First Solar Earnings Call: Record Growth, Policy Risks
First Solar ((FSLR)) has held its Q4 earnings call. Read on for the main highlights of the call.
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First Solar’s latest earnings call struck a cautiously upbeat tone, balancing record sales, higher earnings, and a fortified cash position against clear short-term pressures. Management stressed that technology gains, U.S. capacity growth, and a healthy balance sheet underpin the story, but candidly flagged tariffs, underused overseas plants, and reliance on U.S. tax credits as key execution risks.
Record Shipments Power Double-Digit Revenue Growth
First Solar highlighted a record 17.5 GW of module shipments in 2025, underlining strong demand for its thin-film technology despite broader solar market volatility. This volume helped push full-year net sales to $5.2 billion, a 24% increase versus the prior year and a core driver of the company’s improved financial performance.
Earnings Momentum With Higher EPS
Profitability showed solid momentum, with diluted EPS rising to $14.21 for 2025 from $12.20 a year earlier, a roughly 16.5% gain. The fourth quarter also accelerated, delivering EPS of $4.84 versus $4.24 in the prior quarter, signaling that operational leverage and mix continue to support earnings even amid cost pressures.
Cash Pile Swells on Strong Generation
Liquidity is a major bright spot, as year-end gross cash climbed to $2.9 billion and net cash to $2.4 billion, both up sharply year over year. The company also realized significant value from Section 45X tax credits, monetizing about $800 million in the fourth quarter and $1.4 billion over 2025, giving it ample flexibility for capex and R&D.
U.S. Capacity Expansion Builds Strategic Moat
First Solar ramped commercial production at its new Louisiana factory, its fifth U.S. plant, reinforcing its domestic manufacturing footprint. It also announced finishing capacity in South Carolina to bring Series 6 finishing onshore, with U.S. nameplate capacity expected to rise to 14.9 GW in 2026 and 17.1 GW in 2027, strengthening its policy-aligned positioning.
Technology Progress With CURE and Perovskites
On the technology front, the company began shipping initial CURE modules in 2025 and plans a factory-by-factory rollout, starting with Ohio conversions soon. Its perovskite development line reached full in-line processing in the third quarter of 2025, and a pilot form‑factor line is being readied with operational readiness targeted in early 2027, aiming at future efficiency gains.
Backlog With Pricing Upside Through Adjusters
First Solar closed the year with a 50.1 GW contracted backlog valued at $15.0 billion, providing multi‑year revenue visibility. About 23.2 GW of that backlog includes pricing adjusters that could add up to $600 million, or roughly $0.03 per watt, mainly benefiting 2027–2028 results, while recent bookings included 3.3 GW at attractive pricing.
Guided Strength in 2026 Profitability
For 2026, management guided net sales of $4.9–$5.2 billion and adjusted EBITDA of $2.6–$2.8 billion, implying robust profitability. The company expects a gross margin near 49.5%, heavily supported by Section 45X credits projected at $2.1–$2.19 billion, and sees first‑quarter adjusted EBITDA between $400 million and $500 million.
IP Defenses and Strategic Legal Wins
The company scored notable intellectual property wins as the U.S. patent office rejected three petitions aimed at invalidating parts of its TOPCon-related portfolio. It also filed a trade commission petition and signed a licensing agreement tied to perovskite technology, reinforcing its freedom‑to‑operate and potential monetization of its innovation.
Backlog Compression and Net Debookings
Despite a still‑large order book, the contracted backlog shrank from 68.5 GW to 50.1 GW during 2025, a roughly 27% drop in both volume and value. Gross bookings of 7.4 GW were offset by 8.3 GW of cancellations and adjustments, resulting in net debookings of 0.9 GW and signaling some demand and contract reshaping.
Tariffs and Mix Squeeze Gross Margins
Gross margin for 2025 slipped to 41% from 44% a year earlier, as tariff expenses, warehousing tied to a back‑loaded shipment profile, and detention charges weighed on results. Underuse of international Series 6 facilities also hurt, and First Solar expects tariff-related net profit and loss impacts of $125–$135 million in 2026 even after recoveries.
Underutilized Southeast Asia Plants Drag Earnings
International Series 6 capacity in Malaysia and Vietnam is expected to run at very low utilization, around 20%, through 2026, creating a profit headwind. Ramp and underutilization expenses are forecast at $115–$155 million for the year, while warehousing costs are likely to stay elevated at about $200 million before easing into 2027.
Heavy Dependence on Section 45X Credits
Management emphasized that 2026 gross margin guidance relies heavily on Section 45X manufacturing tax credits, with core profitability much thinner without them. The company referenced an underlying core gross margin of only about 7% excluding these credits, underscoring exposure to potential shifts in U.S. policy or timing of credit monetization.
Warranty and Legal Overhangs Persist
First Solar continues to negotiate warranty issues on certain Series 7 modules made before 2025 and estimates potential future warranty losses of $35–$75 million. It has recorded a $50 million specific warranty liability and is engaged in active litigation and counterclaims with counterparties, keeping some legal and reputational risk on the table.
Operating and Start-Up Costs Trend Higher
Operating expenses climbed to $523 million, up $59 million year over year, reflecting a $42 million increase in R&D and a $15 million rise in SG&A. For 2026, the company expects $110–$120 million of start‑up costs and a stepped‑up R&D budget of $285–$290 million, including about $100 million focused on perovskite development efforts.
CapEx Moderates but Remains Substantial
Capital spending eased to $870 million in 2025 from $1.5 billion in 2024 as major build‑outs rolled off, but investment needs remain sizable. For 2026, capex is guided to $800 million–$1.0 billion, mainly to support U.S. finishing and other projects, with year‑end gross and net cash expected between $1.7 billion and $2.3 billion, implying a possible cash draw.
Market and Policy Uncertainty Shapes Strategy
Management underscored that trade and policy uncertainty, including ongoing investigations and potential new restrictions on competitors, is reshaping pricing and contracting behavior. While some of that disruption may benefit First Solar’s U.S.-based model, it also adds execution risk and could alter demand patterns and customer decision timing.
Outlook: Solid 2026 Targets Amid Policy Reliance
Looking ahead, 2026 guidance calls for 16.5–17.5 GW of production and 17.0–18.2 GW of volumes sold, supporting the targeted revenue and EBITDA ranges. Assumptions include mid‑$0.20s per watt cost levels, mid‑$0.20s to low‑$0.30s per watt selling prices, substantial Section 45X credits, and elevated but declining warehousing, ramp, and start‑up costs as U.S. capacity and technology programs mature.
First Solar’s call painted a picture of a company with strong demand, record earnings, and a fortified U.S. manufacturing and technology base, yet facing real short-term bumps. For investors, the key watchpoints will be policy stability around tax credits, execution on capacity and technology rollouts, and management’s ability to manage tariffs, underutilized assets, and legal exposures while preserving margins.
