Energy Recovery’s second quarter reflected ongoing challenges as the company’s revenue fell short of Wall Street expectations, largely due to delayed megaproject orders in the Middle East and a continued impact from geopolitical tensions. Interim CEO Alex Buehler pointed to persistent delays in project execution, particularly as risk premiums and procurement challenges have increased due to regional instability. Management also acknowledged that these headwinds limited visibility and contributed to softer-than-expected results.
Is now the time to buy ERII? Find out in our full research report (it’s free for active Edge members).
Energy Recovery (ERII) Q2 CY2026 Highlights:
- Revenue: $12 million vs analyst estimates of $18.83 million (57.2% year-on-year decline, 36.3% miss)
- Adjusted EPS: -$0.03 vs analyst estimates of -$0.04 (in line)
- Adjusted EBITDA: -$2.6 million (-21.7% margin, 159% year-on-year decline)
- Adjusted EBITDA Margin: -21.7%
- Market Capitalization: $394.1 million
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Energy Recovery’s Q2 Earnings Call
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Ryan Pfingst (B. Riley Securities) asked about visibility for Middle East megaprojects and the impact of formal delays. Interim CEO Alex Buehler clarified that delays are now more formalized due to financing and logistics, but the long-term pipeline remains strong.
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Ryan Pfingst (B. Riley Securities) inquired about expected margin uplift from the Saudi Arabia facility. Buehler responded that margin improvements will come gradually as the facility ramps up and reduces freight and procurement costs.
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Ryan Pfingst (B. Riley Securities) questioned actions to accelerate wastewater growth. Buehler explained the focus on resource reallocation, targeting high-growth regions, and balancing efficiency with key account coverage.
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Ryan Connors (Northcoast) asked if the Iran conflict must be resolved for project activity to resume. Buehler said order recovery depends on reduced geopolitical risk, stating, “We’ll know it when we see it in our project pipeline.”
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Jeffrey Campbell (Seaport Research Partners) requested guidance on the resiliency of OEM and aftermarket segments. Buehler emphasized these areas should remain resilient for the full year, although some near-term choppiness is expected.
Catalysts in Upcoming Quarters
Looking ahead, our analysts will be closely monitoring (1) progress on major project awards and any signs of order recovery in the Middle East, (2) the pace of ramp-up and cost savings from the Saudi Arabia manufacturing facility, and (3) the commercial adoption trajectory of new products like the PX Q650 across water and wastewater markets. Progress in these areas will be critical to tracking Energy Recovery’s execution and long-term recovery.
Energy Recovery currently trades at $7.81, down from $8.86 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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