First Solar, Inc. Financial Analysis and Market Update - Navigating IRA Benefits and Tariff Challenges

Introduction#

First Solar, Inc. (FSLR has recently experienced notable shifts in its financial and operational landscape, driven by expanding manufacturing capacity, policy incentives, and tariff challenges. As of mid-July 2025, the company's stock trades at $167.43, reflecting a -2.62% decline on recent trading days. This movement occurs against a backdrop of solid fiscal 2024 results, ongoing strategic adjustments, and anticipation of its Q2 2025 earnings report scheduled for July 31.

Financial Performance and Growth Trajectory#

First Solar's fiscal 2024 financial results underscore a robust recovery and growth trajectory following years of volatility. The company reported $4.21 billion in revenue, marking a +26.75% increase over 2023's $3.32 billion. Net income surged to $1.29 billion, a remarkable +55.52% growth, reflecting improved operational efficiencies and market demand. These gains translated to a net income margin of 30.72% in 2024, up from 25.03% in 2023, indicating enhanced profitability.

Operating income rose to $1.39 billion with an operating margin of 33.15%, signaling strong control over costs and successful scaling of manufacturing operations. The gross profit margin improved significantly to 44.17%, up from 39.19% in the prior year, highlighting better cost of revenue management and pricing power.

However, the company's free cash flow was negative at -$308.08 million for 2024, mainly due to aggressive capital expenditures totaling $1.53 billion aimed at expanding manufacturing capabilities. This investment aligns with First Solar's strategic priority to capitalize on domestic production incentives under the Inflation Reduction Act (IRA).

Key Financial Metrics Summary#

Metric	2024 Value	2023 Value	% Change
Revenue	$4.21B	$3.32B	+26.75%
Net Income	$1.29B	$830.78M	+55.52%
Gross Margin	44.17%	39.19%	+4.98pp
Operating Margin	33.15%	25.83%	+7.32pp
Free Cash Flow	-$308.08M	-$784.51M	+60.73%
Capital Expenditure	$1.53B	$1.39B	+10.07%

(Source: Monexa AI

Strategic Drivers: IRA Credits and Manufacturing Expansion#

The Inflation Reduction Act (IRA) remains a pivotal driver for First Solar’s strategic direction. The act’s 45X tax credit incentivizes domestic solar manufacturing, directly benefiting First Solar's U.S.-centric production model. This policy framework reduces reliance on imports, mitigates tariff exposure, and supports long-term cost competitiveness.

First Solar’s significant capital expenditures in 2024 reflect a deliberate expansion of its manufacturing footprint, especially in the United States. This expansion is designed to align with IRA incentives, enabling the company to enhance capacity and meet rising demand for solar modules domestically.

The company's proprietary cadmium telluride (CdTe) thin-film technology also underpins its competitive advantage. CdTe modules offer lower manufacturing costs and superior efficiency in low-light and high-temperature conditions compared to traditional silicon panels, positioning First Solar uniquely in the global solar market.

Tariff Impacts and Supply Chain Adjustments#

Despite the benefits of IRA, First Solar continues to navigate challenges from tariffs imposed on imported solar modules and components. These tariffs elevate costs and introduce margin pressure across the supply chain.

First Solar's U.S.-based manufacturing strategy partially insulates it from some tariff impacts, but the company still faces indirect cost pressures, including higher prices for imported raw materials and components. Recent guidance revisions for 2025, with tempered revenue and EPS expectations, reflect these headwinds.

To mitigate tariff risks, First Solar has diversified its supply chain and increased investment in domestic sourcing. These adjustments aim to enhance supply chain resilience and reduce dependency on vulnerable import channels.

Upcoming Q2 2025 Earnings Preview#

First Solar is set to report Q2 2025 earnings after market close on July 31, with consensus estimates projecting $1.028 billion in revenue and an EPS range of $2.595 to $2.64. This would represent a recovery from Q1 2025's results, which missed estimates with EPS of $1.95 and revenue of approximately $844.57 million.

Investors will closely monitor module shipment volumes expected between 3 to 3.9 GW, and the company’s ability to sustain or improve average selling prices (ASPs) amid tariff and supply chain pressures. Margin trends will be particularly scrutinized as indicators of operational efficiency and pricing power in a competitive landscape.

Valuation and Analyst Sentiment#

At a current price-to-earnings (P/E) ratio of ~14.23x, First Solar trades at a moderate valuation compared to industry peers. Forward P/E estimates suggest a declining trend, with projections of 11.19x in 2025 and as low as 5.02x by 2029, implying expected earnings growth and potential margin expansion.

Enterprise value to EBITDA stands near 10.27x, reflecting a balanced market assessment of growth potential and risk.

Analyst price targets remain broadly positive, reflecting confidence in First Solar’s growth prospects driven by IRA incentives, technological differentiation, and manufacturing scale.

Innovation and R&D Focus#

First Solar continues to invest approximately 4.72% of revenue in research and development, emphasizing advancements in CdTe technology and exploration of next-generation solar solutions such as quantum dots and perovskite cells. These technologies promise enhanced efficiency and lower costs, which could strengthen First Solar’s market positioning over the medium to long term.

Historical Context and Strategic Effectiveness#

First Solar's recent financial resurgence follows a challenging period in 2022 marked by a net loss of $44.17 million and a gross margin collapse to 2.67%. The turnaround to a 30.72% net margin in 2024 demonstrates effective management execution, capital allocation, and alignment with favorable policy shifts.

Capital expenditures have increased steadily since 2021, reflecting a strategic pivot towards capacity expansion. This mirrors industry-wide investment cycles where early-stage growth requires upfront capital for long-term scale and profitability.

What This Means for Investors#

• Strong Growth Momentum: Revenue and net income growth in 2024 highlight First Solar's ability to capitalize on rising solar demand and policy tailwinds.

• Strategic Capital Deployment: Heavy investment in manufacturing capacity signals commitment to leveraging IRA benefits but weighs on free cash flow in the near term.

• Tariff Risk Management: Ongoing tariff-related cost pressures require continued supply chain agility and domestic sourcing expansion.

• Valuation Outlook: Forward multiples suggest market expectations of sustained earnings growth and margin improvement.

• Innovation Pipeline: Continued R&D investment supports potential technological breakthroughs that could drive future competitive advantages.

Key Financial Metrics Comparison Table#

Metric	2022	2023	2024
Revenue ($B)	2.62	3.32	4.21
Gross Margin (%)	2.67	39.19	44.17
Operating Income ($M)	-216.27	857.27	1,390
Net Income ($M)	-44.17	830.78	1,290
Free Cash Flow ($M)	-30.24	-784.51	-308.08

Sources#

• MarketBeat Earnings Data
• Moomoo Financials
• StockTitan News
• GuruFocus News
• Business Wire
• TipRanks Earnings