Why UBS Cut Stem’s Price Target Despite Improved Software Mix and EBITDA

Core Viewpoint - Stem, Inc. is facing challenges in its software sales outlook, leading to a reduction in price target by UBS despite improvements in its software revenue mix and EBITDA performance [2][3][4]. Financial Performance - For Q4 2025, Stem reported revenue of $47.2 million, a decrease of 15% year-over-year, primarily due to lower battery hardware sales [3]. - Software, services, and edge hardware revenue increased by 62% to $46.5 million in Q4 2025 [3]. - The non-GAAP gross margin improved to 45% from 36%, and adjusted EBITDA rose to $5.5 million from $4.2 million [3]. - The net loss narrowed to $16.0 million from $51.1 million in the previous year [3]. Annual Performance - For the full year 2025, Stem's revenue increased by 8% to $156.3 million [4]. - Revenue from software, services, and edge hardware climbed by 25% to $141.4 million [4]. - The company achieved an adjusted EBITDA of $6.7 million, a significant improvement from a loss of $22.8 million in 2024 [4]. - At the end of Q4 2025, Stem had $48.9 million in cash and cash equivalents [4]. Market Position - Stem, Inc. provides software, services, and energy management technology for clean energy assets, enabling customers to monitor, optimize, and operate various energy systems globally [5].