Plug Power Is One of 2026's Surprise Stories. Here's the 3-Year Outlook.

Plug Power (NASDAQ: PLUG) reported its fourth-quarter earnings on March 2. Shares immediately spiked in value. One month later, shares are still 25% higher than they were before the latest earnings announcement was made.

Why did Plug Power stock rise so sharply after earnings were announced? And why have shares held onto their gains despite a marketwide correction? The answer may surprise you, and so might the company's prospects over the next three years. Some analysts believe shares have more than 200% upside potential over the next 12 months. But there are some critical risks to be aware of before jumping in.

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Plug Power may finally be turning a corner

I have been skeptical of Plug Power from an investment standpoint. But I do have to admit that the company's latest quarterly earnings came with a few positive surprises.

Last month, Plug Power reported full-year sales of more than $700 million, reached positive gross margins in the fourth quarter, announced $275 million in asset sales to shore up liquidity, and beat analyst expectations for earnings per share.

I have several concerns with Plug Power both as a stock and as a business. One of the biggest concerns is the company's massive quarterly cash burn. For most applications, hydrogen fuel cell systems like the ones Plug Power designs, manufactures, and sells aren't economically viable versus existing alternatives like fossil fuels and traditional renewables like wind and solar. Some experts believe hydrogen fuel cells could become competitive on price by 2030. But other experts believe it could take another decade or longer.

And when this technology does reach cost parity, there's no guarantee that the specific technological approach in question will be what Plug Power is able to produce. Put simply, some other hydrogen competitor could crack the code first with a proprietary approach.

Due to lackluster end market demand, Plug Power hasn't had much pricing power, often relying on government subsidies to survive. But last quarter's results -- which showed slowing cash burn and improved gross margins -- provide the company with some much-needed relief. There's just one problem left that I'm concerned with.

The next three years will still be challenging for PLUG stock

Even if Plug Power's prospects are looking more optimistic, the next three years should still result in massive dilution for shareholders. Over the last decade, Plug Power's total shares outstanding has grown by nearly 700%. So compared to 2016, patient investors own just one-seventh of their original stake in Plug Power on a percentage ownership basis. The company would need to be doing very well for shareholders to still profit. But that hasn't been the case. In recent years, Plug Power's net losses have actually accelerated.

Over the past 12 months, Plug Power's number of total shares outstanding has jumped by around 50%. This pace of dilution is simply too rapid for investors to profit, especially given that hydrogen fuel remains years, if not decades away from economic viability. So while Plug Power has been a surprise story thus for in 2026, the long-term outlook remains bleak from an investment standpoint.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.