current quarter at or above the $325m guidance midpoint with non-GAAP gross margin inside 22-26%. Would invalidate — Enphase core revenue excluding safe harbor stabilizes above $210m while SolarEdge margin slips back below 22%. Watch next — Third-quarter results in late October, and Treasury's foreign-content safe-harbor tables, due by 31 December 2026. Valuation — Enphase 8.58x trailing, 9.62x forward gross profit, from 14.55x in May; SolarEdge 6.68x and 6.65x, from 16.09x.