Canadian Solar Q4 2025 Earnings Call - Reshoring to U.S. and HJT Ramp Signals Transition Year

Melissa, Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar’s fourth quarter 2025 earnings conference call. My name is Melissa, and I will be your operator for today. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Wina Huang, Head of Investor Relations at Canadian Solar. Please go ahead.

Wina Huang, Head of Investor Relations, Canadian Solar: Thank you, operator, and welcome everyone to Canadian Solar’s fourth quarter 2025 conference call. Please note that today’s conference call is accompanied with slides, which are available on Canadian Solar’s investor relations website within the Events and Presentation section. Joining us today are Dr. Shawn Qu, Chairman and CEO, Colin Parkin, President of Canadian Solar and President of e-STORAGE, Ismael Guerrero, Corporate VP and President of Recurrent Energy, Canadian Solar, and Xinbo Zhu, Senior VP and CFO. All company executives will participate in the Q&A session after management’s formal remarks. On this call, Shawn will go over some key messages for the quarter. Colin and Ismael will review business highlights for manufacturing and Recurrent Energy, respectively, and Xinbo will go through the financial results. Colin will conclude the prepared remarks with the business outlook, after which we will have time for questions.

Before we begin, I would like to remind listeners that management’s prepared remarks today, as well as their answers to questions will contain forward-looking statements that are subject to risks and uncertainties. The company claims protection under the safe harbor for forward-looking statements that is contained in 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 assumes no obligation to update these projections in the future unless otherwise 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 Securities and Exchange Commission. Management’s prepared remarks will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles or GAAP.

Some financial information presented during 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 enable further analysis of the company’s performance and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. Now I would like to turn the call over to Canadian Solar’s chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Thank you, Winner, and thank you all for joining our fourth quarter earnings call. 2025 was another challenging year, marked by persistent market headwinds and a shifting regulatory landscape. Through these turbulent conditions, we demonstrated strategic resilience and operational discipline. We prioritized the margin and diversified our profit drivers, particularly in energy storage. Now, let’s review our operating and financial results. Please turn to slide three. In the fourth quarter, we shipped 4.3 gigawatts of solar modules, bringing total shipments to global customers to 24.3 gigawatts for the year. In response to the prolonged solar downturn, we have pivoted away from industry’s traditional focus on shipment volumes. Instead, we are concentrating on strategic high-value markets. Notably, in U.S. market, we continue to build on our historically strong track record. In 2025, we delivered a record 8.1 gigawatts to the United States.

In energy storage, the volatile tariff environment shifted some shipment volumes into 2026. Even so, we ended the year with a record 7.8 GWh of global shipments, including 3.9 GWh delivered to the United States. Given downward adjustments in both solar modules and energy storage volumes, along with lighter project sales from Recurrent Energy, our total revenue of 2025 was $5.6 billion. Gross margin improved by 160 basis points year-over-year. This was driven by a higher mix of module shipments to high-value regions and a larger shares of storage volumes delivered under third-party contracts. We maintained tight control over operating expenses and achieved operating income of $43 million for the full year.

However, a volatile macro environment increased FX losses and interest costs throughout, as we increased debt to support our IPP build-out. As a result, we recorded a net loss attributable to Canadian Solar of $104 million, or $2.5 per diluted share. Canadian Solar has continuously evolved over more than two decades in the renewable industry. Global opportunities have shifted over time, and we have built a strong global track record across solar manufacturing, storage manufacturing, and project development. Today, we see a compelling opportunity to create value by returning to our home base in North America. In December 2025, we announced a strategic initiative to resume direct oversight of our U.S. operations by forming our new U.S. manufacturing platform, CS PowerTech. For an update on our U.S. manufacturing roadmap, please turn to slide 4.

Canadian Solar is spearheading the effort to reshore manufacturing to North America. In Mesquite, Texas, we have successfully ramped our solar module factory to an annual production run rate exceeding 5 GW, supported by 1,500 local employees. As we have previously noted, we believe the United States is best served by resilient domestic supply chain. Consistent with this view, we are doubling our nameplate capacity to 10 GW peak by the end of 2026. This expansion is expected to increase our local workforce to 1,700 employees. This will make us the largest crystalline silicon solar module manufacturer in the country. We are also pleased to report progress at our flagship solar cell factory in Jeffersonville, Indiana. In response to strong customer demand, we’re expanding our initial nameplate capacity beyond the originally planned 5 GW peak as we install and commission additional production lines through 2026.

Phase 1 will have a nameplate capacity of 2.1 GWp and will use state-of-the-art heterojunction technology or HJT. Trial production is scheduled to begin next month. Phase 1 will represent the only commercially operational HJT solar cell facility in the United States. Phase 2 will add 4.2 GW of capacity, bringing our total U.S. solar cell nameplate capacity to 6.3 GWp. This will make us the largest crystalline silicon solar cell manufacturer in the country. We expect the trial production of phase 2 to begin by the end of 2026. We recognize the significant value of adding phase 2 to our solar cell facility, and we believe the market does as well. This was demonstrated by our recently completed $230 million convertible bond issuing. Demand for storage in U.S. also continues to grow strongly.

The record build-out of data centers to support AI growth is driving increase in power demand for data center infrastructure. Our OBBBA compliant storage solutions produced in Southeast Asia have seen very strong demand. As a result, we plan to scale the resources there to increase both system and battery cell capacity throughout 2026. Hence, we’ll be both expanding our Southeast Asia energy storage manufacturing capacity and advancing phase two of our U.S. solar cell factory in tandem. Given the commercial priority of these two significant investments, we are strategically delaying progress at our battery cell and BESS production facility in Shelbyville, Kentucky. Given our long-term commitment to U.S. manufacturing, Recurrent Energy will proactively rebalance its business towards monetizing in construction and operating assets in order to optimize cash flow and manage leverage.

In conclusion, I am proud of our team for delivering strong performance this year, and I look forward to continue the momentum we are building in our U.S. manufacturing initiatives. With that, I will now turn the call over to Colin, who will provide more details on our manufacturing business. Colin, please go ahead.

Colin Parkin, President of Canadian Solar and President of e-STORAGE, Canadian Solar: Thank you, Shawn. Please turn to slide 5. In the fourth quarter, we continued to operate against a challenging solar market backdrop. Upstream cost increases, particularly in silver, along with the cost associated with underutilization across our global solar supply chain, required careful volume management to protect margins. As a result, we delivered 4.3 gigawatts of solar modules below our guidance. In storage, shipments were delayed into the first quarter of 2026 due to construction delays at one of our customer sites. As a result, we delivered 2 GWh slightly below our guidance. These two volume shortfalls resulted in lower than expected revenue of $1.3 billion. Solar module ASPs remained at record lows throughout 2025. We have been an industry leader in pivoting away from volume growth towards value growth.

By controlling shipments to less profitable markets and increasing shipments to the U.S. market, we maintain blended pricing above the industry average. In 2025, the U.S. accounted for approximately 1/3 of our global module shipments. Meanwhile, our storage business in 2025 faced challenges created by tariff volatility and the passage of the One Big Beautiful Bill Act. These policy uncertainties materially impacted customers’ project planning. While we did not lose any opportunities, some volume shifted into 2026 as we work closely with customers to navigate these trials. Margins normalized in the second half of the year as we delivered more recently signed contracts. With the increase in lithium carbonate prices, we are actively managing our exposure. Today, the two most important drivers of our manufacturing margin are the mix of solar module shipments to the U.S. and the performance of our storage business.

Within US module shipments, domestic manufacturing is becoming increasingly important to margin as we reshore production and deliver a greater portion of our strategy through our own domestic capacity. Now let me walk you through the latest updates on our battery energy storage business. Please turn to slide 6. We delivered 2 gigawatt hours in the fourth quarter, corresponding to $297 million in revenue after accounting for volumes delivered to our own projects. Despite the delays caused by policy changes, we ended the year with a record 7.8 gigawatt hours of energy storage shipments delivered globally, a year-over-year increase of 19%. Over the past 3 years, we have tripled our sales in this business. Our momentum is further reflected in our record contracting backlog of $3.6 billion as of March 13, 2026.

This includes contracted long-term service agreements covering 29 GWh of projects. Today, we are the market leader in our home country of Canada in terms of contracted volume with multiple gigawatt hours under contract. We maintain a strong presence in key markets, including the United States and the United Kingdom, while scaling delivery in newer markets such as Australia and Latin America. At the same time, we continue to actively engage in markets such as Japan and mainland Europe, where we see attractive new opportunities. In terms of applications, we see a significant opportunity driven by the rapid build-out of data centers. For example, the 2.5 GWh supply agreement we recently signed with a major US utility reflects the sharp increase in electricity demand driven by AI and hyperscale data center development.

Battery energy storage is playing an increasingly critical role in supporting the additional power requirements of data center infrastructure. By strengthening regional grid capacity, our storage solutions help ensure reliable power for these emerging loads. We have built a dedicated team focused specifically on the requirements of data centers and related infrastructure, and we are beginning to see the strong results from that effort. Our focus is on delivering comprehensive power solutions, including support for data centers and long-duration applications. Our differentiation lies in providing compatible, competitive and reliable total solutions. We combine strong execution capabilities, deep experience in complex grid interconnection and commissioning, and long-term service expertise with a proven product platform and track record.

This allows us to deliver the value our customers are seeking as they navigate the changing demands created by rapidly growing electricity loads. Now let me hand the call over to Ismael, who will provide an overview of Recurrent Energy, Canadian Solar’s global project development business. Ismael, please go ahead.

Ismael Guerrero, Corporate VP and President of Recurrent Energy, Canadian Solar: Thank you, Colin Parkin. Please turn to slide 7. In the fourth quarter, we sold a few small PV projects in Japan, bringing total full year 2025 sales to nearly 1 gigawatt. Revenues from operating solar and battery energy storage projects decreased sequentially due to seasonality, while power services performance remained stable. Two major project sales originally planned for the fourth quarter have now shifted into 2026. One of these projects has already been sold in the first quarter. Gross margin was further pressured by impairments to project assets within our pipeline. Moreover, without sufficient scale from project sales during the quarter, we were unable to cover operating expenses, resulting in an operating loss of $69 million. We continue to shift our business mix towards the monetization of operating and under-construction assets in order to strengthen our balance sheet and improve cash flow.

As we manage the pace of construction activities, we are also optimizing our pipeline for quality, focusing on generating value from existing opportunities. Please turn to slide 8 for an update on our pipeline. As of December 2025, we have secured interconnections for around 7 gigawatts of solar and 15 gigawatt hours of energy storage globally, excluding projects already in operation. As part of our continued effort to streamline our pipeline, we have removed projects that have been impaired this quarter. Following these adjustments, our total project pipeline now stands at 24 gigawatts of solar and 83 gigawatt hours of energy storage. Now let me hand the call over to Xinbo Zhu, who will go through our financial results in more detail. Xinbo Zhu, please go ahead.

Xinbo Zhu, Senior VP and CFO, Canadian Solar: Thank you, Ismael. Please turn to slide 9. In the fourth quarter, we delivered revenue of $1.2 billion. Revenue was below guidance due to project sales delayed into 2026 and lower than expected volumes in both solar and storage. Gross margin was 10.2%, impacted by project asset impairments at Recurrent Energy and the inventory write-down in our manufacturing business. Selling and distribution expenses decreased 20% sequentially, primarily due to lower shipping costs associated with reduced shipment volumes. General and administrative expenses decreased 8% sequentially, driven by continued cost control measures. Net interest expense in the fourth quarter was $39 million, up $10 million from the prior quarter. This increase was driven by a modest rise in total debt balances.

Net foreign exchange loss in the fourth quarter was $15 million, driven by a weaker US dollar and a stronger Chinese renminbi. Total net loss for the quarter was $131 million. Net loss attributable to Canadian Solar shareholders was $86 million or $1.66 per diluted share. Now let’s turn to cash flow and the balance sheet. Please turn to slide 10. In the fourth quarter, net cash flow used in operating activities was $65 million, driven by change in working capital, specifically an increase in project assets, partially offset by a decrease in inventories, as inventory in the prior quarter had increased in anticipation of higher input costs. Capital expenditures for the year totaled $962 million, slightly below forecast. This was primarily due to payment timing, which we expect to occur in 2026.

Net cash provided by financing activities was $22 million, as debt increased incrementally to provide additional financial flexibility for the group. Of our $6.5 billion in gross debt, non-recourse debt under Recurrent Energy as of December 31, 2025 was $2.2 billion. We ended the year with a cash balance of $1.9 billion, which we will deploy prudently in line with our strategic priorities.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Now let me turn the call back to Colin Parkin, who will conclude with our guidance and business outlook. Colin Parkin, please go ahead.

Colin Parkin, President of Canadian Solar and President of e-STORAGE, Canadian Solar: Thank you, Xinbo. Please turn to slide 11. For the first quarter of 2026, we expect our manufacturing segment to deliver solar module shipments between 2.2-2.4 gigawatts. For energy storage, we expect shipments between 1.7-1.9 gigawatt hours. We forecast total revenue for the first quarter to be between $900 million and $1.1 billion, with gross margin expected to range from 13%-15%. Margins in the first quarter are expected to remain soft across both the manufacturing segment and Recurrent Energy. This reflects cost increases across the solar supply chain as well as delayed project sales at Recurrent Energy. For the full year of 2026, we are issuing new guidance.

We expect to deliver 6.5-7 gigawatts of module shipments and between 4.5-5.5 gigawatt hours of energy storage shipments to the U.S. market. Our solar module shipments in the U.S. are expected to be slightly lower in 2026 compared with 2025. This is due to a limited supply of solar cells qualified as non-FEOC under the BABA during the first half of the year. The elevated cost of these cells will also affect profitability. We believe this constraint will be temporary as our own domestic solar cell production ramps during the second and third quarters. Similarly, battery energy storage shipments are expected to be weighted towards the second half of the year. Within our project development business, our focus remains on rebalancing the portfolio towards asset monetization while continuing to optimize our cost structure.

Overall, 2026 will be a transition year as we accelerate our U.S. manufacturing roadmap and further diversify our long-term profitability drivers. With that, I would now like to open the floor for questions. Operator?

Melissa, Conference Operator: Thank you. If you’d like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Colin Rusch with Oppenheimer & Company. Please proceed with your question.

Colin Rusch, Analyst, Oppenheimer & Company: Thanks so much, guys, and congratulations on being able to shift the business so aggressively here. You know, I’m curious about the pricing environment in the U.S. You know, what are you guys seeing in terms of trend lines here and long-term support for pricing that supports the aggressive capacity expansion?

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Yeah, Colin, this is Dr. Shawn Qu speaking. I guess you mean the solar pricing.

Colin Rusch, Analyst, Oppenheimer & Company: That’s correct.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Long-term price. Solar long-term pricing in the U.S. is stable. As a matter of fact, I mean, our main market in the U.S. is the utility-scale project market, which are usually like larger-scale projects, big orders and with a few quarters of lead time, in general. In this market, we have seen the pricing per watt going up. For example, from the beginning of the year till now, we have seen the U.S., you know, pricing on average go up by like $0.02-$0.03, some more, more mainly in response to, I think number one, the tight supply of the so-called BABA-compliant solar cell supply. But also response to the higher material cost, especially the silver cost.

I think this will allow us to sustain the margin in the U.S. market. Now, for the storage, we also see the price stable and also respond to the higher lithium price. As you probably know, the lithium carbonate price also went up along with other commodities. Major commodity prices also went up. You know, the lithium carbonate price also went up this year, you know, since late December. The current new price reflected this. This will allow us to maintain the growth margin more or less for the U.S. market, Colin.

Colin Rusch, Analyst, Oppenheimer & Company: Thank you so much, Shawn. That’s super helpful. Then just from an organizational perspective, as you you know look at a different strategy around revenue and margin, how should we be thinking about the operating expenses and you know the baseline there and how that allows for some you know some significant operating leverage as you start to grow again on the top line?

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Yeah. In terms of operating expenses, we see it going down, like, proportional to the shipment volume because a large part of operating expenses is the shipping cost. Also the overhead cost to support the volume. If the volume grow, then the operating expenses also grow. If the volume go down, this operating expenses also go down. That’s in case of. In June, we will see some increase of operating costs for the energy storage. Meanwhile, we’ll see operating cost reduction in the solar area. I think going forward, the challenges are in the solar. If the solar price continue to go down, then that will make the, like, percentage operating expenses for solar bigger.

However, fortunately, I mean, since Q1, I mean, since January this year, we don’t see the absolute ASP of solar module going down anymore. We actually see it go up. Also we don’t see the energy storage price going down. It is also going up. I think, as long as we can continue to control and operating expenses and make our operation more efficient, we’ll be able to grow the bottom line. I think that you will see that happen starting from Q2, I believe.

Colin Rusch, Analyst, Oppenheimer & Company: Perfect. Thanks so much, guys.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Thanks, Colin.

Melissa, Conference Operator: Thank you. Our next question comes from the line of Philip Shen with Roth Capital Partners. Please proceed with your question.

Philip Shen, Analyst, Roth Capital Partners: Hi, all. Thanks for taking my question. On the project delays, sorry if I missed, but what drove the project sale delays from Q4 into 2026? Can you give some additional color also on the impairments that you guys experienced? Thanks.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Yeah. I’ll ask Ismael to address this question and Xinbo Zhu to make any supplement if necessary. Ismael?

Ismael Guerrero, Corporate VP and President of Recurrent Energy, Canadian Solar: Sure.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Ismael?

Ismael Guerrero, Corporate VP and President of Recurrent Energy, Canadian Solar: Thank you, Shawn. Thank you. Look, there were a couple of projects that delayed mainly due to permitting delays. One of them was already finalized. The other one is under exclusivity, so it should be finalized soon, hopefully. Mainly permitting delays. Look, the impairments are on. I mean, the main reasons are twofold. One is change on legislation is in some of the countries we play, and many projects that we were developing early stage, we believe might not be making sense anymore, and we stopped putting capital into them with the changes on the regulations. There were a bunch of them on that part and some others on which interconnection suddenly the interconnection costs went through the roof, and we don’t see them viable, not for us and not for anyone.

We also decided to stop investing in. Those are the two main drivers.

Philip Shen, Analyst, Roth Capital Partners: Got it, Ismael. Thanks. Can you share which countries and where you might be downsizing your efforts, either due to legislation or to the interconnection costs? Thanks.

Ismael Guerrero, Corporate VP and President of Recurrent Energy, Canadian Solar: The biggest bulk on solar in U.S. because of the changes on regulation there. Italy also because of the grid reform, also a little bit in France. Those are the main three. A little bit in Spain also, but not major.

Philip Shen, Analyst, Roth Capital Partners: Great. Thanks. Shifting over to the guidance. If you can you explain a little bit more why the 2026 guidance is only focused on the U.S.? Although Q1 has global numbers there, was wondering if you could also share what the U.S. mix for Q1 might be. Also, what the 2026 CapEx might be. Thanks.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Philip, again, this is Shawn. We have already provided a global guidance in November last year. We only added the new guidance for U.S., which we usually mention during the call, but we don’t put it in writing. This time we put it in writing for the U.S. guidance. In terms of CapEx, I will let Xinbo Zhu address. I want to mention that the new CapEx for 2026 is mainly in United States. We have some remaining payment for the capacity in other place, but most of the CapEx are in United States. We also have some new CapEx in Southeast Asia for the energy storage, you know, productions and the lithium battery energy storage production.

Those capacity are mainly prepared for U.S. Now, Xinbo, do you have some new numbers to share?

Xinbo Zhu, Senior VP and CFO, Canadian Solar: Yes. It’s not new numbers. The same as what we guided in last earnings call. It’s around $1.2 billion for this year, the CapEx.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: There might be some uncertainties because of, hopefully, the lower tariffs to the U.S.

Philip Shen, Analyst, Roth Capital Partners: Great. Okay. Thank you, Xinbo and Shawn. One more, if I may. As it relates to the Section 337, that investigation, I was wondering if you might be able to provide some color on that as well as I think the USPTO recently rejected your attempt to invalidate the First Solar TOPCon and lawsuits. Just if you can give us some perspective on the IP situation. It looks like you’re focused more on heterojunction, so maybe it’s not that relevant. Just wanted to touch on this for a bit. Thanks.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: First of all, Philip, we have decided to use a heterojunction, HJT technology for our U.S. domestic solar cell factory a few years ago, before the legal challenge from First Solar. We made a decision independently because we believe we are a master of the HJT technology, and this technology has some very distinguished advantages. First of all, HJT has higher theoretical efficiency limit than the TOPCon solar cell. Second, although both TOPCon and HJT are N-type, you know, for the application on Earth, it’s N-type, right? For the application in the space, some scholars believe P-type HJT has more advantage.

You know, although the TOPCon and HJT are both N-type, HJT does have higher efficiency and also thinner wafers. It has the potential to go thin wafers, therefore further reduce the cost. Also, there was another advantage of HJT technology which has just become more significant recently, which is the low silver use. You know, when we decided to use HJT for the U.S. factory, the silver cost was not that high. Like 2, 3 years ago, polysilicon cost is still number one, not like today, silver cost all of a sudden become number one. HJT uses the so-called low-temperature process.

As you probably know, the processing temperature, the highest processing temperature is around 200 degrees Celsius, rather than for N-type or TOPCon, which you have to go through some 800, 900 degrees Celsius process. Because it’s low temperature, we can potentially use less silver and more copper in the paste. Therefore, it will have very significant savings in terms of of you know, silver cost. Recently, I have called the R&D team in our company to focus on what I call the zero silver technology. For zero silver, we can see that the HJT will go faster than the TOPCon technology. Because of those events, you know, HJT is more of a automated and equipment-dependent process than operators dependent.

Its operator per watt capacity is much less than the TOPCon. It will make reduce the initial operator training burden for us in U.S. That’s why we choose HJT. As I said in my remark, we will see the first piece of HJT cells off our lines in Jeffersonville, Indiana by the end of this month. Next quarter, we will start the ramp up process for this one. I think that the result today, you know, what happened today shows that we made the right decision on the technology selection. Also showed our, you know, depths in the R&D and technology reserve in the company.

Now, turning to the on the legal patent side, I don’t want to comment too much on the legal cases. I do want to emphasize that USPTO pretty much rejected all the review request for patents. It’s not specific to us, but it’s rather a change of their practice. I don’t think it affect or it will weaken our position in front of the court. We have you know we firmly believe that our technology is sound and also we have not you know infringed any of you know other patents. Now, in terms of 337, it’s going to be approximately a one-year process or more than one year. You know, it’s a process in front of ITC. We’ll let the process go.

As I said, we are confident our technology and our patent determination. Meanwhile, we have flexibility. As you see that we have the HJT technology going in U.S. already. By the end of this year, we’ll be ramping up the phase two. In Q1 next year, you will start to see 6 GW, 6.3 GW of nameplate capacity running in United States. That will more or less cover a large part of our solar cell requirement of our Mesquite solar module factory. I also said that we increased our nameplate capacity of the solar module factory, you know, in Mesquite, Texas to 10 GW.

For the remaining 3 GW, we will either use TOPCon to supplement or we might use a PERC technology. Altogether, I’m confident that right now what you are seeing right now is a transition process, you know, ongoing. Starting from second half of this year overall, you will see the result of this, you know, transition. I think we will be one of the most stable players in the global market, especially in the U.S. market. Phil.

Philip Shen, Analyst, Roth Capital Partners: John, thank you very much for the comprehensive answer. I’ll pass it on.

Melissa, Conference Operator: Thank you. Our next question comes from the line of Praneeth Satish with Mizuho Securities. Please proceed with your question.

Praneeth Satish, Analyst, Mizuho Securities: Hey, hello, and thanks for the questions here. On the Jeffersonville expansion, and then even the module expansion, can you talk about like the capital needs, so CapEx needs for those? And then separately on the FEOC side or compliance with FEOC and just touch upon that with this new strategy. Did you still need the 45X, or how do you plan to address the material assistance or any other rules around the foreign entity of concern language in the OBDX? Thanks.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Yeah. This is Shawn. As I also, as we said in the remark, we are more or less completed our restructuring necessary to be compliant to the BABA by December. We formed a new entity, which is called CS PowerTech for U.S. manufacturing. This is, you know, the CS PowerTech and all the subsidiary under it has 75.1% ownership from Canadian Solar. Canadian Solar is headquartered in Kitchener, Ontario. I mean, we just actually had our, you know, first board meeting of 2026 in Kitchener, Ontario.

We’ll have the second board meeting in Kitchener, Ontario, very soon by May. As you’ll see, the major decision-making and those corporate activities are ongoing in Canada, which makes Canadian Solar a clear Canadian operating company. With this structure, we believe we are compliant with the BABA. In terms of CapEx, most of CapEx for 2026 will happen in the United States. There are some CapEx spending for the Mesquite factory, the solar module factory. We mentioned that we expanded the capacity there from 5 GW to 10 GW. That will add a little bit of equipment, but the buildings there, most of the facilities there.

The expansion cost is way lower proportional to, you know, compared with the historical spending. That’s a very efficient expansion. For the Mesquite solar cell phase one and phase two all together, the total CapEx will be over $1 billion. That’s why you see the numbers. Most of the CapEx numbers for 2026 occurred in, you know, Jeffersonville, Indiana, for the solar cell phase one and phase two. However, the phase one is pretty much already there. All the equipment are there. Now we are adding the phase two there.

There are also some CapEx expansion in Southeast Asia for the lithium battery and storage factory. Those are where the expansion and new CapEx are happening in this year.

Praneeth Satish, Analyst, Mizuho Securities: Got it. No, appreciate the clarity there. Maybe just a follow-up on the manufacturing for the U.S. Any thoughts on what gross margins you’re targeting for either the cell or module or the battery manufacturing in the U.S.? Secondly, if you could just talk about any orders you’ve received for the manufacturing for 2027 or 2028 at this stage in the U.S. factories.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Yeah. The U.S. factory, you know, first of all, we typically don’t guide the gross margin for future quarter and future years. However, I can share that for the solar module manufacturing, the typical gross margin demonstrated in previous years, in 2025, is more than 20% for the U.S., you know, manufacturing and U.S. orders. This year, for this first half of the year, the margin might be a little bit, you know, tight because of the tight supply of the so-called BABA compliant solar cell supply, as I mentioned in my call, and also because we are waiting for our Jeffersonville solar cell factory to contribute for the second part of the year.

That tight supply caused a little bit, you know, reduced the volume in U.S., also as we guided, and also a little bit higher price for the, you know, solar cell supply to the U.S. However, I think this is purely transitional. First of all, when I addressed one of the previous questions, I said that the U.S. market seems to be able to respond to the cost increase when we tell our customer that the cost increased because of the silver and also because of the tight supply of the BABA compliant solar cells. Most of our customers are willing to shoulder some of this cost.

I also want to mention that, from now on, looks like we’ll see less tariff impact on the cost. I don’t know how long will it last, but I do know that for at least in Q2 we’ll see the benefit of a lower tariff. Moving into second half and moving into next year, when we start to switch more and more into our domestic manufacture solar cell, the tariff will become a small question. To repeat, historically, we do see over 20% gross margin for U.S. solar manufacturing. Now, for the energy battery, we did say that, we are targeting, like, 20% or higher gross margin for global shipment, including U.S. and non-U.S.

Now, Colin Parkin, do you have additional comment on this topic? Audio? That’s okay. I think we can just move on.

Praneeth Satish, Analyst, Mizuho Securities: Yeah, maybe. Nothing else on that, but just, like, quick clarification just on the 25-30 gigawatts of shipments that you previously guided for 2026. That’s still wise or is that something you’ll guide later or revise that later?

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Can you repeat? I repeat your question.

Praneeth Satish, Analyst, Mizuho Securities: Yeah. No, sure. You previously guided 25-30 gigawatts of solar shipments for 2026, right? Does that still hold or that’s something you’ll revise in coming quarters?

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Yeah. Well, first of all, we didn’t provide any new guidance this year. However, as we see at this point, we think the volume target for 2026, yes, you know, it’s not our priority, but rather the profit is our priority. This is due to, number one, the increase of cost of the solar cell. Number two, you see that, our total volume in U.S. will go down a little bit compared with last year, but it’s more due to the supply chain issue, you know, before we bounce back next year for the U.S. shipment. The current conflict in Middle East will also, I think, impact the market, especially the demand from the Middle East.

You know, it hasn’t materialized yet, but we do expect some turbulence there. For the volume, the megawatt volume of solar, we think it’s getting challenging, and we are not focusing on that for this year. However, we are still early. We are still in March. You know, I have been in the solar industry for 30 years, and Canadian Solar has been operating for 25 years. We do see, in turbulent years, sometimes the volume can switch off and on very fast. We will provide the annual global guidance on volumes in later quarters when we have more clarity.

Praneeth Satish, Analyst, Mizuho Securities: Thank you. Appreciate it.

Melissa, Conference Operator: Thank you. Our next question comes from the line of Alan Lau with Jefferies. Please proceed with your question.

Alan Lau, Analyst, Jefferies: Thank you for taking my question. Congratulations on winning a major orders in relation to AI data center for energy storage. Would like to know how does that project work? Like, do you sell power to the utility company, which in turn or where it is supplying the power to a data center? Do you know how big is the load for the data center?

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: Oh, I think you are asking the question about our new press release, right? On the

Alan Lau, Analyst, Jefferies: Yes.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: 2.5 gigawatt-hour order. Colin is the president for Canadian Solar, as well as our subsidiary, e-STORAGE. Colin, do you want to comment on this question?

Colin Parkin, President of Canadian Solar and President of e-STORAGE, Canadian Solar: Sure. Thanks, Alan, for your question. That particular project, although we can’t name the customer, is for a major U.S. utility, and it is part of their strategy to build out a power supply for a major hyperscale investment. That is a front-of-the-meter solution. What we’re seeing right now is much of the utilities and infrastructure is being formed around the additional power demands for data centers front-of-the-meter. We’re also seeing trends for behind-the-meter and direct-connected data centers, which this is not the case. This is an infrastructure support project.

We do expect to see the trend moving towards more behind-the-meter total power solutions for data centers, which is why we mentioned in our commentary earlier that we are focusing on providing total power solutions to address both front-of-the-meter and direct behind-the-meter connections for data centers. Part of that is the modeling, understanding the modeling and the requirements for the data centers particular application load, flow requirements and response requirements, which are very stringent. Testing those requirements in advance, doing hardware-in-the-loop testing and configuring our total solutions to support the complex needs for data centers. As I mentioned, we’re seeing both the front-of-the-meter and behind-the-meter, but more this particular one is a front-of-the-meter, and we’ll see more of that as well.

Did that answer your question, Alan?

Alan Lau, Analyst, Jefferies: That’s clear. Just a quick follow-up on that. For the behind-the-meter discussion ongoing, you mentioned about a total power solution. Does it mean that you also have to consider the reconnection requirement to stabilize the load requirement from the data center drawing power from the grid? Is it part of the package and on top of powering data center?

Colin Parkin, President of Canadian Solar and President of e-STORAGE, Canadian Solar: That’s right. That’s part of the total solution that we’re looking at. In some cases, auxiliary equipment, power supply equipment, and even potentially generation equipment completes the total power solution. We can do some or part of that with partners, but we’re looking at the data center opportunities in a much more holistic power solution approach. We think that’s part of the value that we’ll be adding as we look forward to participating in the AIDC markets. I think you’ll see more coming from us in terms of our advancement of technologies beyond just the known capabilities that we have with our battery technology.

The other thing that I think we’ve mentioned earlier is we’re focusing on how to bring that additional value to our customer in terms of executing projects, servicing and supporting the equipment with long-term performance and guarantees to meet the specific requirements for data centers.

Alan Lau, Analyst, Jefferies: Thank you. Thank you.

Colin Parkin, President of Canadian Solar and President of e-STORAGE, Canadian Solar: Thank you, Alan.

Alan Lau, Analyst, Jefferies: Thank you.

Melissa, Conference Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I’ll turn the floor back to management for any final comments.

Dr. Shawn Qu, Chairman and CEO, Canadian Solar: All right. Thank you for joining us today and also for your continuing support. If you have any questions or would like to set up a call, please contact our investor relations team. Take care and have a great day.

Melissa, Conference Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.