First Solar (FSLR)

Solar panel manufacturer First Solar (NASDAQ:FSLR) met Wall Streets revenue expectations in Q3 CY2025, with sales up 79.7% year on year to $1.59 billion. On the other hand, the company’s full-year revenue guidance of $5.08 billion at the midpoint came in 3.8% below analysts’ estimates. Its GAAP profit of $4.24 per share was 1.9% below analysts’ consensus estimates.

Company Overview

Headquartered in Arizona, First Solar (NASDAQ:FSLR) specializes in manufacturing solar panels and providing photovoltaic solar energy solutions.

Renewable energy companies are buoyed by the secular trend of green energy that is upending traditional power generation. Those who innovate and evolve with this dynamic market can win share while those who continue to rely on legacy technologies can see diminishing demand, which includes headwinds from increasing regulation against “dirty” energy. Additionally, these companies are at the whim of economic cycles, as interest rates can impact the willingness to invest in renewable energy projects.

Competitors in the solar industry include SunPower (NASDAQ:SPWR), Sunnova Energy (NYSE:NOVA), and SolarEdge (NASDAQ:SEDG).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, First Solar’s sales grew at a decent 7.6% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. First Solar’s annualized revenue growth of 26.4% over the last two years is above its five-year trend, suggesting its demand recently accelerated. First Solar recent performance stands out, especially when considering many similar Renewable Energy businesses faced declining sales because of cyclical headwinds.

This quarter, First Solar’s year-on-year revenue growth of 79.7% was magnificent, and its $1.59 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 21.7% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is healthy and implies the market is forecasting success for its products and services.

First Solar’s unit economics are better than the typical industrials business, signaling its products are somewhat differentiated through quality or brand. As you can see below, it averaged a decent 32.7% gross margin over the last five years. Said differently, First Solar paid its suppliers $67.25 for every $100 in revenue.

First Solar produced a 38.3% gross profit margin in Q3, down 11.9 percentage points year on year. First Solar’s full-year margin has also been trending down over the past 12 months, decreasing by 6.5 percentage points. If this move continues, it could suggest deteriorating pricing power and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

First Solar has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 22.8%.

Looking at the trend in its profitability, First Solar’s operating margin rose by 11.9 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q3, First Solar generated an operating margin profit margin of 29.2%, down 7 percentage points year on year. Since First Solar’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

First Solar’s EPS grew at an astounding 44.2% compounded annual growth rate over the last five years, higher than its 7.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into First Solar’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, First Solar’s operating margin declined this quarter but expanded by 11.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For First Solar, its two-year annual EPS growth of 71.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, First Solar reported EPS of $4.24, up from $2.91 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects First Solar’s full-year EPS of $13.02 to grow 71%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

While First Solar posted positive free cash flow this quarter, the broader story hasn’t been so clean. First Solar’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 7%, meaning it lit $7.04 of cash on fire for every $100 in revenue. This is a stark contrast from its operating margin, and its investments in working capital/capital expenditures are the primary culprit.

Taking a step back, an encouraging sign is that First Solar’s margin expanded by 13.9 percentage points during that time. The company’s improvement and free cash flow generation this quarter show it’s heading in the right direction, and continued increases could help it achieve long-term cash profitability.

First Solar’s free cash flow clocked in at $1.07 billion in Q3, equivalent to a 67.1% margin. Its cash flow turned positive after being negative in the same quarter last year, marking a potential inflection point.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although First Solar hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 13.6%, higher than most industrials businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, First Solar’s ROIC has increased significantly over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Companies with more cash than debt have lower bankruptcy risk.

First Solar is a profitable, well-capitalized company with $2.04 billion of cash and $555 million of debt on its balance sheet. This $1.48 billion net cash position is 5.7% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results as its full-year revenue and EPS guidance fell short of Wall Street’s estimates. By looking at industry peer Enphase's results, one could infer that the lower guidance was driven by demand pull-forward as customers raced to buy solar panels before the expiration of residential solar tax credits. Overall, the outlook could have been better, but the stock traded up 2.4% to $238.60 immediately after reporting.

Updated: December 3, 2025 at 10:59 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in First Solar.

First Solar is a cream-of-the-crop industrials company. For starters, its revenue growth was decent over the last five years and is expected to accelerate over the next 12 months. And while its cash burn raises the question of whether it can sustainably maintain growth, its impressive operating margins show it has a highly efficient business model. Additionally, First Solar’s rising cash profitability gives it more optionality.

First Solar’s P/E ratio based on the next 12 months is 12x. Looking across the spectrum of industrials businesses, First Solar’s fundamentals clearly illustrate it’s a special business. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $271.61 on the company (compared to the current share price of $255.07), implying they see 6.5% upside in buying First Solar in the short term.