--- title: "First Solar Cut Its Customers and Kept the Tax Credit" description: "Third-quarter sales dropped 23% while net income rose 25%, and the 2026 gross-profit guidance never moved because about 85% of it is one federal tax credit. The tariff regime meant to bring buyers back starts on December 4." publisher: "The Inference" section: "Power" published: 2026-10-30T15:42:28.428Z modified: 2026-10-30T15:42:28.428Z canonical: https://theinference.org/article/first-solar-cut-its-customers-and-kept-the-tax-credit language: en keywords: "First Solar, Solar, Earnings, Tariffs, Policy" --- # First Solar Cut Its Customers and Kept the Tax Credit > Third-quarter sales dropped 23% while net income rose 25%, and the 2026 gross-profit guidance never moved because about 85% of it is one federal tax credit. The tariff regime meant to bring buyers back starts on December 4. ## Sales fell 23%, profit rose 25%, same release [First Solar](https://theinference.org/markets/companies/first-solar) reported [third-quarter net sales of $1.23 billion](https://www.businesswire.com/news/home/20261029415483/en) 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](https://www.msn.com/en-us/news/other/first-solar-fslr-tops-q3-earnings-estimates/ar-AA2gn1de); 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]. *Chart: **Revenue slides while profit climbs: Q3 net sales down 23% year over year, net income up 25%** Line chart of First Solar's quarterly net sales and net income from Q1 2024 through Q3 2026, showing net sales dropping to $1.23 billion in the latest quarter while net income reaches its highest point at $571 million.* *Quarterly net sales and net income, $ billions, Q1 2024 to Q3 2026. Source: First Solar's SEC filings; Q3 2026 as reported October 29, 2026. [1][8]* ## 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 [1][4][6]. Second-quarter sales had already taken customer contract terminations [4]. [BMO cut its price target](https://www.investing.com/news/analyst-ratings/bmo-cuts-first-solar-stock-price-target-on-slower-booking-conversion-93CH-4986457) the morning after the print, citing slower booking conversion [5]. [On the earnings call](https://finance.yahoo.com/markets/stocks/articles/first-solar-fslr-q3-2026-142918049.html), 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](https://www.whitehouse.gov/presidential-actions/2026/08/adjusting-imports-of-polysilicon-and-its-derivatives-into-the-united-states/) 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. ## Takeaway About 85% of First Solar's 2026 gross-profit guidance is the Section 45X tax credit, so the stock is now a policy position: the December 4 tariff start and whether deferred orders convert back into bookings decide the next move. ## Sources 1. [Business Wire, First Solar, Inc. Announces Third Quarter 2026 Financial Results, Updates Guidance, and Announces $500 Million Share Repurchase Program, 29 October 2026](https://www.businesswire.com/news/home/20261029415483/en) 2. [Yahoo Finance (Barron's), Lower Guidance Clouds First Solar Earnings Despite Rays of Light on the Horizon, 29 October 2026](https://finance.yahoo.com/m/a4f41008-4a5b-3357-aefa-066ec62bc822/lower-guidance-clouds-first.html) 3. [Zacks Investment Research via MSN, First Solar (FSLR) tops Q3 earnings estimates, 29 October 2026](https://www.msn.com/en-us/news/other/first-solar-fslr-tops-q3-earnings-estimates/ar-AA2gn1de) 4. [Yahoo Finance, First Solar Rises 5% as Guggenheim Lifts Its Target to $299 Ahead of Q3 Earnings, 28 October 2026](https://finance.yahoo.com/markets/stocks/articles/first-solar-rises-5-guggenheim-161713259.html) 5. [Investing.com, BMO cuts First Solar stock price target on slower booking conversion, 30 October 2026](https://www.investing.com/news/analyst-ratings/bmo-cuts-first-solar-stock-price-target-on-slower-booking-conversion-93CH-4986457) 6. [Yahoo Finance (The Motley Fool), First Solar (FSLR) Q3 2026 Earnings Call Transcript, 30 October 2026](https://finance.yahoo.com/markets/stocks/articles/first-solar-fslr-q3-2026-142918049.html) 7. [The White House, Adjusting Imports of Polysilicon and Its Derivatives Into the United States (Section 232 proclamation), 6 August 2026](https://www.whitehouse.gov/presidential-actions/2026/08/adjusting-imports-of-polysilicon-and-its-derivatives-into-the-united-states/) 8. [First Solar, quarterly revenue and net income from its SEC filings, retrieved 30 October 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001274494) --- First Solar Cut Its Customers and Kept the Tax Credit — The Inference. Canonical: https://theinference.org/article/first-solar-cut-its-customers-and-kept-the-tax-credit