Data center demand powers growth despite trade policy storms
- First Solar is a rare large U.S.-based solar manufacturer built around CdTe thin-film modules instead of silicon panels.
- Data center and hyperscaler build outs provide a fresh demand catalyst, with recent large volume tied to companies like Google.
- Gross margin jumped to 57.3 percent in Q2 2026, driven by temporary tariff refunds and Section 45X production credits.
- Trade policy remains highly volatile, with IEEPA tariffs struck down and replaced by Section 301 tariffs in July 2026.
- The company plans to launch a 1-gigawatt perovskite pilot line in 2027 to expand beyond pure CdTe technology.
Hyperscale demand meets policy risk
First Solar remains a primary beneficiary of U.S. industrial policy that favors domestic, non-Chinese supply chains. Its differentiated CdTe technology and Western Hemisphere manufacturing footprint offer insulation from raw material restrictions that impact silicon-based competitors. The power of this position showed in Q2 2026, when gross margin reached 57.3 percent thanks to Section 45X tax credits and temporary tariff refund benefits.
Recent demand signals point to massive growth from data center and hyperscaler projects. Management highlighted 5 gigawatts of recent project volume tied heavily to tech giants like Google. Previous fears about customer contract terminations causing a Q2 revenue decline were misplaced. The slight 4 percent revenue drop was actually a comparison issue against terminations recognized in the prior year.
The stock story must weigh this strong profitability and new tech demand against volatile trade policy and a backlog that is slowly ticking down to 45.1 gigawatts. The U.S. trade environment has seen extreme whiplash, moving from IEEPA tariffs to Section 301 tariffs in July 2026. The bull case relies on converting the hyperscaler pipeline into contracted volume, while the bear case points to long term uncertainty around policy support.
Factories sell the watts
First Solar designs, makes, and sells solar modules. A module is the panel-like unit that turns sunlight into electricity. Its main customers are system developers, independent power producers, utilities, commercial and industrial companies, and large corporate energy buyers.
The company usually sells modules on a per-watt basis under long-term supply agreements. That gives revenue visibility when contracts hold. The recent surge in data center power needs has added a major new customer base to this pipeline.
Its edge comes from proprietary CdTe thin-film technology, large factories in the Western Hemisphere, and U.S. production credits. Section 45X credits reduce cost of sales when eligible U.S.-made modules are sold.
The model can break if policy changes faster than customers can plan, if tariffs raise costs on its own international footprint, or if raw materials like tellurium become scarce.
Thin film now, perovskite later
CdTe utility-scale modules
This is the core product. CdTe means cadmium telluride, a thin-film semiconductor that uses much less semiconductor material than standard crystalline silicon modules.
U.S.-made Series 6 and Series 7 modules
Domestic production is the main earnings engine because eligible modules can qualify for Section 45X credits. The fifth U.S. facility has started operations, and the sixth U.S. facility is expected to start in the second half of 2026.
CuRe modules
CuRe is a module upgrade program meant to improve performance, temperature behavior, and degradation. Management said the CuRe launch is complete in Perrysburg and the first line is ramping.
Southeast Asia semi-finished production
Malaysia and Vietnam are being reworked rather than treated as full growth centers. The remaining capacity operates with a quarterly $30 million underutilization drag pending trade policy decisions.
Perovskite pilot line
First Solar plans a pilot line with up to 1 gigawatt of capacity in 2027 using acquired Oxford IP. The upside is higher efficiency, but commercial scale and cost are still open questions.
One real segment
The Q2 2026 filing confirms First Solar operates as a single segment designing, manufacturing, and selling CdTe solar modules. Sales are concentrated in the United States.
What could go wrong
Extreme trade policy volatility
High impact · High oddsU.S. trade policy has seen rapid changes. The Supreme Court struck down IEEPA tariffs in February 2026, leading to emergency Section 122 tariffs and then Section 301 tariffs in July 2026. These rules can raise costs for the company's own module imports from Southeast Asia.
Southeast Asia underutilization
Medium impact · High oddsThe company is carrying about $30 million a quarter in underutilization costs for its remaining Southeast Asia capacity. They are waiting on a Section 232 polysilicon derivatives decision to determine the long term future of these factories.
IRA credits get less valuable
High impact · Medium oddsSection 45X credits are a key reason U.S.-made modules are so profitable for First Solar. The OBBBA significantly curtails certain clean energy tax credits. If customers expect fewer project credits after 2026, demand for modules could weaken.
Escalating domestic logistics costs
Medium impact · High oddsDomestic inflationary pressures are mounting. Management recently noted that domestic truck freight from Ohio to the West Coast is now equivalent to international shipping economics, putting pressure on operating costs.
Tellurium supply tightens
High impact · Medium oddsTellurium is one of the main components of CdTe modules. China tightened export controls on tellurium-related products in 2025. First Solar is applying for export licenses and looking at other supply options.
In one breath
What does First Solar actually sell?
First Solar sells solar modules, mainly for large utility-scale power projects. Its modules use CdTe thin-film technology rather than the more common crystalline silicon design.
Why do U.S. tax credits matter so much for First Solar?
Section 45X credits can reduce cost of sales when First Solar sells eligible U.S.-made modules. That is a major reason Q2 2026 gross margin reached 57.3 percent.
Why did revenue drop in Q2 2026?
The 4 percent revenue contraction was actually due to a tough comparison against customer contract terminations recognized in the prior year period. Current demand signals, especially from data centers, remain very strong.
What is the biggest supply chain risk?
Tellurium is the key watch item because it is used in CdTe modules. China has tightened export controls, and investors need to see how First Solar secures supply outside that risk.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- August 16, 2026
- Score data
- September 27, 2026
- Reviewed by
- Shivam Bharuka
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