A maker of thin-film solar panels, First Solar is the largest solar manufacturer in the Western Hemisphere, headquartered in Phoenix, Arizona. Its panels use cadmium telluride coated onto glass in a process closer to making flat-screen TVs than to cutting silicon wafers. The company began in 1990 as Solar Cells, Inc., founded by glass-industry inventor Harold McMaster, and was renamed First Solar in 1999 after a new ownership group took over.
Gross margin reached 57.3% as an $88.6M IEEPA tariff refund and higher Section 45X credits more than offset a 3.7% revenue decline.
A one-time tariff refund reshaped the quarter. fell 3.7% to $1.06 billion as lower contract termination payments outweighed higher module volumes, but expanded 11.7 points to 57.3% after an $88.6 million tariff refund and higher Section 45X credits cut cost of sales by nearly a quarter. The company paid off its remaining India debt, but cash fell to $1.69 billion as and consumed the windfall.
Key takeaways
reached 57.3%, up 11.7 points , driven by an $88.6 million net benefit from tariff refunds, higher Section 45X advanced manufacturing production credits, and a $35.6 million reduction in logistics costs.
fell 3.7% to $1.06 billion, as a 5.3% increase in module volumes sold was more than offset by lower revenue from customer contract terminations compared to the prior-year quarter.
Cost of sales fell 24.5% , as the refunds and Section 45X credits were partially offset by a $29.3 million increase in duties and tariffs.
Section summaries
Management's Discussion and Analysis
Q2 2026 gross margin surged to 57.3% driven by IEEPA tariff refunds and higher Section 45X credits, offsetting lower revenue from contract terminations.
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fell 3.7% to $1.1B as lower revenue from customer contract terminations was partially offset by a 5.3% increase in module volumes sold.
expanded 11.7pp to 57.3%, primarily from an $88.6M net IEEPA tariff refund benefit, higher Section 45X credits, and $35.6M in lower logistics costs.
rose 24.6% to $450.4 million, and reached $3.92, up 23.3% from $3.18 a year ago, as the expansion flowed through despite a 39.9% increase in R&D expense tied to equipment and higher R&D facility costs.
The company prepaid the remaining $328.2 million principal on its India , eliminating from the balance sheet, while cash and marketable securities fell to $1.69 billion from $2.90 billion at year-end 2025.
The USITC instituted Investigation No. 337-TA 1494 in March 2026 into allegedly infringing TOPCon imports, with a final ruling expected in September 2027, while the company's patent infringement suits against JinkoSolar, Canadian Solar, and Trina Solar remain stayed pending that outcome.
What changed
The $88.6 million tariff refund was a one-time item not present in any prior quarter, and it is the single largest driver of the 11.7-point expansion this period; without it, the underlying margin improvement from lower logistics costs and higher Section 45X credits would have been more modest.
The contracted , flagged at 47.9 GW in Q1 2026, was not updated in this filing's MD&A, leaving the trajectory unclear after the prior quarter's decline from 50.1 GW at year-end 2025.
The $323.6 million termination payment claim against BP Solar and Lightsource, flagged in Q1 2026, remains unresolved; oral argument on the company's motion to dismiss the defendants' $175 million counterclaim is scheduled for July 29, 2026.
fell to zero from $237.2 million in Q1 2026, as the company prepaid the remaining India balance, resolving a liability that had been declining steadily since its $464.1 million peak in Q4 2023.
remained negative at -$144.9 million, improving from -$214.8 million in Q1 2026 but still a drain, as supplier payments and investments continued to consume cash despite the and Section 45X inflows.
What to watch
Whether the 57.3% is sustainable in Q3 2026 absent the $88.6 million tariff refund, and what the underlying margin run-rate looks like with only the recurring Section 45X credit and logistics savings.
The outcome of the July 29, 2026 oral argument on the motion to dismiss the BP Solar and Lightsource counterclaims, and whether the $323.6 million termination payment claim moves toward trial or settlement.
Whether the USITC investigation yields a preliminary exclusion order or other interim relief before the September 2027 final ruling, and whether any licensing materializes from the TOPCon patent assertions.
The trajectory of the cash balance, now at $1.69 billion, against the $0.8 billion to $1.0 billion in remaining 2026 , including the new South Carolina facility, and whether turns positive.
decreased 24.5% , driven by the IEEPA refunds and Section 45X credits, partially offset by higher duties and tariffs of $29.3M.
R&D expense rose 39.9% to $76.2M due to equipment and higher spending on spare parts, materials, and for R&D facilities.
Cash and marketable securities fell to $1.7B from $2.9B at year-end, driven by supplier payments, investments, , and debt repayment, partially offset by Section 45X and IEEPA refunds.
The company prepaid the remaining $328.2M India principal and expects $0.8B–$1.0B in 2026 , including a new South Carolina facility.
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the information previously provided under Item 7A. of our Annual Report on Form 10-K for the year ended December 31, 2025. 50 Table of Contents
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There have been no material changes to the information previously provided under Item 7A. of our Annual Report on Form 10-K for the year ended December 31, 2025.
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First Solar is asserting patent infringement against multiple TOPCon solar manufacturers and pursuing a $323.6M customer contract termination claim.
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First Solar filed district court suits against JinkoSolar, Canadian Solar, and Trina Solar alleging their TOPCon products infringe a First Solar patent, seeking damages and injunctions; all cases are stayed pending a related USITC investigation.
Mundra filed a suit; First Solar counterclaimed for infringement of two patents, and the case is also stayed pending the USITC outcome.
In February 2026, First Solar petitioned the USITC alleging patent infringement by ten groups of TOPCon solar importers, seeking exclusion and cease-and-desist orders; the USITC instituted Investigation No. 337-TA 1494 with a final ruling expected in September 2027.
JinkoSolar, Mundra, and Canadian Solar each filed inter partes reviews challenging patent validity, all of which were declined by the Patent Trial and Appeal Board; ex parte reexaminations were later granted for the '074 patent.
First Solar sued BP Solar Holding and Lightsource Renewable Energy for breaching master supply agreements, claiming $323.6 million in remaining termination payments; defendants counterclaimed for $175 million in damages plus return of $15 million credit support.
First Solar filed a motion to dismiss the defendants' counterclaims in the customer contract dispute, with oral argument scheduled for July 29, 2026.
U.S. tariff and subsidy policy shifts, plus trade-law enforcement, are the dominant risks to module demand, pricing, and asset values.
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Accelerated termination of U.S. energy tax credits under the 'One Big Beautiful Bill' could reduce solar project financing and module demand.
New and evolving U.S. tariffs—including forced-labor tariffs of 10–12.5% on key manufacturing countries—raise module costs and may impair international facilities.
orders on Southeast Asian solar products (rates up to 3,400%) and new investigations on India, Indonesia, and Laos create both upside and downside exposure depending on enforcement.
India’s ALMM policy is tightening domestic-content requirements (cells by 2026, wafers by 2028) while proposed efficiency thresholds could block the company’s modules from the Indian market.
The company is engaged in multiple TOPCon patent lawsuits and a USITC action against numerous competitors, with no insurance coverage for litigation costs.