Solar panel manufacturer First Solar (NASDAQ: FSLR) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 8.6% year on year to $1.10 billion. The company’s full-year revenue guidance of $5.3 billion at the midpoint came in 4.2% above analysts’ estimates. Its GAAP profit of $3.18 per share was 19.6% above analysts’ consensus estimates.

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StockStory’s Take

First Solar’s second quarter results were positively received by the market, as the company delivered above-consensus revenue and profit, and management credited policy tailwinds and effective backlog management for the outcome. CEO Mark Widmar emphasized that strong U.S. module sales, contract termination payments, and higher domestic content contributed to the quarterly performance. The company also benefited from increased demand following federal legislation that tightened restrictions on foreign solar imports, which management says solidified First Solar’s competitive position domestically. Widmar noted, “We progressed our domestic capacity expansion during the quarter, continuing to ramp up at our Alabama facility.”

Looking ahead, First Solar’s updated outlook is rooted in the evolving U.S. policy landscape, ongoing trade developments, and manufacturing expansion. Management expects continued demand for domestically produced modules, citing new industrial policy and tax credits as key drivers for customer procurement. However, uncertainties remain around international tariffs, executive orders, and supply chain adjustments. CFO Alex Bradley cautioned that tariff recovery and the ability to manage logistics costs would be essential to sustaining profitability, stating, “The ability to recover tariffs is a key factor in our production and sales volume guidance.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to a favorable mix of U.S.-produced modules, contract terminations, and policy-driven demand shifts, while international sales were impacted by tariff uncertainty and logistics costs.

• U.S. module sales strength: Shipments from domestic facilities drove growth, as customers prioritized U.S.-manufactured modules to qualify for tax credits and avoid new import restrictions. The Alabama and Louisiana plants contributed significantly to meeting this demand.

• Contract termination revenue: The company recognized $63 million in contract termination payments, primarily from international customers unable to absorb tariff impacts. This helped boost gross margins but also reflects volatility in international sales commitments.

• Tariff and trade policy impact: Recent U.S. legislation limited eligibility for advanced manufacturing tax credits to non-foreign entities of concern (FEOCs), effectively constraining Chinese solar imports. This created a more favorable environment for First Solar but also led to uncertainty and increased logistics costs for international sales.

• Technology and product development: The CuRe technology platform continued to show improved field performance, and the new perovskite development line remains on track for full test runs. Management highlighted these advancements as supporting future efficiency and product differentiation.

• Backlog and bookings dynamics: Despite a strong overall backlog, there was a net reduction in international bookings due to contract terminations. However, the company saw heightened customer engagement and re-contracting activity following recent policy changes, indicating pent-up demand.

Drivers of Future Performance

First Solar’s forward guidance is shaped by U.S. policy support, domestic manufacturing expansion, and ongoing risks related to tariffs and international sales.

• Domestic supply chain focus: Management believes that expanded U.S. manufacturing capacity and vertical integration will enable the company to maintain its competitive edge as policy incentives increasingly favor domestic production. The planned Louisiana facility ramp and potential for new finishing lines are seen as key to meeting future demand.

• Tariff recovery and cost management: The company’s profitability outlook depends on its ability to recover increased tariffs and manage logistics expenses on international sales. Management warned that failure to recover tariffs could prompt further curtailment of international production, impacting sales volumes and margins.

• Policy-driven demand catalysts: New industrial and trade policies, including tax credits and domestic content requirements, are expected to sustain demand for U.S.-made modules through at least 2028. However, management noted ongoing uncertainty around the implementation of executive orders and potential changes in tariff regimes.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will monitor (1) progress on the Louisiana facility ramp and any announcements around new U.S. finishing lines, (2) the company’s success in mitigating tariff impacts and recovering logistics costs on international sales, and (3) the evolution of federal policy and executive order implementation affecting domestic content and tax credit eligibility. We will also track the pace of customer re-contracting activity and the commercialization of new technology platforms.

First Solar currently trades at $184.25, up from $175.30 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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