Solar panel manufacturer First Solar (NASDAQ:FSLR) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 6.4% year on year to $844.6 million. On the other hand, the company’s full-year revenue guidance of $5 billion at the midpoint came in 8.9% below analysts’ estimates. Its GAAP profit of $1.95 per share was 22.1% below analysts’ consensus estimates.
Revenue: $844.6 million vs analyst estimates of $847.9 million (6.4% year-on-year growth, in line)
EPS (GAAP): $1.95 vs analyst expectations of $2.50 (22.1% miss)
Adjusted EBITDA: $349.7 million vs analyst estimates of $380.6 million (41.4% margin, 8.1% miss)
The company dropped its revenue guidance for the full year to $5 billion at the midpoint from $5.55 billion, a 9.9% decrease
EPS (GAAP) guidance for the full year is $15 at the midpoint, missing analyst estimates by 17.1%
Operating Margin: 26.2%, down from 30.6% in the same quarter last year
Free Cash Flow was -$813.9 million compared to -$145.7 million in the same quarter last year
Market Capitalization: $15.09 billion
“Despite the near-term challenges presented by the new tariff regime, we believe that the long-term outlook for solar demand, particularly in our core U.S. market, remains strong, and that First Solar remains well-positioned to serve this demand,” said Mark Widmar, Chief Executive Officer.
Company Overview
Headquartered in Arizona, First Solar (NASDAQ:FSLR) specializes in manufacturing solar panels and providing photovoltaic solar energy solutions.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, First Solar grew its sales at a mediocre 6.8% compounded annual growth rate. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about First Solar.
First Solar Quarterly Revenue
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 23.3% over the last two years is above its five-year trend, suggesting its demand recently accelerated. First Solar’s recent performance shows it’s one of the better Renewable Energy businesses as many of its peers faced declining sales because of cyclical headwinds.
First Solar Year-On-Year Revenue Growth
This quarter, First Solar grew its revenue by 6.4% year on year, and its $844.6 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 41.1% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will fuel better top-line performance.
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
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 20.8%.
Analyzing the trend in its profitability, First Solar’s operating margin rose by 13.2 percentage points over the last five years, as its sales growth gave it operating leverage.
First Solar Trailing 12-Month Operating Margin (GAAP)
This quarter, First Solar generated an operating profit margin of 26.2%, down 4.4 percentage points year on year. Since First Solar’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Earnings Per Share
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 96% compounded annual growth rate over the last five years, higher than its 6.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
First Solar Trailing 12-Month EPS (GAAP)
Diving into First Solar’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, First Solar’s operating margin declined this quarter but expanded by 13.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses 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 449% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q1, First Solar reported EPS at $1.95, down from $2.20 in the same quarter last year. This print 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 $11.76 to grow 77.1%.
Key Takeaways from First Solar’s Q1 Results
We struggled to find many positives in these results. Despite in-line revenue, adjusted EBITDA and EPS in the quarter fell short, showing that profitability was worse than expected. The company's full-year revenue guidance missed significantly and its full-year EPS guidance also fell short of Wall Street’s estimates as well. Overall, this was a softer quarter. The stock traded down 10% to $123.50 immediately after reporting.
First Solar’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
