FuelCell Energy targets AI power boom with 75 MW Texas deal as quarterly losses deepen

FuelCell Energy Inc. shares fell sharply on September 2 after weaker-than-expected third-quarter results overshadowed major progress in the company’s attempt to become a power supplier to artificial intelligence and data-center operators. Fiscal third-quarter revenue declined 29% year over year to $33 million, while gross loss widened to $24.5 million from $5.1 million as current manufacturing costs exceeded pricing under a major new agreement with Fit Energy USA LP. The company nevertheless announced its first capacity reservation agreement with a major data-center operator for a planned 75-megawatt project in Texas and reported combined committed and awarded capacity backlog of approximately $3.65 billion. FuelCell Energy is now expanding manufacturing capacity and targeting positive adjusted EBITDA during the fourth quarter of fiscal 2027, making the central investor question whether rapidly growing data-center demand can scale the business quickly enough to overcome its current cost structure.

FuelCell Energy shares fell around 13% to roughly $14.90 in early September 2 trading after closing the prior session at $17.08. Investors focused heavily on the earnings miss, with revenue falling below analyst expectations of around $40 million and the reported $0.64-per-share loss coming in wider than the approximately $0.40 loss expected by the market. The reaction demonstrates that enthusiasm around artificial intelligence power infrastructure is not enough by itself to overcome concerns about margins, manufacturing economics and continued losses.

FuelCell Energy’s first 75 MW data-center agreement gives its AI power strategy a major commercial test

FuelCell Energy signed its first capacity reservation agreement with a major data-center operator after the July quarter ended, covering a planned 75-megawatt deployment in Texas. The project is expected to use six 12.5-megawatt FuelCell Energy Block systems, while the customer has made an upfront reservation payment giving it priority access to manufacturing capacity as the companies work toward definitive project agreements. Financial terms and the identity of the data-center operator were not disclosed.

The structure is commercially significant because power availability has become one of the largest constraints facing new data-center construction. FuelCell Energy’s systems generate electricity at the point of use, potentially allowing developers to secure dependable baseload power without waiting entirely for large new transmission projects or conventional grid upgrades. For artificial intelligence operators trying to bring high-density computing capacity online quickly, reducing the time between site development and reliable electricity supply can carry substantial economic value.

The Texas reservation follows FuelCell Energy’s much larger agreement with Fit Energy, which covers as much as 380 megawatts across four potential phases intended primarily for data-center applications. The initial 30-megawatt phase is committed and is expected to begin deliveries during the fourth quarter of fiscal 2026, while Fit Energy has options to proceed with subsequent phases of 100 megawatts, 125 megawatts and another 125 megawatts. Those later phases remain at Fit Energy’s election and do not create payment obligations until the applicable option is exercised.

That distinction is important because FuelCell Energy now reports approximately $1.3 billion of committed backlog alongside $2.35 billion of awarded capacity backlog. The combined figure reaches approximately $3.65 billion, but the company explicitly cautions that awarded capacity backlog is not equivalent to firm contracted revenue and may never convert fully into committed backlog or sales. Investors therefore have substantial potential future business to consider, but considerably less certainty than the headline backlog number might initially imply.

FuelCell Energy’s broader sales pipeline has also expanded to approximately 10 gigawatts during fiscal 2026, reflecting discussions across data centers, digital infrastructure and utility markets. Management has emphasized that this pipeline represents commercial discussions rather than executed agreements, meaning the key metric over the next several quarters will be how much prospective capacity converts into deposits, definitive contracts and ultimately revenue.

Manufacturing economics expose the biggest risk behind FuelCell Energy’s expanding backlog

FuelCell Energy’s third-quarter results exposed an uncomfortable challenge inside the data-center growth strategy: the company is currently producing equipment at a cost above the contractual pricing associated with the initial Fit Energy order. FuelCell Energy operated at an annualized manufacturing rate of approximately 37.1 megawatts during the quarter, below the scale management believes is required to absorb fixed manufacturing overhead efficiently.

The company recorded $17 million of charges related to inventory and firm purchase commitments associated with the initial Fit Energy phase. Those costs contributed to a gross loss of $24.5 million, representing a 377% deterioration from the $5.1 million gross loss recorded a year earlier, while adjusted EBITDA loss widened to $36.7 million from $16.4 million. The numbers explain why investors reacted negatively despite the data-center agreements because signing large contracts creates limited shareholder value if the equipment cannot initially be produced at economically attractive margins.

Management believes scale can change that equation. FuelCell Energy is targeting an annualized production rate of 100 megawatts in October 2026 and is expanding its Torrington, Connecticut, manufacturing facility toward 500 megawatts of annualized capacity by June 2028. Higher volumes are expected to improve fixed-cost absorption, purchasing economics and unit manufacturing costs, potentially allowing large contracts to move from margin pressure toward positive operating contribution.

The timeline leaves significant execution risk because FuelCell Energy must increase production substantially before the economics fully improve. Management is now targeting positive adjusted EBITDA in the fourth quarter of fiscal 2027, subject to awarded backlog converting into committed contracts, customer delivery schedules progressing as expected and cost-reduction initiatives producing results. That means the profitability target depends simultaneously on commercial demand and manufacturing execution rather than either factor alone.

FuelCell Energy does have considerably more liquidity available to fund the expansion. Cash, cash equivalents and restricted cash reached $737.3 million at July 31, up from $341.8 million at the end of October 2025, but much of that increase came from issuing additional shares. A July public offering generated approximately $245.5 million of net proceeds, while sales under the company’s open-market equity program raised another $52.9 million during the quarter.

That capital strengthens the balance sheet and gives FuelCell Energy resources to expand manufacturing, but it also creates dilution. The company’s weighted share count has risen substantially over the past year, meaning existing shareholders own a smaller percentage of the business even as management gains the funding needed to pursue larger data-center opportunities.

Carbon capture, Siemens and South Korea projects broaden FuelCell Energy beyond data-center electricity demand

The artificial intelligence power theme currently dominates investor attention, but FuelCell Energy is also advancing several other commercial programs that could diversify future revenue. During the quarter, the company completed delivery of all 42 fuel cell modules committed to the Gyeonggi Green Energy fuel cell park in South Korea since 2024, including six modules during the latest period that generated approximately $18 million of product revenue.

FuelCell Energy also delivered and installed the first two carbonate fuel cell carbon capture modules at ExxonMobil Technology and Engineering Company’s Rotterdam manufacturing complex in the Netherlands. The industrial-scale demonstration is designed to test technology developed through a multi-year collaboration that captures carbon dioxide while simultaneously producing electricity and hydrogen, potentially improving the economics compared with conventional carbon capture systems that consume substantial energy.

The Rotterdam project remains a demonstration rather than a large commercial revenue source, but successful operation could open another sizable market. Heavy industrial facilities including refineries, chemicals plants, cement operations and other large emitters face continuing pressure to reduce carbon emissions, creating potential demand for technologies capable of integrating carbon capture with useful power generation.

FuelCell Energy is also working with Siemens under a memorandum of understanding aimed at accelerating large fuel-cell deployments. Siemens is expected to provide electrical balance-of-plant systems for projects and work with FuelCell Energy on integrated distributed energy systems combining fuel cells, battery storage, microgrid controls and medium-voltage electrical equipment. The partnership is specifically intended to support commercial installations exceeding 100 megawatts, aligning directly with the scale increasingly required by data centers and industrial customers.

Together, those initiatives show a company trying to move from relatively small fuel-cell deployments toward utility-scale energy infrastructure. The opportunity is significant because AI data centers, industrial electrification and grid congestion are creating demand for power sources that can be deployed closer to customers, but FuelCell Energy still needs to prove that larger projects can translate into profitable manufacturing rather than simply larger order books.

Key takeaways from FuelCell Energy’s data-center expansion, earnings miss and 13% stock drop

• FuelCell Energy’s third-quarter revenue declined 29% to $33 million, missing market expectations as product and generation revenue weakened.
• Gross loss widened sharply to $24.5 million after the company recorded $17 million of charges tied largely to costs associated with the initial Fit Energy order.
• FuelCell Energy signed its first capacity reservation agreement with a major data-center operator for a planned 75-megawatt project in Texas.
• The company also has a Fit Energy agreement covering up to 380 megawatts, although only the initial 30-megawatt phase is currently committed.
• Combined committed and awarded capacity backlog reached approximately $3.65 billion, but $2.35 billion remains awarded rather than firm contracted backlog.
• FuelCell Energy plans to increase annualized production to 100 megawatts in October 2026 and ultimately expand its Torrington facility to 500 megawatts by June 2028.
• Higher manufacturing volume is critical because current production costs remain above pricing associated with the initial Fit Energy order.
• FuelCell Energy now targets positive adjusted EBITDA in the fourth quarter of fiscal 2027, subject to contract conversions, customer schedules and cost reductions.
• Cash and restricted cash increased to $737.3 million, although recent equity offerings strengthened liquidity at the cost of additional shareholder dilution.
• FuelCell Energy shares fell around 13% after the results as investors prioritized margin and earnings concerns over the longer-term data-center opportunity.