Shares of California-based renewable energy storage (i.e., batteries) start-up Energy Vault Holdings (NRGV 2.44%) gained as much as 40% in morning trading on Wednesday -- before giving back most of those gains. Analysts thought the company would lose about $0.15 per share on $118.6 million in sales in its Q3 earnings report, which came out last night. In fact, Energy Vault lost only $0.13 per share -- and its sales were $172.2 million for the quarter.

As of 10:35 a.m. ET, Energy Vault shares are still up 10.5%.

Energy Vault sales and earnings

"Multiple energy storage deployments" in the U.S. drove the Q3 sales outperformance, as management explained. In addition, the company said it is working on five new gravity energy storage projects that will use energy to move water uphill so it can generate energy later as gravity pulls it back down.

That's the good news. Now here's the bad news -- and, perhaps, the reason Energy Vault stock is having trouble holding on to its gains from earlier this morning.

First and foremost, Energy Vault lost money in the quarter. It lost less money than expected, true, and less than the $0.21 per share that it lost in Q3 2022 as well. But it still lost money.

Also noteworthy is that while the company succeeded in growing its revenues sufficiently that its operating profit margins improved, Energy Vault's gross profit margin on revenues declined for the second straight quarter, sequentially, to 4.2%.

What's next for Energy Vault stock

4.2% was also, incidentally, exactly the same gross profit margin that Energy Vault scored one year ago. So the company expanded its revenue base by literally 100 times year over year and...experienced absolutely no improvement in gross profit margin. No advantages from scale whatsoever.

Thus, while management boasted of "record revenue" in the quarter, 49% growth in bookings year to date (YTD), and a 153% increase in YTD project awards, and while it says it is making progress on "multiple customer projects in Nevada, Texas and California" in Q4, it's not clear that Energy Vault is getting much better as it gets bigger.

For a growth stock like Energy Vault, that's a reason for concern.