Item 1. Condensed Consolidated Financial Statements (Unaudited)

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Item 1. Condensed Consolidated Financial Statements (Unaudited)

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Net sales$1,097,170$1,010,482$1,941,738$1,804,590
Cost of sales597,320511,5931,097,485959,698
Gross profit499,850498,889844,253844,892
Operating expenses:
Selling, general and administrative52,59046,560105,75492,387
Research and development54,48751,937106,87694,679
Production start-up31,16627,45148,77242,859
Litigation loss—430—430
Total operating expenses138,243126,378261,402230,355
Gain on sales of businesses, net———1,115
Operating income361,607372,511582,851615,652
Foreign currency loss, net(9,728)(9,649)(21,321)(12,507)
Interest income12,10024,59930,96551,844
Interest expense, net(9,184)(9,765)(18,709)(18,975)
Other expense, net(2,628)(565)(4,560)(3,364)
Income before taxes352,167377,131569,226632,650
Income tax expense(10,299)(27,775)(17,823)(46,678)
Net income$341,868$349,356$551,403$585,972
Net income per share:
Basic$3.19$3.26$5.14$5.48
Diluted$3.18$3.25$5.13$5.45
Weighted-average number of shares used in per share calculations:
Basic107,245107,042107,184107,011
Diluted107,518107,525107,468107,502

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Net income$341,868$349,356$551,403$585,972
Other comprehensive income (loss):
Foreign currency translation adjustments9,475(2,944)16,755(11,477)
Unrealized gain (loss) on marketable securities and restricted marketable securities, net of tax of $(91), $41, $(422), and $143677(1,197)6,108(3,200)
Unrealized (loss) gain on derivative instruments, net of tax of $0, $177, $(87), and $(131)—(571)279491
Other comprehensive income (loss)10,152(4,712)23,142(14,186)
Comprehensive income$352,020$344,644$574,545$571,786

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

June 30, 2025December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents$1,124,740$1,621,376
Marketable securities29,098171,583
Accounts receivable trade, net1,730,9721,261,049
Government grants receivable, net482,546403,759
Inventories1,414,0061,084,384
Other current assets642,229546,882
Total current assets5,423,5915,089,033
Property, plant and equipment, net5,722,5615,413,683
Deferred tax assets, net204,671208,808
Restricted marketable securities213,737199,136
Government grants receivable238,850157,570
Goodwill30,55528,335
Intangible assets, net51,95054,654
Inventories269,852275,372
Other assets702,277697,770
Total assets$12,858,044$12,124,361
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$367,652$482,190
Income taxes payable79,01877,363
Accrued expenses593,244508,581
Current portion of debt249,894236,424
Deferred revenue1,058,262712,000
Other current liabilities504,54760,884
Total current liabilities2,852,6172,077,442
Accrued solar module collection and recycling liability144,599134,394
Long-term debt327,972373,354
Deferred revenue764,8191,327,825
Other liabilities221,907233,769
Total liabilities4,311,9144,146,784
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 107,247,360 and 107,060,281 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively107107
Additional paid-in capital2,892,4262,898,418
Accumulated earnings5,814,5135,263,110
Accumulated other comprehensive loss(160,916)(184,058)
Total stockholders’ equity8,546,1307,977,577
Total liabilities and stockholders’ equity$12,858,044$12,124,361

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

Three Months Ended June 30, 2025
Common StockAdditional Paid-In CapitalAccumulated EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
SharesAmount
Balance at March 31, 2025107,244$107$2,885,650$5,472,645$(171,068)$8,187,334
Net income———341,868—341,868
Other comprehensive income————10,15210,152
Common stock issued for share-based compensation3—————
Tax withholding related to vesting of restricted stock——(15)——(15)
Share-based compensation expense——6,791——6,791
Balance at June 30, 2025107,247$107$2,892,426$5,814,513$(160,916)$8,546,130
Three Months Ended June 30, 2024
Common StockAdditional Paid-In CapitalAccumulated EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
SharesAmount
Balance at March 31, 2024107,041$107$2,878,330$4,207,682$(183,605)$6,902,514
Net income———349,356—349,356
Other comprehensive loss————(4,712)(4,712)
Common stock issued for share-based compensation6—————
Tax withholding related to vesting of restricted stock(1)—(196)——(196)
Share-based compensation expense——8,435——8,435
Balance at June 30, 2024107,046$107$2,886,569$4,557,038$(188,317)$7,255,397

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

Six Months Ended June 30, 2025
Common StockAdditional Paid-In CapitalAccumulated EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
SharesAmount
Balance at December 31, 2024107,060$107$2,898,418$5,263,110$(184,058)$7,977,577
Net income———551,403—551,403
Other comprehensive income————23,14223,142
Common stock issued for share-based compensation287—————
Tax withholding related to vesting of restricted stock(100)—(15,436)——(15,436)
Share-based compensation expense——9,444——9,444
Balance at June 30, 2025107,247$107$2,892,426$5,814,513$(160,916)$8,546,130
Six Months Ended June 30, 2024
Common StockAdditional Paid-In CapitalAccumulated EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
SharesAmount
Balance at December 31, 2023106,847$107$2,890,427$3,971,066$(174,131)$6,687,469
Net income———585,972—585,972
Other comprehensive loss————(14,186)(14,186)
Common stock issued for share-based compensation322—————
Tax withholding related to vesting of restricted stock(123)—(19,148)——(19,148)
Share-based compensation expense——15,290——15,290
Balance at June 30, 2024107,046$107$2,886,569$4,557,038$(188,317)$7,255,397

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,
20252024
Cash flows from operating activities:
Net income$551,403$585,972
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Depreciation, amortization and accretion250,523187,921
Share-based compensation9,39415,191
Deferred income taxes5,861(58,399)
Gain on sales of businesses, net—(1,115)
Other, net7,1711,650
Changes in operating assets and liabilities:
Accounts receivable, trade(417,136)29,613
Inventories(323,781)(215,493)
Government grants receivable(177,419)205,528
Other assets(106,090)(168,363)
Income tax receivable and payable(39,698)3,774
Accounts payable and accrued expenses(85,119)(113,255)
Deferred revenue(186,652)(12,499)
Other liabilities53,138212
Net cash (used in) provided by operating activities(458,405)460,737
Cash flows from investing activities:
Purchases of property, plant and equipment(494,100)(778,618)
Purchases of marketable securities and restricted marketable securities(930,807)(1,113,826)
Proceeds from sales and maturities of marketable securities1,067,7021,224,167
Other investing activities7,002(7,697)
Net cash used in investing activities(350,203)(675,974)
Cash flows from financing activities:
Proceeds from borrowings under debt arrangements, net of issuance costs212,273110,395
Repayment of debt(244,022)(111,375)
Proceeds from other borrowings394,450—
Payments of tax withholdings for restricted shares(15,436)(19,148)
Contingent consideration payment and other financing activities(266)(7,527)
Net cash provided by (used in) financing activities346,999(27,655)
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents3,469(5,600)
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents(458,140)(248,492)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of the period1,638,2231,965,069
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of the period$1,180,083$1,716,577
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment acquisitions funded by liabilities$242,177$402,263
Proceeds to be received from asset-based government grants$155,336$158,908
Acquisitions funded by contingent consideration$3,600$11,000

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of First Solar, Inc. and its subsidiaries in this Quarterly Report have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of First Solar management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Certain prior period disclosures have been recast to conform to the current period presentation.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from such estimates and assumptions. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or for any other period. The condensed consolidated balance sheet at December 31, 2024 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These interim financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2024 included in our Annual Report on Form 10-K, which has been filed with the SEC.

Unless expressly stated or the context otherwise requires, the term “condensed consolidated financial statements” refers to the accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report.

2. Cash, Cash Equivalents, and Marketable Securities

Cash, cash equivalents, and marketable securities consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Cash and cash equivalents:
Cash$1,085,499$1,094,796
Money market funds39,241526,580
Total cash and cash equivalents1,124,7401,621,376
Marketable securities:
Time deposits20,025162,836
U.S. debt9,0738,747
Total marketable securities29,098171,583
Total cash, cash equivalents, and marketable securities$1,153,838$1,792,959

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported within our condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024 to the total of such amounts as presented in the condensed consolidated statements of cash flows (in thousands):

Balance Sheet Line ItemJune 30, 2025December 31, 2024
Cash and cash equivalentsCash and cash equivalents$1,124,740$1,621,376
Restricted cash – currentOther current assets48,2578,262
Restricted cash – noncurrentOther assets3,6063,613
Restricted cash equivalents – noncurrentOther assets3,4804,972
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$1,180,083$1,638,223

Restricted cash and restricted cash equivalents consist of deposits held by various banks to secure certain of our letters of credit, as well as deposits held in custodial accounts to fund the estimated future costs of our solar module collection and recycling obligations. Restricted cash also consists of collections from customers on behalf of factors that have purchased the related receivables.

During the three months ended June 30, 2024, we sold marketable securities for proceeds of $67.5 million and realized a gain of less than $0.1 million on such sales. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our marketable securities. The following tables summarize the unrealized gains and losses related to our available-for-sale marketable securities, by major security type, as of June 30, 2025 and December 31, 2024 (in thousands):

As of June 30, 2025
Amortized CostUnrealized GainsUnrealized LossesFair Value
Time deposits$20,025$—$—$20,025
U.S. debt10,000—9279,073
Total$30,025$—$927$29,098
As of December 31, 2024
Amortized CostUnrealized GainsUnrealized LossesFair Value
Time deposits$162,836$—$—$162,836
U.S. debt10,000—1,2538,747
Total$172,836$—$1,253$171,583

The contractual maturities of our marketable securities as of June 30, 2025 were as follows (in thousands):

Fair Value
Within one year$24,893
After one year through five years—
After five years through ten years4,205
Total$29,098

3. Restricted Marketable Securities

Restricted marketable securities consisted of the following as of June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
U.S. debt$112,855$109,155
Foreign government obligations53,94249,024
Supranational debt28,10022,809
U.S. government obligations18,84018,148
Total restricted marketable securities$213,737$199,136

Our restricted marketable securities represent long-term investments to fund the estimated future cost of collecting and recycling modules covered under our solar module collection and recycling program. We have established a trust under which funds are put into custodial accounts with an established and reputable bank, for which First Solar, Inc.; First Solar Malaysia Sdn. Bhd.; and First Solar Manufacturing GmbH are grantors. As of June 30, 2025 and December 31, 2024, such custodial accounts also included noncurrent restricted cash and cash equivalents balances of $3.5 million and $5.0 million, respectively, which were reported within “Other assets.” Trust funds may be disbursed for qualified module collection and recycling costs (including capital and facility related recycling costs), payments to customers for assuming collection and recycling obligations, and reimbursements of any overfunded amounts. Investments in the trust must meet certain investment quality criteria comparable to highly rated government or agency bonds. As necessary, we fund any incremental amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years, less amounts already funded in prior years. During the six months ended June 30, 2025 and June 30, 2024, we purchased $5.0 million and $7.9 million of restricted marketable securities, respectively, as part of our ongoing management of the custodial accounts.

See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our restricted marketable securities. The following tables summarize the unrealized gains and losses related to our restricted marketable securities, by major security type, as of June 30, 2025 and December 31, 2024 (in thousands):

As of June 30, 2025
Amortized CostUnrealized GainsUnrealized LossesFair Value
U.S. debt$143,727$—$30,872$112,855
Foreign government obligations67,082—13,14053,942
Supranational debt30,232—2,13228,100
U.S. government obligations24,322—5,48218,840
Total$265,363$—$51,626$213,737
As of December 31, 2024
Amortized CostUnrealized GainsUnrealized LossesFair Value
U.S. debt$144,652$—$35,497$109,155
Foreign government obligations62,595—13,57149,024
Supranational debt25,351—2,54222,809
U.S. government obligations24,368—6,22018,148
Total$256,966$—$57,830$199,136

As of June 30, 2025, the contractual maturities of these securities were between 6 years and 14 years, and restricted marketable securities with unrealized losses had generally been in a loss position for a period of time greater than 12 months. The unrealized losses were primarily due to increases in interest rates relative to rates at the time of purchase, and, based on the underlying credit quality of the investments, we expect to hold such securities until we recover our cost basis.

4. Consolidated Balance Sheet Details

Accounts receivable trade, net

Accounts receivable trade, net consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Accounts receivable trade, gross$1,740,278$1,262,353
Allowance for credit losses(9,306)(1,304)
Accounts receivable trade, net$1,730,972$1,261,049

During 2024, we entered into various revolving factoring arrangements to sell certain trade receivables to unrelated financial institutions. Transfers under these arrangements, which retained servicing but were without recourse, qualified as true sales under Accounting Standards Codification (“ASC”) 860, and we derecognized the sold receivables when control transferred to the financial institutions. We factored $245.7 million and $126.0 million under these arrangements and recorded $5.3 million and $1.9 million of discounts on factored receivables in “Selling, general and administrative” expense during the six months ended June 30, 2025 and the year ended December 31, 2024, respectively. The trade receivables sold that remained outstanding as of June 30, 2025 and December 31, 2024 were $227.3 million and $126.0 million, respectively. Proceeds from the sale of receivables are classified as operating activities in our condensed consolidated statements of cash flows.

Inventories

Inventories consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Raw materials$474,954$489,524
Work in process107,546115,696
Finished goods1,101,358754,536
Inventories$1,683,858$1,359,756
Inventories – current$1,414,006$1,084,384
Inventories – noncurrent$269,852$275,372

Other current assets

Other current assets consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Spare maintenance materials and parts$252,128$214,189
Prepaid expenses95,14375,250
Indirect tax receivables90,530122,131
Operating supplies58,78549,906
Restricted cash48,2578,262
Prepaid income taxes29,4156,408
Insurance receivable for accrued litigation (1)21,80021,800
Derivative instruments (2)2,90413,452
Other43,26735,484
Other current assets$642,229$546,882

——————————

(1)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our legal proceedings.

(2)See Note 6. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.

Property, plant and equipment, net

Property, plant and equipment, net consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Land$39,566$38,879
Buildings and improvements1,615,8411,584,981
Machinery and equipment4,902,9134,800,545
Office equipment and furniture151,878181,647
Leasehold improvements40,77840,300
Construction in progress1,269,913858,538
Property, plant and equipment, gross8,020,8897,504,890
Accumulated depreciation(2,298,328)(2,091,207)
Property, plant and equipment, net$5,722,561$5,413,683

We evaluate our property, plant, and equipment for impairment under a held-and-used impairment model whenever events or changes in business circumstances arise that may indicate that the carrying amount of the assets may not be recoverable. Such events and changes include, among other things, significant changes in the manner of use of the assets, expectations that the assets may be sold or otherwise disposed of before the end of their useful lives, and the expected operational status of our international manufacturing facilities. As of June 30, 2025, the recoverability of our property, plant, and equipment was based on certain expectations regarding the ongoing operation of our international manufacturing facilities. However, it is reasonably possible that the operational status of one or more of our international facilities may be adversely affected by geopolitical developments, including trade policies or tariffs, which may result in future decisions to reduce, pause, or cease operations at these facilities. Such decisions may result in certain property, plant, and equipment being sold or otherwise disposed of before the end of their previously estimated useful lives, which, in turn, could result in a decrease in the value, and possible impairment, of this property, plant, and equipment. Accordingly, any such changes to the operational status of our international

manufacturing facilities could be material to our condensed consolidated financial statements and have a significant adverse effect on our results of operations.

Depreciation of property, plant and equipment was $122.1 million and $244.4 million for the three and six months ended June 30, 2025, respectively, and $93.4 million and $180.1 million for the three and six months ended June 30, 2024, respectively.

Other assets

Other assets consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Advance payments for raw materials$332,681$249,218
Lease assets (1)138,169143,545
Income tax receivables110,06787,025
Project assets27,77625,455
Prepaid expenses20,71634,250
Restricted cash3,6063,613
Restricted cash equivalents3,4804,972
Accounts receivable, trade (2)—94,373
Other (3)65,78255,319
Other assets$702,277$697,770

——————————

(1)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(2)In December 2024, we recognized $94.4 million of noncurrent trade receivables attributable to extended payment terms with a customer. During the three months ended June 30, 2025, these trade receivables were sold under a factoring arrangement.

(3)During 2023, we entered into a power purchase agreement with Cleantech Solar (“Cleantech”), a leading provider of renewable energy solutions in India and Southeast Asia, and Cleantech committed to construct certain photovoltaic (“PV”) solar and wind power-generating assets to supply electricity to our manufacturing facility in India.

During 2024, we purchased ownership interests in two subsidiaries of Cleantech for $7.9 million. These subsidiaries own certain of the power-generating assets that supply electricity to our facility, and we account for our investments in these subsidiaries using the equity method.

During the three and six months ended June 30, 2025, we purchased $1.0 million and $1.1 million, respectively, of electricity from these subsidiaries. During the six months ended June 30, 2024, we recognized $19.0 million of revenue from module sales of 75 megawatts to one of these subsidiaries.

Accrued expenses

Accrued expenses consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Accrued property, plant and equipment$176,475$136,176
Accrued freight81,71395,940
Accrued inventory75,83864,866
Product warranty liability (1)60,16562,139
Accrued compensation and benefits45,36330,612
Accrued other taxes39,88341,178
Other113,80777,670
Accrued expenses$593,244$508,581

——————————

(1)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our product warranties.

Other current liabilities

Other current liabilities consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Secured borrowings (1)$394,634$—
Accrued litigation (2)21,80021,800
Derivative instruments (3)16,74018,619
Lease liabilities (4)16,29313,281
Other55,0807,184
Other current liabilities$504,547$60,884

——————————

(1)During the three months ended June 30, 2025, we transferred $400.0 million of trade receivables to a financial institution under a factoring arrangement with recourse, while retaining servicing responsibilities. Transfers under this arrangement do not meet the criteria for a sale of receivables and are therefore accounted for as secured borrowings.

As of June 30, 2025, transferred trade receivables of $400.0 million remained on our condensed consolidated balance sheets within “Accounts receivable trade, net,” and a corresponding liability was recorded under “Other current liabilities.” We record discounts on receivables factored with recourse as interest expense over the term of the respective receivables. Accordingly, during the three months ended June 30, 2025, we recorded $0.2 million of interest expense associated with these arrangements.

(2)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our legal proceedings.

(3)See Note 6. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.

(4)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

Other liabilities

Other liabilities consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025December 31, 2024
Lease liabilities (1)$78,277$95,743
Deferred tax liabilities, net56,52154,696
Other taxes payable54,11049,256
Product warranty liability (2)15,66314,296
Contingent consideration (2)3,6006,500
Other13,73613,278
Other liabilities$221,907$233,769

——————————

(1)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(2)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our product warranties and contingent consideration arrangements.

5. Government Grants

Government grants represent benefits provided by federal, state, or local governments that are not subject to the scope of ASC 740. We recognize a grant when we have reasonable assurance that we will comply with the grant’s conditions and that the grant will be received. Government grants whose primary condition is the purchase, construction, or acquisition of a long-lived asset are considered asset-based grants and are recognized as a reduction to such asset’s cost basis, which reduces future depreciation. Other government grants not related to long-lived assets are considered income-based grants and are recognized as a reduction to the related cost of activities that generated the benefit.

The following table presents the benefits recognized from asset-based government grants, net of depreciation and amortization, in our condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024 (in thousands):

Balance Sheet Line ItemJune 30, 2025December 31, 2024
Property, plant and equipment, net$144,597$150,375
Other assets5,4765,625

In February 2021, the state government of Tamil Nadu, India granted First Solar certain incentives associated with the construction of our manufacturing facility in the state. Among other things, such incentives provide a 24% subsidy for eligible capital expenditures, contingent upon meeting certain minimum investment and employment commitments. We expect to receive the subsidy in six annual installments following the completion of the associated application and review process, which commenced earlier this year. Such incentives are reflected on our condensed consolidated balance sheets within “Government grants receivable, net” and “Government grants receivable” depending on the expected timing of cash receipts.

The following table presents the benefits recognized from income-based government grants in our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
Income Statement Line Item2025202420252024
Cost of sales$377,041$258,580$678,861$453,007
Selling, general and administrative15—48—
Research and development347—2,1914,000

In August 2022, the previous U.S. President signed into law the Inflation Reduction Act of 2022 (“IRA”). Among other things, the IRA offers a tax credit, pursuant to Section 45X of the Internal Revenue Code (“IRC”), for solar modules and solar module components manufactured in the United States and sold to third parties. Such credit may be refundable by the Internal Revenue Service (“IRS”) or transferable to a third party and is available from 2023 to 2032, subject to phase down beginning in 2030. For eligible components, the credit is equal to (i) $12 per square meter for a PV wafer, (ii) 4 cents multiplied by the capacity of a PV cell in watts, and (iii) 7 cents multiplied by the capacity of a PV module in watts. Based on the current form factor of our modules, we expect to qualify for a credit of approximately 17 cents per watt for each module produced in the United States and sold to a third party. We recognize such credit as a reduction to “Cost of sales” in the period the modules are sold to customers. Such credit is also reflected on our condensed consolidated balance sheets within “Government grants receivable, net” and “Government grants receivable” depending on the expected timing of cash receipts.

In December 2024, we entered into two agreements with a financial institution for the sale of $857.2 million of Section 45X tax credits we generated during 2024 for aggregate cash proceeds of $818.6 million. We received initial cash proceeds of $616.0 million in December 2024 and received the remaining cash proceeds of $202.6 million in February 2025.

In June 2025, we entered into an agreement with another financial institution for the sale of $311.9 million of Section 45X tax credits we generated during 2025 for aggregate cash proceeds of $296.3 million. We received the full cash proceeds in June 2025. In connection with this transaction, we recognized a loss of $15.6 million during the three months ended June 30, 2025, which was reflected in “Cost of sales” in our condensed consolidated statements of operations.

6. Derivative Financial Instruments

As a global company, we are exposed in the normal course of business to various risks, including foreign currency and commodity price risks, that could affect our financial position, results of operations, and cash flows. We may use derivative instruments to hedge against these risks and do not hold such instruments for speculative or trading purposes.

Depending on the terms of the specific derivative instruments and market conditions, some of our derivative instruments may be assets and others liabilities at any particular balance sheet date. We report all of our derivative instruments at fair value and account for changes in the fair value of derivative instruments within “Accumulated other comprehensive loss” if the derivative instruments qualify for hedge accounting. For those derivative instruments that do not qualify for hedge accounting (i.e., “economic hedges”), we record the changes in fair value directly to earnings. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the techniques we use to measure the fair value of our derivative instruments.

The following tables present the fair values of derivative instruments included in our condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025
Other Current AssetsOther Current Liabilities
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts$2,904$16,740
Total derivative instruments$2,904$16,740
December 31, 2024
Other Current AssetsOther Current Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts$—$35
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts13,45218,584
Total derivative instruments$13,452$18,619

The following table presents the pretax amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive income (loss) and our condensed consolidated statements of operations for the six months ended June 30, 2025 and 2024 (in thousands):

Commodity Swap Contracts
Balance as of December 31, 2024$(366)
Amount reclassified to cost of sales366
Balance as of June 30, 2025$—
Balance as of December 31, 2023$(1,493)
Amounts recognized in other comprehensive income (loss)(873)
Amount reclassified to cost of sales1,495
Balance as of June 30, 2024$(871)

The following table presents the effect of derivative instruments not designated as hedges on our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):

Amount of Gain (Loss) Recognized in Income Statement
Three Months Ended June 30,Six Months Ended June 30,
Income Statement Line Item2025202420252024
Foreign exchange forward contractsForeign currency loss, net$8,061$(6,859)$4,578$(15,808)

Foreign Currency Risk

Transaction Exposure and Economic Hedging

Many of our subsidiaries have assets and liabilities (primarily cash, receivables, deferred taxes, payables, accrued expenses, lease liabilities, debt, and solar module collection and recycling liabilities) that are denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which these assets and liabilities are denominated will create fluctuations in our reported condensed consolidated statements of operations. We may enter into foreign exchange forward contracts or other financial instruments to economically hedge assets and liabilities against the effects of currency exchange rate fluctuations. The gains and losses on such foreign exchange forward contracts will economically offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency denominated assets and liabilities.

We also enter into foreign exchange forward contracts to economically hedge balance sheet and other exposures related to transactions between certain of our subsidiaries and transactions with third parties. Such contracts are considered economic hedges and do not qualify for hedge accounting. Accordingly, we recognize gains or losses from the fluctuations in foreign exchange rates and the fair value of these derivative contracts in “Foreign currency loss, net” on our condensed consolidated statements of operations.

As of June 30, 2025 and December 31, 2024, the U.S. Dollar equivalent notional values of our foreign exchange forward contracts that do not qualify for hedge accounting were $532.8 million and $603.4 million, respectively, including contracts in Indian Rupee, Euro, and Malaysian Ringgit, among other currencies.

Commodity Price Risk

From time to time, we use commodity swap contracts to mitigate our exposure to commodity price fluctuations for certain raw materials used in the production of our modules. During the year ended December 31, 2024, we entered into various commodity swap contracts to hedge a portion of our forecasted cash flows for purchases of steel between April 2024 and December 2024. Such swaps had an aggregate initial notional value based on short tons of forecasted steel purchases, equivalent to $7.6 million, and entitled us to receive the price based on the U.S. Midwest Hot-Rolled Coil Steel Index while requiring us to pay certain fixed prices. The notional amount of the commodity swap contracts proportionately adjusted with forecasted purchases of steel.

These commodity swap contracts qualified for accounting as cash flow hedges in accordance with ASC 815, and we designated them as such. We reported unrealized gains or losses on such contracts in “Accumulated other comprehensive loss” and subsequently reclassified applicable amounts into earnings when the hedged transactions occurred and impacted earnings. We determined that these derivative financial instruments were highly effective as cash flow hedges as of December 31, 2024. As of June 30, 2025, we had no outstanding cash flow hedges.

7. Leases

Our lease arrangements include our corporate and administrative offices, certain warehouses, certain land for our manufacturing facilities, and certain of our manufacturing equipment. Such leases primarily relate to assets located in the United States, Malaysia, India, and Vietnam.

The following table presents certain quantitative information related to our lease arrangements for the three and six months ended June 30, 2025 and 2024, and as of June 30, 2025 and December 31, 2024 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Finance lease cost:
Amortization of right-of-use assets$403$120$801$236
Interest on lease liabilities5362541,068484
Operating lease cost4,1983,2288,3136,449
Variable lease cost8227231,7171,432
Short-term lease cost161294435478
Total lease cost$6,120$4,619$12,334$9,079
Cash paid for amounts included in the measurement of:
Operating lease liabilities$7,830$6,123
Finance lease liabilities933110
Lease assets obtained in exchange for:
Operating lease liabilities$1,663$532
Finance lease liabilities343,428
June 30, 2025December 31, 2024
Operating LeasesFinance LeasesOperating LeasesFinance Leases
Lease assets$109,684$28,485$114,283$29,262
Lease liabilities – current14,3451,94811,7991,482
Lease liabilities – noncurrent49,04329,23466,21129,532
Weighted-average remaining lease term9 years27 years9 years28 years
Weighted-average discount rate5.2%6.6%5.5%6.6%

As of June 30, 2025, the future payments associated with our lease liabilities were as follows (in thousands):

Operating LeasesFinance Leases
Remainder of 2025$7,733$993
202615,1832,797
20278,0152,840
20287,3632,893
20295,5372,970
20303,7693,004
Thereafter35,25452,246
Total future payments82,85467,743
Less: interest(19,466)(36,561)
Total lease liabilities$63,388$31,182

8. Fair Value Measurements

The following is a description of the valuation techniques that we use to measure the fair value of assets and liabilities that we measure and report at fair value on a recurring basis:

*•*Cash Equivalents and Restricted Cash Equivalents. At June 30, 2025 and December 31, 2024, our cash equivalents and restricted cash equivalents consisted of money market funds. We value our cash equivalents and restricted cash equivalents using observable inputs that reflect quoted prices for securities with identical characteristics and classify the valuation techniques that use these inputs as Level 1.

*•*Marketable Securities and Restricted Marketable Securities. At June 30, 2025 and December 31, 2024, our marketable securities consisted of time deposits and U.S. debt, and our restricted marketable securities consisted of U.S. debt, foreign and U.S. government obligations, and supranational debt. We value our marketable securities and restricted marketable securities using observable inputs that reflect quoted prices for securities with identical characteristics or quoted prices for securities with similar characteristics and other observable inputs (such as interest rates that are observable at commonly quoted intervals). Accordingly, we classify the valuation techniques that use these inputs as either Level 1 or Level 2 depending on the inputs used. We also consider the effect of our counterparties’ credit standing in these fair value measurements.

*•*Derivative Assets and Liabilities. At June 30, 2025 and December 31, 2024, our derivative assets and liabilities consisted of foreign exchange forward contracts involving major currencies and commodity swap contracts involving major commodity prices. Since our derivative assets and liabilities are not traded on an exchange, we value them using standard industry valuation models. As applicable, these models project future cash flows and discount the amounts to a present value using market-based observable inputs, including credit risk, foreign exchange rates, forward and spot prices for currencies, and forward prices for commodities. These inputs are observable in active markets over the contract term of the derivative instruments we hold, and accordingly, we classify the valuation techniques as Level 2. In evaluating credit risk, we consider the effect of our counterparties’ and our own credit standing in the fair value measurements of our derivative assets and liabilities, respectively.

  • Contingent Consideration. At June 30, 2025 and December 31, 2024, our contingent consideration consisted of balances associated with a prior business acquisition. We project future cash outflows associated with certain payout outcomes and discount the amounts to a present value using significant unobservable inputs, including various probabilities and assumptions regarding the timing, nature, and extent of technical milestones achieved. We classify the valuation technique that uses these inputs as Level 3.

At June 30, 2025 and December 31, 2024, the fair value measurements of our assets and liabilities measured on a recurring basis were as follows (in thousands):

Fair Value Measurements at Reporting Date Using
June 30, 2025Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds$39,241$39,241$—$—
Restricted cash equivalents:
Money market funds3,4803,480——
Marketable securities:
Time deposits20,02520,025——
U.S. debt9,073—9,073—
Restricted marketable securities213,737—213,737—
Derivative assets2,904—2,904—
Total assets$288,460$62,746$225,714$—
Liabilities:
Derivative liabilities$16,740$—$16,740$—
Contingent consideration3,600——3,600
Total liabilities$20,340$—$16,740$3,600
Fair Value Measurements at Reporting Date Using
December 31, 2024Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds$526,580$526,580$—$—
Restricted cash equivalents:
Money market funds4,9724,972——
Marketable securities:
Time deposits162,836162,836——
U.S. debt8,747—8,747—
Restricted marketable securities199,136—199,136—
Derivative assets13,452—13,452—
Total assets$915,723$694,388$221,335$—
Liabilities:
Derivative liabilities$18,619$—$18,619$—
Contingent consideration6,500——6,500
Total liabilities$25,119$—$18,619$6,500

Fair Value of Financial Instruments

At June 30, 2025 and December 31, 2024, the carrying values and fair values of our financial instruments not measured at fair value were as follows (in thousands):

June 30, 2025December 31, 2024
Carrying ValueFair ValueCarrying ValueFair Value
Assets:
Government grants receivable – noncurrent$238,850$213,789$157,570$123,743
Liabilities:
Long-term debt, including current maturities (1)$419,101$397,901$464,550$441,016

——————————

(1)Excludes unamortized issuance costs and debt arrangements with an original maturity of less than one year.

The carrying values in our condensed consolidated balance sheets of our trade accounts receivable, restricted cash, current government grants receivable, accounts payable, accrued expenses, and debt arrangements with an original maturity of less than one year approximated their fair values due to their nature and relatively short maturities; therefore, we excluded them from the foregoing table. The fair value measurements for our noncurrent government grants receivable and long-term debt are considered Level 2 measurements under the fair value hierarchy.

Credit Risk

We have certain financial instruments that subject us to credit risk. These consist primarily of cash, cash equivalents, marketable securities, accounts receivable, restricted cash, restricted cash equivalents, restricted marketable securities, foreign exchange forward contracts, and commodity swap contracts. We are exposed to credit losses in the event of nonperformance by the counterparties to our financial instruments. We place these instruments with various high-quality financial institutions and limit the amount of credit risk from any one counterparty. We monitor the credit standing of our counterparty financial institutions. Our net sales are primarily concentrated among a limited number of customers. We monitor the financial condition of our customers and perform credit evaluations whenever considered necessary. We typically require some form of payment security from our customers, including, but not limited to, advance payments, parent guarantees, letters of credit, bank guarantees, or surety bonds.

9. Debt

Our debt arrangements consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

Balance (USD)
Loan AgreementCurrencyJune 30, 2025December 31, 2024
Revolving Credit FacilityUSD$—$—
India Credit FacilityUSD419,101464,550
India Citibank Working Capital FacilityINR50,87748,017
India JPM Working Capital FacilityINR44,44528,490
India Credit Agricole Working Capital FacilityINR38,597—
India HSBC Working Capital FacilityINR25,14669,097
Total debt principal578,166610,154
Less: unamortized issuance costs(300)(376)
Total debt577,866609,778
Less: current portion(249,894)(236,424)
Noncurrent portion$327,972$373,354

Revolving Credit Facility

In June 2023, we entered into a credit agreement with several financial institutions as lenders and JPMorgan Chase Bank, N.A. as administrative agent, which provides us with a senior secured credit facility (the “Revolving Credit Facility”) with an aggregate borrowing capacity of $1.0 billion. Borrowing under the Revolving Credit Facility bears interest at a rate per annum equal to, at our option, (i) the Term Secured Overnight Financing Rate (“Term SOFR”), plus a credit spread of 0.10%, plus a margin that ranges from 1.25% to 2.25% or (ii) an alternate base rate as defined in the credit agreement, plus a margin that ranges from 0.25% to 1.25%. The margins under the Revolving Credit Facility are based on our net leverage ratio or, if we elect to switch to a credit ratings-based system after the investment grade ratings trigger date occurs (as defined in the credit agreement), on our public debt rating.

In addition to paying interest on outstanding principal under the Revolving Credit Facility, we are required to pay an unused commitment fee that ranges from 0.125% to 0.375% per annum based on the same factors discussed above and the daily unused commitments under the facility. We are also required to pay (i) a letter of credit fee based on the applicable margin for Term SOFR loans on the face amount of each letter of credit, (ii) a letter of credit fronting fee as agreed by us and such issuing lender, and (iii) other customary letter of credit fees. Our Revolving Credit Facility matures in June 2028. Loans and letters of credit issued under the Revolving Credit Facility are secured by liens on substantially all of our tangible and intangible assets.

As of June 30, 2025 and December 31, 2024, we had no outstanding debt or letters of credit under our Revolving Credit Facility.

India Credit Facility

In July 2022, FS India Solar Ventures Private Limited (“FSISV”), our indirect wholly-owned subsidiary, entered into a finance agreement (the “India Credit Facility”) with the U.S. International Development Finance Corporation for aggregate borrowing of up to $500.0 million for the development and construction of a solar module manufacturing facility in India. Principal on the India Credit Facility is payable in scheduled semi-annual installments beginning in August 2024 through the facility’s expected maturity in August 2029. The India Credit Facility is guaranteed by First Solar, Inc.

India Citibank Working Capital Facility

In August 2024, FSISV entered into a working capital facility agreement (the “India Citibank Working Capital Facility”) with Citibank, N.A. In January 2025, the India Citibank Working Capital Facility was amended to provide certain working capital loans of up to INR 6.4 billion ($74.9 million). The outstanding balance matures in the third and fourth quarters of 2025. The India Citibank Working Capital Facility is guaranteed by First Solar, Inc.

India JPM Working Capital Facility

In December 2022, FSISV entered into a working capital facility agreement (the “India JPM Working Capital Facility”) with JPMorgan Chase Bank, N.A. for the issuance of bank guarantees, bonds, and other similar forms of security. During 2023, the India JPM Working Capital Facility was amended to include certain working capital loans of up to INR 6.2 billion ($72.8 million). The outstanding balance matures in the fourth quarter of 2025 and the second quarter of 2026. The India JPM Working Capital Facility is guaranteed by First Solar, Inc.

India Credit Agricole Working Capital Facility

In August 2022, FSISV entered into a working capital facility agreement (the “India Credit Agricole Working Capital Facility”) with Credit Agricole Corporate and Investment Bank, for the issuance of letters of credit, bank guarantees, and overdraft. During 2024, the India Credit Agricole Working Capital Facility was amended to include certain working capital loans of up to INR 4.0 billion ($46.8 million). The outstanding balance matures in the third quarter of 2025. The India Credit Agricole Working Capital Facility is guaranteed by First Solar, Inc.

India HSBC Working Capital Facility

In February 2024, FSISV entered into a working capital facility agreement (the “India HSBC Working Capital Facility”) with the Hongkong and Shanghai Banking Corporation Limited, which provides certain working capital loans of up to INR 8.2 billion ($95.9 million). The outstanding balance matures in the fourth quarter of 2025. The India HSBC Working Capital Facility is guaranteed by First Solar, Inc.

10. Commitments and Contingencies

Commercial Commitments

During the normal course of business, we enter into commercial commitments in the form of letters of credit and surety bonds to provide financial and performance assurance to third parties. As of June 30, 2025, the issued and outstanding amounts and available capacities under these commitments were as follows (in millions):

Issued and OutstandingAvailable Capacity
Revolving Credit Facility (1)$—$250.0
Bilateral facilities (2)231.694.8
Surety bonds130.5137.3

——————————

(1)Our Revolving Credit Facility provides us with a sub-limit of $250.0 million to issue letters of credit, at a fee based on the applicable margin for Term SOFR loans, a fronting fee, and other customary letter of credit fees.

(2)Of the total letters of credit issued under the bilateral facilities, $1.6 million was secured with cash.

Product Warranties

When we recognize revenue for sales of modules, we accrue liabilities for the estimated future costs of meeting our limited warranty obligations. We estimate our limited product warranty liability for power output and defects in materials and workmanship under normal use and service conditions based on return rates for each series of module technology and other factors. We make and revise these estimates based primarily on the number of solar modules under warranty installed at customer locations, our historical experience with and projections of warranty claims, and our estimated per-module replacement costs. We also monitor our expected future module performance through certain quality and reliability testing and actual performance in certain field installation sites. From time to time, we have taken remediation actions with respect to affected modules beyond our limited warranties and may elect to do so in the future, in which case we would incur additional expenses. Such potential voluntary future remediation actions beyond our limited warranty obligations may be material to our condensed consolidated statements of operations if we commit to any such remediation actions.

Product warranty activities during the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Product warranty liability, beginning of period$75,566$25,194$76,435$25,491
Accruals for new warranties issued3,3231,6535,9793,050
Settlements(3,061)(3,152)(6,572)(5,344)
Changes in estimate of product warranty liability——(14)498
Product warranty liability, end of period$75,828$23,695$75,828$23,695
Current portion of warranty liability$60,165$5,684$60,165$5,684
Noncurrent portion of warranty liability$15,663$18,011$15,663$18,011

During the year ended December 31, 2024, we identified manufacturing issues affecting certain Series 7 modules manufactured in 2023 and 2024 that may cause the modules to experience premature power loss once installed in the field. The ultimate loss we will incur for these manufacturing issues will depend on the extent of the premature power loss that is experienced in relation to the obligations under our limited product warranties, as well as any potential additional commitments we may make to remediate the affected modules. Based on currently available information and certain assumptions and estimates, we believe a reasonable estimate of the aggregate losses related to these manufacturing issues will range from approximately $56 million to $100 million. No individual amount within that range is a better estimate than any other amount. Accordingly, we increased our product warranty liability by the low end of the range, which we recorded as a reduction to revenue during the year ended December 31, 2024. The estimated range set forth above was based on our evaluation of the currently available information, including select samples of module performance data from several locations, the estimated number of affected modules, and projections of probable costs to remediate the issues. As additional information becomes available to us, our estimate of the aggregate losses related to these manufacturing issues may change, and any change in estimate may also result in a change to our product warranty liability.

Indemnifications

In certain limited circumstances, we have provided indemnifications to customers or other parties under which we are contractually obligated to compensate such parties for losses they suffer resulting from a breach of a representation, warranty, or covenant; the resolution of specific matters associated with a solar project’s development or construction; guarantees of a third party’s payment or performance obligations; or any disallowance or lack of the right to claim all or any portion of certain tax credits. For contracts that have such indemnification provisions, we initially recognize a liability under ASC 460 for the estimated premium that would be required by a guarantor to issue the same indemnity in a standalone arm’s-length transaction with an unrelated party. We may base these estimates on the cost of insurance or other instruments that cover the underlying risks being indemnified and may purchase such instruments to mitigate our exposure to potential indemnification payments. We subsequently measure such liabilities at the greater of the initially estimated premium or the contingent liability required to be recognized under ASC 450. We recognize any indemnification liabilities as a reduction of earnings associated with the related transaction.

After an indemnification liability is recorded, we derecognize such amount pursuant to ASC 460 depending on the nature of the indemnity, which derecognition typically occurs upon expiration or settlement of the arrangement, and any contingent aspects of the indemnity are accounted for in accordance with ASC 450. As of December 31, 2024, we accrued $2.5 million of indemnification liabilities. As of June 30, 2025, we had no accrual for indemnification liabilities, and the maximum potential amount of future payments under our indemnifications was $1.8 billion. Such potential payments primarily relate to a future retroactive event that affects an entity’s ability to benefit from the transfer of Section 45X tax credits.

Contingent Consideration

As part of a business acquisition in May 2023, we agreed to pay additional consideration of up to $42.5 million to the selling shareholders contingent upon the successful achievement of certain technical milestones. As of June 30, 2025, we reduced the associated long-term contingent consideration liability to $3.6 million, based on certain revisions to the probability and timing of achieving the remaining milestones. Changes in the fair value of the contingent consideration arrangement are classified within “Research and development” expense in our condensed consolidated statements of operations. As of December 31, 2024, we recorded $6.5 million of long-term liabilities for such contingent obligation, which was based on its estimated fair value at that time.

Solar Module Collection and Recycling Liability

We previously established a module collection and recycling program, which has since been discontinued, to collect and recycle modules sold and covered under such program once the modules reach the end of their service lives. For legacy customer sales contracts that are covered under this program, we agreed to pay the costs for the collection and recycling of qualifying solar modules, and the end-users agreed to notify us, disassemble their solar power systems, package the solar modules for shipment, and revert ownership rights over the modules back to us at the end of the modules’ service lives. Accordingly, we recorded any collection and recycling obligations within “Cost of sales” at the time of sale based on the estimated cost to collect and recycle the covered solar modules.

We estimate the cost of our collection and recycling obligations based on the present value of the expected future cost of collecting and recycling the solar modules, which includes estimates for the cost of packaging materials; the cost of freight from the solar module installation sites to a recycling center; material, labor, and capital costs; and by-product credits for certain materials recovered during the recycling process. We base these estimates on our experience collecting and recycling solar modules and on certain assumptions regarding costs at the time the solar modules will be collected and recycled. In the periods between the time of sale and the related settlement of the collection and recycling obligation, we accrete the carrying amount of the associated liability and classify the corresponding expense within “Selling, general and administrative” expense on our condensed consolidated statements of operations.

Our module collection and recycling liability was $144.6 million and $134.4 million as of June 30, 2025 and December 31, 2024, respectively. See Note 3. “Restricted Marketable Securities” to our condensed consolidated financial statements for more information about our arrangements for funding this liability.

Legal Proceedings

During the year ended December 31, 2022, we received several indemnification demands from certain customers, for whom we provided EPC services, regarding claims that such customers’ PV tracker systems infringe, in part, on patents owned by Rovshan Sade (“Plaintiff”), the owner of a company called Trabant Solar, Inc. In January 2023, we were notified by two of our customers that Plaintiff served them with patent infringement complaints, and we have assumed the defense of these claims. We have conducted due diligence on the patents and claims and believe that we will prevail in the actions. Since filing the action, Plaintiff has sought a series of stays of the proceedings, the last of which was lifted on July 14, 2025. Since the stays concluded, the parties have begun responding to their respective discovery demands. Because we have yet to fully evaluate these responses, at this time, we are not in a position to assess the likelihood of any potential loss or adverse effect on our financial condition or to estimate the amount or range of possible loss, if any, from these actions.

In April 2019, a subcontractor of First Solar sustained certain injuries while performing work at a former project site and, in May 2019, commenced legal action against a subsidiary of the Company. In June 2023, a jury awarded damages of approximately $51.3 million to the plaintiff. On September 21, 2023, the Superior Court of California for Monterey County ruled, in response to a motion for remittitur filed by the Company, that the damages awarded to the plaintiff were excessive and reduced the award from $51.3 million to $21.8 million. The plaintiff and defendant have appealed and cross appealed varying aspects of the verdict and the remittitur. Accordingly, due to the uncertainty surrounding the multiple decisions and appeals, as of June 30, 2025, we recorded a $21.8 million accrued litigation payable included in “Other current liabilities” in our condensed consolidated balance sheet. We believe the full amount of awarded damages will be covered by our various insurance policies. Accordingly, we also recorded a $21.8 million receivable included in “Other current assets” in our condensed consolidated balance sheet as of June 30, 2025. The plaintiff did not accept the reduced award by the court ordered deadline of October 10, 2023. As a result, the $21.8 million award has been vacated, and a new trial is expected to be scheduled. We, in conjunction with our insurance carriers, are challenging the initial verdict in an appellate court, and the plaintiff is cross appealing from the decision to reduce the award, among other issues, stemming from the trial. We filed our initial briefs with the court on December 20, 2024. The plaintiff submitted its briefs on April 23, 2025. First Solar’s reply briefings are due on August 6, 2025.

On September 29, 2023 and June 5, 2024, the Company received subpoenas from the Division of Enforcement of the SEC seeking documents and information relating to the Company’s operations in India, the Company’s entry into a PV module supply agreement with an India-based customer, and certain aspects of the Company’s technology roadmap, among other things. On May 7, 2025, we received a notice from the SEC stating that the SEC had concluded its investigation as to First Solar and noting that based on the information collected to date, the SEC staff did not intend to recommend an enforcement action against First Solar.

We are party to other legal matters and claims in the normal course of our operations. While we believe the ultimate outcome of these matters and claims will not have a material adverse effect on our financial position, results of operations, or cash flows, the outcome of such matters and claims is not determinable with certainty, and negative outcomes may adversely affect us.

11. Revenue from Contracts with Customers

We recognize revenue for module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon delivery of the modules to the location specified in the terms of the underlying contract. Our customer contracts generally contain provisions that (i) require us to pay the customer liquidated damages if we fail to deliver modules by scheduled dates or if we fail to deliver modules that meet certain U.S. domestic content requirements and (ii) entitle us to a termination payment if the customer defaults on its contractual obligations and the contract is terminated. For sales of modules imported into the United States, our customer contracts generally include provisions that are intended to mitigate the adverse impact from changes in trade policy, such as tariffs. If a contract is terminated on the basis of these provisions, such contract would effectively be canceled without liability to either party, resulting in a corresponding reduction in future sales of solar modules related to such contract and the return of any customer deposit under the contract, if applicable.

The following table reflects the changes in our contract liabilities, which we classify as “Deferred revenue,” for the six months ended June 30, 2025 (in thousands):

June 30, 2025December 31, 2024Six Month Change
Deferred revenue$1,823,081$2,039,825$(216,744)(11)%

During the six months ended June 30, 2025, our contract liabilities decreased by $216.7 million primarily due to (i) the recognition of revenue for sales of solar modules for which payment was received in prior years, (ii) the reversal of a $63 million advance payment previously accrued due to our deferral of a customer’s invoice due date, (iii) the restructuring of payment terms with a customer that resulted in the return of $50 million of previously received advance payments in exchange for a letter or credit, and (iv) the recognition of revenue of $42 million associated with certain customer contract terminations, partially offset by (v) advance payments received or accrued in the current period for future sales of solar modules. During the six months ended June 30, 2025 and 2024, we recognized revenue of $236.1 million and $221.3 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

As of June 30, 2025, we had entered into contracts with customers for the future sale of 61.9 GW of solar modules for an aggregate transaction price of $18.5 billion, which we expect to recognize as revenue through 2030 as we transfer control of the modules to the customers. This volume and transaction price exclude contracts with customers in India for which payment has not been fully secured. This transaction price also excludes estimates of variable consideration associated with (i) future module technology improvements, including enhancements to certain energy related attributes, (ii) sales freight in excess of defined thresholds, (iii) changes to certain commodity prices, (iv) the module wattage committed for delivery, (v) the volume of modules sold that meet certain U.S. domestic content requirements, and (vi) changes to certain tariff structures within a defined threshold, among other things. As a result, the revenue recognized from such contracts may increase or decrease in future periods relative to the original transaction price or may otherwise be impacted if a contract is canceled. These contracts may also be subject to amendments as agreed to by the parties to the contract. These amendments may increase or decrease the volume of modules to be sold under the contract, change delivery schedules, or otherwise adjust the expected revenue under these contracts.

12. Share-Based Compensation

The following table presents share-based compensation expense recognized in our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Cost of sales$962$1,388$1,306$2,415
Selling, general and administrative4,8156,0056,70010,874
Research and development1,0321,0061,3871,926
Production start-up111(24)
Total share-based compensation expense$6,810$8,400$9,394$15,191

As of June 30, 2025, we had $35.1 million of unrecognized share-based compensation expense related to unvested restricted stock and performance units, which we expect to recognize over a weighted-average period of approximately 1.4 years.

In May 2021 and March 2022, the compensation committee of our board of directors approved grants of performance units for key executive officers to be earned over multi-year performance periods, which ended in December 2023 and December 2024, respectively. Vesting of the 2021 and 2022 grants of performance units was contingent upon the specific attainment targets of each grant, which targets included metrics such as contracted revenue, return on capital, cost per watt, incremental average selling price, and operating income metrics. In February 2024, the compensation committee certified the achievement of the vesting conditions applicable to the 2021 grants, which approximated the maximum level of performance. In February 2025, the compensation committee certified the achievement of the vesting conditions applicable to the 2022 grants, which approximated the maximum level of performance. Accordingly, each participant received one share of common stock for each vested performance unit granted, net of any tax withholdings.

In March 2023, March 2024, and May 2025, the compensation committee approved additional grants of performance units for key executive officers; such grants are expected to be earned over a multi-year performance period ending in December 2025, December 2026, and December 2027, respectively. Vesting of the 2023, 2024, and 2025 grants of performance units is contingent upon the specific attainment targets of each grant, which targets include metrics such as contracted revenue, production, incremental average selling price, operating margin, and technology development.

Vesting of performance units is also contingent upon the employment of program participants through the applicable vesting dates, with limited exceptions in case of death, disability, a qualifying retirement, or a change-in-control of First Solar. Outstanding performance units are included in the computation of diluted net income per share based on the number of shares that would be issuable if the end of the reporting period were the end of the contingency period.

13. Income Taxes

In July 2025, the U.S. President signed the budget reconciliation legislation (House of Representatives 1, or “H.R.1”) into law, commonly referred to as the “One Big Beautiful Bill.” H.R.1 includes significant provisions, such as (i) the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, (ii) modifications to the international tax framework, and (iii) the restoration of favorable tax treatment for certain business provisions. H.R.1 has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently evaluating the impact of H.R.1 on our consolidated financial statements.

In August 2022, the previous U.S. President signed into law the IRA, which revised U.S. tax law by, among other things, including a new corporate alternative minimum tax of 15% on certain large corporations, imposing a 1% excise tax on stock buybacks, and providing various incentives, including the introduction of the advanced manufacturing production credit under Section 45X of the IRC. The provisions of the IRA are generally effective for tax years beginning after 2022.

Our effective tax rate was 3.1% and 7.4% for the six months ended June 30, 2025 and 2024, respectively. The decrease in our effective tax rate was primarily driven by the relative amounts of advanced manufacturing production credits earned in each period, partially offset by lower relative amounts of income earned in foreign jurisdictions with lower tax rates. Our provision for income taxes differed from the amount computed by applying the U.S. statutory federal income tax rate of 21% primarily due to the effect of tax law associated with the IRA.

Our Malaysian subsidiary has been granted a long-term tax holiday that expires in 2027. The tax holiday, which generally provides for a full exemption from Malaysian income tax, is conditional upon our continued compliance with certain employment and investment thresholds. We are currently in compliance with such thresholds.

Our Vietnamese subsidiary has been granted a long-term tax incentive that generally provides a full exemption from Vietnamese income tax through 2023, followed by reduced annual tax rates of 5% through 2032 and 10% through 2036. Such long-term tax incentive is conditional upon our continued compliance with certain revenue and research and development (“R&D”) spending thresholds. We are currently in compliance with such thresholds.

We are subject to audit by federal, state, local, and foreign tax authorities. We are currently under examination in India, Chile, the United States, and the States of Georgia and Tennessee. We believe that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed by our tax examinations are not resolved in a manner consistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.

14. Net Income per Share

The calculation of basic and diluted net income per share for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands, except per share amounts):

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Basic net income per share
Numerator:
Net income$341,868$349,356$551,403$585,972
Denominator:
Weighted-average common shares outstanding107,245107,042107,184107,011
Diluted net income per share
Denominator:
Weighted-average common shares outstanding107,245107,042107,184107,011
Effect of restricted stock and performance units273483284491
Weighted-average shares used in computing diluted net income per share107,518107,525107,468107,502
Net income per share:
Basic$3.19$3.26$5.14$5.48
Diluted$3.18$3.25$5.13$5.45

The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net income per share for the three and six months ended June 30, 2025 and 2024 as such shares would have had an anti-dilutive effect (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Anti-dilutive shares1—1—

15. Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss, net of tax, for the six months ended June 30, 2025 (in thousands):

Foreign Currency Translation AdjustmentUnrealized (Loss) Gain on Marketable Securities and Restricted Marketable SecuritiesUnrealized (Loss) Gain on Derivative InstrumentsTotal
Balance as of December 31, 2024$(127,296)$(56,483)$(279)$(184,058)
Other comprehensive income before reclassifications16,4326,530—22,962
Amounts reclassified from accumulated other comprehensive loss323—366689
Net tax effect—(422)(87)(509)
Net other comprehensive income16,7556,10827923,142
Balance as of June 30, 2025$(110,541)$(50,375)$—$(160,916)

The following table presents the pretax amounts reclassified from accumulated other comprehensive loss into our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):

Comprehensive Income ComponentsIncome Statement Line ItemThree Months Ended June 30,Six Months Ended June 30,
2025202420252024
Foreign currency translation adjustmentOther expense, net$—$—$(323)$—
Unrealized gain on marketable securitiesOther expense, net—11—11
Unrealized loss on derivative instruments:
Commodity swap contractsCost of sales—(346)(366)(1,495)
Total loss reclassified$—$(335)$(689)$(1,484)

16. Segment Reporting

First Solar operates as one business, which involves the design, manufacture, and sale of CdTe solar modules, which convert sunlight into electricity. As such, we operate as a single operating segment. Third-party customers of this segment include system developers, independent power producers, utilities, commercial and industrial companies, and other system owners and operators. Our business is managed by our Chief Executive Officer, who is also considered our chief operating decision maker (“CODM”).

Prior to 2025, we regularly provided our CODM with financial information that included certain legacy business activities. As such activities have continued to decline in size and importance, our CODM no longer receives detailed financial information at this disaggregated level. Therefore, we currently operate as a single operating segment, and our disclosures reflect this change.

Although our CODM regularly uses gross profit for key operating decisions about allocating resources and assessing performance, we have concluded that consolidated net income is also used and is the measure of profit or loss required to be disclosed under the provisions of ASC 280 for our single operating segment. Accordingly, we considered whether there were any significant expense categories to disclose and concluded that the condensed consolidated financial statements and accompanying notes thereto include the relevant categories regularly provided to our CODM. The measure of segment assets is reported in our condensed consolidated balance sheets as “Total assets.”

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