The U.S. solar industry is poised for growth, supported by record installations and strong projections for 2025. However, challenges remain in the form of the temporary freeze on Inflation Reduction Act funding in early 2025, which disrupted solar project timelines. Also, high interest rates and economic uncertainty continue to weaken residential demand. China’s dominance in low-cost solar module manufacturing is pressuring U.S. producers. Nevertheless, utility-scale projects are thriving, with solar generation expected to rise 33% this summer. A few prominent forerunners in this industry that solar investors may keep in their portfolio are Nextracker (NXT Quick QuoteNXT - Free Report) , Array Technologies (ARRY Quick QuoteARRY - Free Report) and Tigo Energy Inc. (TYGO Quick QuoteTYGO - Free Report) . 

About the Industry

The Zacks Solar industry can be fundamentally categorized into two groups of companies. While one is involved in designing and producing high-efficiency solar modules, panels and cells, the other is engaged in installing grids and, in some cases, entire solar power systems. The industry also includes a handful of companies that manufacture inverters for solar power systems, which convert solar power from modules into electricity required by electric grids. Per a report by the Solar Energy Industries Association (“SEIA”), published in June 2025, photovoltaic (PV) solar accounted for 69% of the new electricity-generating capacity added to the U.S. grid in the first quarter of 2025. Hence, it remains the nation's dominant form of new generating capacity.

3 Trends Shaping the Future of the Solar Industry

Record Solar Installations Boost Prospects: The U.S. solar industry has been witnessing a solid installation trend lately. As reported by SEIA, the industry installed approximately 10.8 gigawatts-direct current (GWdc) of new solar capacity during the first quarter of 2025, marking the fourth-largest quarterly installation on record. We expect to witness a similar robust solar installation trend in the United States in the near term as well. To this end, the U.S. Energy Information Administration (“EIA”) expects U.S. solar generation to grow 33% this summer and 32.5 GW of new utility-scale solar capacity to be added to the U.S. grid by the end of 2025. Such impressive projections are indicative of a bright outlook for U.S. solar stocks.

Freezing Inflation Reduction Act Dealt an Initial Blow: Following the Inflation Reduction Act's (“IRA”) enactment in August 2022, actual investment in clean energy technologies and infrastructure improved a solid 71% to $493 billion (as per the Clean Investment Monitor Report) during the second half of 2022 to the first half of 2024. However, in January 2025, current U.S. President Trump suspended all IRA funding disbursements. This freeze caused momentary delays and widespread uncertainty for various solar projects across the nation. This decision by the U.S. administration invited widespread criticism, particularly from climate scientists and advocates, and the majority of the funds freeze was revoked following a court order in April. However, the initial freeze created significant hesitancy and disrupted planning for many solar initiatives, which might result in a significant delay in the completion of projects, thereby hurting U.S. solar stocks’ growth trajectory in the near term.   

Macroeconomic Challenges Might Hurt: Recent macroeconomic challenges in the U.S. economy have also negatively impacted the solar industry. In particular, the residential solar space has been reflecting signs of continued struggles over the past couple of quarters. In the first quarter of 2025, residential solar installations in the United States tanked 13% year over year, as high interest rates and economic uncertainty continued to suppress demand. Looking ahead, SEIA projects growth in the residential solar segment to remain flat in the next five years due to multiple issues like broader power sector challenges, a lack of labor availability, high voltage equipment constraints and interconnection delays.

China’s dominance in solar module manufacturing is another major headwind for U.S. solar stocks. With China accounting for 80% of global module capacity, the country's oversupply of solar panels has been putting significant downward pressure on module pricing in the United States. As a result, U.S. module manufacturers are facing a cost competitiveness challenge, with solar PV manufacturing costs in China being 20% lower than in the United States (as per a report by the International Energy Agency). While America is making efforts to support its domestic solar module industry, it faces difficulty competing against cheaper modules offered by China. This might have some adverse impact on the profitability of the U.S. solar industry in the near future.

Zacks Industry Rank Reflects Grim Outlook

The Zacks Solar industry is housed within the broader Zacks Oils-Energy sector. It currently carries a Zacks Industry Rank #181, which places it in the bottom 26% of more than 245 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the bottom 50% of the Zacks-ranked industries is due to a negative earnings outlook for the constituent companies in aggregate. 

Looking at the aggregate earnings estimate revisions, it appears that analysts have lost confidence in this group’s earnings growth potential over the past few months. The industry’s bottom-line estimate for the current fiscal year has moved down 43.7% to 94 cents since March 31.

Before we present a few solar stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
 

Industry Lags Sector & S&P 500

The solar industry has underperformed both its sector and the Zacks S&P 500 composite over the past year. The stocks in this industry have collectively lost 46% in the past year, while the Oils-Energy sector gained 1.3%. The Zacks S&P 500 composite has surged 9.4% in the same time frame.

One-Year Price Performance

 

Industry's Current Valuation

On the basis of a trailing 12-month EV/EBITDA, which is commonly used for valuing solar stocks, the industry is currently trading at 4.69X compared with the S&P 500’s 16.87X and the sector’s 4.87X.

Over the past five years, the industry has traded as high as 50.91X, as low as 4.22X and at the median of 24.09X, as the charts show below.

EV-EBITDA Ratio (TTM)

3 Solar Stocks Worth Watching

Tigo Energy Inc.: Based in Campbell, CA, the company is a provider of intelligent solar and energy storage solutions. On June 16, 2025, Tigo Energy announced that its TS4 MLPE devices are now certified compatible with Sonnen’s hybrid inverter-battery systems. This compatibility should boost Tigo’s product appeal among installers and strengthen its position in the residential energy market. 

The Zacks Consensus Estimate for TYGO’s 2025 sales indicates an improvement of 64% from the prior-year reported figure. The consensus estimate for 2025 earnings has improved over the past 60 days. TYGO currently carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price & Consensus: TYGO

Nextracker: Based in Fremont, CA, the company is a provider of intelligent, integrated solar tracker and software solutions used in utility-scale and distributed generation solar power plants. On May 14, 2025, Nextracker announced its acquisition of U.S.-based Bentek Corporation for $78 million, boosting its solar tracker platform with Bentek’s pre-assembled electrical solutions. The deal enhances Nextracker’s U.S. supply chain, simplifies project logistics, and supports faster, more reliable solar plant construction with both integrated and standalone eBOS offerings.

The Zacks Consensus Estimate for NXT’s fiscal 2026 earnings has improved 12.6% over the past 60 days. The stock boasts a long-term (three-to-five years) earnings growth rate of 11.9%. The company currently carries a Zacks Rank #3 (Hold).

Price & Consensus: NXT

Array Technologies: Based in Albuquerque, NM, the company is a manufacturer of ground-mounting systems used in solar energy projects. On June 18, 2025, Array Technologies declared that it will acquire APA Solar, a U.S.-based maker of foundation and fixed-tilt systems. The deal enables an integrated tracker-plus-foundation product, tailored for tough soil conditions, and strengthens the company’s domestic manufacturing and offerings for utility and commercial solar projects. 

The stock boasts a long-term earnings growth rate of 21.9%. The Zacks Consensus Estimate for 2025 sales indicates an improvement of 19.6% from the prior-year reported figure. The company currently carries a Zacks Rank #3.

Price & Consensus: ARRY