Bloom Energy’s platform could benefit from artificial intelligence’s growing power demands. Is it a buy today?
Energy helps keep global economies going, and demand for it will only go up from here. One growing sector of the economy that is expected to need more energy, according to a recent study from Goldman Sachs, involves the use of artificial intelligence (AI) applications and services such as OpenAI’s ChatGPT. The study says demand for data center power is expected to grow 160% by 2030.
There are plenty of options for where that energy can come from. One source that could help meet the sizeable demand while also decarbonizing the economy is hydrogen. Some see hydrogen as the “new oil” because it burns cleaner and could help companies meet their long-term carbon reduction goals.
Bloom Energy (BE 5.52%) is developing technology for low-carbon and grid-independent power generation to position itself as a key player in meeting data center energy demands over the next decade. With the hydrogen energy industry projected to grow into an $11 trillion market, is now a good time to scoop up Bloom Energy?
Bloom Energy hopes to meet AI’s growing energy demand
Hydrogen-fueled energy generation offers a versatile, clean, and sustainable alternative to fossil fuels. The chemical reaction that turns hydrogen into energy produces only water and heat as byproducts, making it extremely appealing for entities looking to reduce their carbon footprint. Another added benefit of hydrogen is that it can be stored, transported, and deployed when and where needed. The conversion process that creates the hydrogen fuel has historically been too expensive to be practical, but Bloom has developed technology to fix this problem.
Over the past two decades, Bloom Energy has refined its technology so it now creates hydrogen with less energy. Its Bloom Energy Server uses its proprietary solid oxide technology to convert fuel, such as hydrogen, natural gas, and biogas, through an electrochemical process without combustion.
What makes Bloom’s technology appealing is that its modular servers can be clustered together to provide customers with hundreds of kilowatts to hundreds of megawatts of energy based on their needs. It’s also designed to stay online to provide energy that is resilient against weather events, cybersecurity attacks, or other grid outages, and it can be installed faster than traditional energy sources.
Image source: Bloom Energy.
Bloom’s cleaner-burning, grid-independent power generation platform makes it an appealing option for data center operators, who have seen power demand explode thanks to the AI revolution.
In May, the company announced a power capacity agreement with Intel to install additional megawatts of its fuel cell-based Energy Server at Intel’s high-performance computing data center in Santa Clara, California. Last month, it partnered with the Nvidia-backed AI hyperscaler CoreWeave to generate on-site power for its high-performance data center in Illinois.
Here’s the latest look at Bloom’s financial picture
Much of Bloom’s revenue comes from energy server sales. This requires a significant amount of capital upfront, and Bloom provides financing or pay-as-you-go plans to help customers.
Revenue growth has been solid, but this year, the company is seeing a slowdown in sales. Bloom’s total revenue was $571 million in six months, down 1% from last year. Because of the nature of its product, sales can be a bit uneven for the company. Despite this, management expects second-half revenue to pick up and projects revenue of $1.4 billion to $1.6 billion this year, or a 12% growth from last year at the midpoint.
One thing investors should keep a close eye on is Bloom’s profitability. Last year, the company posted a net loss of $308 million and another $119 million through the first half of this year. The company still hasn’t turned a profit and has work to do to achieve this goal.
BE Revenue (TTM) data by YCharts.
It’s making progress on its non-GAAP operating income, which excludes things like stock-based compensation and restructuring charges. Since last year, it reduced its non-GAAP operating loss from $26 million to $3.2 million this year. It projects a non-GAAP operating income of $75 million to $100 million by the end of this year.
Is Bloom Energy stock for you?
Bloom Energy is making solid progress in expanding its business and has signed key agreements over the past several months that validate its product. The company is positioned to play a key role in data centers’ growing demand for power, and its resilient power solutions could be an important part of helping companies reduce their carbon footprints. If you already own the stock, it still has potential, and holding on to it is still the best option at this point.
Investors looking to capitalize on the clean hydrogen trend may find Bloom Energy’s stock compelling despite its lack of profitability. However, I’d like to see the company make further progress in expanding its data center footprint and improving its bottom line before scooping up shares of the stock.