Canadian Solar managing 'solar downturn' that has lasted 'longer than expected'

Canadian Solar is focused on key strategic markets as solar energy production continues to experience challenges, though its battery storage business is attracting greater interest.

"The solar downturn has lasted longer than expected," Shawn Qu, Canadian Solar's executive chairman and chief technology officer, said May 14 during the company's first-quarter earnings call. "Against this backdrop, we have consistently made the right strategic decisions."

The company has refocused on strategic markets, Qu said, noting the creation of CS PowerTech in December 2025, which is helping it reshore US manufacturing. CS PowerTech is a joint venture for US assets that avoids US scrutiny over China from new foreign entity of concern (FEOC) restrictions added under the July 2025 Republican-backed budget law to qualify for tax credits.

"At the same time, we have strategically dialed back volumes in less profitable markets, maintaining a steadfast profit-first strategy," Qu added. "Furthermore, energy storage represents a pioneering strategic move for us."

In a May 14 note reacting to Canadian Solar's results, J.P. Morgan analysts wrote, "We continue to acknowledge the US build-out as a productive strategic positioning and remain confident in [Canadian Solar]'s ability to deliver under full FEOC compliance."

Canadian Solar stock was down more than 10% as of 2:15 p.m. ET on May 14, in triple average trading volume.

Qu transitioned from board chairman and CEO to executive chairman and chief technology officer, and Colin Parkin assumed the role of CEO effective May 14. Parkin previously served as president of Canadian Solar.

Canadian Solar shipped 2.5 gigawatts of solar modules and 2.1 gigawatt-hours of storage capacity in the first quarter, above guidance. However, solar shipments were down 42% quarter over quarter and 64% year over year. Storage shipments were up 5% quarter over quarter and up 142% year over year.

For solar, the company "maintained a disciplined approach, strategically managing volumes in response to elevated feedstock costs, including silver, to mitigate losses," Parkin said, adding that storage was "supported by steady construction progress across multiple customer sites."

Canadian Solar has begun trial production at its heterojunction technology solar cell facility in Indiana, with commercial operation targeted to begin in July. It will have an initial nameplate capacity of 2.1 GW-peak and begin shipping in the second half of the year, ramping up to 6.3 GWp. It is doubling the capacity of its module manufacturing facility in Texas to 10 GWp in the second half of 2026. It is also expanding battery production in Southeast Asia.

The e-STORAGE segment's contracted backlog, including contracted long-term service agreements, was $3.5 billion as of May 8.

Project development subsidiary Recurrent Energy had a total global solar project development pipeline of about 24 GWp and a battery energy storage project development pipeline of 81 GWh.

Results, outlook

Canadian Solar reported revenue of $1.10 billion in the first quarter of 2026, down from $1.20 billion in the prior-year period. The S&P Capital IQ consensus revenue estimate for Canadian Solar in the first quarter was $1.02 billion. Executives attributed the decrease to lower solar module sales, partially offset by higher battery energy storage system sales.

The company reported first-quarter gross margin of 25.1%, beating the 11.7% gross margin in the prior-year quarter and beating the S&P Capital IQ consensus estimate of 14.2%.

"It increased both sequentially and year over year due to the accrual of tariff refunds," Canadian Solar Senior Vice President and CFO Xinbo Zhu said. "Without this one-time benefit, our gross margin still exceeded guidance on strong storage volumes and a healthy geographic mix of solar modules volumes."

Canadian Solar reported a first-quarter net loss attributable to the company of $32.1 million, or a loss of 71 cents per share, compared with a net loss of $34.0 million, or a loss of 69 cents per share, in the prior-year period. The S&P Capital IQ consensus GAAP estimate was a net loss of 69 cents per share.

For the second quarter, Canadian Solar expects to ship 3.1 GW to 3.3 GW of solar and 2.8 GWh to 3.2 GWh of storage. Canadian Solar expects revenue of $1 billion to $1.2 billion and a gross margin of 13% to 15%.

"The broader solar market remains complex as incremental price increases have not yet fully absorbed upstream cost pressures," Parkin said. "In the storage business, we expect record volumes in the second half of the year, though margins are projected to normalize, and we remain partially exposed to fluctuations in the lithium carbonate pricing. In the face of these challenges, we remain committed to a balanced strategy focused on rigorous execution and continuous innovation."

The company reiterated its full-year 2026 guidance of 6.5 GW to 7 GW of solar modules shipped and 4.5 GWh to 5.5 GWh of battery storage shipments.