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K. R. Sridhar

Good afternoon, and thank you for joining us today. Bloom had an excellent quarter. In fact, the best first quarter in our 24-year history. You're seeing strong disciplined execution across the entire company from sales to service, technology and manufacturing operations. I want to thank the incredible team at Bloom for their dedication to serving our customers and building on the success of last year.
We are off to a good start for the year, and we are very excited to continue building on that success throughout 2025. We know the current economic environment affects various businesses differently. Here is the dynamic we are seeing at Bloom. The world needs a lot of power and demand for electricity will continue to expand at a rate that cannot be met solely by traditional sources of supply and methods of delivery. We don't see that changing anytime soon.
This reality means that major users of power have accepted on-site generation as a necessity. Here is how that realization impacts Bloom's major customer segments. First, AI data centers. We have seen no slowdown in this sector. Just last week, I was at a gathering of business leaders, including some of the largest cloud service providers.
What I heard loud and clear was that they remain committed to investing in data center capacity growth and the necessary power needs that come with it. Even down the road, should there be a slowdown in the pace of investing, the total gigawatt gap is so large that it will not have a meaningful impact on Bloom's growth in this market. This is an investment super cycle and short-term economic issues will not adversely impact the megatrend. The robustness in this sector is clearly validated by the customer activity we are experiencing. The second segment is our commercial and industrial business, which I'm breaking down into 2 buckets.
First, we see robust activity in large load advanced manufacturing operations. AI-related hardware and semiconductor chips as well as essential services like hospitals and health care for whom power is mission-critical. We don't see any slowdown here. Reshoring and growth in the U.S. industrial base is continuing.
Their need for electricity has not diminished and their operations cannot afford to pause. The second bucket of commercial and industrial customers are the consumer-facing businesses such as retail. They may see a stretch out of decision-making cycles until the economic scenario is clear. We are keeping a close eye on this segment and are staying close to our customers. Our third customer segment is in the international arena.
Our Korea business remains strong, and the rest of international is growing off a small base. Our fuel cells provide reliable, scalable, high-density baseload power, making them an ideal power choice in many industrialized nations. This international expansion continues to progress well. When you put the 3 segments together, the diversification of our customer base, both in terms of sector and geography is a key strength that gives us the flexibility to soften the impact of exogenous factors that make us more resilient. Based on the bottoms-up customer-by-customer forecast in these 3 segments, we remain confident in our previously provided 2025 revenue guidance.
Tariffs are probably another topic everybody wants to hear about today. The main takeaway is that the strength of our supply chain in combination with the relentless execution of our product cost reduction goals will greatly mitigate the impact of tariffs on Bloom. We have been developing, diversifying and fortifying our supply base for years to mitigate the impacts of any particular country or supplier. We have 2 manufacturing and assembly facilities, and they are both located in the United States. Our products are proudly made in America.
Yes, we do import materials and components from abroad, but not from China. The majority of our material spend is in custom-made components unique to us, which give us control over pricing and sourcing. We have excellent long-standing partners and are jointly invested in each other's success. If the current tariff structure continues throughout the year, we expect to see up to a 100 basis point impact on our gross margin for the year. Cost reduction is in our DNA, and we will work extra hard to mitigate the adverse impact through innovations and efficiency improvements.
As of now, we remain committed to our margin and profit guidance for 2025. As we look ahead, we are excited about the super cycle in electricity infrastructure growth. The ongoing momentum will be driven by growing demand for on-site power generation and Bloom Energy is at the forefront of this revolution. The opportunity for Bloom is immense, and we are focused on growing the business. We have the resilience to navigate through short-term challenges and execute on strengthening market leadership in the long term.
Before I turn it over to Dan to go through the numbers, I want to thank him for his service to Bloom over the past year. Dan will be exiting the company on May 1, and we have started a search for a permanent CFO. In the interim, Maciej Kurzymski, Bloom's Chief Accounting Officer for the last 4 years, will assume the role of Acting Principal Financial Officer. Bloom has a strong leadership team and capable finance organization, and we will continue to perform without missing a beat. I'll turn it over to Dan for now, and I look forward to answering your questions.

Daniel Berenbaum

Thank you, K.R., and good afternoon, everyone. K.R. gave some great detail about how we view the current economic environment and more importantly, how excited we are about future growth potential. Bloom's product capability enhancements over the past few years have dramatically improved our value proposition to customers and our relentless focus on cost reduction and profitable growth has left Bloom in a very healthy financial position. Turning to our excellent first quarter.
Execution was and remains strong. We saw record revenue for a first quarter, our first ever positive Q1 non-GAAP EPS and our fifth consecutive quarter of service profitability. As a reminder, I'll focus my discussion on non-GAAP adjusted cost and profitability metrics. For a reconciliation of GAAP to non-GAAP, please see our press release and the supplemental deck on our website. Revenue for the quarter was $326 million, up 39% year-over-year.
We have talked before about how this is a project-based business with quarterly variability, and that continues. Q1 was better than implied by the commentary we provided on our late February call, driven by timing of customer projects. Gross margin was 28.7%, more than 1,000 basis points higher than the 17.5% gross margin in Q1 of '24, attributable to our product mix and level-loaded manufacturing. As expected, we took advantage of our balance sheet and our confidence and visibility into customer demand to build inventory and level load our factory. Our operating income was a positive $13.2 million as opposed to the $30.7 million deficit in Q1 last year.
EBITDA was $25.2 million versus a negative $18.2 million in Q1 of '24, while EPS was $0.03 per share versus the loss of $0.17 per share a year ago. Again, these are all non-GAAP numbers. Turning to the full year. We are reiterating our 2025 guidance. As a reminder, we expect 2025 revenue of $1.65 billion to $1.85 billion, non-GAAP gross margin of approximately 29% and non-GAAP operating income of approximately $150 million.
We also expect positive cash flow from operations around the same levels as we saw in 2024, and we also expect CapEx to be around the same levels as 2024. Of course, we will maintain our strong fiscal discipline to flex our business as needed. As we discussed on our last call, consistent with historical patterns, we continue to expect the majority of our revenue in the second half of the year with a roughly 40-60 first half, second half split. I mentioned our services business as a highlight for the quarter as it was profitable for the fifth consecutive quarter. This is a critical part of our business and the long tail in our backlog.
Service performance over the past year is dramatically better than we saw in prior years, and we expect this trend to continue. Technology improvement, scale and AI-assisted execution will drive continued improvement in service profitability. To conclude, we delivered record Q1 revenue and continue to execute in a strong commercial environment. I am excited about the future opportunities for Bloom. And even as I leave the organization, I have full confidence in the finance team, and I wish all of Bloom's employees the utmost success.
Operator, we are now happy to take questions.

Question and Answer Session

Operator

(Operator Instructions)
Andrew Percoco, Morgan Stanley.

Andrew Percoco

Congrats on the strong start to the year. And Dan, unfortunate to see you go, but wish you the best of luck. Multipart question here, but just maybe to start out with the guidance. K.R., it sounds like you're not really seeing any change in demand, particularly from data centers. But just curious more on a granular level, if you're seeing any impact on timing of that pipeline conversion.
I guess I'm thinking about some of the projects that may have been commissioned in 2025 that might get commissioned in 2026 because of supply chain issues, policy uncertainty. So just curious if you've seen any shift to the right in those types of conversations? And then second part of the guidance question is around margins. You mentioned 100 basis point margin impact from tariffs, but you reiterated the gross margin guidance. So just to be clear, are you not including tariffs in the reiterated guide?
If you could just maybe clarify that. And then, Dan, just to end it with you, can you provide any more information or context around your decision to leave here? Obviously, a pretty quick turnaround. So anything that you can provide there would be helpful.

K. R. Sridhar

Andrew, thank you for that series of questions, and I'll start and then pass it on to Dan afterwards. So let me start with the simple question first on margins. So we had guided for the year at 29% and we said because of all the reasons that I said in my script, but let me reiterate very simply. We're not dependent on China. We have a multi-country strategy.
But predominantly, we are a U.S. manufacturer with our 2 factories here in the U.S., Made in America products. For all those reasons, we can mitigate the impact of tariffs, if they continue the way it is today to the 100 basis points. However, I'm still reiterating the 29% because, as you know, over 15 years, cost reduction is in our DNA. We have a culture of pushing ourselves hard and finding ways to optimize and reduce cost.
So we are going to take this externality and make it a challenge to find that 100 basis points and other activities we do and speed it up and not use tariffs as an excuse to not meet our guidance. This is our culture of being able to get to that point. We're not going to pass it on to customers. We are not going to take it on ourselves. We're going to find ways to solve it.
So net-net, we would still reiterate the 29% guidance. So that's the first answer. Hopefully, that's clear. Now on your question on where the macros are with respect to guidance, you're asking the right question. We have to book, build, ship and recognize revenue for a portion of our second half revenue in order to meet the guidance.
Now if we didn't have confidence in that entire process, including the bookings and also timing because timing means revenue recognition, we wouldn't be making this. So very strong confidence based on everything that we see. And let me explain a couple of things here. The big shift, Andrew, that's happened in our business, and I think it's worth taking the 2 extra minutes to explain this to you. It is no longer do we see our customers, whether it is data centers or large factories asking if on-site power is needed.
That debate is over. The grid can only do so much in the short term. And without on-site power, people are not going to have power. That is no longer a question to us. Then it becomes a question of, are we a viable on-site power solution for people.
That's what we built the company for. We have a record of doing this more so than any other technology. However, the easy button is to go to combustion turbines and combustion reciprocating engines because they've been around a lot longer than we have. Not too many people know us. However, the people that know us are expanding with us.
And every time that we succeed, people are wanting our solutions. We can compete both economically and from a technical performance and from an environmental perspective. It's a check, check, check. So we are super excited about the cycle, extreme confidence in being able to meet those demands. And will certain projects shift in the short term?
Maybe they will. But the amount of projects that get executed is plenty and enough given where we are for us to be able to meet the guidance. That's how we see it. I'll pass it on to Dan now to answer the question.

Daniel Berenbaum

Yes. Thanks, Andrew. So listen, I'll just say that I think the opportunity ahead for Bloom is fantastic. I think there's a huge commercial opportunity for all of the reasons that K.R. discussed, for all the reasons that we've talked about previously.
Nothing more to add for myself personally at the moment, but you'll hear more from me, I'm sure.

Operator

Manav Gupta, UBS.

Manav Gupta

Just wanted to thank Dan upfront. You came in and you were very helpful right away. You brought in transparency. So thank you for all the help. My question here is, as you are trying to scale up Sri, there are 2 ways you're doing it.
One, obviously, you are directly working with data centers. But the other, which we kind of liked last year was you're building this partnership with utilities. So can you help us understand which will be the bigger driver of your product deployment in '25 and '26? Will it be you directly going to these customers? Or will it be a combination of that and working with AEP or maybe even more utilities to place more product into service?

K. R. Sridhar

Manav, thank you so much for that question. So here's what I can tell you very simply, right? The grid is what is constrained. The grid is what is challenged. Utilities are a business that manage their customers.
In many cases, the utilities have both the willingness and the ability from a regulatory perspective to procure our products and supply it to their customers. That always will be our preferred choice and it will be the customer's preferred choice because they can continue to procure their power from whoever they got it all along, except through a different means of generation right on site. So for that reason, we are working with multiple utilities and with AEP. We are very bullish on that partnership and where that's going to go. But we are also working with several other utilities as we speak right now, both electric utilities and gas utilities.
And when they materialize and when we are allowed to speak about that by them, those are the 2 conditions for us to announce anything. Sometimes we book things and we can't speak about it because the customer tells us not to. Sometimes it takes a little while to get there, but we are very confident we're going to get there within the time line. So it's that combination. But definitely, we are working with them.
In certain other cases, because of regulatory reasons or because of a customer's wish, they want to procure their systems directly and procure the power from us. In that case, we work with the utility to get the fuel from them and supply to the customer. We are agnostic, and we like both models. In terms of small retail, there, most often, the utility doesn't want to get involved and would rather have us supply it directly to the customers. But for the large loads, I think partnering with the utility is a very smart option.
Hopefully, that answers your question.

Operator

Dushyant Ailani, Jefferies.

Dushyant Ailani

Dan, it was nice working with you, and hopefully, we can see you again. Maybe on the first question, guys, margins for repowering came a little strong. How do you kind of think about that going forward? And then my second question is on Tariff, the 100 basis points. that you talked about.
What's the sensitivity to that if, let's say, the 90-day pause is over and maybe we revert back to higher tariffs?

K. R. Sridhar

Look, in the estimation and everything that we have given you, we are based it on the best current understanding with the tariffs remaining the way they are and balancing it as a portfolio against all the countries that we deal with and everything that's going on. So we stand by those numbers. We wouldn't likely reiterate that guidance if we didn't have strength in our conviction. So it's a strong conviction that we can represent it. But how we do it is internal to us, but what we will deliver is what I can state with conviction to you.
So that's the key part that I want you to understand in terms of where our guidance is. And then the other question was on -- repowering.

Daniel Berenbaum

In my script, I just said mix did have an impact on Q1 gross margin, obviously. We won't comment more specifically on mix. Repowerings are part of our business. There's some quarters, there will be some, some quarters, there won't be any, but it is an ongoing part of our business. And we do try to give you some color around that as we think about our guidance for the full year.

K. R. Sridhar

And understand this is part of the reason why Dan had explained how our metrics were changing in the last two scripts. Not every installation, not every customer stuff is the same. There is so much complexity associated with load following, islanded microgrids. And so we take all that into consideration, deal by deal, line by line as we project through the margins. And again, when we reiterate the guidance, we take that pretty seriously, and it's through that extensive, rigorous analysis, we are giving you those numbers.
So yes, your point is well taken. We appreciate it, but we stand by the numbers we gave you.

Operator

Colin Rusch, Oppenheimer.

Colin Rusch

As you look at some of the stack technology and your ability to multisource critical materials as well as evolve the chemistries, can you talk a little bit about the resilience in the supply chain around some of those critical materials as the trade war starts to heat up a little bit and we kind of go through some ways around what's getting shipped between the US and China?

K. R. Sridhar

Again, a very good question. What you need to understand is none of our critical materials come from contested supply chains or work zones, and there is no China supply chain for us. So -- and with respect to our -- we -- I spoke in my script about commercial off-the-shelf is a small portion of our buy, custom-made parts for us, where we have developed vendors over the last 15 years is what we depend on. They are geographically very diverse. And we have learned and we have actually firsthand battle tested this strategy of resilience.
Bloom never had a part shortage and never shut down a factory once or slowed down an order during the entire time of COVID. So we have actually battle tested this for another scenario. So we feel very strongly that not only will we maintain that now, but we will be able to keep that kind of a discipline as we scale the company many times over. So we built the supply chain not just for today, but for the very large scale that we want to grow to very fast. So extremely confident and huge shout out to our supply chain team and to our Chief Operations Officer, Satish Chitoori, who leads this effort.

Colin Rusch

And can you just give us an update on customer traction outside of the U.S. and outside of Korea? There's been a lot of activity in and around end market in Europe as well as some places like Australia. Just curious how your sales efforts are going in both those geographies.

K. R. Sridhar

Sure. So we are focused predominantly right now on a couple of countries in the EU and a couple of countries in Asia. That's -- so that's how we think about expansion, and we build a base. This is outside of US and Korea, right?
So if you think of Europe, we are targeting right now Italy, Germany and the U.K. And if you look at Asia, we are really targeting Taiwan in a major way because the entire AI supply chain, the amount of growth that's happening in Taiwan in the face of them -- in the face of their grid not being able to grow fast enough and deliver power and rising cost of power out there and them depending quite significantly on natural gas as their source of energy, all that fits very well for us. So we are like targeting on those. And again, we will see in the next 2 years, you will see these markets take off and grow. We are strategic.
And so we don't take a short-term approach to this. We take a rifle approach to our international growth.

Operator

Jordan Levy, Truist Securities.

Henry Roberts

It's Henry on for Jordan here. Firstly, congrats on the strong quarter, and thank you, Dan, for your work over the last year. Just looking at the domestic C&I side of the business, can you just talk to -- maybe just provide some more color on the power demand concerns there and how that's translating into orders?

K. R. Sridhar

Yes. On the commercial industrial side, I think what we are seeing right now is most customers coming and talking to us are asking us for [islanded power], okay? That's a big shift. Interconnection times even for a few megawatts in most of the regions that we operate in seem to be very long, and our customers are seeking islanded power. There, it should be very obvious to you that being in a manufacturing environment, sometimes the factory shuts down or operates at very, very low load during a weekend period depending on what they do, some don't, some do.
So the ability to load follow becomes very important. Unlike in the past, when Bloom only offered baseload power, we now are able to offer islanded power. And here is the beauty of it. We say this many times, but not everybody may understand. So let me use your question to tell all of you on the call that we don't require batteries to operate a microgrid to follow our load.
That is a huge advantage right now given supply chain challenges with batteries, tariff challenges with batteries and all that. So not only do we not need an interconnection, we don't need batteries, and we can load follow for customers. So that is taking a big traction. So now let me focus on -- I broke it down for you into 2 sectors. Let's focus on the large load factories.
Here are the numbers, right? All of 2000s and 2010s, the average over those 20 years of construction-related spending related to manufacturing facilities was roughly $85 billion a year, $85 billion a year. That number in '23 and '24, and we expect it to continue in '25 is close to $250 billion a year, 3x that expansion. And these factories are more automated, more roboticized with AI coming in, which means the amount of power per square foot goes up enormously. We see this as a huge growth area.
This $250 billion that was invested in '23 and '24 that's already invested, those factories are not going to be mothballed. They have to be powered up. They will go on. There could be a few slips in terms of cycles. It comes from the CHIPS Act.
It comes from the Infrastructure Act. It comes from abundance of cheaper energy that customers have today. It comes from shortening the supply chain. All these things are driving that. It's very strong for us.
Now the other side of our C&I business, think of retail that we do big box stores, other people. These are consumer-facing businesses. They are going to stretch out their decision-making cycle in this time of economic uncertainty until they fully understand where it falls. But understand it's a small part of our business, and we have enough diversification. That's how we think about the whole business.
Hopefully, that color helps.

Henry Roberts

No, that's very helpful. And then just a quick follow-up for me. Looking at the margin trajectory during the rest of the year, with the strong first quarter and the reiterated guide, it looks like gross margin will actually be relatively flat, maybe see a little bit of upside during the remainder of the year. I guess just how should we think about that trajectory? And is there any incremental upside from the guidance at this point?

K. R. Sridhar

No. Again, what I said is what I meant in the script. We are just reiterating guidance at this point in time. And again, look, we are going to have to do a lot of things very innovatively, and we are confident we will do it to make up for any of these tariff issues. And I'm sure you're not on too many calls or too many companies that are saying that in spite of the tariffs, they are not downward revising their margins.

Daniel Berenbaum

And I would say, just to go back to my prepared remarks, remember what I said in the commentary that our mix as well as the level loading, those were both positive impacts on our Q1 gross margin. Obviously, just to reiterate that ability to level load the factory given the strong balance sheet, given the visibility that we believe to have, we made that comment on last quarter's earnings call that we thought that you wouldn't see the sort of more extreme peaks and valleys that you saw in gross margin that we saw last year. So this is a little -- it is relatively consistent with I think that.

Operator

Chris Dendrinos, RBC Capital Markets.

Christopher Dendrinos

Yes. And maybe just to start and follow up on the prior commentary around the tariffs. Could you maybe just provide a bit more detail on where you think there's opportunities to save and sort of what types of things you're looking at?

K. R. Sridhar

So when you look at our -- we have always in the last 15 years, there is a weekly operational review that I sit in where all my direct reports sit in. And we review at any point in time, there are probably 100 cost reduction projects that go on in the company. And we review them routinely on a weekly basis. And every quarter, at least once these projects will get reviewed depending on their criticality. And it's a portfolio approach for us.
And it's never a straight line. There will be a few projects that come in ahead. There will be a few projects that fall behind. There will be unexpected things that happen in like commodity prices, other things. And we manage these things very effectively.
And it is that discipline that has allowed us to continue to keep reducing costs time after time. So there are technology improvements. There are simplification in building the products. There are yield improvements. There are factory improvements.
There are efficiencies we gain from the learning curve, not just in our factories, but with our supply chain partners. We go help them with those learning curves. So because it's really hard to single out any one thing. It is just part of our DNA. And for 15 years to get double-digit cost reductions almost every single year as an industry of one, right?
This is really at the core of what we do every single day. And starting at my level, everybody in the company is focused on this.

Daniel Berenbaum

And then just recall that everything that K.R. just talked about that we focus on benefits product and it also benefits service, right? So all of that scale, those technology cut-ins, those continuous improvement programs benefit both product and service with a very long tail.

K. R. Sridhar

That's a very good point, Dan.

Christopher Dendrinos

Got it. And then maybe shifting gears a little bit here. On the utility regulatory environment, I know there's the FERC colocation decision that you all -- or AEP is waiting on the PUC approval process. I guess maybe more broadly, is this maybe sort of a bottleneck or holding back deal flow near term as your customers look for those decisions? Or how is that kind of playing out in your eyes?

K. R. Sridhar

Very good question again. Look, you can -- I know that many of you have been talking to AEP regarding this, and you're getting directly from them. It is better for them to answer from their point of view where things are. They feel very confident that the projects that they've already signed up are going to go through and not have any issues. And going forward, they have a very robust pipeline of customers that they are talking to and are confident that with what they believe and the reason they chose us is we are a superior technology with a superior value that they can make many more of these transactions.
And they have pathways very clearly to be able to satisfy those customers. So that's AEP, and they'll be more than happy to answer more questions on that -- from that perspective. Now from the customer side, what do they see? I think our large customers are very, very sophisticated when it comes to power and electricity buy. They clearly understand that any arrangement that they can make that does not impact the local rate payer is not only a nice thing to do, but a necessary thing to do if they want to locate their new data centers in a new neighborhood.
And our solution becomes extremely useful. For the regulators and the policymakers, it's very clear to them if they do not allow a structure where without affecting the rate payer, they can also provide electricity to these big data centers. Those data centers are not going to be located in their neighborhood and they're going to lose economic development. So the interests are all aligned out here. Our customers see it that way.
These are temporary blips in any transition that goes on where the technology and the market is always slightly ahead of regulators. Regulators are catching up.

Operator

Christopher Senyek, Wolfe Research.

Christopher Senyek

K.R., Dan, good luck on your future endeavors. I wanted to just ask what's the size of the backlog at the end of Q1? And can you help frame the typical size within that backlog?

K. R. Sridhar

We only give backlog comments once a year. That is our policy, and we don't change that. We clearly -- I think I've said this implicitly a couple of times and explicitly once is that when we give -- when we reiterate our guidance on the year, it means that we are very confident about the strong commercial pipeline that we have and our confidence in being able to convert that. So you should take that as a positive signal. But in terms of numbers and commentary, it's once a year.

Christopher Senyek

All right. And then maybe just based on current conversations, do you see the next potential deal coming from utility or perhaps an end user?

K. R. Sridhar

Hopefully, both.

Operator

Ameet Thakkar, BMO Capital Markets.

Ameet Thakkar

Dan, I just want to echo everybody else's sentiments and kind of wish you all the best. Thanks for all the patience over the last year. You guys have been very clear on kind of your lack of exposure to, I guess, kind of Chinese or disputed supply chains. Your prior disclosures did use to highlight the use of scandium in your fuel cell in coatings. I was just wondering if you could kind of share with us where are you sourcing that if it's not from China, given kind of the large percentage of that?
And then I guess the second question for us or follow-up question is, I was wondering if you could kind of level set us on the kind of the megawatts you've got deployed at the end of last year and kind of where you are at today?

K. R. Sridhar

So let me address the scandium question first. And I'll have Dan explain why we changed metrics and how we change metrics right after that. So the first thing for you to know is like number one, we are not dependent on China first. I can state that very clearly, okay, number one. Number two, we get this from multiple geographies and multiple continents.
Number three, knowing that we would be the world's largest consumer. This was in 2007- '08 when we were barely shipping units to today when we actually are the largest consumer of that material, we have complete confidence that we have that supply to grow as fast as we need to for the foreseeable future from multiple sources. We don't reveal those sources, and that's part of our IP.

Daniel Berenbaum

Yes. And just as a reminder, we stopped talking about megawatts shipped in specific periods because it's -- we feel like -- number one, it's not how we run the business, and we feel like it's less useful information because every megawatt is not the same cost and price depends on configuration, whether it's sort of baseload only grid interconnected, whether it's islanded microgrid with AI data center load following capabilities. So we feel like it's much less useful information. It's not really apples-to-apples. We did give a little color in my script again around mix supporting gross margin a little bit in Q1.
So we'll expect to hear more that megawatt information. Just it's not how we think about the business. We think about the overall economics of each individual deal and the portfolio of deals that we have as we manage the overall business.

Operator

Sherif Elmaghrabi, BTIG.

Sherif Elmaghrabi

One of the advantages of Energy Services is that they can tap the existing gas network. You've talked about this earlier on the call. But for larger agreements with utilities like the one you signed with AEP, is there a new gas grid infrastructure that needs to be put in place? And if you can characterize the timing around that?

K. R. Sridhar

Very good question. Look, I think the main trunks and where the gas flows, there is plenty of flow, but the secondary trunks that go from the high-pressure lines to the medium pressure lines is where -- it depends on where the location is. So it is very location specific, and there is not a single answer to that question. You can be thinking anywhere from a couple of months to 6 to like 9 months, depending on where that location is in order to be able to get that level of gas. And if you think about how that flows though, Sherif, it's -- by the time a customer decides like a large data center that they want to install something and facilitize it, it takes that amount of time for them to facilitize it.
So as long as they understand that, that power is needed for them and they place the orders and they are building that data center, this should not be the long pole in the tent. And that is typically what we have seen so far in terms of the data centers and how they go. And it's very telling, right? It's very telling that people are getting tuned to this. The large data center operators know this.
But if it is not explicit, I thought in the GTC keynote, Jensen Huang from NVIDIA on March 18, made a beautiful statement. It went something like your revenues are power limited. He was talking to his customers. Your revenues are power limited. You could figure out what your revenues will be based on the power you have to work with, okay?
So this -- so when they procure the chips, they know it has to get facilitized, and that's where it's going to go. So gas is available. Is it available in a specific location where the data center is, that extension of gas pipeline. In certain geographies, I think it took longer to permit my guess would be, again, this is my guess, given the understanding of the need to win the AI race and given the current administration's propensity to make sure they make this happen. And again, let me quote Secretary of Energy, Chris Wright, right?
He said this is the Manhattan project of our time. If that's the case, I think these gas lines are going to come much faster than data centers are going to get built.

Sherif Elmaghrabi

That's really great color. So second question, there's a Conagra contract announced at the beginning of the month. It's not the biggest, but it's interesting because of its duration. Can you remind us how long energy servers typically last? And to the extent that you can, maybe some specifics about why they were willing to commit to 15 years?

K. R. Sridhar

So very good question. We have a lot of contracts, the ranges being anywhere from 5 years to 20 years. A lot of our South Korea contracts are 20 years. Many of our PPAs that we do are 15 or 20 years. So what happens in that cycle, though, is most of our equipment have operating lifetime as certified by independent engineers to be much longer than that, but the fuel cell itself gets replaced.
And that is the hot box of the field replacement units that we talk about, and we recycle all those parts and put them back on. Today, an average life of those units hover somewhere in the 5-year range. So in the Conagra contract, what will happen is their service pricing will allow us to keep replacing these units, assuming that the 5-year is the number we're talking about in a 15-year contract, 2x through the life of that contract to be able to fulfill the entire contract while the rest of the system will continue to operate. And the good news about this, right, 5 years from now, when they get the next hot box, it will be the latest and greatest technology of that time, which will even be better than what we put out today.

Operator

Noel Parks, Tuohy Brothers.

Noel Parks

I heard you mentioned earlier that the alternative to a Bloom solution, the easy button alternative would be combined cycle gas turbines. And I was sort of surprised because I don't think of those as sort of playing in the -- with the same customers or projects you would be just on the lead time to -- for the ordering of those turbines. So are those realistically competition for your projects, the kind of power projects?

K. R. Sridhar

No, very good question. Thank you for asking me to clarify that. When I said combustion turbines, I should have been very clear. I was talking about the microturbines, the aeroderivative turbines that are in the 50-megawatt class, 30-megawatt class, not a combined cycle gas turbine. There are many, many reasons why CCGT will not be a good choice for situations like this, if they are not connected to the grid for them to load follow.
And if they're not connected to the grid, remember, they have to be maintained, they have to be shut down. You cannot have a monolithic failure of 1 unit. So if you build 2 of those to back it up, all those become super expensive. So most of these 100-megawatt, 200-megawatt solutions you're looking at today, it is tens of microturbines or tens of reciprocating engines that are clustered together is what that solution is. And that is the true competition, a combined cycle gas turbine at a gigawatt scale, there are very few projects.
And like you correctly identified, it will take a very long time to put that together. And unless there is grid connection, backing that up becomes a real issue. So that's what I meant. Hopefully, that clarifies for you. And in that, both on a cost basis, performance basis, total cost of ownership basis, reliability basis, time to power basis and an environmental impact basis, noise, water use, air pollution, [global web].

Noel Parks

Great. It totally clarifies it. And just for data center customers, for on-site expansions versus greenfield new data centers, and I'm thinking of your capacity to deliver 100 megawatts in an acre, is there any difference in sort of the decisiveness or the sales cycle, say, for a cloud vendor who's pursuing one type of project versus another?

K. R. Sridhar

Right now -- that's a very good question. I think within months and quarters, the answer that I would give to you is going to change, okay? That is my true belief. And let me explain to you why, right? As we are speaking, as we are on this call, right, Meta is having their earnings call and what did they say out there.
They are upping their amount of infrastructure spend, even from the $60 billion to a higher number. That's going to come from the Magnificent 7, right, the [Tech-7] that's building what they build. Add to that, the national imperative that was announced in the White House and what they're going to do with Stargate and things like that. You're looking at $600 billion to $700 billion worth of spend that is being committed to for 2025. That translates to more than 15 gigawatts of power that you're going to need, right?
So everybody is counting for whatever power they can get from the utility backups, things like that. And as they saturate, you're not buying these chips at a premium to keep them in cold storage or for safety stock. You have to deploy them. And that's when I think the demand is going to -- the cycles are going to shrink. So I think it's an indirect way to answer your question saying the decision cycles and the need for implementation cycles has to necessarily shrink, if you believe that AI and NVIDIA and everybody is going to grow, right?
Those are two correlated statements. One cannot be right and the other one wrong. Does that make sense?

Operator

Maheep Mandloi, Mizuho Securities.

Maheep Mandloi

Just one question on the tariff impact. I presume your guidance of the 100 basis points of impact you talked about is more on the 10% tariff right now. Just curious like how to think about the impact of these reciprocal tariffs go back to the levels talked about, which you guys are seeing [Indiscernible] there?

K. R. Sridhar

So Maheep, great question. So what we have done is done a thorough detailed portfolio analysis of all our U.S. suppliers, what we procure, how much we procure, what the dollar value cost is, our U.S. manufacturing, the 2 plants make everything for us. Those don't get impacted.
Then we have taken into account what countries we procure from and what flexibility we have of moving temporarily from one place to another to optimize for where we need to go. So it is through that detailed analysis, rolling it up to material costs versus other costs and then looking at that impact and then totally translating it -- that to gross margin. So it's a very detailed analysis based on which we have come up with that number and that's the 100 basis points. And this is not a -- we are not taking a wild guess at it. It is really thought-through process.
This is what we think it will be. And again, we are working very hard to mitigate it. That's why as a team, we are committing to keeping our guidance. Thank you very much for that question. And looking at the clock, I just want to, again, thank you all for joining us out here.
We are off to a great start in 2025. Our momentum is strong. And what you need to think about as you're thinking about Bloom today is very simple. The sale on on-site power being necessary, that brief case is closed. Large customers completely understand they need on-site power.
So unlike in the past where we had to ask what's our value proposition vis-a-vis the grid. Today, the real question that you should be asking when you are looking at Bloom is what is our value proposition when it comes to customers absolutely needing on-site power. You shouldn't be asking do they need on-site power. That answer is very clear. So you then look at all the attributes that Bloom brings and compare it against the attributes of the alternatives for on-site power.
It is not solar. It is not wind, not for those sizes because you can't transmit those electrons. You're left with combustion engines, mature saturated technology whose costs are actually going up if you just look at it. That's what the customers are saying. The prices have actually gone up.
And we can compete against that. We can compete with a better product, more reliable, faster, quieter, cleaner. And so that's the way to think about Bloom. We're super excited about what the future holds for us. And we thank you for believing in us and being with us.
This is a great time to be in on-site power business. That's all I can say. Thank you all. Good night.