Stem Reaches Profitability Milestone as Software Pivot Accelerates
Key Takeaways
- Stem (STEM) achieved its first full year of positive adjusted EBITDA and operating cash flow, signaling a successful transition to a software-led business model.
- This shift toward high-margin recurring revenue is echoed across the SaaS landscape, with companies like Riskified and Red Violet reporting record growth and margin expansion.
Mentioned
Key Intelligence
Key Facts
- 1Stem achieved its first full year of positive adjusted EBITDA ($7M) and operating cash flow ($7M).
- 2Software and services revenue at Stem grew 25% YoY to $141M, representing over 55% of total revenue.
- 3Riskified reported 65% YoY revenue growth to $344.6M and reached GAAP profitability in 2025.
- 4Red Violet achieved record quarterly revenue of $23.4M with an 83% adjusted gross margin.
- 5Everspin's MRAM product sales increased 22% YoY, driven by data center and industrial automation demand.
- 6Stem's Annual Recurring Revenue (ARR) ended the year at $61M, a 16% year-over-year increase.
| Metric | |||
|---|---|---|---|
| Revenue Growth (YoY) | 8% | 65% | 20% |
| Gross Margin (Non-GAAP) | 46% | 52% | 83% |
| Adj. EBITDA | $7M (Full Year) | $17.7M (Q4) | $5.9M (Q4) |
| Key Growth Driver | Software/Services | Fraud Prevention AI | Data Analytics |
Analysis
Stem’s Q4 2025 earnings report marks a definitive turning point for the energy storage leader, as the company successfully navigated its transition from a hardware-heavy integrator to a high-margin software and services provider. By reporting its first full year of positive adjusted EBITDA ($7 million) and positive operating cash flow ($7 million), Stem has validated its strategy of de-emphasizing low-margin battery hardware resale in favor of its PowerTrack software platform. This pivot is reflected in the company's revenue mix, where software, services, and edge hardware now account for over 55% of total revenue, growing 25% year-over-year to $141 million. This evolution is critical in the current market environment, where investors are increasingly prioritizing bottom-line profitability and recurring revenue over raw top-line growth.
The broader SaaS and cloud-adjacent sectors are showing similar patterns of margin expansion and strategic refinement. Riskified (RSKD) demonstrated exceptional momentum, reporting 65% year-over-year revenue growth and achieving GAAP net income for the first time. Riskified’s success in diversifying its product revenue—with nearly $10 million coming from newer offerings like Policy Protect and AccountSecure—highlights the market's appetite for multi-product platform adoption. Similarly, Red Violet (RDVT) reached record quarterly revenue of $23.4 million with an adjusted gross margin of 83%, driven by its IDI and FOREWARN data analytics platforms. These results suggest that data-centric SaaS models remain highly resilient and capable of significant operating leverage as they scale.
Stem’s ARR reached $61 million, a 16% increase, while Riskified managed to reduce its headcount by 3% through AI adoption while simultaneously growing its Gross Merchandise Volume (GMV) by 18%.
What to Watch
However, the transition to software-led models is not without friction. Nexxen (NEXN) faced headwinds in its CTV and programmatic segments, with contribution ex-TAC declining 7% year-over-year, largely due to the absence of political advertising and the loss of a major DSP customer. Despite this, Nexxen’s data products grew by 51%, indicating that even in challenged sectors, specialized software and data services remain the primary growth engine. This trend is also visible in the industrial sector; Everspin (MRAM) saw its MRAM product sales rise 22%, supported by a strategic shift toward data center and industrial automation applications, further proving that specialized technology providers are finding success by moving up the value chain.
Looking ahead, the focus for these companies will be on sustaining Annual Recurring Revenue (ARR) growth and leveraging artificial intelligence to drive further efficiencies. Stem’s ARR reached $61 million, a 16% increase, while Riskified managed to reduce its headcount by 3% through AI adoption while simultaneously growing its Gross Merchandise Volume (GMV) by 18%. For analysts and investors, the key metric to watch in 2026 will be the continued expansion of gross margins as these companies further decouple their revenue from physical hardware or one-time service contracts. The successful 'SaaS-ification' of these diverse industries—from energy storage to fraud prevention and industrial memory—represents a fundamental shift in how value is captured in the modern cloud economy.
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| Signal on this page | What it tells you |
|---|---|
| Verified by N sources | Independent corroboration count. N≥2 is our confidence floor; N=1 is marked explicitly. |
| Impact score (1-10) | Regulatory + financial + operational weight. 8+ signals an experienced-operator action item. |
| Sentiment | Five-tier classification trained on labeled saas-specific corpora. |
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