Orad: what is really behind the solar segment's profitability improvement
Orad’s solar-margin improvement in 2025 was real, but it did not come from a clean shift toward a service-led model. The evidence points first to a strong project-volume year with better operating leverage, a more entrenched customer base and a backlog that gives 2026 visibility, but it still does not prove that the 2025 margin level is a new steady state.
The main article argued that solar was the segment that moved Orad in 2025. This follow-up isolates the more important question: did the profitability improvement reflect a more durable improvement in the segment’s economics, or was it mostly a product of timing, project volume and one unusually favorable reporting year.
The short answer is fairly sharp. The improvement was real, but it came first from a jump in project execution and from better operating leverage, not from a step-change toward a more service-heavy model. Maintenance and the installed base did support the picture, and they matter a great deal for 2026, but they were not the primary source of the earnings jump.
There is also a second layer that is easy to miss. A strong solar report would normally suggest a broad sector pricing tailwind. That is not what the filing says. The company describes a market in which demand improved, grid capacity opened through new quotas and rates became less restrictive, but competition also intensified and installation prices for small and mid-sized rooftop systems fell. In other words, the 2025 margin does not look like a gift from a friendlier market. It looks more like a year of better scale, execution and probably tighter cost discipline.
That matters for 2026 because year-end 2025 already gives a mixed signal. On one hand, a solar backlog of NIS 41.8 million, almost equal to the segment’s full 2025 revenue, plus an O&M base of about 129 MW gives the business a more comfortable floor. On the other hand, the filing does not quantify merger synergies, does not show that maintenance became the main profit engine, and does not yet prove that the 13.6% segment gross margin is a new baseline.
What Actually Improved In 2025
At the headline level the improvement was sharp. Solar-segment revenue rose 50.8% to NIS 41.3 million, while segment gross profit jumped 209.2% to NIS 5.6 million. Segment gross margin nearly doubled, from 6.6% in 2024 to 13.6% in 2025.
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| Solar revenue | NIS 27.4 million | NIS 41.3 million | 50.8%+ |
| Segment gross profit | NIS 1.8 million | NIS 5.6 million | 209.2%+ |
| Segment gross margin | 6.6% | 13.6% | 7.0 pts+ |
| Year-end solar backlog | NIS 36.3 million | NIS 41.8 million | 15.2%+ |
| Rooftop O&M base | not disclosed | about 129 MW | disclosed only for 2025 |
What matters is not only that revenue rose, but that profitability improved much faster than volume. When gross profit expands far faster than sales, the right follow-up is to test whether that came from a service mix shift, better pricing, backlog timing, or simply from revenue growing faster than the segment’s direct cost base.
Where The Improvement Really Came From
First, from larger project execution
Anyone looking for a clear turn toward a maintenance-led model does not really see it in the 2025 mix. If anything, the opposite happened. The project share of solar revenue rose to 76.6% from 72.9% in 2024, while the maintenance share fell to 23.4% from 27.1%.
| Revenue component | 2024 | 2025 | What it means |
|---|---|---|---|
| Project execution | NIS 20.0 million | NIS 31.6 million | The main growth driver was installation volume |
| Maintenance services | NIS 7.4 million | NIS 9.7 million | Healthy growth, but not the main mover |
| Project share | 72.9% | 76.6% | The segment became more project-heavy, not less |
| Maintenance share | 27.1% | 23.4% | Maintenance supported the story, but did not lead it |
This is material because it breaks a tempting but incomplete narrative. The 2025 improvement did not come from a clean shift toward more recurring service economics. It came primarily from the fact that the company executed more installations. Management itself links the expansion to more new installations, broader grid absorption capacity and new electricity-network quotas.
Put simply, 2025 was first a volume year. Maintenance was a support layer, not the main acceleration engine.
Service still matters, but as a stabilizer rather than the main engine
That does not make the maintenance layer unimportant. At the end of 2025 the company was providing maintenance services only for rooftop solar systems, with a serviced base of about 129 MW, and maintenance revenue rose to NIS 9.7 million. The company also says customer churn in solar maintenance remains low.
The importance of that disclosure is not that it explains the earnings jump on its own. It is that it helps build a floor for 2026. The company also notes that system-output warranties are tied to the existence of a valid maintenance agreement. That creates a direct connection between installation work and ongoing post-installation service.
But precision matters here too. In some agreements that include maintenance, the customer can terminate the maintenance element on 30 days’ notice. So this is still not pure subscription economics. Maintenance adds stickiness and continuity, but it does not turn the segment into a hard annuity.
An entrenched customer base, probably with more expansion work on top of existing installations
The other important datapoint is the customer-tenure table. In 2025, NIS 38.8 million of the solar segment’s NIS 41.3 million revenue came from customers with relationships longer than five years, or 94.2% of the segment’s revenue. In 2024, the same category accounted for only NIS 15.5 million, or 56.5% of segment revenue.
The filing does not explicitly break that number between expansions on existing systems and maintenance contracts, so it would be wrong to overstate the point. But together with the company’s description of sales through long-term agreements and expansions of existing projects, the reasonable reading is that 2025 leaned more on reputation, installed base and long-standing relationships, and less on chasing brand-new logos.
That supports backlog quality. It also means the 2025 improvement does not look like one isolated win that transformed the year.
Integration likely helped, but the report does not give it full numerical credit
The merger of SolarPower into Orad was completed for accounting purposes at the end of 2024 and was formally registered in February 2025. The company says the move was intended to enable unified management and operations, cost savings, better efficiency and improved use of experience, reputation and infrastructure.
The 2025 numbers do fit that story, but they do not fully prove it. In the broader segment cost table, solar revenue rose by NIS 13.9 million, variable costs rose by only NIS 8.8 million, and fixed costs rose by just NIS 0.5 million. That is the profile of improved operating leverage inside the activity itself.
But this is exactly where discipline matters. The company does not present a formal merger-synergy bridge, and it does not quantify how much savings came from removing an extra corporate layer or unifying overhead. The right conclusion is therefore more restrained: integration probably supported cost discipline, but the evidence is still indirect rather than explicit.
What Remains Open For 2026
At first glance, 2026 looks almost locked in. Solar backlog at the end of 2025 stood at NIS 41.8 million, and management spreads it almost evenly across the four quarters of 2026. That is almost equal to the segment’s entire 2025 revenue base.
That is a good starting point. It says 2026 is not a no-work problem. But it does not solve the margin question. For 2025 profitability to prove repeatable in 2026, several things still need to happen at once:
- The backlog has to convert without price erosion. The company itself says competition increased and installation prices for smaller rooftop systems fell. So volume alone does not guarantee the same margin.
- Maintenance has to keep growing at least alongside the installed base. If projects remain the overwhelming majority of the segment and maintenance does not gain weight, 2026 stays more exposed to project timing.
- The company has to show that the softer fourth quarter was timing rather than the start of normalization. The quarterly consolidated tables show a weaker profitability profile in the fourth quarter than in the second and third quarters. That does not prove solar weakness specifically, but it also does not let investors read 2025 as a perfectly linear acceleration.
- The development upside is still optional. The company says it is examining solar-development agreements, but as of the report date one signed development agreement had not yet started operating. That means the 2026 case should not be built on developer-style upside that has not begun to contribute.
The result is a more balanced thesis. The 2026 revenue base looks reasonably supported. The 2026 margin base, not yet.
Conclusion
Orad’s solar profitability improvement in 2025 was real, but it was much more project-driven than a first read might suggest. The money came first from higher installation volume and from better operating leverage, not from a clean pivot toward a higher-quality, maintenance-heavy mix.
Maintenance, the long-standing customer base and the SolarPower merger gave the segment an important support layer. They explain why the improvement does not look purely accidental, and they are also the reason 2026 does not start from zero. But the filing still does not fully prove that a 13.6% segment gross margin is the new steady state.
The right way to read 2026, then, is not as an automatic breakout year but as a proof year for the solar economics. If the NIS 41.8 million backlog converts without price erosion, if maintenance revenue continues to expand around the 129 MW base, and if integration starts showing up in the numbers without relying on good timing, then 2025 will look like a structural shift. If not, it will look in hindsight like one particularly strong execution year.
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