According to a report, South Korean battery manufacturer LG Energy Solution released preliminary third-quarter results that significantly beat market expectations, driven by U.S. manufacturing incentives and soaring demand for energy storage systems.

The company expects third-quarter revenue, covering the period through September, to rise 59% year-on-year to 9.6 trillion Korean won, surpassing the analyst consensus of 8.5 trillion won. Operating profit is projected to increase 26% year-on-year to 756 billion won, far exceeding the analyst consensus of 365.5 billion won. LG Energy Solution stated that it plans to release detailed quarterly results on November 3.

As LG Energy Solution expands its energy storage system production in the United States, the U.S. production tax credit has provided support for its performance. At the same time, subsidies for U.S.-made electric vehicle batteries have also offered a boost. In addition, the company saw a recovery in electric vehicle battery shipments to Europe.

On the capacity side, LG Energy Solution currently operates four ESS battery production bases in North America, including the Holland plant in Michigan, the L-H Battery joint venture in Ohio, Ultium Cells in Tennessee, and NextStar in Canada. Additionally, a plant in Lansing, Michigan, is also scheduled to begin ESS battery production within the year.

Amid weakening global electric vehicle battery sales, LG Energy Solution has been shifting capacity toward energy storage systems to meet the surging electricity demand from data centers. At the same time, the company is expanding its U.S. production scale to benefit from the U.S. Advanced Manufacturing Production Tax Credit policy.

LG Energy Solution said in a statement that the quarterly guidance includes tax credits provided under the U.S. Inflation Reduction Act for the company's battery production in the United States. Excluding these tax credits, the company's operating profit would be 339.1 billion won. Analysts believe that LG Energy Solution's better-than-expected operating profit was mainly driven by a one-time gain from a North American automaker. Due to weak electric vehicle demand, the automaker failed to meet its minimum purchase commitment and therefore paid compensation to LG Energy Solution. Analysts also noted that demand for energy storage systems from AI-driven data centers is gradually becoming a growth driver for battery manufacturers. However, they also warned that LG Energy Solution's energy storage system business is still operating at a loss, and the timeline for turning profitable has already been delayed.