First Solar (FSLR) Stock Climbs On Rich Margins As Policy Risk Lingers

First Solar stock added 2.4% to about US$211, even after a flat three months, as investors absorbed an earnings release built around one clear story: profitability. The quarter delivered a gross margin of about 57% and trailing net profit margins of 32.5% with net income of US$423 million, which is a notably strong combination for a hardware heavy solar manufacturer.

Short term traders are reacting to the headline print. Long term holders are more likely focused on whether this kind of margin profile and earnings power can hold up against policy risk and the company’s multiyear backlog.

Is First Solar at 13x P/E with a DCF value well above the current US$211 price genuinely cheap, or is the market seeing something you are not? Compare the implied upside and margin durability in the valuation analysis for First Solar.

Q2 2026 Earnings Summary

• Revenue, Q2 2026 vs. Q2 2025: US$1,056.2m vs. US$1,097.2m (down about 4%)
• Net Income, Q2 2026 vs. Q2 2025: US$422.6m vs. US$341.9m (up about 24%)
• Basic EPS, Q2 2026 vs. Q2 2025: US$3.93 vs. US$3.19 (up about 23%)
• Gross Margin, Q2 2026 vs. Q2 2025: about 57% vs. about 45% (up about 12 percentage points)

Prefer clean charts over another wall of raw earnings figures and margin tables? Explore First Solar's full financial picture with a visual view of its valuation in the company report for First Solar.

First Solar Bull Case Scores On Profit And Backlog

Bulls argue First Solar’s U.S. centric manufacturing, policy support and large contracted backlog can sustain high utilization and strong pricing. Q2 results provide clear milestones for that story. The company produced record quarterly and first half module volumes while keeping U.S. plants running at high utilization. That aligns with the claim that domestic factories are effectively sold out for several years.

Profitability is also tracking the thesis that policy support and technology upgrades can keep margins supported. Gross margin was near 57% with adjusted EBITDA margin around 61%, helped by Section 45X credits and tariff-related benefits. CuRe technology is already in high volume manufacturing and performing better than the company originally expected, with contractual price adjusters starting to take effect. Finally, a 45.1 GW backlog, roughly US$13.6 billion, with most contracts tied to domestic content requirements, supports the idea of multi-year visibility under current policy rules.

Compare whether that 57% gross margin, high utilization and 45.1 GW backlog have really shifted sentiment on First Solar, or if the recent 2.4% share price move is still out of sync with the Street. See the consensus price target analysis for First Solar

First Solar Bear Case: Policy Reliance Still Unresolved

Bears argue First Solar’s earnings power is too dependent on U.S. policy support and fragile overseas capacity. This quarter does not fully clear that hurdle. The 57% gross margin leans heavily on an estimated US$89 million tariff-related benefit and higher Section 45X tax credit mix, which fits the concern that a large slice of profit is tied to temporary incentives and tariff mechanics. Management also keeps full year guidance unchanged but now includes only US$60 million to US$80 million of net tariff benefit, which suggests that Section 301 and other actions could have mixed effects.

On capacity, U.S. factories are busy, yet Malaysia and Vietnam utilization remains subdued with 1.8 GW of idle finished capacity. That aligns with earlier worries about underused international plants and earnings drag from production shifts rather than fully disproving them.

With earnings power so strong, the real question for First Solar is whether liquidity, cash generation and reinvestment needs actually support this margin profile. Verify the balance sheet story in our financial health analysis of First Solar stock.

Take Control Of Your Next Move

If First Solar's 57% gross margin and 45.1 GW backlog have your attention, register for free with Simply Wall St and add it to a Watchlist to track the share price against fair value and watch for a better entry point. Once you are invested, use the Portfolio Command Center to cut through market noise and focus on the most important updates that matter for your returns. For a longer term edge, tap into shared research and discussion through the Community and see how other investors are thinking about the same risks and catalysts. In this way, you can spot hidden drivers and potential red flags early and stay a step ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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