First Solar's Profitability Questioned
Despite record 2025 revenues of $5.2 billion, First Solar's stock has been hit hard by regulatory headwinds. Analysts on "The Money Lab" note the company's core profitability is "heavily dependent on government subsidies," raising questions about its long-term health amid tariffs and permitting freezes.
Despite the record revenue, First Solar's stock took a more than 12% hit in after-hours trading following its 2025 earnings announcement. The key driver was a lower-than-expected sales and revenue guidance for 2026, which spooked investors. The company's full-year net income for 2025 was $1.53 billion, a significant increase from $1.29 billion in the previous year. Earnings per share also grew to $14.21, up from $12.02 in 2024. This growth was fueled by a 24% increase in the volume of third-party modules sold. A critical component of First Solar's 2025 financial strength came from the Inflation Reduction Act's Section 45X tax credits. The company monetized $1.4 billion from these credits throughout the year, with $800 million realized in the fourth quarter alone. Looking ahead, the company's 2026 net sales forecast of $4.9 billion to $5.2 billion fell short of analyst expectations of $6.1 billion. This cautious outlook is influenced by the company's strategy to underutilize its Southeast Asian factories as it waits to see how new tariffs will be implemented. First Solar's gross margins for components are expected to remain historically low due to these tariff and material costs. The company is also navigating challenges from tariff costs and warehousing expenses, which contributed to a decline in the full-year 2025 gross margin from 44% to 41%. In a move to protect its market position, First Solar has filed a patent infringement action with the U.S. International Trade Commission against ten foreign-headquartered manufacturers. This legal battle, alongside the tariff uncertainties, adds another layer of complexity to the company's future performance.
