Canadian Solar Inc. (CSIQ-Q) reported record-breaking results in Q2 2023, despite missing out on its profit and revenue guidance and lowering its revenue expectation for Q3.

Shawn Qu, Canadian Solar’s chairman and CEO, said in a conference call the company achieved “record total net income” of $170 million in Q2 ending June 30. Net income in the second quarter compared to $84 million in Q1 2023 and $74.5 million in Q2 2022.

The Guelph-based solar photovoltaic module manufacturer announced a 39 per cent increase in net revenues quarter-over-quarter to $2.36 billion – slightly below the guidance of $2.4 billion to $2.6 billion – due to higher solar module shipment volume and higher project sales.

Gross profit also rose by 39 per cent quarter-over-quarter and 19 per cent year-over-year to $441 million. The gross margin fell just short of the 19 to 21 per cent expectations, at an 18.6 per cent margin. Canadian Solar blames a decrease in module average selling price and a $31 million inventory writedown for the drop in gross margin.

Total operating expenses in Q2 stood at $216 million, higher than the $172 million in Q1 2023 but lower than the $255 million in Q2 2022. Canadian Solar said operating expenses increased at lower rates than the revenue growth rate quarter-over-quarter, attributing it to its operating leverage and a further decline of unit logistics costs.

Yan Zhuang, president of Canadian Solar’s majority-owned subsidiary CSI Solar, said during the call Q2 was “a record quarter” crossing the $2 billion mark for the first time, beating a sharp decline in raw material costs and an inventory write-down impacting its gross margin.

Canadian Solar’s pipeline

Activity during recent months included:

• rebranding its project developer subsidiary Global Energy to Recurrent Energy in April;
• a CSI Solar initial price offering on the Shanghai Stock Exchange in June; and
• rebranding CSI Solar’s utility-scale battery energy storage subsidiary to e-STORAGE in July.

The company also reported its project pipeline remains strong.

CSI Solar’s module shipments rose to 8.2 gigawatts, up 62 per cent year-over-year and 35 per cent quarter-over-quarter in Q2. It matched the guidance of 8.1 gigawatts to 8.4 gigawatts.

Recurrent Energy’s total solar project development pipeline is 25 gigawatt-peak with 17.2 gigawatt-peak in advanced and early-stage pipeline projects. Its total battery storage project development pipeline is 51.7 gigawatt-hours.

Ismael Guerrero, CEO of Recurrent Energy, said in the release accompanying the report the subsidiary achieved “significant” revenue and profit growth in Q2 with the sale of its flagship 100 megawatt-peak Azuma Kofuji project in Japan.

Guerrero said during the call Q2 was one of Recurrent Energy's largest quarters for revenue and profit. He added Recurrent is concentrating on executing projects for long-term holding as opposed to immediate monetization and is building projects in the U.S. and Europe to capture higher value as an asset owner and operator.

e-STORAGE has a contracted backlog of $2.1 billion with a total pipeline of 26 gigawatt-hours.

Canadian Solar’s outlook

In the next quarter, Canadian Solar anticipates total revenue to range from $1.9 billion to $2.1 billion, and the gross margin between 17.5 per cent and 19.5 per cent.

Total module shipments by CSI Solar are expected to be in the 8.5-gigawatt to 8.7-gigawatt range.

Across the year, the company’s outlook for CSI Solar module shipments remains in the range of 30 gigawatts to 35 gigawatts. CSI Solar’s battery storage shipments are expected to be in the range of 1.8 gigawatt-hours to 2.0 gigawatt-hours. Total revenue is expected to range from $8.5 billion to $9 billion, compared to its previous guidance of $9 billion to $9.5 billion.

"We expect margins to rebalance through the year as we restrict the production of non-vertically integrated solar module shipments while strengthening our leadership position in premium markets and segments,” Qu said in the release.

The Canadian Solar CEO said during the call, “Under the backdrop of the Inflation Reduction Act we continue to strengthen our competitive position in the U.S.,” which is one of its core markets.

Qu said Canadian Solar’s Mesquite, Tex. solar module factory is expected to begin production at the end of the year, with an expected annual production of five gigawatts.

The report highlighted significant projects and deals under Canadian Solar’s belt.

• Recurrent Energy’s 1,200 megawatt-hour Papago energy storage project under development in Maricopa County, Ariz. e-STORAGE will deliver the energy storage products.
• Canadian Solar’s multi-year module supply agreement with EDF Renewables North America to deliver up to seven gigawatts of solar modules that will be produced in the Mesquite, Tex. factory.
• CSI Solar’s agreement to deliver 49.5 megawatts of turn-key battery energy storage solutions to Cero Generation and Enso Energy for a solar project in South Gloucestershire, U.K.
• e-STORAGE signed approximately $630 million in new bookings in Q2 2023 with a contracted backlog of $2.1 billion.