FuelCell Energy reported fiscal second-quarter results on Monday that missed analyst expectations on both revenue and adjusted earnings. But the company's story isn't really about this quarter's numbers — it's about where the business is heading, and that direction is increasingly tied to data centers.

The numbers themselves were a bit of a mixed bag. Adjusted net loss came in at 53 cents per share, just a penny wider than the 52-cent loss analysts had expected. Revenue fell 5% year over year to $35.589 million, missing the $40.496 million forecast. Net loss attributable to common stockholders was $78.7 million, or $1.45 per share, compared to $38.8 million, or $1.79 per share, a year earlier. Adjusted EBITDA loss improved to $17.1 million from $19.3 million.

The revenue decline was driven by lower service revenue — no module exchanges occurred during the quarter — and weaker generation revenue from reduced output during repairs at the Groton Project. Higher product and Advanced Technologies revenue partially offset those declines.

Product revenue rose to $18 million from $13 million. Service revenue fell to $4.2 million from $8.1 million, while generation revenue decreased to $8.7 million from $12.1 million. Advanced Technologies revenue increased to $4.7 million from $4.1 million.

Gross loss widened to $12.9 million from $9.4 million, and operating loss ballooned to $77.9 million from $35.8 million. That jump was largely due to a $42.6 million noncash impairment charge tied to equipment upgrades at the Groton project. CFO Michael Bishop explained on the earnings call that the charge reflects FuelCell's decision to upgrade the 7.4-megawatt Groton Navy project with its current-generation 2.5-megawatt power blocks to improve reliability. He emphasized that the investment is aimed at delivering dependable baseload power for a critical U.S. government asset and noted that, excluding the impairment charge, core operating expenses actually declined year over year.

Backlog totaled $1.14 billion as of April 30, down 9.9% from $1.26 billion a year earlier. Generation backlog was $928.5 million, service backlog $155.4 million, product backlog $36.1 million, and Advanced Technologies backlog $15.4 million.

But the headline number that got investors' attention was the sales pipeline: 4 gigawatts, up 267% from the first quarter. And here's the kicker — CEO Jason Few said during the call that potential data center customers account for about 89% of that pipeline. That's a massive concentration, but it reflects the reality that data centers are hungry for power, especially with the AI boom driving demand for reliable, around-the-clock electricity.

FuelCell is positioning itself to serve that market. The company launched a standardized 12.5 MW FuelCell Energy Block designed to reduce time-to-power for AI and data center projects in grid-constrained markets. It also continued expanding its Torrington, Connecticut factory, lifting its annual production capacity target to 500 MW from 350 MW. The expansion is expected to cost between $200 million and $275 million and be completed within 24 months.

On the carbon capture front, FuelCell shipped its first two carbon capture modules to Rotterdam, Netherlands, as part of its collaboration with Exxon Mobil Corporation (XOM)'s technology and engineering arm. That's a separate revenue stream that could grow over time.

"This past quarter reflected strong commercial momentum and disciplined operational execution across the business, including continued progress on our data center strategy," Few said in a statement.

Financially, the company ended the quarter with $440.9 million in cash, cash equivalents, and restricted cash, up from $341.8 million at the end of October. That gives it some runway to fund the factory expansion and other growth initiatives. The company recorded $4.8 million in mark-to-market net losses on natural gas purchase contracts, classified as generation cost of sales.

FuelCell also cited risks including economic uncertainty, interest rates, supply chain volatility, regulatory changes, commodity prices, government incentives, financing challenges, and bid-to-revenue conversion — the usual laundry list for a company trying to scale up.

Shares of FuelCell Energy (FCEL) were up 5.28% at $18.24 at the time of publication on Monday, according to market data. Investors seemed willing to look past the earnings miss and focus on the data center opportunity. Whether that bet pays off will depend on FuelCell's ability to convert that 4 GW pipeline into actual revenue — and to do it faster than the competition.