GET DAILY SIGNALSEnergy Recovery (ERII) Q3 Results Show -65% Revenue Drop Amid Project Delays
Key Takeaways
- Revenue fell 65% year over year to $11.2 million, missing the consensus estimate of $16.11 million.
- Energy Recovery swung to a GAAP net loss of $6.3 million, or $0.12 per share, from a profit of $3.9 million in the same quarter last year.
- Adjusted EPS of a $0.10 loss missed the consensus forecast for a $0.06 loss.
- Gross margin compressed to 37.5% from 64.2% a year ago as lower volume was spread across fixed costs.
- Megaproject revenue plunged 95% to roughly $0.9 million, pressured by conflict in the Middle East.
- The company's project pipeline grew to $525 million, up from $500 million in the prior quarter.
Why This Quarter Matters for Energy Recovery
Energy Recovery, Inc. designs and manufactures pressure-exchanger technology that recovers energy in desalination, wastewater, and other industrial processes. Its third quarter of 2026 results matter because they reveal how the company is navigating a sharply weaker environment in its largest revenue channel. Megaproject shipments — historically tied to large desalination contracts concentrated in the Middle East — have been disrupted by regional conflict, creating unusual volatility in quarterly results. For investors, the report is a direct test of whether management can offset project-timing disruptions with its aftermarket and original equipment manufacturer (OEM) channels while preserving a strong balance sheet. The quarter also follows earlier guidance withdrawals, making this update an important signal on the company's path back to normalized growth. I also checked this using Tickeron’s AI Screener to see how the stock compares to others in the industry.
Breaking Down the Reported Numbers
Energy Recovery reported third-quarter 2026 revenue of $11.2 million, down 65% from $32.0 million in the third quarter of 2025 and below the $16.11 million consensus estimate. The decline was driven primarily by the company's megaproject business, where revenue fell roughly 95% to about $0.9 million. OEM channel revenue declined 31% to $6.2 million, while aftermarket revenue slipped 13% to $4.0 million.
The company posted a GAAP net loss of $6.3 million, or $0.12 per diluted share, compared with net income of $3.9 million, or $0.07 per share, a year earlier. On an adjusted basis, the loss per share was $0.10, wider than the $0.06 loss analysts had expected. Adjusted EBITDA was a loss of $7.8 million, versus positive $6.8 million in the prior-year quarter.
Gross margin fell to 37.5% from 64.2%, reflecting the spread of fixed costs over much lower volume in the megaproject channel, while operating expenses declined 17.2% year over year. Cash, cash equivalents, and investments totaled $85.6 million at quarter-end. The company did not restore full-year guidance, which it had withdrawn earlier in the year.
How the Market Reacted
The market responded negatively to the results, with shares falling about 7.4% in after-hours trading to around $6.64 following the report, according to Investing.com data. The stock had already declined significantly ahead of the print, down more than 58% over the prior 12 months, reflecting investor unease about the company's exposure to Middle East project disruptions and the absence of formal guidance.
Sentiment heading into the quarter was cautious, with analyst estimates already projecting a modest loss. The wider-than-expected revenue shortfall and margin compression reinforced concerns that project-shipment timing remains difficult to predict, even as management emphasized that underlying demand and the project pipeline remain intact. The sharp contraction in megaproject revenue, in particular, underscored the concentration risk that has weighed on the stock.
What to Watch Going Forward
Looking ahead, investors should watch several signals tied to the company's recovery trajectory. Management indicated that it expects roughly $17 million in fourth-quarter megaproject activity as a "floor," with the potential for additional contracting in the near term. That figure will be a key gauge of whether project-timing disruptions are beginning to ease.
The project pipeline, which expanded to $525 million from $500 million, is another important metric. Management described it as larger, more diversified, and composed of bigger individual projects, suggesting demand remains robust even if shipment timing is uncertain. Progress on restoring formal guidance will also matter, since executives have signaled they may reinstate it once project velocity becomes more predictable.
Cost discipline and manufacturing efficiency remain central themes. The company has consolidated its water sales organizations, reduced headcount, and continued lean-manufacturing initiatives, which could support margin recovery as volume returns. Finally, watch for diversification beyond China in the wastewater segment and progress on the overseas manufacturing footprint and the newer PX Q650 product transition, both of which could reshape the growth outlook over the next several quarters.
Using AI Tools in My Research Process
In my analysis of names like ERII, I often turn to Tickeron’s AI Screener to quickly filter for comparable companies and surface relevant technical or fundamental signals. It helps me cross-check industry trends without spending hours on manual reviews, which is especially useful when project-based revenue creates this kind of quarterly volatility. The tool lets me apply custom filters on sectors, patterns, and performance metrics to identify ideas worth exploring further alongside traditional earnings reviews.
Disclaimer
The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.
Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
ERII in upward trend: price rose above 50-day moving average on November 02, 2026
ERII moved above its 50-day moving average on November 02, 2026 date and that indicates a change from a downward trend to an upward trend. In 33 of 43 similar past instances, the stock price increased further within the following month. The odds of a continued upward trend are 77%.
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on October 27, 2026. You may want to consider a long position or call options on ERII as a result. In 63 of 90 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are 70%.
The Moving Average Convergence Divergence (MACD) for ERII just turned positive on October 02, 2026. Looking at past instances where ERII's MACD turned positive, the stock continued to rise in 36 of 48 cases over the following month. The odds of a continued upward trend are 75%.
Following a +3.79% 3-day Advance, the price is estimated to grow further. Considering data from situations where ERII advanced for three days, in 214 of 303 cases, the price rose further within the following month. The odds of a continued upward trend are 71%.
Bearish Trend Analysis
The 10-day RSI Indicator for ERII moved out of overbought territory on October 30, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 29 similar instances where the indicator moved out of overbought territory. In 22 of the 29 cases, the stock moved lower in the following days. This puts the odds of a move lower at 76%.
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 4 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where ERII declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 76%.
ERII broke above its upper Bollinger Band on November 02, 2026. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Aroon Indicator for ERII entered a downward trend on October 22, 2026. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Fundamental Analysis (Ratings)
The Tickeron Valuation Rating of 62 (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (2.122) is normal, around the industry mean (11.776). P/E Ratio (26.556) is within average values for comparable stocks, (-17.204). Projected Growth (PEG Ratio) (0.120) is also within normal values, averaging (0.975). Dividend Yield (0.000) settles around the average of (0.057) among similar stocks. P/S Ratio (3.115) is also within normal values, averaging (251.106).
The Tickeron Price Growth Rating for this company is 64 (best 1 - 100 worst), indicating steady price growth. ERII’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is 75 (best 1 - 100 worst), indicating slightly better than average sales and a considerably profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron PE Growth Rating for this company is 82 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is 100 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. ERII’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 91, placing this stock worse than average.
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Advertisement
General Information
a developer of energy recovery devices
Industry IndustrialSpecialties
Advertisement