Nel ASA's PEM Bet: Why a NOK 1.3 Billion Backlog Hasn't Yet Become Revenue

Nel ASA's latest quarterly report reads like two different companies sharing one balance sheet. On one side sits an order machine firing on all cylinders; on the other, a revenue line in freefall. Bridging that gap — not adding to the backlog — is now the central test for the Norwegian hydrogen equipment maker.

The stock reflected the tension immediately. Shares fell 6.3% on the day the figures landed, a clear signal that investors were not willing to trade a swelling order book for a shrinking income statement.

Revenue Collapse Overshadows Order Momentum

Customer contract revenue in the third quarter of 2026 came in at NOK 112 million, down 63% from the same period a year earlier. The decline wasn't merely a year-on-year story: the figure also fell well short of the NOK 202.2 million analyst consensus, underscoring how far the actual business trailed expectations.

The bottom line followed the top line downward. Nel posted a net loss of NOK 141 million, widening from NOK 85 million in the prior-year quarter. EBITDA stood at minus NOK 93 million.

Against that backdrop, the order intake tells a sharply different story. New orders climbed 339% to NOK 253 million, and the total order backlog rose 34% year on year to NOK 1,314 million. The contrast is stark — and it is precisely the kind of divergence that demands careful reading rather than a quick verdict.

PEM Is Carrying the Growth Story Alone

Not all of Nel's business is moving in the same direction. The alkaline electrolyser segment has slumped, while the PEM business is expanding. That asymmetry makes PEM revenue the single most important gauge of whether the company can stabilize.

PEM revenue jumped 65% year on year to NOK 89 million. Order intake in the segment reached NOK 245 million — equal to 97% of the group's total NOK 253 million in new orders. The alkaline side contributed just NOK 8 million.

The PEM backlog grew by NOK 126 million from the previous quarter to NOK 1,116 million, forming the bulk of the group's NOK 1,314 million total. Those figures give Nel a foundation for future deliveries, but they are not proof that revenue will follow on schedule. A rising backlog and a falling top line can coexist — and right now, they do.

Rheinmetall Talks: A Prospect, Not a Purchase Order

On Tuesday, Nel and Rheinmetall signed a non-binding memorandum of understanding to explore decentralized production of synthetic fuels for defense applications and critical infrastructure. The concept would pair Nel's electrolyser technology with Rheinmetall's Giga-PtX approach.

What the agreement is not: a construction contract, a confirmed supply order, or a committed timeline. It sets out a feasibility review covering technical and commercial viability, with possible pilot projects to follow. Investors treating it as secured revenue would be mistaking an open evaluation process for a binding commitment.

What Would Actually Change the Picture

The bull case rests on visible demand. If Nel can steadily convert PEM orders into revenue, the narrative could shift from current sales weakness toward a broader business base. PEM wouldn't need to fix everything at once — it would simply need enough momentum to offset the alkaline decline.

The bear case is equally concrete. If PEM demand stays strong but conversion lags, the larger backlog won't offset the earnings drag. More business without better margins would leave the core weakness untouched.

Nel ended the quarter with NOK 1,078 million in cash. That figure alone says nothing about how long the company is funded — what matters is whether losses actually narrow as revenue picks up.

The next real checkpoint is a visible improvement in both revenue and earnings. On the Rheinmetall front, a catalyst would be the feasibility review or a pilot project moving toward something concrete. Until then, the number of potential applications matters far less than the firmness of progress. Higher PEM revenue and smaller losses would validate the recovery thesis. More letters of intent without operational follow-through would not.