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 costs. 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.


	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
Product warranty liability, beginning of period	$	77,430	$	75,566	$	79,408	$	76,435
Accruals for new warranties issued	5,015		3,323		9,477		5,979
Settlements	(9,506)		(3,061)		(14,575)		(6,572)
Changes in estimate of product warranty liability	4,289		—		2,918		(14)
Product warranty liability, end of period	$	77,228	$	75,828	$	77,228	$	75,828
Current portion of warranty liability	$	56,650	$	60,165	$	56,650	$	60,165
Noncurrent portion of warranty liability	$	20,578	$	15,663	$	20,578	$	15,663

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. Subsequently, we identified the causes of these issues and compiled and evaluated data on the expected impact such issues may have on performance, including collecting samples of module performance data from several locations. We have settled certain of our obligations related to these issues and have continued to engage in settlement discussions with various additional customers. Based on such settlement experience, the estimated number of affected modules, and projections of probable costs to remediate the issues, we believe a reasonable estimate of potential future losses will range from approximately $40 million to $65 million. Within that range, we recorded a specific warranty liability of $47 million as of June 30, 2026, which represents our best estimate of expected future losses related to the identified manufacturing issues. The ultimate loss we will incur 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. 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.

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 June 30, 2026 and December 31, 2025, we had no accrued indemnification liabilities. Our potential future payments under these indemnifications primarily relate to legislative changes that may adversely affect an entity’s ability to benefit from previously transferred Section 45X tax credits.

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.

During the year ended December 31, 2022, we received several indemnification demands from certain customers, for whom we provided engineering, procurement, and construction services, regarding claims that such customers’ PV tracker systems infringe, in part, on patents owned by Rovshan Sade, the owner of a company called Trabant Solar, Inc. In January 2023, we were notified by two of our customers that the 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. After a series of stays of the proceedings, the last of which was lifted on July 14, 2025, the parties have begun responding to their respective discovery demands. Each party has submitted its claim construction filings with the court, and a claim construction hearing took place on February 20, 2026. The court has stayed discovery in the actions until it decides the parties’ claim-construction issues. On June 19, 2026, East Pecos Solar was served with a complaint filed by the plaintiff in the Western District of Texas. The complaint alleges the same causes of action as those in the current infringement actions. Southern Power, East Pecos Solar’s parent company, tendered the defense to First Solar pursuant to an indemnification obligation set forth in the Engineering, Procurement and Construction Agreement by and between East Pecos Solar, LLC and First Solar Electric, LLC dated as of March 4, 2016. The answer is due on August 24, 2026. 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 First Solar. 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 our motion for remittitur, that the damages awarded to the plaintiff were excessive and reduced the award from $51.3 million to $21.8 million. We and the plaintiff 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, 2026, 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, 2026. 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. The appeal was fully briefed on November 25, 2025. There is no deadline by which the appellate court must issue a ruling. There is no timetable for an appellate decision.

A securities class action lawsuit was commenced in the United States District Court for the Eastern District of New York on June 23, 2026, by Claire Day, a purchaser of First Solar common stock, against First Solar and certain executive officers of First Solar, individually and on behalf of all persons and entities that purchased or otherwise acquired First Solar securities between February 26, 2025 and February 24, 2026, seeking to recover damages. The plaintiff alleges that we made materially false and misleading statements regarding our business, operations, and compliance policies and failed to disclose material information regarding our capacity to manage the impact of U.S. tariff policy on our business, and understated the extent to which our responses to U.S. tariff policy were likely to negatively impact projected performance in 2026. The plaintiff alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and U.S. Securities and Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder. We dispute the allegations and intend to defend the action vigorously. 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. On July 28, 2026, based on allegations substantially similar to the above-described securities class action, a shareholder derivative lawsuit was commenced in the United States District Court for the Eastern District of New York by Manh Ho, a purchaser of First Solar common stock, against certain directors and executive officers of First Solar, on behalf of First Solar, seeking to recover damages and equitable relief. The derivative complaint asserts claims for violations of the federal securities laws, breach of fiduciary duty, unjust enrichment, gross mismanagement, and waste of corporate assets.