First Solar Faces Tariff-Induced Turbulence: A Stock’s Rocky Road Ahead?

First Solar (FSLR) shares plunged 10.5% in after-hours trading on April 25, 2025, after the company slashed its financial guidance due to newly imposed tariffs. The Q1 2025 results revealed immediate strain on its operations, with net sales dropping $700 million sequentially and cash reserves halving from year-end levels. While First Solar remains a pillar of U.S. solar manufacturing, the tariff challenges underscore a critical crossroads for the company’s near-term prospects.

The Tariff Toll on Margins and Guidance

First Solar’s Q1 results highlighted the stark impact of tariffs effective April 2025. Net sales fell to $844.57 million, though the company narrowly beat revenue estimates. However, earnings missed significantly, with diluted EPS at $1.95 versus estimates of $2.63. The real story lies in the revised full-year guidance:

• Net Sales: Cut to $4.5B–$5.5B (from $5.3B–$5.8B).
• Gross Margin: Reduced by ~$500M to $1.96B–$2.47B, now including $95M–$220M in ramp costs and underutilization penalties.
• EPS: Slashed to $12.50–$17.50 (from $17.00–$20.00).

The tariffs have also strained liquidity. Cash reserves dropped to $400 million from $1.2 billion in late 2024, due to capital expenditures for its Louisiana factory and a $607 million operating cash flow deficit. Management cited inventory buildup and delayed receivables as key drivers of the liquidity crunch.

Navigating the Near-Term Storm

First Solar’s leadership remains bullish on its long-term prospects, emphasizing its unique position as the only fully vertically integrated U.S. solar manufacturer. CEO Mark Widmar highlighted proprietary CadTel semiconductor technology and a domestic supply chain as competitive advantages. However, near-term hurdles include:

1. Tariff-Driven Cost Pressures: The tariffs, which apply to imported solar cells and modules, force First Solar to absorb higher input costs. Management estimates $60M–$70M in startup expenses for new production lines to mitigate these costs.
2. Tax Credit Timing: The company relies on Section 45X tax credits under the Inflation Reduction Act to offset tariff impacts. However, these credits are backloaded, with ~$1.65B–$1.7B expected in 2025—too late to stabilize Q1’s cash burn.
3. Volume Constraints: Module sales volume guidance was trimmed to 15.5GW–19.3GW from 18.0GW–20.0GW, reflecting delayed projects and inventory management challenges.

The Long-Term Bet: Solar’s Unstoppable Momentum

Despite the near-term pain, First Solar’s strategic position remains formidable. The U.S. solar market is projected to grow at 12% CAGR through 2030, driven by federal incentives and state-level net metering policies. First Solar’s domestic manufacturing base—particularly its 4GW Louisiana facility—positions it to capture this demand.

Conclusion: A Bumpy Ride, but the Destination Remains Bright

First Solar’s Q1 stumble is a clear reminder of the volatility inherent in the solar sector. The stock’s 10.5% post-earnings drop to $122.81 reflects investor anxiety over its ability to navigate tariffs and liquidity pressures. However, the company’s long-term moat—proprietary tech, domestic supply chains, and IR Act tailwinds—remains intact.

Crucially, First Solar’s revised 2025 EPS range of $12.50–$17.50 still implies strong profitability relative to its 2024 EPS of $14.47. With $1.7B in Section 45X credits set to materialize later this year and a backlog of 23GW of contracted projects, the company is poised for a rebound. The key question is whether investors can stomach the interim volatility.

For now, First Solar’s story is a microcosm of the broader solar industry: short-term turbulence amid long-term clarity. With shares now trading at ~12x the midpoint of 2025 EPS guidance ($15), the risk-reward balance tilts toward patience for those willing to bet on the sun rising.