Solar Energy Doesn't Lack Long-term Prospects, But Falls Short on Near-term Outlook! 2026 Performance Guidance Falls Short of Expectations First Solar(FSLR.US)Stock Price Plunges Over 17%

The stock price of First Solar (FSLR.US), a leading American solar energy company, once plummeted over 17% in pre-market trading on Wednesday. As the AI infrastructure boom ignites a surge in green energy demand, renewable energy systems like solar should be the winners in this unprecedented expansion cycle of AI data centers. However, due to uncertainties in U.S. renewable energy and tariff policies, as well as widespread delays in permitting approvals during the Trump administration, the company’s annual sales forecast has significantly fallen short of Wall Street analysts’ consensus expectations. Some analysts view First Solar’s growth narrative as a “2027 story,” and the current market does not buy into the company’s growth prospects.

The latest earnings report from this largest U.S. manufacturer of solar panels shows an expected full-year net sales between $4.9 billion and $5.2 billion in 2026. According to data compiled by LSEG, the average Wall Street analyst forecast is about $6 billion, making the latest outlook considerably lower than market consensus.

Under the Trump administration’s support for traditional energy sources like oil and gas, the renewable energy sector faced tariffs and froze approvals for large-scale renewable projects. The core energy agenda focused on oil, natural gas, coal, and nuclear power, diverging from the green energy policies advocated by former President Joe Biden.

First Solar executives stated during a Tuesday earnings call that the company expects tariffs to impact approximately $125 million to $135 million this year, well above market expectations.

As a domestic U.S. photovoltaic (PV) and solar technology company, First Solar’s core differentiation lies in its cadmium telluride (CdTe) thin-film modules (rather than mainstream silicon-based technology), and it continues to expand its solar cell manufacturing capacity within the U.S.

Solar energy is arguably one of the key beneficiaries of the “AI infrastructure superwave,” but its benefits are more long-term and require a “system engineering” closed loop: rising electricity demand from AI data centers will significantly increase the certainty of new power plant and grid investments. Goldman Sachs research estimates that data center electricity demand could increase by approximately 220% relative to 2023 by 2030, greatly boosting the need for new power generation, including photovoltaics. Large AI data centers, like those in the Stargate project, operate 24/7 with high reliability. The intermittent nature of solar energy means it is usually integrated into power supply structures through “PV PPA + energy storage/peaking power + grid redundancy,” making it a critical piece of the data center’s power supply puzzle.

A Growth Story for 2027

Christopher Dendrinos, a senior analyst at RBC Capital Markets, said that the 2026 performance outlook is lower than expected due to curtailment activities, but he views this as a “clearing event” or a bottoming catalyst. Assuming no additional tariffs are imposed, this positions the company for a strong sales recovery next year.

The company added in its earnings statement that its Series 6 solar modules—designed for data centers or utility-scale solar farms and produced at large-scale facilities in Malaysia and Vietnam—are still experiencing significant demand constraints.

To address this, First Solar plans to build a new domestic finishing line in South Carolina, expected to start production in Q4. This line will utilize some of the capacity from its Southeast Asian factories.

The company expects this move to significantly optimize freight costs, tariffs, and the proportion of U.S.-made products, enabling it to continue large-scale sales of incremental products within the U.S. market.

Vikram Bagri, an analyst at Citigroup, said, “The market generally understands that First Solar is a 2027 growth story, with several positive catalysts along the way.”

The AI Infrastructure Boom Has Ignited a Surge in Green Energy Demand

According to an IRENA cost report cited by Morgan Stanley, most new renewable projects in 2024 are already below the overall costs of fossil fuel alternatives, especially with declining average levelized costs of electricity (LCOE) for PV and onshore wind. As AI significantly boosts global data center electricity demand, renewable energy sources like wind and solar, which are cheaper, naturally receive priority.

In terms of new installed capacity and LCOE, renewables may soon become the “first choice” for power system expansion in the AI era, supplemented by energy storage and nuclear power to fill in supply curves.

In the AI era, clean energy supply is becoming increasingly critical. Major data centers operated by companies like Google and Microsoft have an immense demand for clean energy, driven by the global decarbonization trend. High efficiency, low cost, zero emissions, and the clean attributes of wind, geothermal, and other renewable resources are likely to be the most important sources for the global AI power system.

Wall Street giant Morgan Stanley recently published a report stating that the unprecedented expansion cycle of AI data centers is increasingly tied directly to renewable-based clean power supply and grid integration. However, First Solar’s stock price has instead plunged, mainly because “near-term cash flow and sales visibility” are disrupted by policy and project execution risks. The market tends to price it as a “2027 recovery story” rather than an immediate beneficiary of the current AI power surge in the renewable sector.

The company’s 2026 net sales guidance of $4.9–$5.2 billion is significantly below market expectations, citing uncertainties in U.S. policy environment and widespread delays in permitting and project development. It also expects tariff impacts of about $125–$135 million, and its Series 6 demand and delivery in Malaysia and Vietnam remain capacity-constrained.

Morgan Stanley’s report references Google’s parent company Alphabet’s acquisition of Intersect Power, highlighting that tech giants need renewable energy to meet 24/7 clean power demands. Google plans to mobilize $20 billion in renewable investments by 2030, with Amazon and Microsoft having similar plans. Google also intends to invest around $40 billion by 2027 in three large-scale AI data center campuses in Texas, one of which is a “solar + battery storage” project developed in partnership with Intersect.

Morgan Stanley analysts note that the structural increase in power demand from AI data centers is shifting “clean power + storage + grid” from a thematic investment to an asset allocation issue. Infrastructure renewable assets with contract-based cash flows are better characterized by “target price + dividends + total return,” making them more likely to see valuation recovery during periods of rate cuts and improved risk appetite.