Welcome to SMA's investor and analyst call covering our results for the first nine months of 2026. Thank you for joining us today. The call is scheduled to last up to 60 minutes and is being recorded. Following the presentation, we will open the line for questions. The presentation is available in the investor relations section of our website, where a replay of today's webcast will be posted shortly after the call. Let me briefly outline today's agenda.
I will begin with our nine months financial performance, then provide an update on our strategic progress, and close with our full-year outlook. The presentation will take a little bit more than 30 minutes. I refer to our disclaimer on page two. Before we turn to the financial details, let me briefly put the first nine months into context. Overall, the business continued to develop well and in line with our expectations.
Sales were slightly above the prior year level, reported EBITDA improved significantly, and our liquidity position strengthened further. At the same time, the recovery in Home & Business Solutions continues to make progress. In Large Scale, strong demand and a high order backlog provide good visibility. The market environment remains complex, shaped by geopolitical uncertainty, regulatory change, and supply chain constraints. Even so, the structural drivers of our business remain intact.
Storage, energy independence, and security of supply are becoming increasingly important, supporting demand for SMA solutions. Beyond the financial performance, we also reached several important strategic and technological milestones in the first nine months. We entered the fast-growing data center market with dedicated power infrastructure solutions, officially opened our new gigawatt factory in Niestetal, and achieved the first certification under Germany's new VDE FNN framework for the provision of instantaneous reserves.
Together, these achievements strengthen our industrial capabilities, broaden our addressable markets, and reinforce SMA's leading position in grid-forming technologies and resilient energy infrastructure. Against this backdrop, let us turn to page four and the key financial highlights for the first nine months of 2026. Gross sales rose to EUR 1.2 billion from EUR 1.1 billion a year earlier.
This increase was achieved despite a EUR 22 million reduction in revenue related to U.S. tariff refunds in Large Scale in the second quarter. Reported group EBITDA improved to EUR 146 million versus -EUR 17 million in the first nine months 2025. The corresponding margin was 12.6%. Before the effects detailed in the quarterly statement, EBITDA was EUR 110 million. The main positive items were EUR 39 million related to the sale of previously written-down inventories and EUR 3 million from the release of restructuring-related provisions in personnel costs.
U.S. tariff refunds added a further EUR 90 million to earnings. These benefits were partly offset by EUR 3 million of external sales commissions for a transformation project, provisions for potential insurance compensation claims in a low double-digit million euro amount, and provisions for potential customer litigation in a low single-digit million euro amount. I will return to the divisional drivers in a moment.
Free cash flow increased to approximately EUR 136 million from EUR 115 million in the prior year period. Total order backlog reached EUR 1.9 billion at the end of September, well above EUR 1.3 billion a year earlier. This gives us solid revenue visibility, particularly in Large Scale. Page five provides a closer look at the sales mix by region and division. Starting with the regional split on the left, EMEA remained our largest market, accounting 48 % of group sales.
The Americas contributed 37% and APAC 15%. Year-on-year, APAC gained share, while the Americas accounted for a smaller proportion of the total. Turning to the divisional split on the right, Home & Business Solutions sales climbed to EUR 232 million from EUR 181 million in the prior year period, reflecting higher demand.
Large Scale & Project Solutions generated EUR 929 million versus EUR 954 million in the first nine months of 2025. The comparison includes the revenue-reducing effect of U.S. tariff refunds, as mentioned before. Let us move to profitability on page six. At group level, reported EBITDA was EUR 146 million. After depreciation and amortization of EUR 39 million, EBIT reached EUR 107 million. This corresponds to a margin of 9.3%. Before the special effects outlined earlier, EBITDA was around EUR 110 million.
At divisional level, Home & Business Solution EBIT improved markedly to -EUR 29 million from -EUR 322 million a year earlier. Higher sales, savings from the restructuring and transformation program, and the positive items already discussed drove the recovery. Provisions for individual warranty cases in a mid-single-digit million euro amount partly offset the positive effects. Large Scale & Project Solutions EBIT was EUR 130 million versus EUR 200 million in the prior year period.
The development reflected provisions for expected service and remediation measures in a low double-digit million euro amount and provisions for potential customer litigation in a low single-digit million euro amount. Page seven shows how the improvement in net working capital supported strong cash generation and further strengthened our liquidity position. Net working capital decreased to EUR 193 million at the end of September from EUR 213 million at year-end 2025.
The ratio improved to 12.5% from 14%, slightly outperforming our target corridor of 13%-16%. Let me briefly walk you through the main net working capital components. Inventories, including advanced payments to suppliers for goods not yet received, stood at EUR 400 million at the end of September compared with a bit more than EUR 350 million at year-end 2025. This increase mainly resulted from higher inventory levels in large scale to support the positive order development.
Trade receivables rose to EUR 234 million from EUR 184 million at year-end, driven by strong business activity towards the end of the reporting period. Based on customer payment terms, we expect a significant portion to convert into cash in the fourth quarter. Trade payables increased by EUR 78 million to EUR 237 million, supported by the strong operating performance in the third quarter.
Advanced payments received from customers grew by EUR 36 million to EUR 205 million. Given the recent high level of order intake, particularly in Large Scale, we expect them to remain on a high level in the fourth quarter. Let's have a look at the group balance sheet on the right side of this page. I've already explained the changes in the net working capital position.
I will focus on the major changes in the other balance sheet items. Let us start with cash and financial liabilities. Our liquidity position strengthened significantly during the first nine months. We fully repaid the cash drawn under our revolving credit facility in the first half of the year. Total liquidity stood at EUR 302 million, supported by strong operating cash flows, improved net working capital, and the U.S. tariff refunds.
Turning to the other balance sheet items, non-current assets increased slightly to EUR 499 million from EUR 492 million at year-end 2025. The main drivers were higher deferred tax assets and increased receivables from associated companies. Deferred tax assets rose by EUR 24 million to EUR 137 million. Other assets also increased compared with year-end 2025. This mainly reflects higher contract assets related to our Altenso project business.
Shareholder's equity increased by 28% to EUR 469 million, lifting the equity ratio to 31.3%. This positive development was primarily driven by the net income generated during the first nine months. Provisions were broadly stable at EUR 241 million compared with EUR 237 million at year-end 2025, with ongoing consumption of existing warranty provisions and offsetting for the individual warranty claim provisions booked in the third quarter.
Other liabilities increased compared with year-end 2025, mainly due to higher advance payments received from customers, VAT, and income tax liabilities. This stronger balance sheet position brings us to cash generation on page eight. Operating cash flow was broadly stable at around EUR 149 million, in line with the prior year period, although its composition changed materially.
Starting with the net income of EUR 99 million, we add back non-cash P&L items, including depreciation and amortization, as well as changes in provisions. This demonstrates the strong cash contribution from our operating performance in the first nine months. The main cash effects not recognized in the current P&L included payments related to the restructuring program, prepaid expenses such as annual IT licenses that are recognized over the full year, and income tax paid. Net working capital made a positive contribution overall.
In Home & Business Solutions, we successfully sold inventories that had been previously been written down. At the same time, inventories increased in Large Scale to support the strong business development and upcoming project execution. The associated increase in trade payables more than offset the cash tied up in inventories and higher trade receivables, resulting in an overall reduction in net working capital.
Net CapEx declines to EUR 14 million from EUR 38 million, mainly due to lower capitalized development costs and fewer additions to fixed assets. Consequently, free cash flow rose to approximately EUR 136 million from around EUR 115 million in the first nine months of 2025, despite restructuring-related cash outflows during this period. Let us now turn to the order backlog on page nine. On the left, total order backlog expanded to EUR 1.9 billion at the end of September from EUR 1.4 billion at year-end 2025.
Product orders increased by around 49% to EUR 1.5 billion from EUR 1.02 billion. The service backlog remained broadly stable, rising by around 2% to EUR 340 million from EUR 334 million at the end of 2025. The chart on the right shows that Large Scale represents the clear majority of the product backlog. Looking at the product backlog as a whole, the regional profile is well balanced: 42% in EMEA, 38% in Americas, and 20% in APAC.
Compared with year-end 2025, the product backlog grew by approximately 53% in EMEA, 38% in the Americas, and 66% in APAC. The strong growth in the Americas is particularly encouraging and reinforces our Large Scale position in one of our most important and definitely competitive markets. This high level supports good revenue visibility. Encouragingly, both divisions contributed to the increase, with HBS recovering and Large Scale demand remaining strong.
Now let's turn to the next page, and I will give you an update on our business activities and our ongoing transformation program. Let me start with a brief update on some developments supporting SMA's future positioning. First of all, the transformation program of SMA with focus on HBS is progressing according to plan, with initial positive effects already becoming visible.
In particular, our cost reduction initiatives, efficiency improvements, and strategic focus on our product portfolio are increasingly contributing to improved operational performance. The launch of our new home hybrid inverters in Central Europe has been very successful, and orders keep coming in for our new solution. Across a growing range of applications, customers need systems that combine power conversion, storage, intelligent controls, and energy management to manage increasingly complex energy infrastructure.
This creates opportunities for SMA to apply its inverter technology, software, system integration, and grid expertise across different applications using a common technology base. Today's business update shows how these capabilities translate into concrete market opportunities, not only in HBS, but also in Large Scale. The following examples cover cybersecurity, the shift towards storage, and future fields such as grid stability, data centers, and industrial capacity.
Now, let me begin with cybersecurity, which is becoming an increasingly important factor in the operation and procurement of energy infrastructure. Cybersecurity is a clear differentiator for SMA. With the second flight of our Let's Get Loud campaign, we are making these capabilities more visible and translating a complex technical topic into clear customer benefits. The campaign highlights the concrete mechanisms SMA uses to protect people, assets, and data.
These include secure authentication for privileged users, encrypted communication, tamper-resistant automatic updates, no standard passwords after commissioning, and no hidden backdoors, including for SMA. Customers and operators retain full control over third-party access to their systems. An important foundation for this positioning is our internationally recognized ISO/IEC 27001 certification for information security, which SMA received in 2024.
The certified scope covers SMA Sunny Portal and all areas and processes required for its operation. The relevant cloud infrastructure and data are hosted in Europe, with Sunny Portal powered by ennexOS, developed and operated by SMA, and its associated data also hosted in Germany. The current campaign helps us communicate these established strengths more clearly and makes cybersecurity a tangible argument for SMA. At the same time, we are taking the next strategic step.
Building on the ISO/IEC 27001 certification achieved in 2024, we aim to expand the certified scope to the entire SMA group by end of 2027. While cybersecurity is an important market trend for Home & Business Solutions, the following developments primarily affect our Large Scale & Project Solutions segments. Here, the market is increasingly shifting from traditional PV applications towards storage and additional future fields.
The development shown on this slide reflects a deliberate strategic shift within our Large Scale & Project Solutions business. Photovoltaics remain an important part of SMA's technology base and customer offering. The share of revenue from this business has, though, declined from 80% to less than 50% in the last five years. The future of large-scale business will therefore increasingly be driven by storage and additional applications that require advanced power conversion, grid integration, and system-level capabilities.
Battery storage is becoming increasingly important as renewable generation expands and power systems require more flexibility and stability. Here, we see an increase of revenue share from around 10% to more than 50%. Storage systems can shift energy over time, support the integration of renewable generation, and provide advanced grid services. Grid-forming battery inverters can additionally contribute to frequency and voltage stability and provide inertia in increasingly inverter-based power systems.
At the same time, we are transferring our established technology base into future fields, such as hybrid power plants and data center power infrastructure. These markets share many of the technical requirements we already address, including reliable power conversion, medium voltage integration, battery integration, intelligent control, cybersecurity, and stable operation under demanding grid conditions. Now let's have a look at the key developments in the last quarter.
First, SMA has achieved the first certification under the German VDE FNN guideline for grid-forming capabilities, including the provision of inertia. The certification applies to the Sunny Central Storage UP-S battery inverter platform and confirms compliance with the requirement of version 2.1 of the VDE FNN guideline. This certification is important because it establishes a standardized pathway for the testing and verification of grid-forming technologies.
Similar certification processes are expected to emerge also in other markets. For project developers and independent power producers, certified technology can provide access to emerging revenue opportunities from inertia and other stability services. It can also give utilities and investors greater confidence when planning battery storage assets for future grid requirements. For SMA, the key opportunity lies not only in inertia itself, but the ability of certified grid-forming solutions to provide a broad range of grid stability services.
As grid operators place greater emphasis on stability services, certification and proven project experience are becoming increasingly important purchasing criteria. Second, we officially opened our new Gigawatt Factory in Niestetal, Kassel, in September. The facility is designed for utility-scale technologies supporting PV, storage, hybrid, hydrogen, and data center applications. Under full utilization, it has space for an annual production capacity of more than 60 GW.
The strategic significance goes beyond the capacity figure. The factory strengthens our ability to industrialize and manufacture critical energy infrastructure in Europe. It also provides flexibility to adopt the value creation and production mix as demands shift between applications. Third, we are expanding into the new data center market with dedicated power infrastructure solutions for artificial intelligence and hyperscale applications.
Driven by AI, cloud computing, and digitalization, global demand for data center capacity is growing rapidly, while access to reliable and scalable power is increasingly becoming a bottleneck. SMA is well-positioned to address this challenge. Our solutions leverage proven technologies from utility-scale energy projects, including power conversion, battery integration, medium voltage stations, grid-forming capabilities, plant controls, and cybersecurity.
This allows us to help customers accelerate time to power while ensuring reliable and efficient operation. Importantly, this is not a completely new technology area for SMA, but a new application field built on our existing competencies and product platform. While still at an early stage, we expect the data center business to make initial meaningful revenue contribution from 2027 onwards. As always, this remains subject to the development and timing of individual projects.
Alongside these markets and technology opportunities, regulatory requirements are also continuing to evolve, particularly relevant for us in Germany, Europe, and the U.S. Let me address three regulatory developments that may influence future product requirements and market opportunities. The planned amendment to the German Renewable Energy Sources Act, EEG-Novelle, affects both the residential and commercial PV markets.
Compared with the initial proposal, the reform has been softened through transitional arrangements, including temporary feed-in remuneration of EUR 0.052 per kilowatt hour for new PV systems below 25 kW peak until 2030. However, the transition away from long-term fixed feed-in tariffs remains part of the proposed framework. Importantly, the EEG-Novelle has not yet been finally adopted. For Home & Business Solutions, the proposed amendment is expected to support the stabilization of the German residential PV market by preserving economic incentives for new installations over the coming years.
At the same time, the increasing focus on self-consumption is likely to drive demand for battery storage and energy management solutions, as homeowners seek to maximize the use of their own solar energy rather than exporting it to the grid. With its integrated portfolio of PV, storage, and energy management solution, SMA is well-positioned to benefit from these trends, strengthen its market position, and regain market share.
For Large Scale & Project Solutions, annual tender volumes for ground-mounted PV are planned to increase from 9.9 GW to 14 GW between 2027 and 2032. The new Net-Zero Industry Act resilience tender is also expected to support European-made components, starting at 0.5 GW per year in 2027. However, additional costs and an unchanged price cap of EUR 0.059 per kilowatt hour may limit the upside.
The second development I want to talk about is the revision of the European requirements for generators, known as RfG 2.0. It updates the technical grid connection requirements for power-generating installations and power electronics and reflects the growing share of inverter-based renewable generation and battery storage in the power system. For SMA, this development could become a competitive advantage.
As grid operators increasingly require advanced grid support functionalities, the market is expected to place greater value on proven grid-forming capabilities and system stability services. SMA has already demonstrated these capabilities in large-scale projects such as Blackhillock, Kilmarnock, and Föhren, using solutions including the Sunny Central Storage UP and Sunny Central Storage UP-S. As a result, stricter technical requirements may increase barriers to entry and strengthen differentiation based on technology performance, system expertise, and project track records.
SMA is therefore well-positioned to benefit from the transition toward more demanding grid integration standards, while continuing to support technically appropriate, harmonized, and internationally aligned requirements that accelerate deployment and reduce complexity across European markets. The final development is in the U.S. executive order on critical power infrastructure.
The U.S. government has declared a national emergency for the bulk power system and will exclude Chinese components from covered infrastructure projects effective August 26, 2026. For SMA, there is no immediate impact on ongoing projects. However, the scope of the regulation and the treatment of existing equipment will be defined by the forthcoming rules of the US Department of Energy, short DOE. The DOE's rulemaking process is expected to be completed within 120 days by late December 2026.
An industry consultation is currently underway, and the final provisions, their scope, and implementation timelines will determine the commercial implications for market participants, including SMA. Given SMA's established U.S. presence and global technology expertise, we believe the company is well-positioned to adapt to the evolving regulatory environment. At this stage, however, it's too early to quantify any potential impact before the final DOE rules are published.
Now let us move directly to page 17 and our outlook for 2026. Let me start with the key message. Following the guidance upgrade in July, we are now confident to even further narrow down both the sales and EBITDA ranges to the upper half of the guidance update issued in July. This further positive step reflects the strong execution in the first nine months, increased visibility for the fourth quarter, and our confidence in the full-year outlook.
For the full year, we now expect sales between EUR 1.675 billion and EUR 1.725 billion. EBITDA is expected to range from EUR 205 million -EUR 230 million. These ranges correspond to the upper half of our previous guidance. The refined guidance ranges reflect a significant reduction in the risk we identified at the beginning of the year, as well as the improved business conditions in both divisions. In Large Scale, the high order backlog, sustained demand, and the more favorable US dollar development than originally assumed support the outlook.
In addition, the high IEEPA tariff refunds were received almost in full in the second quarter. In Home & Business Solutions, higher demand and the recovery in order intake underpin the expected improvement. At group level, the benefits from the restructuring and transformation program, stronger operating performance, and the positive tariffs and foreign exchange effects are supporting earnings.
Following the strong sequential improvement in the third quarter, we expect operating momentum to continue in the fourth quarter, which we expect to deliver the highest sales and earnings contribution of the year. In Large Scale & Project Solutions, full year EBIT is forecasted to be close to the prior year level, with higher sales compensating for higher costs and the lower capitalization of development expenditures.
Home & Business Solutions will remain loss-making, but improve significantly compared with 2025. At the same time, our outlook remains subject to the trade and geopolitical conditions currently known to us. Conversely, the growing focus on energy independence and security of supply may provide further support for demand.
We expect CapEx, including capitalized development expenditures and leasing investments of around EUR 30 million, and depreciation and amortization should be approximately EUR 50 million. Before we move to Q&A, one final housekeeping item. Our financial calendar is available in the investor relations section of the SMA website. That concludes the presentation, and I'm now ready to take your questions. Thank you very much.
Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two.
Questioners on the phone are requested to disable the loudspeaker mode while asking a question. In the interest of time, please limit yourself to three questions. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from Lasse Stüben from Berenberg. Please go ahead.
Hi, good afternoon. My first question is just on one-offs. I saw in the report, and I think you mentioned in the presentation, you had the warranty provisions, it's in the mid-single digit EUR million range. Just wondering, did that fall entirely in the third quarter? The second part of that question is, should we expect any further impact from the sale of written-down inventories in HBS in the fourth quarter?
The second question is on supply chain. I'm just wondering, are you seeing any sort of supply chain tightness, particularly in HBS? The reason I ask is, revenues maybe aren't turning, or orders aren't turning into revenues quite as quickly as historically. So just wondering if there's any tightness in any components.
Then finally is the question, do you see the demand in HBS as sustainable now at these levels? The reason I ask is, sort of on the current trajectory and the backlog you have, with typical conversion, you should be hitting close to EUR 2 billion in sales next year. So I'm just wondering if there's anything to sort of prevent you from doing that. I guess this relates to supply chain as well. So thank you very much.
Thanks, Lasse. Good questions, definitely. Let me start with the last one, where you asked about how we look at HBS. I think the demand that we currently see is mainly driven by our new hybrid inverters and our battery portfolio and the whole solution I talked about, and we think this is sustainable. So we have a good feeling that we will go with a similar level into Q1 next year.
So we don't see that drop. When it comes to what the revenue is for next year, obviously we don't do the guidance now, so I leave that one to you, to be honest. Your first question was, or maybe the second one was around supply chain tightness, right? Yes, we see that supply has tightened in selected categories. When it comes to mechanical parts, for example, they're very good.
We have topics around, for example, printed circuit boards, PCBs, electronic components, memory chips. What we see there is that the whole data center market, pretty much driven by that, is sucking up a lot of the supply. There is a bit pressure on that side. We are in a good managing mode here. We have all kind of measures, starting from escalations, obviously.
We build up a bit of safety stocks, but on a different level than we did before. We reserve capacities. We do faster qualification of alternative sources. In some cases, we do redesign. We do a lot of things to prevent this becoming a topic to limit our revenues. As I talk that much about it, you see that we are taking that very seriously. I think your first question was around the one-offs.
I think the main one-offs that we have seen this year were all around reversing the write-downs we did in last year. We had, I think in Q3, around EUR 17 million of reversals in inventory provisions. We also had a release of purchase commitments, which we could just consume and did not need to pay out. These are helping us.
Then we have some mid-single digit million range for potential claims and insurance indemnities that had an impact on the results. If you look forward for Q4, I think there should not be big one-offs to be expected. Maybe a little bit around the reversal of inventory still, but that is something we will have a look then as we go. Hope that covered your questions.
Very good. Yeah, thank you.
The next question comes from Constantin Hesse from Jefferies. Please go ahead.
Good afternoon. Thank you so much for taking my questions. The first one, I want to start with order intake momentum. Clearly, Q2 was a bit of a record month there with the data center. Sorry, record quarter with the data center deal being signed. Q3 remained at a good momentum. I am just wondering, as you go into Q4, if you can share a bit how momentum has been in October, what you are seeing for November. Can we expect these elevated levels to continue from here on out? Let's start with that, and then I want to drill in further into the demand environment.
Yeah, sure. As you said, I think Q2 was exceptionally high. Q3 was on a good level, much higher than we had the years before, right? Q4, I think we can expect something on a level as Q3. We basically, and then that is the number. But in terms of what we see is that the demand continues to be very good in both divisions, honestly. We are very, very confident with the order intake we are seeing currently in Q4.
Great. Thanks, Kaveh. Just to drill down a little bit into this, right? If we look at the sustainability of this momentum that you are seeing in order intake, particularly in Large Scale, could we expect some additional order intake in data centers potentially coming in in Q4, or do you think that is rather a 2027 story? If you can maybe talk a little bit about what you are seeing with regards to the competitive environment, because, you know, Nextpower obviously bought Prevalon.
They have announced 10 GW of capacity by the end of 2027 in the U.S., so I am assuming they are going to be quite competitive coming into the market. What are you guys expecting there from a competitive behavior? Do you think you can hold market share? Any details you can give there? Also, what do you expect from the U.S. regulation by the end of the year? Thanks.
Thanks, Constantin. I think I spoke a lot about U.S. regulation, so honestly can't, yeah, add more to it. I think, as you know, it is ongoing processes. The pushout for Chinese manufacturers is ongoing. However, this is going to land, hard to say. Let's park that for a second, yeah?
When it comes to the market dynamics, I think we are operating in a highly competitive market for years now, and we have been gaining market share year-over-year in the large-scale business, and we are very, very happy about it and very proud. We do not see those movements hindering us to continue to do so, yeah, the things you mentioned, because you need to make sure you have the installed base, you have the service around the topics, you have the functionalities.
It's a long way to go for everyone to enter and who wants to expand. I think that's good. Going forward, I think when it comes to demand, be it for PV or be it for storage, we've seen good growth this year in sales. We've seen even better growth in order intake, as we just talked about, and we don't expect this to be a topic that would go down in the next months or quarters as far as we can see.
On a final note, on the data center topic, yes, we are pushing that. I think the bulk of order intakes would come next year, and then we would see the revenue generation in 2028. That's nothing, given the nature of the business, that would materialize immediately in terms of a huge order intake soon.
But as we said, in Q3, we had already some order intake that will add revenues in 2027. It's a dynamic market. The pressure is high there. It's also interesting from a financing perspective how those markets operate, given the high debt that is around. There's always, you have to be on top of things, and our teams are very, very active and very dynamic there and pushing hard to create the business momentum for us.
No, that's great. Maybe just the last question. I mean, you currently have about 3.5 GW of capacity in the U.S. I think that was the latest update. Assuming this regulation in the U.S. comes out or turns out to be positive for Western manufacturers, would you potentially expand capacity there? Just to add to that, I think you mentioned a lawsuit in Large Scale that you provisioned for. Can you just give us some additional details on what that's related to? Thanks.
Two different questions. Maybe on the lawsuit thing, it's an IP-related topic. It's not a big topic, I would say, but we had just a provision for it in a small million number. I wouldn't like to be more specific here, but it's just something we have to be careful about, but not a big topic, I would say. Now I forgot the first part. Can you just repeat? Sorry.
No, just with regards to your capacity in the U.S. You currently have-
Capacity.
Yeah, yeah. I was wondering if you were keen to expand that. Yeah.
No, I think the question that we have to answer when it comes to capacity is there a regulation coming that is demanding a local footprint in the U.S.? That's something we are currently analyzing, right? Then with that, we would also answer the capacity question.
If we don't, let's say if regulation is not demanding local production, I think with the capacities we have, we can cover everything we need to produce currently. So even if you take the, let's say, more optimistic forecast for the next two or three years, we have enough capacity. So that's not a capacity topic for us. It's more around, are we forced by regulation to have more on the ground in the U.S.? That's the angle that we use to look at this topic.
Understood. Thanks so much.
Sure. Thanks.
As a reminder, if you would like to ask a question, you may press star and one at this time. We do have one more question coming from Guido Hoymann from Metzler. Please go ahead.
Yeah. Good afternoon. Yeah, three questions from me. The first one is again on the status of the restructuring process in HBS. I think last time you indicated, with these nice little charts, that the execution was at about three-quarters of what you had planned to achieve. So what would be the update at the moment?
Are we getting close to 100% in this execution by the end of this year, or will that be still an issue when we go into the next year? That's the first one. The second one, can you give us an update on Mr. Reinert? Has he returned yet, or are you expecting him to be back soon? The last one on Large Scale, I think we had some changes accounting-wise, and I think also some investments into service, et cetera, in Large Scale, having an impact on the cost base.
Would you say that the base we have achieved now is sustainable? Or in other words, shall we expect the margin in Large Scale for the coming years now to be at around 13%-15% or so? Is that the sustainable margin level we have reached now in Large Scale? Thank you.
Thank you, Guido. It's three different topics. Where to start? Let me first talk about Jürgen. No, Jürgen is not yet back. To be honest, health topics, nothing to discuss in public. I'm not a doctor, to be honest. So Olaf and myself continue to lead the company during this period, and of course, we support Jürgen and we wish him all the best for his recovery. But I don't have a date for you when he will be back.
Talking about HBS, yes, so the updates, we took it out this time, you're right, the bubble chart with the progress on restructuring. We will update it again for the next quarter. But to tell you right away now, we're making still good progress. I think we are maybe at 90%, if you say we were at 75% last time.
We see a good acceptance of the products in the market, as mentioned. We see the cost levels coming down. Not many of the measures left to be implemented, so it's more around coming to a certain run rate and then taking it with us to the next year. We just, in this quarter, brought out the new battery and the, let's say, the last piece, the bigger hybrid inverter is also coming out this month.
So let's say the final pieces on the product side should be in the market by November, December. Then we expect to go with the full run rate into the next year, and we keep the goal to be break-even next year. So that's, to be clear, there's nothing. All good, I would say. As good as it can be, yeah?
Okay.
Large Scale, yes, I think you're right. We had a bit of ups and downs, given FX capitalization investments in service. But overall, the margin is very positive this year, and the figures you mentioned is more or less the range we will land by year-end, right? Going into next year, this is also what we are targeting, definitely. It depends a little bit on the revenue side, how well this margin in the end is, just given the fixed cost base, right? But yeah, that's definitely the range we're pushing for.
All right, perfect. Thank you.
Then we do have some more questions coming from Constantin Hesse from Jefferies. Please go ahead.
Thanks. Just a very quick follow-up. With regards to the data center revenue potential there, I think you mentioned mid to high double digit in 2027. Then, Kaveh, you said that the bulk of the orders are expected in 2027 to be converted in 2028. What kind of revenue levels are we talking about here? Is there anything you can share?
It's a bit early, to be honest. I would rather not do that, but if you do simple math, then you can add up where it could be. The thing is, this market is growing so fast that you can easily write down in a spreadsheet any kind of number. It depends a little bit on how good you are in positioning yourself. Our focus is really now to go out with the current setup, convince the customers, and get into the door, and then install them. Then I'm pretty sure the numbers will be very nice. Let's put it like this.
Understood. Thank you.
Then the next question comes from Richard Alderman from BTIG. Please go ahead.
Yes, thanks for taking my questions, and thank you for the presentation. Just two quick follow-up questions to the ones before. Just on the component costs issue, you say you have built some inventory in advance of that and have diversified a little bit. If current component cost inflation was to persist into next year, at what point do you think that would have an impact on your bottom line and margins?
Secondly, it is encouraging to see the run rate in HBS in terms of revenues. That would imply, if I take you back to the H1 Q&A, that would imply that you will be somewhere inside the EUR 350 million-EUR 400 million annualized number in 2027 that would bring you to break even or better. Do you see that happening in the first half of next year or the second half?
Let us start with the second question. I am not sure I get your question is whether Q1 or Q2 will already be break-even on a quarterly basis, or?
Yes.
I think the quarters are not evenly distributed, right? Because we have a seasonal business. Usually, the wintertime has lower sales into PV and solar panels and all these kind of things. Usually, Q1 and Q4 are by nature a little bit weaker, and then Q2 and Q3 are the best quarters.
If you have that in mind, I think we can achieve the figures you mentioned in terms of revenue, but the distribution will not be in a favorable way for Q1. Is Q2 or Q3 already break-even? Hard to say at this point. But definitely, it has to be there. The first question, it was about the costs increase. I think I mentioned a little bit, because it was a question that came already.
What we are trying to do to manage that, obviously, there are some components that are becoming very expensive. We find good mitigation measures. On the HBS side of things, we decided to increase prices for some of our products in the small-digit range, and then that is probably also the same amount we would see the cost increase. For the Large Scale piece, given, let us say, the size of the product, it should not have a material impact on our margin. Yeah, I think that is maybe the best answer. It depends a little bit how the market continues. If it hits us, it would hit us Q2, Q3 probably.
Do you see any scope to increase prices next year?
I do not think we have to for Large Scale, and for Home & Business Solutions, for selected products, we have decided and communicated that already from January onwards.
Thank you very much.
Sure.
Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Kaveh Rouhi for any closing remarks.
Yeah, thank you, everyone, for the interest, for the good questions. Well, our investor relations team remains available if you have any follow-ups. Having said that, I wish you a wonderful autumn afternoon in November, and have a great day. Goodbye.