Shares of Ocean Power Technologies, Inc. (OPTT Quick QuoteOPTT - Free Report) have declined 31.3% since reporting fiscal 2025 earnings. This compares with the S&P 500 index’s 0.6% growth over the same time frame. Over the past month, the stock has gained 21.5% compared with the S&P 500’s 3.2% rally.

Ocean Power posted modest 6% revenue growth for fiscal 2025 to $5.9 million from $5.5 million in fiscal 2024. However, this top-line expansion came alongside a contraction in gross profit to $1.7 million from $2.8 million.

Operating expenses declined 28% to $23.3 million from $32.2 million the previous year, showcasing the impacts of a streamlined cost structure. The net loss narrowed to $21.5 million from $27.5 million, reflecting improved cost management despite a softer gross margin. Ocean Power reported a diluted net loss per share of 17 cents for fiscal 2025, an improvement from the loss of 47 cents incurred in fiscal 2024, led by reduced operating expenses and a higher share count.

Other Key Business Metrics

OPT closed fiscal 2025 with a record backlog of $12.5 million, marking a 155% upsurge from $4.9 million at the end of fiscal 2024. The company’s sales pipeline also soared 88% year over year from $71.6 million to $137.5 million. This expanded backlog reflects multi-quarter contractual commitments, notably in Latin America and the Middle East. Management noted the healthy mix in the backlog, with a balance of PowerBuoy, WAM-V vehicles and related services, indicating diversification across its autonomous maritime solutions.

Operating efficiency improved, as net cash used in operations dropped 38% to $18.6 million from $29.8 million. The company ended the year with $6.9 million in combined cash and equivalents, up from $3.3 million, and secured a $10-million post-year-end unsecured debt facility to support near-term scaling efforts.

Management Commentary

CEO Dr. Philipp Stratmann characterized fiscal 2025 as a “pivotal year,” emphasizing OPT’s evolution from a technology demonstrator to a scaling solutions provider. He credited this transformation to international deployments of AI-enabled Merrows PowerBuoy and WAM-V platforms, including operational success in harsh maritime environments such as the Indo-Pacific and Middle East.

Dr. Stratmann highlighted the company’s Facility Security Clearance from the U.S. Department of Defense as a turning point, enabling OPT to participate in classified contracts and high-value defense procurement programs.

The company also reported ISO 9001 certification for its quality management system. This, according to management, enhances OPT’s credibility in competitive government bidding processes and signals operational maturity as the company scales internationally.

Factors Influencing the Headline Numbers

While the year closed with momentum, revenues remained below expectations. Management attributed this to delays in procurement stemming from U.S. election-related uncertainty and macroeconomic headwinds, particularly in the defense segment. These factors slowed pipeline conversion and affected fiscal fourth-quarter 2025 profitability targets. However, the CFO noted that recent improvements in customer acquisition efficiency and a redesigned sales strategy are expected to support faster conversion, going forward.

The gross margin fell due to the participation in demonstration-heavy projects like Project Overmatch, which are revenue-generating but not margin-accretive. Nevertheless, management anticipates an uptick in margins as the mix shifts toward recurring service revenues and full-scale system deployments.

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Management expressed confidence in continued backlog execution, improved pipeline conversion and sustainable operating leverage. The firm intends to focus on delivering against existing contracts while investing cautiously in capacity expansions to meet future demand surges.

Other Developments

In the fourth quarter of fiscal 2025, Ocean Power pursued several strategic initiatives aimed at strengthening its international footprint and expanding its technological capabilities. The company signed a $3-million reseller agreement with a prominent Mexican engineering firm to promote its full suite of maritime solutions across Central America.

In addition, OPT formed exclusive distribution partnerships with Remah International Group in the UAE for defense and security markets, Unique Group to extend WAM-V deployments across the GCC region, Elektron SAS in Colombia with a multi-million-dollar purchase commitment, and Ocean Wave Solutions Ltda in Brazil to tap into the growing South American market. These alliances are expected to boost OPT’s market reach and reduce customer acquisition costs through localized integration and support.

Further enhancing its product offerings, OPT entered a strategic alliance with Red Cat Holdings to integrate military-grade aerial drones with its WAM-V surface vehicles. This collaboration is aimed at enabling advanced multi-domain intelligence, surveillance and reconnaissance operations by combining aerial and maritime capabilities.

Additionally, the company signed an OEM agreement with Teledyne Marine to co-develop AI-powered integrated payload solutions, reinforcing its commitment to innovation and expanding its value proposition across global defense and commercial sectors.