Key Points
Plug Power was able to reverse its long history of negative gross margins by producing a gross profit in Q4.
Plug Power management projects that the company will turn EBITDA positive in Q4 2026.
Plug Power's (NASDAQ: PLUG) share price climbed this week after the company reported it was able to turn a gross profit in the first quarter. The hydrogen company has struggled with negative gross margins throughout its history, so this was a huge step in the right direction.
Let's take a closer look at the company's results and prospects to see if the stock could be a buy.
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Transformation taking hold
Plug Power started out making hydrogen fuel cells used in forklifts and other material-handling equipment deployed in high-volume warehouses and distribution centers. However, the deals typically include the company providing hydrogen fuel, which it has historically acquired from third parties and subsequently sold at a loss. To address this problematic business model, the company has started building its own network of hydrogen plants.
While it still isn't selling fuel at a profit, it improved its fourth-quarter fuel gross margins enough to eke out a 2.4% overall gross margin, as it turned in a $5.5 million gross profit. That was a huge improvement from the negative 122.5% gross margin it reported a year ago.
Overall, Q4 revenue climbed nearly 18% year over year, helped by higher equipment sales. Meanwhile, the company's adjusted earnings per share (EPS) loss improved from $0.29 a year ago to $0.06.
The company had operating cash flow outflows of $535.8 million for the year, while its free cash flow was negative $661.5 million. It ended 2025 with $368.5 million in unrestricted cash, and it has recently struck deals to monetize $275 million in assets.
Looking ahead, Plug Power aims to grow its 2026 revenue at a similar pace to the 30% growth it saw in 2025. The growth is expected to be led by its material handling business, with it seeing new customers coming online this year and growth at existing customers. It forecast that it could be earnings before interest, taxes, depreciation, and amortization (EBITDA) positive in the fourth quarter.
Is the stock a buy?
After looking like it was on the brink of bankruptcy a couple of years ago, Plug Power is finally turning the corner, becoming gross-margin positive in Q4 and significantly reducing its cash outflows in 2025. As it continues to scale its hydrogen production business and the effect of its restructuring plan fully kicks in, it should continue to see improved operating leverage.
Plug Power remains a highly speculative stock. However, it is now giving investors something it hasn't in a long time: Hope. Still, I'd keep any positions small at this point.
Should you buy stock in Plug Power right now?
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
