The U.S. solar market continues to benefit from strong demand driven by rising electricity consumption, AI-powered data center growth and corporate clean-energy goals, with the Solar Energy Industries Association projecting solar capacity to nearly triple by 2036. However, growth is being tempered by policy uncertainty following the OBBBA, tighter tax-credit timelines, supply-chain pressures and weaker residential solar economics resulting from changes such as California’s Net Billing Tariff, all of which are increasing project risks and slowing parts of the market. A few prominent companies that solar investors may want to monitor are First Solar (FSLR Quick QuoteFSLR - Free Report) , Enphase Energy (ENPH Quick QuoteENPH - Free Report) and Canadian Solar (CSIQ Quick QuoteCSIQ - Free Report) .

About the Industry

The Zacks Solar industry can be fundamentally categorized into two groups of companies. One is involved in designing and producing high-efficiency solar modules, panels and cells, while 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 from the U.S. Energy Information Administration (“EIA”), solar’s share of U.S. electricity generation will be 8% in 2026 and 9% in 2027. It remains the nation's dominant form of new generating capacity.

3 Trends Shaping the Future of the Solar Industry

Strong Demand Supports Solar Market Growth: Utilities and businesses across the United States are accelerating their adoption of solar energy — particularly solar systems combined with battery storage — as they seek cleaner, more resilient and cost-effective power solutions. Rising electricity prices and growing decarbonization commitments are making solar increasingly attractive, while battery storage helps users maintain power reliability during grid disruptions and periods of peak demand. The U.S. solar market is experiencing rapid expansion due to an unprecedented increase in electricity demand from data centers. The rapid expansion of artificial intelligence and cloud computing has significantly increased electricity consumption, prompting major technology companies and hyperscalers to invest aggressively in utility-scale solar and energy-storage projects. These investments are intended not only to secure reliable grid capacity for future operations, but also to support ambitious corporate sustainability and net-zero commitments.

A report published in March 2026 by the Solar Energy Industries Association (“SEIA”) projects cumulative U.S. solar capacity to nearly triple from 279 GWdc installed at year-end 2025 to 769 GWdc by 2036, with average annual capacity additions exceeding 44 GWdc. The updated forecast represents an increase from the prior quarter’s outlook, reflecting a stronger near-term utility-scale project pipeline and continued growth in energy demand expectations.

Policy Uncertainty Slows the Momentum: Policy uncertainty at the federal level has emerged as a significant challenge for the U.S. solar sector after the enactment of the One Big Beautiful Bill Act (“OBBBA”). The law significantly reduced the eligibility window for key clean-energy tax incentives, requiring most solar and wind projects to either begin construction by July 2026 or enter service before the end of 2027 to qualify for federal tax credits. In addition, the legislation imposed more rigorous construction qualification rules along with stricter regulations tied to foreign sourcing and supply-chain compliance. These changes have heightened development, financing and execution risks across the industry. Many market participants believe the tighter deadlines could force delays, restructuring or even cancellation of projects that are still navigating permitting approvals or grid interconnection processes. 

The SEIA report highlighted that the residential segment installed 4,647 MWdc of solar capacity in 2025, representing a 2% decline from 2024 levels. Although module shortages and delivery delays raised concerns late in the year, most installers secured sufficient equipment to complete projects. Demand also failed to meaningfully accelerate ahead of the Section 25D tax credit expiration, as the OBBBA provided too little time for companies to ramp up sales, customer acquisition and installations before the deadline.

Tariff Pressures Strain Solar Economics: The heightened U.S. tariffs on imported goods have been negatively impacting nearly all industries, and solar is no exception. As expected, these tariffs have increased manufacturing costs for solar companies, which were already grappling with raw material shortages due to global supply-chain challenges. State-level policy changes have added pressure to the residential solar market. For example, California’s transition to the Net Billing Tariff (“NBT”) significantly reduced the compensation homeowners receive for excess electricity exported to the grid, lowering the economic benefits of rooftop solar systems.

According to the SEIA report, the U.S. commercial solar segment grew 6% in 2025, reaching 2,345 MWdc of new installations, largely driven by the continued rollout of California projects approved under the more favorable NEM 2.0 policy. Despite the transition to the less attractive NBT system, over 70% of fourth-quarter installations were still NEM 2.0 projects. However, as the backlog gradually declines, the market is expected to slow in 2026 because projects developed under NBT generally offer lower customer savings and weaker economic returns.

Zacks Industry Rank Reflects Gloomy Outlook

The Zacks Solar industry is housed within the broader Zacks Oils-Energy sector. It currently carries a Zacks Industry Rank #203, which places it in the bottom 17% 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 outperform 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 9.1% to $1.50 since Feb. 28.

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 Beats Sector & S&P 500

The solar industry has outperformed both its sector and the Zacks S&P 500 composite over the past year. The stocks in this industry have collectively grown 71.4% over the past year, while the Oils-Energy sector rose 43.3%. The Zacks S&P 500 composite has surged 31% in the same time frame.

One-Year Price Performance

Industry's Current Valuation

On the basis of the trailing 12-month EV/EBITDA, which is commonly used for valuing solar stocks, the industry is currently trading at 12.76X compared with the S&P 500’s 18.65X and the sector’s 7.03X.

Over the past five years, the industry has traded as high as 34.03X, as low as 4.44X and at the median of 13.12X.

EV-EBITDA Ratio (TTM)

3 Solar Stocks to Watch

Canadian Solar: Based in Kitchener, Ontario, Canada, the company is one of the leading manufacturers of solar PV modules and a provider of solar energy and battery energy storage solutions. On May 14, 2026, CSIQ reported first-quarter results. Solar module shipments in the quarter totaled 2.5 GW, down 64% year over year. Total battery energy storage shipments amounted to 2.1 GWh, up 142% year over year. The company commenced trial production at the flagship HJT solar cell factory in Jeffersonville, IN, marking a milestone in U.S. domestic manufacturing, with commercial operation targeted to begin in July 2026.

The Zacks Consensus Estimate for Canadian Solar’s 2026 earnings per share (EPS) indicates an increase of 53.6% year over year. The consensus estimate for 2026 sales indicates an increase of 2.8% year over year. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

Price & Consensus: CSIQ

Enphase Energy: Based in Fremont, CA, this company is a global energy technology company that delivers energy management technology for the solar industry. It designs, develops, manufactures and sells home energy solutions, which connect energy generation, energy storage and control and communications management on a single intelligent platform. On May 18, 2026, Enphase Energy, announced the launch of PowerMatch technology for IQ Battery 10C systems in the United States, including Puerto Rico, and for IQ Battery 5P systems across North America and select countries in Central America and the Caribbean. During the first quarter of 2026, ENPH shipped 1.39 million microinverters from Texas and South Carolina facilities. 

The Zacks Consensus Estimate for Enphase Energy’s 2026 earnings has improved 2.91% over the past 60 days. The consensus estimate for 2027 EPS indicates an increase of 19.9% year over year. The stock currently carries a Zacks Rank of 3.

Price & Consensus: ENPH

 

First Solar: Based in Tempe, AZ, the company is a leading global provider of comprehensive PV solar energy solutions and specializes in designing, manufacturing, and selling solar electric power modules using a proprietary thin-film semiconductor technology. On April 30, 2026, FSLR reported first-quarter results. Net sales were $1.04 billion for the first quarter, a 24% increase year over year, driven primarily by an increase in the volume of modules sold to third parties. It reported contracted sales backlog of 47.9 GW as of March 31, 2026. 

The Zacks Consensus Estimate for First Solar’s 2026 EPS indicates an improvement of 24.1% from the prior-year reported figure. The consensus estimate for 2027 EPS indicates an improvement of 36.2% year over year. The company currently carries a Zacks Rank of 3.  

Price & Consensus: FSLR