First Solar Beats Q1 but Policy Overhang Keeps Us Waiting

What happened

First Solar trounced Q1 estimates with EPS of $3.22 and revenue of $1.04B, but the beat was largely driven by favorable 45X credit mix and lower logistics costs, not organic demand. The company’s 46.6% gross margin masks a declining ASP per watt and persistent underutilization/startup costs. Near-term guidance remains unchanged, with management holding commercial discipline pending a Section 232 decision. The core investment thesis hinges on policy clarity around 45X eligibility and trade regime durability, both of which remain unresolved. Until these catalysts are clarified, the stock’s ~$200-215 range reflects balanced risk without a clear catalyst for upside.

Implication

First Solar's Q1 beat underscores its ability to profit from 45X credits and logistics improvements, but these are transient. The company’s true earnings power depends on sustained policy support (Section 45X, tariffs) and a ramp in U.S. bookings at stable pricing (~35¢/W). With only 1.4 GW of U.S. bookings since late February and the trade regime in flux, the risk of a margin reset remains elevated. Investors should demand a higher margin of safety (entry near $185) to compensate for the unresolved policy gating. Waiting for 2Q26 results and a Section 232 decision provides a better risk/reward than chasing the beat.

Thesis delta

The Q1 beat confirms solid operational execution but does not resolve the core policy overhang. The stock remains stuck in a range awaiting clarity on Section 45X and trade durability. Our WAIT rating is reaffirmed; no shift in the investment thesis.