Canadian Solar Inc. (NASDAQ: CSIQ) Q2 2025 Earnings call | 08/21/2025

Canadian Solar reported a mixed quarter, with strong module shipments and profitability metrics overshadowed by significant headwinds from new U.S. trade policy (the "One Big Beautiful Bill Act" or OBBB Act). While revenue was impacted by delayed storage shipments and project sales, gross margins exceeded guidance. The company is navigating a complex policy environment but remains committed to the U.S. market.

Key Financial Highlights:

• Module Shipments: 7.9 GW, near the high end of guidance.

• Storage Shipments: 2.2 GWh, below guidance due to tariff-related delays pushing some deliveries into H2 2025.

• Revenue: $1.7 billion, impacted by the storage shipment delays and postponed project sales.

• Gross Margin: 29.8%, exceeding guidance. However, this was boosted by one-time items; the underlying margin was 21.6%.

• Profitability: Net income attributable to shareholders was $7 million, but a net loss of $0.08 per diluted share was reported due to accounting for a preferred shareholder.

Segment Performance:

1. CSI Solar (Manufacturing):

   • Strong performance driven by a favorable sales mix (higher North American volumes) and robust storage margins.

   • Impairment charges were taken on legacy PERC manufacturing assets as the company phases out this technology.

   • Rising costs from anti-dumping tariffs and supply chain inflation are expected to pressure module margins in H2 2025.

2. Recurrent Energy (Project Development):

   • Revenue was lower sequentially due to lighter project sales, though the company monetized over 200 MW in Europe and Japan.

   • Achieved key milestones: energized a merchant storage project in Texas and closed financing for a 100 MW solar project in Kentucky.

   • Pipeline remains robust: 27 GW solar and 80 GWh storage.

   • Safe Harbor Strategy: A key focus, with 1.6 GW of U.S. solar projects already safe-harbored and plans to safe-harbor an additional 2.3 GW, insulating them from upcoming Investment Tax Credit (ITC) phase-outs.

Major Challenges & Headwinds:

• OBBB Act Impact: The new U.S. law creates uncertainty with its Foreign Entity of Concern (FEOC) and domestic content requirements. The company estimates up to 23 GW of U.S. module capacity could be at risk.

• Rising Costs: Supply chain inflation and tariffs are increasing manufacturing costs.

• Normalizing Margins: The benefit from falling lithium carbonate prices is fading, leading to expected normalization of storage margins in H2.

Strategy and Outlook:

• U.S. Manufacturing Commitment: The company is confident its U.S. factories (module, cell, storage) are currently FEOC-compliant and has a strategy to remain compliant as rules evolve.

• Guidance:

  • Q3 2025: Module shipments of 5-5.3 GW; storage shipments of 2.1-2.3 GWh; revenue of $1.3-$1.5B; gross margin of 14-16%.

  • Full-Year 2025: Narrowed module volume guidance to 25-27 GW; maintained storage guidance of 7-9 GWh; revised revenue guidance down to $5.6-$6.3B due to project sale delays and softer pricing in China.