FSLR Solar manufacturing · Clean energy · U.S. manufacturing · Industrial policy · Thesis updated August 11, 2026

Record margins mask sudden revenue contraction

First Solar is a rare large U.S.-based solar manufacturer, built around CdTe thin-film modules instead of silicon panels.
Q2 2026 revenue fell 3.7% to $1.1 billion due to customer contract terminations, a concerning sign for demand.
Gross margin jumped to 57.3% in Q2, driven by temporary IEEPA 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.

01 Running thesis

Great margins, weaker bookings

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% thanks to Section 45X tax credits and temporary tariff refund benefits.

However, the top line is now a major concern. Revenue contracted 3.7% in Q2 2026 due to customer contract terminations. This validates earlier fears about the declining backlog and suggests real demand or financing weakness among project developers.

The stock story must weigh this proven profitability against volatile trade policy and weakening bookings. The U.S. trade environment has seen extreme whiplash, moving from IEEPA tariffs to Section 122 and finally Section 301 tariffs in July 2026. The bull case relies on resuming top-line growth and defending the tariff structure, while the bear case points to further backlog contagion and long-term uncertainty around policy support.

Jul 2026▼Q2 2026 results revealed a 3.7% revenue decline driven by customer contract terminations. Trade policy volatility also increased with the shift to new Section 301 tariffs.

Apr 2026→Q1 2026 showed much stronger profitability, with gross margin rising to 46.6%. The offset was another backlog decline, to $14.4 billion for 47.9 GW.

Apr 2026▲The product story improved with CuRe ramping in Perrysburg and a planned perovskite pilot line of up to 1 GW in 2027. First Solar also pressed its IP case through an ITC Section 337 investigation.

Feb 2026▼The 2025 Form 10-K raised policy and supply chain risk. The OBBBA clouded long-term clean energy credits, and China export controls made tellurium a clearer risk.

Oct 2025▼Backlog fell to $16.4 billion for 53.7 GW, while gross margin compressed to 38.3%. New India tariffs also added pressure to the international footprint.

Jul 2025▼Backlog slipped to $18.5 billion for 61.9 GW, and margin pressure from logistics, storage, and U.S. production mix became more visible. The OBBBA made the policy risk more specific.

Apr 2025→The core IRA and domestic manufacturing thesis held, but backlog moved down to $19.8 billion for 66.1 GW. Management also flagged possible Southeast Asia production cuts.

Feb 2025▼The 2024 Form 10-K added tellurium export controls as a new supply risk and quantified Series 7 manufacturing issues. Backlog was updated to $20.5 billion for 68.5 GW.

02 Business model

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. However, Q2 2026 proved that these agreements are not bulletproof, as contract terminations directly caused a revenue decline.

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, if customers cancel more contracts, or if raw materials like tellurium become scarce.

03 Product portfolio

Thin film now, perovskite later

Cash cow

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.

Growth engine

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.

Growth engine

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.

Steady

India-made modules

India is a growing market and production base, but earlier results showed that a higher India sales mix lowered average selling price per watt. India policy rules can help local sales, but they can also shift quickly.

Steady

Southeast Asia semi-finished production

Malaysia and Vietnam are being reworked rather than treated as full growth centers. Management said historical 7 GW capacity in Southeast Asia is being partly redirected to support U.S. finishing and perovskite work.

Option

Perovskite pilot line

First Solar plans a pilot line with up to 1 GW of capacity in 2027 using acquired Oxford IP. The upside is higher efficiency, but commercial scale and cost are still open questions.

04 Business segments

One real segment

CdTe solar modules100%modest

Other activities0%flat

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.

05 Risk factors

What could go wrong

Customer contract terminations

High impact · High odds

In Q2 2026, revenue fell 3.7% directly due to customer contract terminations. If this signals broader financing or demand weakness among developers, more of the contracted backlog could be at risk.

We watchQuarterly revenue growth and any further disclosures about canceled supply agreements.

Extreme trade policy volatility

High impact · High odds

U.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.

We watchUpdates on Section 301 tariff impacts and any preliminary determinations in the ITC Section 337 investigation.

IRA credits get less valuable

High impact · Medium odds

Section 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 and adds limits tied to foreign entities of concern. If customers expect fewer project credits after 2026, demand for modules could weaken.

We watchCompany updates on OBBBA rules, Section 45X eligibility, and post-2026 customer demand.

Tellurium supply tightens

High impact · Medium odds

Tellurium 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, but the full plan is still an open question.

We watchLicense approvals, raw material cost comments, and any production delays tied to tellurium.

Product quality issues return

Medium impact · Medium odds

The company previously identified Series 7 manufacturing issues that may cause premature power loss. As of March 31, 2026, it recorded a specific warranty liability within an estimated future loss range. A wider issue would hurt margins and customer trust.

We watchWarranty liability changes, customer settlements, and any new module performance disclosures.

06 Quick answers

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%.

What caused the revenue drop in Q2 2026?

Revenue fell 3.7% year-over-year in Q2 2026 primarily due to customer contract terminations, raising concerns about the stability of the order book.

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.