By Avi Salzman
Three solar stocks plunged more than 30% after reporting earnings this week -- and a fourth fell 14% -- in a sign that the industry's growing headaches are starting to hit financial statements. Tariffs are pinching margins, federal energy policies are a drag, and demand looks weaker than expected. There are no easy or immediate answers for those problems.
On Friday, residential solar developer Sunrun fell 35%. Its decline followed washouts in solar manufacturer First Solar, and equipment companies Array Technologies and Shoals Technologies, which dropped 14%, 34%, and 31%, respectively, after reporting earnings earlier in the week.
The Invesco Solar exchange-traded fund fell 8% this week, marking its worst five-day performance since June.
The bad news comes after a few months of relative calm, and even optimism. Solar stocks had a surprisingly good run in 2025, despite losing key tax credits in the large tax bill Republicans passed last year. President Donald Trump's policies have been negative for most renewable players, but not as negative as feared: the tax bill allowed projects that had already begun construction to receive access to the credits available under prior law, for instance. While homeowners can't get federal credits for putting panels on their roofs, those that lease the panels can still benefit from tax breaks.
But the solar industry now faces a reckoning from the loss of federal support, consumer reticence, and an increase in costs.
Residential solar has a particularly bad demand problem. Energy research firm Wood Mackenzie sees installations falling 18% this year across the U.S. The slowdown appears to have already started: Sunrun, which leases panels to homeowners, added 17% fewer subscribers in the fourth quarter of 2025 than it did in the fourth quarter of 2024. The company's leases pay off over time as its customers pay off their bills on a monthly basis. But it's costing Sunrun more to add each new customer -- and the net value of each new customer was down 30% in the quarter.
The company's guidance for 2026 was also underwhelming. Sunrun's executives appear to be bracing for "a more prolonged period of market contraction," wrote Jefferies analyst Julien Dumoulin-Smith, who downgraded his rating on the shares to Hold from Buy.
Trump's tariffs are also starting to catch up to the industry. First Solar, Array, and Shoals all said tariffs hurt their profit margins.
First Solar, an industry bellwether because of its size and status as the largest U.S. manufacturer, has been having demand problems, too. Its backlog was down to 50.1 gigawatts at the end of last year, after starting the year at 68.5 gigawatts. The company had more "de-bookings" -- including terminated or canceled contracts -- than new bookings.
First Solar's fourth quarter marked the seventh straight quarter where First Solar's backlog declined sequentially, according to Raymond James analyst Bobby Zolper. "With respect to 2026 and 2027 guidance, shipment volumes, sales, and [earnings before interest, taxes, depreciation, and amortization], all missed prior views by about 15%, with the stock down by a similar amount," Zolper wrote, rating the stock at Market Perform. "We would prefer to wait out the near-term negatives."
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 27, 2026 19:18 ET (00:18 GMT)
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