First Solar Cut Its Customers and Kept the Tax Credit

Sales fell 23%, profit rose 25%, same release

First Solar▼−3.19% — First Solar, down 3.19 percent today reported third-quarter net sales of $1.23 billion↗ on October 29, down 23% year over year and driven primarily by a decrease in the volume of modules sold to third parties ¹. In the same press release, net income rose 25% to $571 million, $5.30 per diluted share, the largest quarterly net income in the three years of filings charted below ¹.

Adjusted EBITDA rose 11% to $744 million, a 60% margin ¹. Earnings beat the $4.64 analysts expected↗; revenue missed estimates by 6.24% ³. The stock fell in after-hours trading anyway ², and the shares are down about a third since the start of the year ³.

The profit line that did not move

The updated 2026 guidance explains the mismatch ¹. Volume sold was cut to 16.0 to 17.0 GW from 17.0 to 18.2 GW ¹. Net sales was cut to $4.6 to $4.9 billion from $4.9 to $5.2 billion ¹.

Gross profit was left unchanged at $2.4 to $2.6 billion ¹. That line holds because guidance assumes $2.07 to $2.19 billion of Section 45X tax credits, the federal payment for American-made solar modules, plus $110 to $120 million of underutilization costs ¹. At the midpoint, the credit is about 85% of guided gross profit ¹. The customers went down; the credit did not.

Bookings are slowing, and the company calls it discipline

Contracted backlog stood at 44.0 GW at September 30, about $13.5 billion of contracted value with deliveries through 2030, down from 45.1 GW at mid-year ¹⁴⁶. Second-quarter sales had already taken customer contract terminations ⁴. BMO cut its price target↗ the morning after the print, citing slower booking conversion ⁵.

On the earnings call↗, chief executive Mark Widmar framed part of the slowdown as choice: customers are shifting to project-by-project contracts and deferring early-stage procurement, and a 2 GW deal in final negotiation died when a state placed a moratorium on the project ⁶. The company still booked 1.4 GW since the last call at about $0.36 per watt, above the backlog average, with roughly 4 GW of option volume priced before the tariffs waiting on customer elections ⁶.

The moat is now an act of government

"Section 232 represents a structural change in how the United States approaches solar manufacturing," Widmar said ¹. The August 6 proclamation↗ sets a $0.38 per watt minimum import price on imported solar modules and a 15% duty on polysilicon derivatives, effective December 4, 2026 ⁷. First Solar has raised prices since that announcement and expects price discovery to take time ⁶.

The outlook assumes the current U.S. policy environment persists ¹. The $500 million buyback authorized the same day, capex guidance trimmed to $0.6 to $0.8 billion, and net cash of $1.5 billion, down from $2.4 billion at year-end, are all built around that bet ¹.

What to watch: December 4

Fourth-quarter guidance calls for 4.3 to 5.3 GW of module sales and $643 to $843 million of adjusted EBITDA ¹. The decisive inputs sit outside the factory: the tariff start on December 4 ⁷, pending federal guidance on foreign-entity-of-concern rules ⁶, and a binary decision on the 1.8 GW Malaysia plant in the first half of 2027 ⁶.

At roughly 8 times forward earnings against a $274 consensus price target, the market already prices these estimates as breakable ⁴. Until bookings confirm otherwise, this is a policy position with a factory attached.