Prepared remarks
Good afternoon, and welcome to First Solar's Second Quarter 2026 Earnings Conference Call. This call is being webcast live on the Investors section of First Solar's website at investor.firstsolar.com. All participants are in a listen-only mode. And please note that today's call is being recorded. I would now like to turn the conference over to your host, Byron Michael Jeffers, Head of Investor Relations.
Good afternoon. Thank you for joining First Solar's Second Quarter 2026 Earnings Call. With me today are Mark R. Widmar, Chief Executive Officer, and Alexander R. Bradley, Chief Financial Officer. Mark will begin with second quarter highlights, followed by Alexander, and then we will open the line for questions. Today's discussion contains forward-looking statements. Actual results may differ materially due to risks and uncertainties as described in our earnings press release and other SEC filings and the earnings material available at investor.firstsolar.com. We undertake no obligation to update these statements due to new information or future events. We will also reference certain non-GAAP financial measures; reconciliations to the most directly comparable GAAP measures are in our earnings press release and presentation. This non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with US GAAP. With that, I will turn it over to Mark.
Thank you, and good afternoon. Beginning on Slide 4, we delivered both record second quarter and first half sales volume and improved financial performance relative to the prior year. During the quarter, we generated over $1 billion in net sales, expanded gross margin to approximately 57%, and delivered strong adjusted EBITDA performance. We also surpassed an important milestone for First Solar — exceeding 100 gigawatts of cumulative module sales globally. We view this as a reflection of the trust customers have placed in First Solar over the more than 2.5 decades and the durability of our technology and manufacturing platform. We ended the quarter with approximately 45.1 gigawatts of contract backlog. We delivered with deliveries extending through the end of the decade, demonstrating the demand for our differentiated technology platform, domestic manufacturing footprint, and delivery certainty. Turning to manufacturing. Our U.S. facilities continue to operate at high utilization rates during the quarter. In South Carolina, the first phase of the finishing facility remains on track to begin production in the second half of 2026, with equipment installations progressing as expected. For the second phase, we now expect completion in mid-2027. While the revised timing reflects a number of factors associated with optimizing the facility's launch, it also enables the earlier incorporation of CuRe technology. We are pleased with the performance of CuRe, with both high-volume manufacturing at our Perrysburg facility and performance data from field deployments across multiple climates exceeding expectations. We believe incorporating the technology closer to the onset of the facility's commercial launch will simplify execution, accelerate value realization, and enhance customer value and the facility's long-term financial performance. Once completed, the South Carolina facility is expected to provide up to 3.5 gigawatts of finishing capacity for modules initiated at our international manufacturing sites, giving us greater flexibility to optimize our supply chain while also optimizing freight, tariff, domestic content, and Section 45X economics. With respect to our international manufacturing fleet, production planning and utilization levels in Malaysia and Vietnam continue to be influenced by demand drivers and economics, including the pending Section 232 polysilicon and derivative investigation and tariffs. We expect greater policy clarity will help inform the long-term operating profile for the approximately 1.8 gigawatts of fully finished international capacity that remains available after accounting for capacity being used to produce semi-finished product destined for our new South Carolina finishing line. A note on manufacturing optimization and allocation: approximately 41 gigawatts of our 45 gigawatt backlog includes some form of domestic content requirement. These requirements vary significantly and range from requiring exclusive supply from U.S. fully integrated factories to blending U.S.-made supply with both fully integrated domestic factories as well as product from our upcoming South Carolina finishing line, to domestic content points requirements which are factory-agnostic, allowing blending of product from across our global fleet. We therefore continually balance and refine our module supply and demand allocation across the fleet to meet customer contractual obligations, optimize factory throughput, and optimize gross margin. This typically means that over a period of time, we will seek to maximize production and sales first from our fully integrated U.S. factories, second from our South Carolina finishing line, and third from our international facilities. As it relates to perovskites, we continue to advance our development program for this potentially significant technology platform. Our previously announced development line continues to progress to process-improved efficiency and reliability attributes on smaller form factor modules. While our Series 6 form factor pilot line remains on schedule and is expected to reach operational readiness in the first half of 2027. Our continued progress has given us confidence as we continue to invest substantial capital in our efforts to realize the commercialization of perovskites. Earlier today, we published our latest corporate responsibility report reinforcing our conviction that how and where solar technology is made matters. The report details how we create enduring value by developing, sourcing, manufacturing, and recycling solar modules domestically — supporting jobs and communities, strengthening industrial capacity, and helping ensure the benefits are realized locally. It also highlights our continued focus on responsible manufacturing, supply chain transparency, workforce development, and resource efficiency. The report reflects the effectiveness of a business model where corporate responsibility is not a construct but the default. Before turning the call over to Alexander, I want to briefly address the market and policy environment and how it is informing our commercial approach. The underlying drivers for utility-scale solar remain intact, including low-cost generation, data center development, electrification, aging generation assets, and the need for affordable, scalable new capacity. The policy landscape continues to evolve, particularly as it relates to the pending outcome for the Section 232 polysilicon and derivatives investigation, as well as final FEOC regulations. In this environment, we continue to prioritize pricing, contract quality, appropriate risk allocation, and long-term value over short-term booking volume. Relative to the beginning of the year, we are seeing increased customer engagement, and as policy clarity improves, we believe First Solar remains well positioned to capitalize on these opportunities. With that, I will now turn the call over to Alexander to discuss our bookings and financial results. Thanks.
Beginning on Slide 5, as of June 30, 2026, our contracted backlog totals 45.1 gigawatts with an aggregate transaction value of $13.6 billion, exclusive of technology adjusters, with scheduled deliveries extending through 2030. Early this month, Cypress Creek Energy broke ground on the Steel River Energy Center in Arkansas, a project utilizing First Solar modules and previously included in our contracted backlog. The initial phase is expected to provide approximately 1.6 gigawatts of solar generation capacity and 1.9 gigawatt hours of battery storage to support Google's growing energy needs, with the opportunity for future expansion. Since our last earnings call, we recorded approximately 1.9 gigawatts of additional U.S. gross bookings at an average selling price of approximately $0.36 per watt, inclusive of applicable technology adjusters. While near-term customer activity continues to be influenced by the current policy environment discussed by Mark, our fully integrated domestic manufacturing fleet remains substantially committed through 2028, providing a high degree of volume and pricing visibility. Given the limited amount of uncommitted domestic capacity available over the next several years, we continue to be disciplined in evaluating incremental contracting opportunities. We also initiated our first customer notifications related to contract CuRe adjusters during the quarter. An important milestone — we are beginning to translate CuRe's performance benefits from potential adjusters into backlog value and future revenue realization. We expect the contribution from these adjusters to increase as CuRe deployment expands across our contracted portfolio. As a reminder, we expect limited ASP upside from CuRe sales in 2026, largely as a function of contractual notification deadlines and the relative timing of the decision to recommence CuRe production. Turning to India. Our guidance continues to assume production is largely sold domestically in a short-cycle book-and-bill market, with the factory operating at a high utilization rate. India gross bookings during the first half of the year totaled approximately 1.1 gigawatts at an average selling price of approximately $0.20 per watt. Given the shorter contracting cycle of the domestic India market, booking economics generally provide a reasonable indicator of near-term revenue realization. Turning to Slide 6. Net sales for the second quarter were approximately $1.06 billion, a decrease of approximately 4% year over year. The decrease was primarily driven by lower revenue associated with customer contract terminations recognized in the prior year period, partially offset by higher module volumes sold. Gross margin was approximately 57%, an increase of approximately 12 percentage points compared to the second quarter of 2025. The increase was primarily driven by an estimated $89 million net IEPA tariff-related benefit, a higher mix of modules qualifying for Section 45X tax credits, and lower logistics costs. The net IEPA tariff-related benefit reflects our current estimate of expected recoveries related to commercial obligations and other tariff-related considerations and remains subject to refinement as additional information becomes available. These benefits were partially offset by lower termination-related revenue and higher duties and tariffs. While logistics costs improved year over year, the quarter included higher over-the-road freight costs driven by overall capacity tightening and volatility in diesel costs. These impacts were partially offset by higher sales rate recovery. Operating expenses were approximately $155 million, including $76 million of R&D expense. R&D increased year over year, primarily reflecting continued investment in perovskite development and the impairment of certain R&D equipment that is no longer expected to be used as part of our technology roadmap. Net income was $423 million, up approximately 24% year over year. Adjusted EBITDA was $644 million, above the high end of our previously communicated Q2 preview range, with an adjusted EBITDA margin of 61%. Moving to Slide 7. We ended the quarter with $1.7 billion of net cash, providing substantial balance sheet strength and financial flexibility while remaining within our targeted long-term cash range of $1.5 billion to $2 billion. Operating cash outflows year to date were $360 million; first-half working capital dynamics improved compared to outflows of $458 million during the first half of 2025. First-half capital expenditures were $280 million, primarily supporting our South Carolina finishing facility and technology investments. We completed the full prepayment of our India DFC loan during the quarter. Turning to Slide 8, our full-year 2026 guidance remains unchanged. With that said, our guidance now assumes a net tariff impact of $60 to $80 million, with updates including the previously mentioned net IEPA recovery and the assumption of Section 301 tariffs in the second half of the year. We also forecast offsetting updates between production start-up expense and R&D expense, as well as incremental freight costs due to certain non-recoverable domestic trade expenses above our previously assumed forecast, largely driven by changes in module delivery locations. In some cases, domestic freight costs are now approaching international shipping economics. For the third quarter, we expect volumes sold between 3.9 and 4.5 gigawatts and adjusted EBITDA between $625 million and $775 million. Summary of first-half performance and our reaffirmed outlook reflect the strength of our strategy of reshoring and scaling domestic manufacturing, progressing our technology roadmap, and maintaining a selective approach to new bookings in light of key pending trade and policy decisions. If we look ahead, our priorities remain unchanged. We remain focused on disciplined execution, serving our customers, advancing our technology roadmap, managing capital prudently, and maintaining financial flexibility. With that, operator, please open the line to questions.
Questions and answers
We will now begin the question-and-answer session. Please limit yourself to one question. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Jonathan Windham with UBS. Jonathan, your line is now open. Please go ahead.
Perfect. Thanks. Hey, congratulations on the result and appreciate you taking the questions. So obviously, the FCC had a ruling about solar inverters a couple of days ago. On one side, it signals the government is promoting domestic content within electrical equipment hardware, which is obviously very good for you given your position in domestic solar modules. But just curious if you have any early thoughts on potential impact on broader solar installations and the industry's ability to work around that provision. Thank you so much.
Yeah. Thanks, Jonathan. I think it continues the theme of our U.S. government trying to ensure we do not have overreliance on certain countries, China being one of them in particular. I think the good thing about this is that the industry has started to get ahead of trying to find comprehensive domestic supply chains. We were an early industry leader in reshoring manufacturing and creating a supply chain in the U.S. for our U.S. operations. You are seeing this now really across all components of equipment suppliers, all the way up to efforts to localize battery supply chains as much as possible. So I do not see it being a constraint near term. I think current models that have been shipping into the U.S. will continue to be allowed. There is a message there, though, that scrutiny may be stepped up as we move forward. It sends another great signal to domestic manufacturers: we need to create domestic supply-chain resiliency to enable not only the solar industry to thrive, but really other industries as the U.S. industrializes. We fully support this direction.
Your next question comes from the line of Brian Lee with Goldman Sachs & Co. Brian, your line is now open. Please go ahead.
Hey, guys. Thanks for taking the questions. I have two: first, on the Google Steel River project, appreciate you commenting on that. I might have missed it, but how much of the 1.9 gigawatts in U.S. gross bookings came from that one project in the quarter? And how much more booking potential exists on that project site? And bigger picture, maybe speak to how you are seeing general interest from the hyperscaler data center community. Second, customary question on latest thoughts, timing, and visibility into Section 232: how are you viewing the potential for floor prices in the $0.40 per watt or higher range, and how quickly would you move on your bookings funnel and Southeast Asia strategy once you get clarity on this, presumably in the next few months? Thanks.
Alright, Brian. I'll take the first two and Alexander can talk about Southeast Asia. On the project we announced with our partner, the modules we supplied to Cypress Creek for the Steel River project were already included in our bookings. That announcement was to highlight a strategic project. If you look at recent announcements over the last several weeks, you'll see a theme: the Cypress Creek project will be phase one at about 1.6 gigawatts and could expand to roughly 2.5 gigawatts for a later phase. That project also includes significant battery storage. We also had recent announcements with Terra-Gen at about 1.44 gigawatts and another with Pattern for over a gigawatt. Those three projects announced recently represent about 5 gigawatts of capacity. Half of that volume is directly tied to Google as a hyperscale. The other 2.5 gigawatts have undisclosed counterparties, but disclosures reference very large corporate accounts, and you can infer the likelihood of who those are. So demand from hyperscalers is strong. These strategic projects rely on delivery certainty, storage integration, and reliability — areas where First Solar is well positioned. On Section 232 pricing dynamics, there are many evolving views about whether there will be minimum import prices, tariffs, or quotas. We believe the outcome will be constructive but it's still evolving. We remain in constant contact with the appropriate parties at USTR and Commerce and continue to provide our input. We have used this policy uncertainty as a reason to be disciplined. In July we booked almost 2 gigawatts in the U.S. at very good prices, as Alexander indicated. There are about 2 or more gigawatts that are subject to closing conditions, and another couple of gigawatts in active conversations that have high probability of closing by year-end. How much this is catalyzed by decisions around Section 232 remains to be seen.
Brian, as it relates to Southeast Asia capacity, we have been treating that capacity like an option. We are running underutilization costs of roughly $30 million a quarter related to Southeast Asia, about half of which is non-cash. Given that we have held through the first half of the year, making a decision on the long-term future of that capacity pending the outcome of Section 232 makes sense. To frame the capacity: we originally had about 7 gigawatts of total nameplate capacity in Malaysia and Vietnam. About half of that is dedicated to production that will feed our new finishing line in South Carolina — so roughly 3.5 gigawatts. We did remove some tools and moved them to the U.S. to reuse in our perovskite work. That ultimately leaves about 1.8 gigawatts of end-to-end fully finished capacity that we could ramp up across Malaysia. It's that approximately 1.8 gigawatts that we are evaluating and holding a decision on pending the outcome of Section 232.
Your next question comes from the line of Praneeth Satish with Wells Fargo. Your line is now open. Please go ahead.
Thanks. Good evening. Maybe going back to Section 232: we've heard potential waivers or quotas being allowed for certain domestic cell producers that could exempt them from some of these policy changes. Conceptually, if some of these waivers are granted, do you think that could mute some of the price upside from Section 232, or do you still see a constructive supply-demand setup? Just trying to think conceptually how you view that.
Any modification versus a broad restriction will create some potential dilutive impact to the strategic intent of Section 232. It depends on the size and duration of any waiver or quota and whether it scales down over time. It's hard to give a precise impact now. We are not advocating for extensive waivers; to the extent they're allowed, they should be limited in duration. The goal is to create a domestic supply chain, and broad carve-outs would disincentivize the investments needed to scale here in the U.S. Clarity and certainty are better than creating ongoing exceptions that introduce ambiguity.
There's history here. If you look back at Section 201 tariffs and the exemption for bifacial technology, that exemption effectively undermined the provision. The administration has seen how exemptions can undermine policy intent. If Section 232 is intended to address a national security interest, it doesn't make sense to have a carve-out or quota that defeats that provision.
Got it. That makes sense. And then, if Section 232 goes through and you get a constructive outcome, you mentioned about 4 gigawatts-plus of pending deals for the second half — do you sense more demand sitting on the sidelines waiting for policy clarity that could push that number higher? And a clarification: if Section 232 goes through, would you bring Southeast Asia capacity into the U.S. as finished modules, or would you bring them as semi-finished and expand U.S. finishing capacity?
There are definitely customers sitting on the sidelines waiting to see how this plays out. Some deals subject to closing conditions are tethered to posting security; posting the required security is a priority for us and sometimes counterparties can't post immediately. That has delayed some closings. Some counterparties are hedging and waiting to see if ASPs rise. So yes, there is demand on the sidelines. We want clarity. I'll let Alexander address the specifics of how we might use Southeast Asia capacity depending on tariff and policy outcomes.
What we could do with the Southeast Asia facilities depends not only on where Section 232 ends up but also other tariff provisions. For example, Section 301 replaced Section 202 tariffs that were in effect for the first half of this year, and there is still risk around Section 301 relating to excess capacity; that investigation is ongoing. Depending on the total tariff impact for product coming from Malaysia and Vietnam, we could sell fully finished international product into the U.S., bring some product in as semi-finished work-in-progress and finish it in our existing U.S. facilities, or, less likely but still an option, build another finishing line in the U.S. Building another finishing line would require finding a site with power and the time to build it out, so that's a longer-term option. We also note that we have limited incremental finishing capacity at our existing U.S. finishing lines, probably in the couple-hundred-megawatt range, which could provide a small amount of flexibility but not full resolution for the underutilization we're seeing this year.
Your next question comes from the line of Julien Dumoulin-Smith with Jefferies LLC. Julien, your line is now open. Please go ahead.
Thank you, operator. Good afternoon, team. Appreciate the opportunity. Quickly, to follow up on the bookings: how do you think about safe harbor having played into the latest quarter? Obviously, July 4 being a relevant threshold and also being a leading indicator for future sales into the later part of the decade. What are you thinking in terms of safe harbor to acquire initial customer commitments? And as a follow-up, could you elaborate on permutations and the timeline for the remaining piece in Southeast Asia? It sounds like you might be making a decision soon; can you be more specific?
I'll take the Southeast Asia question. We are really waiting for the outcome of Section 232. We would expect to evaluate that and have a view shortly thereafter. It does not necessarily mean we will take an immediate action such as a shutdown or full ramp-up, but once we have a sense of the policy, it allows us to evaluate options. That evaluation will take some time — we want to make sure we understand the policy and give customers a chance to evaluate it as well. Then we can discuss long-term offtake potential from those facilities.
On safe harbor: most of the bookings we reported — the 1.9 gigawatts of U.S. bookings — occurred outside of the quarter close and outside typical safe harbor considerations; most of that activity happened in July. There was a court ruling in late June around the use of certain CapEx rules to safe harbor, but it came too late in the quarter to be broadly actionable. Most parties have safe harbored with transformers and inverters. Looking forward, safe harbor remains an important component for projects targeting commercial operation dates in the 2029–2030 timeframe, and FEOC-related project-level requirements will be important for those projects. We are seeing a conservative approach from customers — they are receiving cautious advice from tax counsel and others, and they want to be airtight to protect ITC or PTC benefits. That conservatism tends to benefit us because of our domestic footprint and the clarity of our supply options as we move toward delivering modules later in the decade.
Your next question comes from the line of Philip Shen with Roth Capital Partners. Philip, your line is now open. Please go ahead.
Hey, guys. Thanks for taking my questions. Just wanted to follow up on Section 232 timing. We had been thinking August, but we've seen delays. If it slips past August into September and gets closer to the midterms, there's a chance the decision could be pushed. Based on the folks you are in touch with, do you think August is still likely, or is there greater probability it could slip into the fall or beyond?
I think I got your question.
We are engaged and we want a decision that achieves the strategic intent and spirit of the policy. There are many factors being evaluated and the administration is trying to ensure implementation will achieve its goals. We are patient and continue to engage, but I can't give a high-conviction timing view beyond what you've already heard. We are getting signals that meetings are happening and decisions are being considered, but I cannot confidently predict whether it will be August or slip into September or later. The most important outcome is that the policy achieves its strategic intent.
And we are going to continue to be engaged with the administration to ensure that. Your next question comes from the line of Colin Rusch with Oppenheimer & Co. Your line is now open. Please go ahead.
Thanks so much. Are there opportunities for you to reduce input costs in U.S. manufacturing? Talk a little bit about the supply chain and how that is evolving. I know you have had discussions with glassmakers around capacity expansion and their capital needs. How do you look at that trend on a multi-year basis?
Colin, it's a challenging environment. With reshoring there is pressure on commodities — steel, copper, and other inputs — and while we don't use silver like some competitors, there are many pressures. Fuel and electricity prices have been elevated but may be transitory in some cases. We are focusing on increasing throughput and automation to reduce labor cost, and we are exploring product design changes to take cost out, such as adjustments to back rails and glass thickness where feasible. CuRe gives us an opportunity to drive efficiency up, which helps cost per watt even if cost per module remains under pressure. We continue to seek ways to optimize input costs, but it's a challenging commodity environment right now.
I'll add that we could use the balance sheet to work with suppliers who need funding for expansion. Leveraging our financial strength to secure forward pricing is an option if it is the right risk-return profile. Also, beyond bill-of-material costs, period costs matter: we are experiencing challenges around the cost of producing versus the cost of selling. Freight challenges are notable — we are seeing domestic trucking costs that, in some routes, approach the economics of shipping from Asia. We are continuously optimizing domestic transport routes and factory allocations to reduce those costs as much as possible.
Our final question comes from the line of Corinne Blanchard with Deutsche Bank. Your line is now open. Please go ahead.
Hey. Good afternoon. Thank you for taking my question. I want to come back to M&A. You mentioned using the balance sheet and potentially working with suppliers. Can you expand on what you are targeting with the current balance sheet? It felt like you suggested M&A could help manage input cost — what else do you see as options for First Solar?
When we talk about uses of cash, M&A has been on the list for a long time, but generally we've focused on working capital reserves and growing capacity. Over the last decade we have also increased R&D investment. If we pursue M&A, the obvious area would be technology and technology-adjacent assets: companies, teams, or intellectual property that accelerate our technology transition, including perovskite development. We are also open to adjacent opportunities where we can leverage our strengths in high-volume thin-film manufacturing. We will evaluate any potential M&A with a disciplined focus on the competitive landscape, the addressable market, and the policy environment. Given our position in the industry, many opportunities come across our desk, and we are more open to M&A now than we have been historically, but we'll be disciplined about it.
We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.