Key Takeaways

The Year the Reckoning Arrived

The CEA industry entered 2025 knowing it would be difficult. What no one fully anticipated was how thoroughly the year would rewrite the industry’s narrative—from one of limitless potential and exponential growth to one of hard-won operational discipline and economic reality. It turned out to be the year that separated the companies built on viable economics from those built on venture capital optimism.

The numbers tell the story clearly: 188 global announcements, 14 bankruptcies, and $290 million in disclosed funding—a 90 percent decline from the $2.8 billion peak in 2021. This was not a blip. It was a structural reset of an industry that had raised and burned billions on the premise that scale would eventually solve unit economics. Why Vertical Farms Keep Failing — And What the Survivors Are Doing Differently

The funding that did flow in 2025 tells its own story. Investment concentrated at Seed to Series B—backing early-stage operators with disciplined cost structures and clear paths to profitability. Late-stage mega-rounds, the kind that defined the 2019–2022 boom, effectively disappeared. Investors were no longer writing checks against projections. They wanted demonstrated unit economics, validated customer contracts, and management teams that could articulate exactly when and how they would reach positive cash flow.

For an industry accustomed to raising hundreds of millions on the promise of future scale, this represented a fundamental shift in the relationship between operators and capital. The question was no longer “how big can this get?” It was “does this work at the scale you’re at right now?” CEA Industry Mid-Year Report: Consolidation, AI, and What’s Next

The Biggest Story: Plenty’s Fall

Plenty’s Chapter 11 filing in March was the earthquake the industry had been bracing for. The company had raised $940 million—more than almost any other indoor farming venture in history—and built a showcase facility in Compton, California, that was supposed to prove vertical farming could operate at commercial scale. Instead, it proved the opposite: that no amount of capital can compensate for fundamentally misaligned unit economics. The facility’s cost per pound of leafy greens could not compete at retail price points, and no amount of operational optimization could close the gap quickly enough to satisfy investors or creditors.

Plenty’s failure was not unique—it joined 13 other CEA companies that filed for bankruptcy or ceased operations in 2025—but its scale made it definitive. It was the final, unmistakable signal that the “raise big, scale fast” playbook imported from Silicon Valley does not work in agriculture. Indoor farming is a manufacturing business with agricultural margins—and companies that treated it as a technology startup with unlimited runway learned that lesson at enormous cost.

What Actually Went Right in 2025

The bankruptcy headlines, dramatic as they were, obscured a more important story: the emergence of a viable, disciplined indoor farming sector. The companies that survived 2025 did not just endure—many of them thrived, posting operational milestones that would have been remarkable in any year.

AeroFarms, rebuilt after its own 2023 bankruptcy and restructuring, achieved sustained profitability with a focused microgreens strategy—proving that the right crop at the right scale with the right cost structure can work. The company’s journey from $900 million in investor losses to profitable operations is arguably the most instructive case study in CEA history. From AeroFarms to Profitability: What the Restructured Indoor Farming Pioneer Tells Us About the Industry’s Future

The 80 Acres Farms and Soli Organic merger signaled that smart consolidation was underway—stronger operators absorbing complementary capabilities rather than building everything from scratch. Oishii’s acquisition of Tortuga AgTech brought robotics in-house and achieved a reported 50 percent cost reduction, demonstrating that vertical integration of automation could fundamentally change the cost equation.

At scale, the numbers were genuinely impressive. BrightFarms’ merger with Cox Farms created the largest US greenhouse operator at over 700 acres of production capacity. Gotham Greens reached approximately 100 million heads of lettuce per year distributed across all 50 states—a milestone that would have seemed implausible for an indoor grower just five years ago. Little Leaf Farms claimed the title of largest US indoor lettuce producer, having expanded methodically from its New England base. These are not startups burning through venture capital—they are operating companies generating revenue, managing costs, and building market positions that would survive a capital drought.

Two broader trends reinforced the positive signals. Government support strengthened meaningfully across the US, Canada, and northern Europe, with policy makers increasing CEA infrastructure funding as food security moved up national agendas. And AI and automation matured from conference buzzwords to deployed production tools. Facilities that adopted integrated data platforms and automated monitoring reported measurable improvements in yield consistency, labor efficiency, and energy optimization—not theoretical gains, but documented operational improvements.

Why the 2026 Vertical Farming Outlook Is Cautiously Optimistic

The companies entering 2026 are fundamentally different from those that entered 2023. The survivors have proven unit economics, experienced management teams, and operational discipline forged through the industry’s most difficult period. Several structural tailwinds support a more constructive outlook. 10 Trends That Will Shape Indoor Farming in 2026

LED efficiency has improved 20 to 30 percent compared to 2020, directly reducing the single largest operating cost for vertical farms. This is not incremental—a 25 percent reduction in lighting energy consumption can shift a facility from operating loss to operating profit. Automation costs are declining as warehouse robotics technology crosses into agriculture—what cost millions in custom engineering five years ago is increasingly available as configurable, off-the-shelf systems. Oishii’s Tortuga acquisition demonstrated where this trend leads: robotics integrated at the operator level, not purchased as an add-on.

Climate volatility continues to strengthen the fundamental case for controlled environment production. Extreme weather events disrupted outdoor produce supply chains multiple times in 2025, creating both price spikes and supply gaps that indoor growers were positioned to fill. Consumer demand for local, pesticide-free produce continues to grow, and retailers are increasingly willing to pay premiums for supply chain reliability they cannot get from field-grown sourcing.

Hybrid models—combining elements of greenhouse and vertical farming—are gaining traction as a pragmatic middle ground between the capital intensity of pure vertical and the climate vulnerability of pure greenhouse. And government support is accelerating, particularly in Canada and northern Europe where food security concerns are driving significant policy investment in domestic CEA infrastructure.

The Necessary Caution

Optimism should be qualified. Capital markets remain tight for unprofitable CEA operators, and 2026 will almost certainly see further bankruptcies among companies that cannot achieve positive cash flow. The industry has not solved its fundamental economic challenges—it has simply shed the companies that could not survive them. Energy costs remain stubbornly high in many markets. Labor challenges persist. And the gap between what consumers say they will pay for indoor-grown produce and what they actually pay at the register remains wider than many operators projected.

The funding environment will remain selective. Investors burned by the 2021–2023 wave of CEA failures are not likely to return to growth-stage indoor farming investments until they see sustained profitability from the current cohort. For operators seeking capital, this means the bar has permanently moved: demonstrated economics first, scale second.

Looking Ahead: An Industry Growing Up

What 2025 ultimately proved is that indoor farming is transitioning from a venture-funded experiment into an operational industry. The companies that remain are not chasing scale for its own sake—they are building businesses with margins, managing costs with discipline, and investing in the data and intelligence infrastructure that will compound their advantages over time.

The intelligence layer—the ability to capture, structure, and learn from the enormous amount of data that controlled environments generate—is becoming as important as the growing systems themselves. Companies that treat every growing cycle as a data-generating event, building institutional knowledge that improves crop recipes, predicts equipment failures, and optimizes energy consumption, are constructing advantages that compound with every harvest.

The CEA industry in 2026 will be smaller than the hype predicted. It will also be healthier, more honest about its economics, and better positioned to deliver on the original promise: fresh, local, sustainable food production that works as a business, not just as a concept.

The headlines in 2025 were dominated by failures. The headlines in 2026 will increasingly be written by the companies that survived them—operators who proved that indoor farming works when it is treated as a discipline, not a disruption. That is not a failure story. It is what growing up looks like.