First Solar 2025 Annual Report: 24% Revenue Growth Amid Policy Volatility and Margin Compression

What happened

First Solar reported net sales of $5.2 billion for 2025, a 24% increase from $4.2 billion in 2024, driven primarily by a 24% increase in module volumes sold. The company produced 16.1 GW and sold 17.5 GW of solar modules during the year. Gross profit as a percentage of net sales decreased 3.6 percentage points to 40.6% from 44.2%. The margin compression stemmed from higher costs related to a sales mix that included more US-produced modules, higher warehousing costs totaling $130.7 million, additional duties and tariff costs including $94.4 million in tariffs on international modules imported into the United States, and higher logistics charges totaling $173.1 million which included detention and demurrage charges. These cost increases were partially offset by $1.6 billion in Section 45X advanced manufacturing production credits recognized as a reduction to cost of sales. Operating income was 30.6% of net sales in 2025 compared to 33.2% in 2024. Net income margin was 29.3% compared to 30.7% in the prior year. The effective tax rate decreased to 3.3% from 8.1%, primarily due to beneficial effects of tax law associated with the Inflation Reduction Act. Cash, cash equivalents, and marketable securities increased to $2.9 billion from $1.8 billion, driven by proceeds from Section 45X tax credit sales and higher cash receipts from module sales including advance payments, partially offset by supplier payments, capital expenditures for US facilities, and debt repayment. Operating cash flow was $2.1 billion compared to $1.2 billion in 2024. The company commenced production at its fifth US manufacturing facility in Louisiana during 2025 and is constructing a sixth US facility expected to commence operations in the second half of 2026.

Why it matters for investors

First Solar's results demonstrate the dual reality of strong volume growth offset by structurally higher costs from domestic manufacturing. The company's gross margin compression of 360 basis points reflects a fundamental shift in its cost structure as US production replaces international sources. While the Section 45X credit provided $1.6 billion in cost relief (equivalent to approximately 17 cents per watt for US-produced modules), the underlying production economics deteriorated due to higher labor, overhead, and logistics costs associated with domestic manufacturing, compounded by tariff impacts. The company's ability to maintain operating margins above 30% despite these headwinds reflects pricing power in the US market supported by domestic content requirements and trade barriers. However, the July 2025 enactment of the One Big Beautiful Bill Act, which severely limits Section 45X eligibility for products involving foreign entities of concern and curtails clean electricity tax credits, introduces material uncertainty into the company's forward economics. First Solar's $15.0 billion contracted backlog through 2030 provides revenue visibility, but $0.6 billion of potential revenue depends on achieving technology improvements tied to future module enhancements. The manufacturing quality issues in Series 7 modules, while representing a modest $35-75 million loss estimate, signal execution challenges in ramping new production capacity. The $323.6 million lawsuit against BP Solar/Lightsource for contract breaches highlights customer counterparty risk and the company's reliance on contract enforceability to protect revenue. Capital intensity remains high with $0.8-1.0 billion in expected 2026 capex for capacity expansion and R&D initiatives including CuRe technology conversion and perovskite development. Trade policy volatility — including the February 2026 Supreme Court ruling invalidating IEEPA tariffs, China's export controls on tellurium, and escalating antidumping/countervailing duties on Southeast Asian modules — creates both protection for First Solar's domestic pricing and risk to international supply chains and raw material costs.

Key highlights

First Solar is the largest PV solar module manufacturer in the Western Hemisphere and the world's largest thin film manufacturer, operating manufacturing facilities in the United States, India, Malaysia, and Vietnam. The company's advanced CdTe thin film technology is manufactured using a fully integrated, continuous process that does not rely on Chinese crystalline silicon supply chains. During 2025, the company commenced production at its Louisiana facility and is constructing its sixth US facility expected to begin operations in the second half of 2026, with anticipated investment of approximately $0.3 billion. The company estimates it qualifies for approximately 17 cents per watt in Section 45X credits for each US-produced module sold to third parties, based on current module form factor. As of December 31, 2025, First Solar had entered into contracts for the sale of 50.1 GW of modules with an aggregate transaction price of $15.0 billion through 2030, including 23.2 GW with anticipated price adjustments for future module technology improvements worth up to $0.6 billion if realized. The company is implementing its CuRe technology program to improve semiconductor structure by replacing copper with other elements expected to enhance bifaciality characteristics, temperature coefficient, and warranted degradation, with conversion of one Ohio facility planned for Q1 2026 followed by phased replication across the fleet. First Solar maintains a module collection and recycling program with $217.2 million in restricted marketable securities and $6.9 million in restricted cash held in trust as of December 31, 2025 against a $146.0 million liability. The company expects 2026 capital expenditures of $0.8-1.0 billion for the new facility, R&D initiatives including perovskite development, and equipment upgrades. In February 2026, First Solar terminated its existing $1.0 billion revolving credit facility and replaced it with a $1.5 billion revolving facility. The company filed a lawsuit in February 2025 against JinkoSolar and related entities in the US District Court for the District of Delaware alleging infringement of certain US TOPCon patents, with similar lawsuits filed against Canadian Solar in May 2025, and a petition filed with the USITC in February 2026 against multiple entities including Axitec Solar, Canadian Solar, JA Solar, JinkoSolar, Mundra, Hanwha QCells, Trina Solar, and others.

Management commentary

Management emphasized that First Solar is focused on competitively and reliably enabling power generation needs with advanced, uniquely American thin film PV technology developed at R&D labs in California and Ohio. The company stated it provides a competitive, high-performance, and responsibly produced alternative to conventional crystalline silicon PV solar modules, with production using a fully integrated, continuous process that does not rely on Chinese crystalline silicon supply chains. Management noted that the financial incentives provided by the Inflation Reduction Act have significantly increased demand for modules manufactured in the United States, though they acknowledged that the current US presidential administration and control of Congress present uncertainty as to the continued availability of certain benefits. On January 20, 2025, the President issued the 'Unleashing American Energy' executive order indicating a lack of support for federal funding of certain solar projects, and on July 4, 2025, the President signed the One Big Beautiful Bill into law, which significantly curtails the availability of certain energy tax credits. Management stated they continue to advocate for industrial and trade policies that provide a level playing field for manufacturers of solar cells and modules, while focusing on their strategies and points of differentiation including proprietary advanced module technology, manufacturing process and distributed manufacturing presence, localized supply chain, R&D capabilities, commitment to responsible solar, and financial stability. Management noted that even on an unsubsidized basis, utility-scale PV solar is cost competitive with conventional forms of energy generation including natural gas and nuclear, and is significantly faster to deploy. The company indicated it believes manufacturers of solar cells and modules, particularly those in China, have significant installed production capacity relative to global demand and the ability for additional capacity expansion, which may lead to periods of structural imbalance between supply and demand and pricing volatility. Management disclosed they have assembled a cross-functional team to interpret China's export controls on tellurium and related developments and analyze impacts on materials required for module production, applying for export licenses where appropriate and implementing strategic alternatives such as sourcing from other suppliers. Regarding the Series 7 manufacturing issues, management stated they currently believe the primary causes have been identified and actions taken to address them, with the ultimate loss depending on the extent of premature power loss experienced relative to limited product warranty obligations and any additional commitments to remediate affected modules.

What to watch next

Investors should monitor:

• Implementation and enforcement of Section 45X credit limitations under the One Big Beautiful Bill Act related to foreign entities of concern (FEOC), which could materially reduce the $1.6 billion annual benefit if domestic supply chains or manufacturing processes are deemed to involve FEOC material assistance.

• Outcomes of China's export control regime on tellurium and rare earths, including the company's ability to secure necessary export licenses and maintain adequate raw material supply without significant cost increases or production disruptions.

• Resolution of the $323.6 million lawsuit against BP Solar Holding/Lightsource and any impact on contract enforceability, customer payment behavior, and revenue recognition from the $15.0 billion backlog.

• Final cost realization from Series 7 manufacturing issues relative to the $35-75 million estimated range and $50 million accrued liability, including customer settlement outcomes and any reputational impact on future sales.

• Progress on CuRe technology conversion beginning Q1 2026 at the Ohio facility and phased replication across the fleet, including validation of claimed performance improvements in bifaciality, temperature coefficient, and degradation in real-world operating conditions.

• Gross margin trajectory as the company increases US production mix and navigates tariff costs, warehousing expenses, and logistics challenges, particularly if Section 45X benefits are curtailed or eliminated.

• Capital deployment and return on investment for the $0.8-1.0 billion in expected 2026 capex, including the sixth US facility ramp timeline and achievement of planned operating metrics similar to existing production lines.

This summary is based solely on excerpts from the company's Form 10-K filing.