Canadian Solar Q2 Revenue $1.2B, Storage Shipments Beat Guidance, Net Loss $77M

Canadian Solar announced its second-quarter financial results on Thursday. Below is a transcript of the company's second-quarter earnings conference call.

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Summary

Canadian Solar confirmed revenue from 3.1 GW of solar modules and 3.3 GWh of energy storage products, generating $1.2 billion in revenue with a gross margin of 13.9%, despite a net loss of $77 million due to elevated freight costs and capacity ramp-up expenses.

The company opened a new heterojunction solar cell factory in the U.S., targeting capacity expansion to 6.3 GW peak by 2027, supported by strong demand and a contracted order backlog exceeding $4.5 billion and 13 GWp.

Energy storage product shipments reached 3.7 GWh, and significant contracts were secured, including a project with a major U.S. utility. Total energy storage order backlog is valued at $3.5 billion.

Canadian Solar's project development business, Recurrent Energy, faced revenue delays but achieved operational milestones, including a new solar asset in Spain and project financing in California.

The company is actively investing in U.S. manufacturing, expecting capital expenditures to reach $1.3 billion in 2026, and aims to leverage new U.S. policies favoring domestic production.

Future guidance includes third-quarter revenue expectations between $1.3 billion and $1.5 billion, with anticipated increases in module and energy storage product shipments.

Management expressed confidence in the long-term positive impact of U.S. policy changes on domestic manufacturing and overall business strategy.

Full Transcript

Operator

Ladies and gentlemen, thank you for your patience, and welcome to Canadian Solar's 2026 Second Quarter Earnings Call. I am Melissa, your operator for today's call. All participants are currently in listen-only mode. We will have a question-and-answer session later. As a reminder, this call is being recorded for replay. I will now turn the call over to Winna Wang, Head of Investor Relations for Canadian Solar.

Please begin.

Winna Wang, Head of Investor Relations

Thank you, operator, and welcome everyone to Canadian Solar's 2026 Second Quarter Conference Call. Please note that today's call is accompanied by a slide presentation, which can be found on the Events and Presentations section of the Canadian Solar Investor Relations website. Joining us on today's call are Colin Parkin, Chief Executive Officer; Dylan Marks, Chief Executive Officer of Recurrent Energy, a Canadian Solar subsidiary; Jimbo Zhu, Senior Vice President and Chief Financial Officer; and Dr. Sean Hsu, Executive Chairman and Chief Technology Officer.

All company executives will be available for the Q&A session. Following management's formal remarks, Colin will cover key highlights for the quarter. Dylan will share updates on Recurrent Energy. Shinbo will present financial results, and Sean will discuss sustainability and technology highlights. Colin will conclude the prepared remarks with a business outlook, after which we will have time for questions. Before we begin, I'd like to remind listeners that management's prepared remarks today and their responses to your questions will contain certain forward-looking statements that are subject to risks and uncertainties.

The company seeks the protection of the safe harbor provisions contained within the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations. Any projections of the company's future performance represent management's estimates as of today. Canadian Solar undertakes no obligation to update these projections in the future, except as required by applicable law. A more detailed discussion of risks and uncertainties can be found in the company's annual report on Form 20-F filed with the U.S. Securities and Exchange Commission.

Management's formal remarks will be made in accordance with SEC regulations regarding generally accepted accounting principles. Some financial information presented on the call will be provided on both a GAAP and non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to further analyze the company's performance and underlying trends. Management uses non-GAAP measures to better evaluate operating performance and set operational goals.

Non-GAAP information should not be considered by investors as a substitute for data provided in accordance with GAAP. I would now like to turn the call over to Colin Parkin, Chief Executive Officer of Canadian Solar. Colin, please go ahead.

Colin Parkin, Chief Executive Officer

Thank you, Winna, and thank you everyone for joining our second quarter earnings call. Starting on slide 3, we confirmed 3.1 gigawatts of solar module revenue, in line with guidance. We exceeded our energy storage guidance, shipping 3.7 gigawatt hours and confirming 3.3 gigawatt hours of revenue. For the quarter, total revenue reached $1.2 billion, at the high end of our guidance range. Gross margin was 13.9%, in line with guidance. Profitability was impacted by elevated freight costs due to ongoing geopolitical uncertainties.

We also faced short-term capacity ramp-up costs at our Jeffersonville solar cell manufacturing plant. These factors resulted in a net loss attributable to shareholders of $77 million, or $1.40 per share. Now please turn to slide 4. Our manufacturing business segment remains the primary driver of our current financial results and is our strategic focus. Within our solar business, we continue to prioritize high-margin regions, shipping nearly half of our module shipments to our North American home market during the quarter.

In our energy storage business, we are rapidly expanding and executing well globally. In a single quarter, we delivered products to utility-scale projects in North America, Europe, the Middle East and Africa, Asia Pacific, and Latin America. We exceeded guidance due to accelerated deliveries to two projects in the United States and Canada. Higher unit transportation costs and ramp-up expenses resulted in an operating loss of $49 million. As we complete the ramp-up of Phase 1 of our solar cell factory and expand through Phase 2, these costs will normalize.

We expect overall module margins to improve as a result. Now please turn to slide 5. A key highlight of the quarter was the official opening of our advanced heterojunction solar cell factory. This marks a historic milestone. Canadian Solar is now the first heterojunction manufacturer in the United States to achieve commercial operation. We are also proud of the meaningful impact and contribution this factory has made to the local economy and community. We are currently ramping Phase 1 capacity to 2.1 gigawatts peak.

Phase 1 is scheduled to reach full production on October 1st. Before the end of the year, we will begin installing equipment for Phase 2, which will bring our total nameplate cell capacity in Jeffersonville to 6.3 gigawatts peak by 2027. This facility will become the largest crystalline silicon cell manufacturing plant in North America. Combined with our 10 gigawatt peak module factory in Texas, CSI Solar has solidified its position as one of the largest and most advanced integrated PV manufacturers in North America.

These expansions are supported by strong customer demand for our high-performance U.S. solar products, which offer valuable domestic content advantages. Please see slide 6. Our U.S. manufacturing business has secured a signed order backlog of over 13 gigawatts peak for its domestically manufactured heterojunction and TOPCon N-type bifacial modules. Deliveries are scheduled through 2029. This backlog includes multiple long-term master supply agreements with leading U.S. utilities, independent power producers, developers, and EPC contractors.

These commitments continue to grow daily and are now valued at over $4.5 billion. On the policy front, President Trump issued a new Section 232 proclamation this month focusing on imported polysilicon and its derivative products. We believe this new policy framework supports our long-term investment in domestic manufacturing. Key details include minimum import prices, tariff provisions, and potential manufacturing offsets for companies investing in domestic manufacturing capacity.

The Department of Commerce will begin reviewing investment plans in the U.S. We will continue to have active and constructive ongoing dialogue with the Department of Commerce and will remain engaged throughout the entire 120-day implementation period. Our current assessment indicates these measures will solidify pricing for U.S. solar products, and we are actively working with customers to navigate this period of uncertainty. Overall, we view this policy direction as a net positive for Canadian Solar, and we welcome the government's support for U.S. industrial growth.

Now please turn to slide 7 on e-Storage. This quarter we shipped 3.7 gigawatt hours of energy storage solutions and confirmed 3.3 gigawatt hours of revenue after deducting over 400 megawatt hours used for internal projects under execution. At the end of the quarter, our signed order backlog was $3.5 billion. This includes long-term service agreements covering 34 gigawatt hours of signed projects. We are seeing demand from data centers transitioning from conversation to contracting opportunities.

Earlier this year, e-Storage signed a contract with a major U.S. utility to supply products for a 500-megawatt, 2.5-gigawatt-hour DC project designed to support grid infrastructure and resilience for data centers. Energy-intensive data centers and their stakeholders face two major obstacles: securing power supply and maintaining grid stability. Interconnection approvals and transmission line construction can take years to complete. Battery energy storage can unlock higher throughput from existing infrastructure, dynamically respond to load fluctuations, enhance grid resilience, and protect critical computing hardware from power interruptions.

For on-site, behind-the-meter facilities, storage can be seamlessly integrated with other energy generation technologies, including natural gas and renewable generation. We are actively working with data center hyperscalers, developers, and utility customers to provide solutions that help overcome these challenges. Our market value extends far beyond supplying battery containers. We produce our own battery cells, design the SolBank platform, integrate power conversion and proprietary energy management control systems, provide complete EPC and commissioning services, and offer ongoing support through long-term service agreements.

This end-to-end, full-stack model provides customers with a single point of responsibility while providing us with real-world operational data to refine future solutions. Now, let me hand the call over to Dylan to review the latest developments at Recurrent Energy, Canadian Solar's global project development business. Dylan, please go ahead.

Dylan Marks, Chief Executive Officer of Recurrent Energy

Thank you, Colin. Starting on slide 8, we generated $117 million in revenue in the second quarter. Revenue declined sequentially, primarily due to several project sales being deferred to the second half of the year. Power sales revenue increased sequentially, supported by a large solar asset in Spain reaching commercial operation. Operating expenses increased sequentially due to flat project sales in the quarter and a $24 million impairment charge related to an upcoming project sale in Latin America.

As a result, we recorded an operating loss of $19 million. Despite the lower financial performance, we reached key operational milestones in the second quarter. Earlier in the quarter, we brought a 426-megawatt solar asset in Spain into commercial operation, which began contributing recurring revenue. Our partnership with a leading global technology company further validates our development platform. In Australia, we recently interconnected the 150-megawatt CarWarp project, supported by a long-term power purchase agreement with Microsoft.

We also continue to secure competitive financing for large-scale projects. Recently, we closed a $695 million construction financing and tax equity package for the 330-megawatt Cobalt Solar project in California. MUFG and NORDLB provided the construction loan, while Wells Fargo provided tax equity. Please see slide 9 for an update on our project portfolio pipeline. As of June 30, 2026, we have secured grid interconnection permits for approximately 6 gigawatts of solar and 13 gigawatt-hours of energy storage projects globally.

Excluding projects already in operation, our total development pipeline stands at nearly 22 gigawatts of solar and 84 gigawatt-hours of storage. Our strategy for this pipeline remains focused on high-quality, high-margin opportunities that drive real value. We are actively reducing lower-margin assets. For example, after detailed assessments of permitting, technology, and commercial viability, we have reduced our pipeline in the EMEA region. At the same time, we are acting decisively where we see attractive upside.

Our teams are actively positioning to participate in Brazil's upcoming energy storage auction, which expands our early-stage pipeline in Latin America. For the second half of the year, our priorities remain selectively monetizing certain operating assets, under-construction assets, and development assets. These transactions are designed to support our capital recycling strategy, enhance financial flexibility, and address leverage levels over time, while maintaining our ability to invest in high-return growth opportunities.

Now, let me hand the call over to Shinbo, who will review our financial results in more detail. Shinbo, please go ahead.

Jimbo Zhu

Thank you, Dylan. Starting on slide 10, in the second quarter we confirmed 3.1 gigawatts of module revenue and 3.3 gigawatt-hours of energy storage solutions revenue, both up sequentially. Module performance was driven by strong U.S. sales, while the storage business exceeded guidance due to accelerated deliveries of North American projects, although Recurrent's contribution was smaller due to deferred project sales. Solid execution in the manufacturing segment pushed total revenue to $1.2 billion, reaching the high end of our guidance.

Gross margin was 13.9%, in line with guidance. The sequential and year-over-year increase in gross margin reflects two non-recurring items: first, a tariff rebate benefit recognized in the prior quarter; second, the release of unrealized profit from the sale of a U.S. project fleet in the prior year period. Operating expenses increased 21% sequentially. This was primarily driven by higher freight costs and non-logistics-related capacity ramp-up costs at the Jeffersonville solar cell factory.

Net interest expense increased to $43 million from $36 million in the first quarter, mainly due to lower capitalized interest. We recorded a net foreign exchange loss of $9 million, primarily driven by the strong appreciation of the Chinese yuan. CSI Solar recorded a $41 million mark-to-market investment gain from its equity investment in a battery equipment company, which helped cushion our profitability. As a result, Canadian Solar recorded a total net loss attributable to shareholders of $77 million, or $1.40 per share.

Now let's turn to slide 11 for cash flow and balance sheet. Net cash used in operating activities for the second quarter of 2026 was $181 million, primarily driven by working capital changes. Total assets increased to $16.1 billion. This growth primarily reflects continued spending on U.S. solar and storage projects, as well as inventory expansion to support our U.S. manufacturing strategy. Total debt increased to $7.1 billion, primarily from non-recourse construction financing for Recurrent Energy's U.S. solar and storage projects. As we monetize operating, under-construction, and development assets, we expect the project development business to deleverage. Meanwhile, our manufacturing segment will take on incremental debt to fund strategic U.S. manufacturing investments, which we expect to expand profitability and cash flow in 2027 and beyond. Capital expenditures in the second quarter were $172 million, primarily directed toward our U.S. manufacturing initiatives.

We expect total capital expenditures for the full year 2026 to be approximately $1.3 billion. This implies higher capital expenditures in the second half of the year as we begin Phase 2 equipment installation in Jeffersonville, double capacity at our Mesquite module factory, and expand our energy storage facility in Southeast Asia. We ended the quarter with a cash balance of $1.9 billion, providing us with solid liquidity to execute our strategic priorities. Now let me hand the call to Sean to discuss our sustainability achievements and technology roadmap.

Sean, please go ahead.

Sean Hsu

Thank you, Jimbo. Turning to slide 12, in June we published our 2025 Corporate Sustainability Report. This highlights our commitment to driving the global clean energy transition through sustainable and responsible business practices. The report tracks our focus on value-driven growth. Notably, the Science Based Targets initiative validated our net-zero greenhouse gas emission targets. We also improved resource efficiency, achieving significant energy and water savings, and obtained two zero-carbon factory certifications.

Furthermore, we strengthened supply chain transparency and ethical labor standards. These efforts are supported by independent audits and certifications of our manufacturing footprint and key suppliers. Overall, this report demonstrates that environmental stewardship, social responsibility, and strong governance are fundamental to building long-term stakeholder value. At the core of everything we do is technological innovation. Turning to slide 13, we continue to execute a multi-generation technology roadmap across solar PV and energy storage solutions.

Starting with solar PV, our near-term priority through 2028 is the large-scale production and optimization of next-generation heterojunction and TOPCon architectures in our core utility, commercial and industrial, and residential markets. We are increasing module efficiency from 23.2% to 24.4%, while actively reducing silver consumption from 6.5 milligrams per watt to 3 milligrams per watt to lower this key input cost. Looking further out, we expect to achieve mass production of our high-end QBC architecture by 2028.

QBC is primarily designed for the high-end residential market, targeting efficiencies of 24.8% to 25.2% and achieving ultra-low silver usage of only 1 to 2 milligrams per watt. Beyond terrestrial single-junction silicon technology, we are expanding into cutting-edge applications and multi-junction technologies. We have already begun collaborating on space photovoltaic opportunities using our heterojunction cell technology, with shipments planned for 2029.

For extreme space environments where radiation tolerance and thermal cycling resilience are critical, as well as for long-term utility-scale expansion, our ultimate efficiency frontier lies in tandem cells, targeting commercial shipments by 2030 to break through the 30% module efficiency range. Given that perovskite reliability requires five to ten more years of validation before large-scale terrestrial deployment, space applications are likely to serve as the initial commercial stepping stone for these next-generation tandem structures.

Turning to the energy storage and power electronics roadmap on slide 14, we are laying the foundation for sustainable, high-density, and long-duration energy storage assets. We are currently mass-producing SolBank 3.0, which delivers 5 megawatt-hours of energy using 314 amp-hour LFP cells in a standard 20-foot container. We will soon begin shipping our next-generation product, SolBank 4.0, starting in 2027. This solution increases energy density by 25%, delivering 6.25 megawatt-hours within the same 20-foot footprint, using high-capacity 588 amp-hour LFP cells.

To complement these larger battery systems, our power electronics hardware is also scaling up. We are transitioning from air-cooled medium-voltage...1.0 to liquid-cooled medium-voltage...2.0, which integrates 32 450-kilowatt inverters to achieve 14.4 megawatts of power in a 40-foot layout. Further out on our 2030 roadmap, we are exploring solid-state transformers, a 2.5-megawatt, 34.5-kilovolt AC to 800-volt DC solution achieving over 98.5% conversion efficiency, with the potential to replace traditional PCS units and integrate directly into fast-charging platforms as costs and reliability mature.

To address long-duration energy storage and harsh environment requirements with potentially lower levelized cost of storage, we are actively validating our containerized sodium-ion platform. This will ultimately offer superior cycle life exceeding 15,000 cycles. Sodium-ion technology offers compelling structural advantages: abundant raw materials free from geopolitical constraints, performance in extreme cold temperatures, and simplified cooling requirements, which can significantly reduce long-term operating expenses.

It also provides important safety advantages, such as significantly lower thermal runaway risk. We are also developing a high-capacity energy storage product designed for deployment within AIDC server rooms to provide millisecond-level energy management solutions. Ultimately, unifying these solar and storage developments advances our vision as an all-around energy technology provider. By combining these technology roadmaps with robust end-to-end capabilities and full visibility of our supply chain, we are uniquely positioned to deliver future-ready clean energy infrastructure to our global customers.

We will release more cutting-edge energy technologies in the future, so stay tuned. Now let me hand the call back to Colin to conclude with our guidance and business outlook. Colin, please go ahead.

Colin Parkin, Chief Executive Officer

Thank you, Sean. Now please see slide 15. For the third quarter of 2026, we expect to confirm 3.5 to 3.8 gigawatts of solar module revenue. We expect energy storage product deliveries to be between 3.4 and 3.8 gigawatt-hours, benefiting from sequentially higher manufacturing output. We expect third-quarter revenue to be between $1.3 billion and $1.5 billion, with gross margin expected to be between 13.5% and 15.5%. We expect U.S. solar and energy storage product shipments to accelerate in the second half of the year, with each remaining quarter achieving higher shipments than the previous quarter.

At Recurrent, we expect to complete the project sales deferred from the second quarter. This will drive stronger sequential results in the third quarter. For the full year 2026, we reaffirm our U.S. shipment guidance of 6.5 to 7 gigawatts of module shipments and 4.5 to 5.5 gigawatt hours of energy storage product shipments. With that, I would now like to open the call for questions. Operator, please go ahead.

Operator

Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If you would like to remove your question from the queue, you may press star followed by the number two. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. We ask that you limit yourselves to one question and one follow-up. Thank you. Our first question comes from Colin Rush of Oppenheimer and Company.

Please go ahead.

Colin Rush, Oppenheimer & Co. Analyst

Thank you very much, everyone. You know, Sean, the roadmap you just laid out from a technology perspective is quite robust. There's a lot of activity. So I want to understand two dynamics. First, the overall trend line of R&D spending to achieve all of this. And second, from a regionalization perspective, as you push what looks like five or six fairly significant technology evolutions to market, where will this work be done and where will the IP sit?

Sean Hsu

Yes, Colin, thank you. Because our revenue base is large, while R&D spending is significant, it's generally around 1% to 2% of total revenue. So we are well controlled.

Colin Rush, Oppenheimer & Co. Analyst

From an IP perspective, where will it sit? In the U.S.? Or outside the U.S.? Is that a concern, or is it more about proprietary technology and understanding how to manufacture these things, where you feel you have an advantage?

Sean Hsu

Yes, Colin, that's a good question. Yes, we are developing more and more manufacturing and process R&D capabilities in the U.S. We will see more and more IP sitting in the U.S., but at the same time, we are also developing a lot of good technology in Canada. I also see more and more IP sitting in Canada, particularly related to power electronics, whether it's inverters or PCS for energy storage systems.

Colin Rush, Oppenheimer & Co. Analyst

Great. And then a follow-up question actually on freight costs, and what practical things you can do over the next six to twelve months to manage that, or start to pass it through to customers in a more meaningful way.

Colin Parkin, Chief Executive Officer

Good morning, Colin. Thank you for your question. This is Colin. Regarding freight costs, yes, we do include them in our contracts and pass them through. But of course, as we continue to scale up in North America, the dynamics of transportation costs and logistics costs start to change. Obviously, we don't have as much overseas freight, so we will start to see transportation costs decline, mainly due to localized production in the U.S.

Colin Rush, Oppenheimer & Co. Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from Mahip Mandaloy of Mizuho Securities. Please go ahead.

Maheep Mandaloy

Hey, thanks for taking the question, and thanks for the detailed information on the new orders. I have a related question. You mentioned the 13-gigawatt order through '29. The price seems to be in the mid-30 cents per watt range. Can you clarify whether this already includes the new Section 232 impact on polysilicon, and if not, what prices are you seeing, and is there flexibility to raise prices to existing customers if spot prices increase due to Section 232?

Colin Parkin, Chief Executive Officer

Yes, good morning, Maheep. Thank you for your question. I'm Colin, and Thomas is also on the line, but I'll start. You know, our contract structures include provisions for changes in law and adjustments