Canadian Solar’s Earnings Call: Growth Amid Challenges

Canadian Solar ((CSIQ)) has held its Q3 earnings call. Read on for the main highlights of the call.

Canadian Solar’s latest earnings call presented a balanced sentiment, highlighting both impressive growth and notable challenges. The company showcased strong advancements in energy storage and high-margin project sales, alongside strategic progress in US manufacturing. However, concerns were raised due to decreased solar segment margins, net losses impacted by shareholder actions, ongoing litigation, and increased debt levels.

Record Energy Storage Shipments

Canadian Solar achieved a record quarterly shipment of 2.7 gigawatt hours in energy storage, underscoring robust growth in this segment. This milestone reflects the company’s successful expansion and strategic focus on energy storage solutions.

Strong Revenue Performance

The company reported total revenue of $1.5 billion, reaching the high end of expectations. This strong revenue performance is indicative of Canadian Solar’s effective market strategies and operational execution.

Gross Margin Exceeded Expectations

Canadian Solar’s gross margin stood at 17.2%, surpassing guidance. This was primarily driven by significant contributions from energy storage shipments, highlighting the profitability of this segment.

Significant Progress in US Manufacturing

The company is making notable strides in US manufacturing, with phase one of the solar cell factory in Indiana and the lithium battery factory in Kentucky on track to start production by the end of 2026. These developments are expected to strengthen the US supply chain.

Growth in Residential Energy Storage

Canadian Solar is experiencing strong growth in residential energy storage markets in Japan, Italy, and the US, while expanding into Germany and Australia. The company is on track to achieve profitability in this segment by 2025.

High-Margin Project Sales

The company monetized over 500 megawatts of projects, achieving a gross margin of 46.1%. This was driven by profitable project sales, demonstrating Canadian Solar’s ability to capitalize on high-margin opportunities.

Decreased Gross Margin in Solar Segment

The solar segment experienced a gross margin decrease of 730 basis points to 15%, attributed to incremental upstream price increases and underutilization. This highlights a key area of concern for the company.

Net Loss Due to Preferred Shareholder Impact

Canadian Solar reported a net income attributable to shareholders of $9 million, translating to a net loss of $0.07 per diluted share. This was primarily due to the impact of paid-in-kind preferred shareholder actions.

Challenges with ADCVD Process

The company is facing ongoing litigation related to the ADCVD process, which could result in significant financial liabilities. Despite this, no reserve has been booked, indicating uncertainty in this area.

Reduced Cash Flow and Increased Debt

Canadian Solar reported net cash used in operating activities of $1.112 billion, with total debt rising incrementally to $6.4 billion. This increase in debt is a critical area of concern for the company’s financial health.

Forward-Looking Guidance

Looking ahead, Canadian Solar expects fourth-quarter revenue between $1.3 and $1.5 billion, with a gross margin of 14 to 16%. For 2026, the company projects module shipments ranging from 25 to 30 gigawatts, including one gigawatt for internal projects, and energy storage shipments between 14 and 17 gigawatt hours. The company is also focusing on strategic US manufacturing investments and compliance with the One Big Beautiful Bill Act to support long-term growth and market positioning.

In conclusion, Canadian Solar’s earnings call highlighted a mix of strong growth and strategic progress, alongside challenges that need addressing. The company’s advancements in energy storage and US manufacturing are promising, while concerns about solar segment margins, shareholder impacts, and increased debt remain areas to watch closely.