Bloom energy (NYSE:BE) investors are having a banner Friday, as shares of the renewable energy company rose 47.8% through 10:30 a.m. ET.
Last night, Bloom Energy announced a deal to supply up to 1 gigawatt of fuel cells to electric utilities American electrical energy (NASDAQ: AEP).
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Last night’s announcement comes after a miserable earnings report from Bloom last week – a report that was offset by Bloom’s announcement of a deal to build an 80-megawatt fuel cell system for South Korea’s SK Eternix. However, there are 1,000 megawatts in a gigawatt.
So today’s news is 12.5 times bigger than that news, which explains the size of the reaction investors have to it.
As Bloom explained, AEP plans to purchase Bloom’s fuel cell systems to deploy at the site of some of its customers’ AI data centers. (Yes, you read that right. Bloom Energy is now an artificial intelligence stock.) The rollout will begin with an initial order of 100 MW of fuel cells (already more than last week’s announcement), and additional more fuel cells will be ordered over time. 2025, and will be “rapidly deployed”.
In total, the AEP deal promises to deploy approximately 77% of the volume of fuel cells that Bloom has already deployed (1.3 GW) over its entire 23-year history. While Bloom didn’t say how big the AEP deal will be in terms of revenue, if you compare historical data on Bloom’s revenue since 2014, which goes as far back as S&P Global Market Intelligence’s historical data, it implies the AEP deal would could ultimately generate revenues well in excess of $7 billion for Bloom.
Furthermore, Bloom has already reached a point where these sales are grossly profitable, with gross profit margins approaching 24% in the third quarter, and while profitable operating and net margins finally appear achievable.
This deal could be the one that puts Bloom over the top and ultimately makes the company profitable.
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