Baird has downgraded First Solar to Neutral from Outperform, pointing to a softer-than-anticipated outlook for 2026 and heightened uncertainty around policy and the company's ability to secure new bookings.
The brokerage described the fourth-quarter results as mixed. First Solar reported revenue of $1.68 billion, outpacing Baird's $1.56 billion estimate and the $1.57 billion consensus estimate. Reported earnings were $4.84 per share, which Baird said was roughly in line with its internal forecast but below the $5.15 consensus. Gross margin improved to 39.5% from 38.3% in the prior quarter, a change Baird attributed in part to a more favorable U.S. sales mix.
For 2026, First Solar provided guidance that calls for revenue of $4.9 billion to $5.2 billion. That range sits below the $5.4 billion Baird had modeled and well under the $6.1 billion consensus view. Adjusted EBITDA was guided to $2.4 billion to $2.6 billion, versus roughly $3.1 billion that analysts had been expecting. Volume guidance of 17.0 to 18.2 gigawatts was largely consistent with Baird's prior estimate.
The company did not offer GAAP net income or EPS guidance, citing uncertainty tied to Section 45X credit discounts, potential gains and losses, and tax accounting. Baird flagged the lack of EPS guidance as a potential negative for investor sentiment.
Despite maintaining a strong backlog, management signaled caution about taking on new contracts while questions remain over Section 232 tariffs, foreign entity of concern rules, and broader global trade policy. Baird said this hesitancy on bookings, combined with policy ambiguity, contributed to its decision to step back from a more bullish stance.
The brokerage also highlighted near-term margin pressure associated with international facilities operating at lower utilization rates. This dynamic is expected to persist until a new finishing line in South Carolina is brought online in late 2026, with production ramping through the first half of 2027. Baird pointed to policy crosscurrents, product warranty issues, and uncertainty around international capacity as further complicating factors for visibility on demand and margins.
In sum, Baird stepped away from a more positive rating until there is clearer evidence of demand stability and margin visibility, driven by concerns around the company's 2026 financial outlook, policy risks, and the timing of capacity ramp-up at new lines.
Analyst perspective: The combination of weaker guidance relative to both the broker's model and consensus, the absence of GAAP EPS guidance, and multiple policy and capacity uncertainties underpin Baird's move to a Neutral rating.