Canadian Solar (NASDAQ:CSIQ) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below.
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Summary
Canadian Solar reported Q1 2026 revenue of $1.1 billion, with a gross margin of 25.1%, benefiting from tariff refunds; however, they experienced a net loss of $32 million.
The company is focusing on strategic markets and has launched CS Powertech for US manufacturing, with significant expansions in solar cell and module capacity in Indiana and Texas.
Energy storage shipments reached 2.1 GWh, with plans to double battery capacities in Southeast Asia by 2027, and a current backlog of $3.5 billion in contracted projects.
A leadership transition was announced with Colin Parkins as the new CEO, emphasizing strategic succession and the company's shift to value-driven leadership.
Guidance for Q2 2026 includes revenue expectations of $1 to $1.2 billion and gross margin between 13% and 15%, with a continued focus on US operations and energy storage growth.
Full Transcript
Melissa (Operator)
Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's first quarter 2026 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 Winna Hwang, Head of Investor Relations at Canadian Solar. Please go ahead.
Winna Hwang (Head of Investor Relations)
Thank you operator and welcome everyone to Canadian Solar's first quarter 2026 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. Sean Hsu, executive Chairman and CTO Colin Parkins, CEO Ismail Guerrero, CEO of Canadian Solar subsidiary Recurrent Energy and Simbo Zhu, Senior VP and cfo. All company executives will participate in the Q and A session. After Management's formal remarks on this call, Sean will go over some key messages for the quarter, Colin and Ismail will review business highlights for Manufacturing and Recurrent Energy respectively, and Simbo 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 certain 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 20F 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 provided in accordance to gaap. And now I would like to turn the call over to Canadian Solar's executive chairman and CTO Dr. Shawn Hui. Sean, please go ahead.
Sean Hsu
Thank you Winna and thank you all for joining our first quarter 2026 earnings call beginning on slide 3. We started the year with strong momentum. We recognized revenue of 2.5 gigawatts of solar modules and 2.1 gigawatt hours of energy storage solutions, both of which exceeded our guidance range. Revenue totaled $1.1 billion, reaching the high end of our expectations. Gross margin of 25.1% outperformed our forecast. Aided by the accrual of IPA tariff refunds. Profitability was impacted by elevated non logistics operating expenses, foreign exchange losses and tax expense accruals related to the tariff refund. This led to a net loss attributable to shareholders of $32 million or $0.71 per dilutive shares. The solar downturn has lasted longer than expected. Against this backdrop, we have consistently made the right decision Strategic Decisions we have repositioned our solar module business to focus on key attractive markets cumulating in the formation of CS Powertech, which is now leading our efforts in the domestic reshoring of manufacturing in the United States. At the same time, we have strategically dialed back volumes in less profitable markets, maintaining a steadfast profit first strategy. Furthermore, energy storage represents a pioneering strategic move for us. Throughout this business we have transformed from a pure PV module manufacturer into an integrated energy solutions provider. The boom in artificial intelligence has also provided new clarity as the world chases digital breakthroughs. Our core foundation is still physical power infrastructure. With rising global geopolitical friction and the push for energy independence, nations are increasingly seeking self sufficient, reliable local energy solutions. Renewable energy paired with energy storage has become an inevitable imperative. Turning to slide 4 our journey from our funding in Ontario, Canada to our current position as a global leader in integrated clean energy is a testament to our enduring resilience. We have consistently evolved and today we are navigating a pivotal shift from volume driven expansion to value driven leadership. This evolution calls for strategic succession and I am proud to transition the Chief Executive Officer's role to Colin Parkins. Colin is a veteran of the company and renewable energy industry. He previously served as President of Canadian Solar and was pivotal in establishing our first mobile advantage in the energy storage sector as President of Estorage. This transition follows a thoughtful long term succession planning process approved unanimously by the Board of Directors. I will transition to the role of Executive Chairman and Chief Technology Officer, focusing on our technology roadmap and long term R and D strategy while working closely with Colin to execute this transition. With that, I will now turn the Call over to Colin Colin, please go ahead.
Colin Parkins (CEO)
Thank you, Sean. It is an honor to take over the Chief Executive role. and I look forward to your continued guidance as we navigate our next phase of role beginning on slide 5. As Sean highlighted, the first pillar of our global strategy is US Manufacturing. Since our last update, we have achieved critical milestones in reshoring the renewable energy supply chain. Phase one of our flagship solar cell factory in Jeffersonville, Indiana, produced its first trial HJT solar cell at the end of March. With a nameplate capacity of 2.1 GW peak, it will be the first and only commercial operational HJT solar cell facility in the United States. Once it ramps up over the next two quarters. In response to strong customer demand, we are increasing our domestic solar cell capacity beyond the original planned 5 GW peak. We expect to begin trial production for phase two the beginning of next year. This expansion will add 4.2 GW peak of capacity, bringing our total US solar cell main plate capacity to 6.3 GW peak and making us the largest crystalline silicon solar cell manufactory in the country. Parallel to this is the expansion of our successful solar module factory in Mesquite, Texas. This facility reached full ramp last year and we are currently expanding capacity at the existing site. By the second half of this year, we expect nameplate capacity to double to 10 GW peak, allowing us to fulfill all future US volumes from this Texas facility. Now let's walk through this quarter's manufacturing numbers, turning to Slide 6. In the first quarter of 2026, we delivered 2.5 gigawatts of solar modules globally. We maintained a disciplined approach, strategically managing volumes in response to elevated feedstock costs, including silver, to mitigate losses. Our domestic manufacturing in the US Contributed robust margins as we maintained an optimized geographic mix of volumes. Storage shipments recognized as revenue reached 2.1 gigawatt hours, slightly above guidance, supported by steady construction progress across both customer sites. Revenue for the manufacturing segment reached $950 million and our gross margin was 29.1%. The sequential 1,460 basis point increase was driven by healthy energy storage volumes and the tariff refund. With unit shipping costs holding steady and disciplined management of operating expense expenses, we achieved operating income of $127 million. Now referring to Slide 7 regarding E storage, we shipped 2.6 gigawatt hours of energy storage solutions this quarter, including 500 megawatt hours to internal and external projects under execution. Recognizing revenue on 2.1 gigawatt hours of volume. We are now delivering to a diversified global customer base within a single quarter what we delivered in a full year just a few years ago. We have also significantly advanced our manufacturing capabilities. For example, our internal production of lithium ion phosphate prismatic cells is proving to be a distinct advantage in today's market as we have now achieved a cost basis below the market price of third party cells. This strategic vertical integration provides an economic buffer during cyclical fluctuations while equipping us with the proprietary technical expertise necessary to drive further innovation. To support our global momentum and markets, we are also expanding capacity at our integrated battery energy storage system and battery cell factory in Southeast Asia. We plan to double both our battery cell and sold bank capacities to ensure strong coverage of annual volumes with internally sourced compliant solutions. The new production lines are currently being constructed and will come online in the first half of 2027. As we focus on maintaining our stellar execution track record, we are also balancing growth and profitability. As of May, our contracted backlog totaled $3.5 billion, including 34 gigawatt hours of operating projects under long term service agreements. As we continue to scale our storage business, these recurring revenue streams will also increase. Finally, we continue to actively pursue opportunities within both front of the meter and behind the meter data center applications. While most commercialized demand today is manifesting through front of the meter contracts, we are seeing steady industry progress in the planning, permitting and technical development required for future behind the meter opportunities. As this market gradually matures, we remain closely aligned with the key stakeholders driving these opportunities forward. Now let me hand the call over to Ismail who will provide an overview of recurrent energy Canadian Solar's global project development business. Ismail, please go ahead.
Ismail Guerrero (CEO of Recurrent Energy)
Thank you Colin. Beginning with Slide 8, we generated $139 million in revenue in the first quarter. Revenue improved sequentially, primarily driven by the sale of the Fort Duncan project. However, the overall contribution of this project sale was offset by related tax equity arrangement as we had recognized tax equity gains when the project was placed in service. Fort Duncan is a milestone. It is the first standalone best project in our portfolio that was financed with non recourse project finance and had no capacity contract in place. We have now successfully monetized and sold the asset profitably, demonstrating that we can also achieve profitable sales for these merchant market project types. With relatively muted project sales this quarter and ongoing platform operating costs, we posted an operating loss of $60 million. As we continue to monetize more operating and under construction assets, the PNL impact may not be optimal in the near term however, this strategy remains necessary to deliver our balance sheet and recycled capital. Turning to Slide 9, as of March 31, 2026, we have secured interconnections for 7 gigawatts of solar and 14 gigawatt hours of storage, globally excluding projects already in operation. Our total project pipeline is comprised of 24 gigawatts of solar and 81 gigawatt hours of energy storage. Our focus in 2026 is to reduce depth and mature our pipeline. Our pipeline is one of the largest in the industry with a focus on the most stable geographic markets. Our strategy will also allow us to reduce operating expenses by concentrating fewer geographies within our core footprint. We are now focused on unlocking the value of the existing pipeline as it matures. At the same time, we see the rising global energy demand trend and growing appetite for these projects. Our OANM platform continues to grow steadily and holds a contracted portfolio of 15 gigawatts of which 11.2 gigawatts are already operational. The remainder is currently under construction and will join our managed project portfolio over the coming quarters. Now let me hand the call over to Chimbo, who will go through our financial results in more detail. Chimbo, please go ahead.
Chimbo Zhu
Thank you, Ismail. Beginning with Slide 10 in the first quarter, we recognized revenue on 2.5 gigawatt of modules and 2.1 gigawatt hours of energy storage solutions, both slightly above guidance. As a result, revenue reached $1.1 billion at the high end of our forecast gross margin of 25.1% strongly exceeded guidance. It increased both sequentially and year over year due to the accrual of tariff refunds which contributed 860 basis points without this one time benefit. Our gross margin still exceeded guidance on strong storage volumes and a healthy geographic mix of solar modules volumes. Operating expenses increased 5% sequentially and lower freight costs were offset by the absence of one time gains recorded in previous quarter. Net interest expense in the first quarter was $36 million, down from $39 million in the first quarter of 2025. Cost of debt was lower following refinancings in the project development business. Net foreign Exchange loss was $29 million, driven by appreciation in the Chinese Yuan and the weakness in the US dollar. Total net loss attributable to Canadian Solar was $32 million or $0.71 per diluted share. Now let's turn to cash flow and the balance sheet on slide 11. Net cash flow used in operating activities during the first quarter of 2026 was $209 million. This outflow was primarily driven by increased inventories associated with the U.S. solar and storage business. Total assets grew to $15.5 billion, driven by increased inventories to support the U.S. solar and Storage business as well as U.S. manufacturing investments. In the first quarter, we invested $173 million in capital expenditures, primarily toward U.S. manufacturing initiatives. We expect 2026 capacity to total around $1.3 billion. We ended the quarter with a cash balance of $1.9 billion and total debt of $6.8 billion. Total debt increased mainly due to new convertible notes issued to support US Manufacturing. Now let me turn the call back to Colleen, who will conclude with our guidance and business outlook. Colleen, please go ahead.
Colin Parkins (CEO)
Thank you, Simbo Turning to Slide 12 for the second quarter of 2026, we expect to recognize revenue on 3.1 and 3.3 gigawatts of solar modules. We expect to deliver between 2.8 and 3.2 gigawatt hours of energy storage solutions, including approximately 400 megawatt hours to internal and external projects under construction. Revenue and profit recognition for volumes delivered to these in progress projects may be subject to timing lags. Furthermore, our storage guidance range is slightly more conservative and wider due to delays related to ongoing shipping congestion. We project total second quarter revenue to be in the range of 1 to $1.2 billion, with gross margin expected to be between 13 and 15%. The broader solar market remains complex as incremental price increases have not yet fully absorbed upstream cost pressures in the storage business. We expect record volumes in the second half of the year, though margins are projected to normalize and we remain partially exposed to fluctuations in the lithium carbonate pricing. In the face of these challenges, we remain committed to a balanced strategy focused on rigorous execution, continuous innovation for the full year of 2026. We reiterate our US volume guidance 6.5 to 7 gigawatts of module shipments and 4.5 to 5.5 gigawatt hours of energy storage shipments. With that, I would like to open the floor for questions. Operator
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 2 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 Rush with Oppenheimer and Company. Please proceed with your question.
Colin Rush
Thanks so much, Sean Hsu. This is actually a question for you on the technology side. You know and congratulations on getting the battery cost down to where you've gotten them. I'm just curious about the evolution of the battery chemistry. You know, notably around incremental silicon doping for the anode side as well as the form factor and chemistry optimization for data center duty cycles. Can you just talk about how quickly things are changing and how we can see that start to translate into some advantage pricing over time.
Sean Hsu
Thanks Colleen, that's a good question. Now we are working on several front of the battery, of the battery storage system. You mentioned the pre-lithiation I think which is a way to you know, dope additional lithium into the anode so that we can achieve like almost no degradation in the first five years and also slow degradation in the future. These are good technology and process wise we are all ready however that indeed that will increase the cost of the battery because you have to do more lithium into it so it become a cost balance issue. We propose this technology to our customers and some customers see benefit. Some customers get concerned about cost because as you know the lithium carbonate price has doubled in the past five months. So the technology is ready. We can implement it on any project where this technology provides more volume. Another approach in the chemistry of the battery is the sodium sodium battery. We also have research in this area. You know sodium is not subject to the fluctuation of raw material. Sodium is everywhere, not like lithium. So when the lithium carbonate price go to this level, sodium become price competitive and also the sodium can or have better low temperature performance and almost doesn't require any thermal management. So you can also save the 2% annual thermal management electricity cost. So that's another chemistry. We are doing research and there are a few other technologists I'm more than willing to to go through that with you later on in any dedicated conversations.
Colin Rush
Perfect. That's super helpful Sean, thank you. And then on the recurrent side, given where utility scale prices are in the US I'm just curious about your ability to renegotiate PPAs or start cutting PPAs at substantially higher prices to support margins. Just curious about that dynamic and potential timing around that.
Sean Hsu
Yeah, I would just make a quick comment here. Now for the mature product or project already in operation, the PPA is fixed. The advantage is that PPA and cash flow is secure and you can do financing, the bank financing and non recourse financing easily. However, it will be difficult to renegotiate PPA already signed in place. Usually you will have to pay, you know, pay back your, you know, LLCs which you know, guarantees or support PPA if you want to do a higher PPA. I think we did one project in the in the past which we paid the LC and cancel PPE and renegotiate, but normally we don't. However, on the other hand Colin, we have a large pipeline of middle state and early stage project. This project we have not signed PPA yet, so we'll be able to repurpose it for example the AI DC specific applications and therefore drive higher values. So in short, the mature pipeline, our breeding pipeline with PPA give us certainty now. Meanwhile, the large pipeline of mid stage and early stage project will help us to create more values in the future.
Colin Rush
Great. Thanks so much guys. Appreciate it.
Sean Hsu
Thank you.
OPERATOR
Thank you. Our next question comes from the line of Philip Shen with Roth Capital Partners. Please proceed with your question
Philip Shen
everyone. Thanks for taking my questions. Wanted to check in with you guys more on the US Cell manufacturing ramp. Cell capacity ramp. You guys have had first sell out. Congratulations on that. When would you expect the commercial shipment of those cells to go into your modules? And when do you think your first US module with US Cell is available commercially for your customers? Thanks.
Sean Hsu
Hi Philip, it's an interesting question. We have answered mentioned that in several places in the press release and also in the prepared speech. We expect somewhere in July or two months later to have commercial operation and then we'll be able to make our own modules with the HJT solar cell and deliver to customer. That process should be fast. If we can have a commercial delivery in July, then probably in August audience September or have the first module delivered to our customer. Now I would like to caution you all these expectations right now. There are still two, three months to go and this is the first time the industry ever start to produce HJT solar cells in us. It will be a milestone and it's not an easy task. I just want to caution you about that. However, our Expectation is in Q3.
Philip Shen
Great. Thank you for the additional color, Sean. And then as it relates to your sourcing of third party cells, can you remind us what countries or places you're sourcing those cells from? And do you have any exposure to Ethiopia? There was that new petition that was filed a couple days ago or yesterday on a potential new anti circumvention tariff on cells coming from Ethiopia. And then finally, do you buy any blue wafers at all? Is that or in your supply chain do you have exposure to blue wafers?
Sean Hsu
Thanks. Thanks Philip. That's a very tricky question. However, I will give you a straightforward answer now. We do source outside sales and also Import sales from other countries to United States. We are transitioning to more and more domestic cell. So as I have mentioned in several previous calls, 2026 is a transition year for us. Now we don't provide the geographic distribution or sources of our cells in this transition period. However, as far as I know we are not subject to the exposure of the recent petition as you mentioned.
Philip Shen
Okay, thank you, Sean. And then anything on blue wafers? Do you have any thoughts on that? And is that in your supply chain?
Sean Hsu
No, there's no blue. So both called blue wafers. Whatever cell made in a certain country, those cells should go through the necessary solar cell steps. We, you know for our factory we only use so called grade wafer and the cell production process are completed in the whatever set country.
Philip Shen
Great, okay, thank you. And then one last one here on the IPA tariff in the quarter you guys booked it. Can you talk about the accounting for that? And specifically did you guys secure cash with that refund or is that expected sometime in the future? And if it doesn't come then what happens to the accounting? Thanks.
Sean Hsu
Yeah, I will let you symbol to supplement. And now the refund. IPA Terra refund consists of basically I guess I would say three components. One is the refund on the tariff or imported, let's say imported solar cell or other manufacturing components. Now those refunds I believe will be accrued in the COGS which is the standard accounting. Now there are also some refunds of the machines we shipped to us. Those will not go into COGS. I think those will be used to reduce the cost base of our capex investment in us. Therefore later on benefit on the depreciation of the machines. And those refund, some of those will go into the CSI Solar subsidiaries because CSI Solar have done importing last year. Now some of this I believe will go to the CSI companies because CSI also imported materials earlier this year. Now in terms of cash flow, I'm glad to report that we have already started to receive the IPA tax refund. Receive the cash. As of today we have already received cash. So we will, you will see the, you know, cash components in the Q2 accounting. So in Q1 those IPA will be recorded as. But there will be a account receivable or something like that. And Q2 you will see real cash accredited to those accounting, you know, account receivable. I hope I answered the question right. But you know, simple can supplement.
Simbo Zhu (Senior VP and CFO)
Not much to add. We received the cash tariff together with interest. Thank you.
Sean Hsu
Yeah, so far we have started to receive tariff refund together with the with the interest. As you probably know, those refunds are batch by batch. It depends on the every entrance or every entries of the of the import. So what CBP does is to verify and refund entries by entries. Therefore there will be like you know, cash flow refund come to us depending on the entry. So we will see lots of entries. So it will be a process. However, we have already started to receive cash. Some cash already arrived in our bank accounts. Great.
Philip Shen
Thank you for all the color, Shaun and Jimbo. I'll pass it on.
Sean Hsu
Thank you.
OPERATOR
Thank you. Our next question comes from the line of Allen Lau with Jefferies. Please proceed with your question.
Allen Lau
Thanks for taking my question. So the margin in first quarter is very solid, actually even taking out the refund of tariff. So we'd like to know how much of the module shipment is coming from the US plant. And as you have mentioned, the margins from your US manufacturing plant was decent. We'd like to know approximately at what levels is it?
Sean Hsu
Yeah, I think around 30, 40% of the module shipment come from US factory. It's more or less the same ratio as before. Now Wena, do you have some color to provide?
Wena
Yes. In line with our profit first strategy, we have been emphasizing our key strategic markets. So you'll see quarter over quarter we've maintained a very healthy mix of North American volume. This quarter out of our 2.5 gigawatts 45% came from North America. So a very healthy mix that supported our module margins.
Sean Hsu
So basically almost all of the shipment to the US is manufactured by the US plant.
Allen Lau
All of, not almost all of. Thank you. Thank you. So how about the margins here? Like what's the approximate margin of the US manufacturing plant?
Sean Hsu
I will let Colin to provide colors there.
Colin Parkins (CEO)
Hi Alan, thanks for your question. You know we're in a transitional period in the US as we transition our scale, our mesquite module operations, but bring online our cell manufacturing in Jeffersonville. So there will be a transitional period. But I think what we can say is with the combination of the 45X manufacturing credits, but also with the economies of scale that we're building in the US and the fact that we're going to be using the most advanced HJT cell technology in our products, that during this transitional transition, as we mentioned, we start to scale in Q3, Q4 and heavily into 2027, that those will all be combined and complementary to a pretty robust margin. So we strongly believe that all these factors are going to lead to a strong and robust US profitable business. Model
Allen Lau
Understood. So then. So actually the company is already ramping up its HTAT sales. So wonder if you are seeing a premium of HJT products versus other products like Perc or Topcon products in the US markets.
Sean Hsu
Yeah, Alan, we haven't commercially delivered the HJT cell yet. As I said in answer to a previous question, what do you expect in Q3? We start to deliver that. However, based on the contract booking, we do price a premium of HJT sale compared to the Topcon sale. Yes, we do price. You know, for the contract, we'll resign. The customers willingly accepted a premium for the HJT sales.
Allen Lau
That's impressive. So how much is the premium like in terms of US Sands?
Sean Hsu
Well, it's still going process where just start to book those contracts. As far as I remember, you're Talking about over 10% or maybe 10, 15% of the price premium of the HJT cell. HJT modules versus Topcom modules. But we will give you better numbers I guess after Q4 when we have actual comparison of the motor shipments,
Allen Lau
if it's 10 to 15%, that's equivalent to more than 3 cents maybe, which is pretty impressive. So, yeah, switching gear to ESS segments, I would like to know if the margins is around 20% level. Can you repeat which area? ESS Energy Storage. What's the margin for ESS storage in the first quarter? Yes.
Colin Parkins (CEO)
Okay. I would like Colin to address this question. Yeah, I think, Alan, one of the things that I'd like to point out is that our backlog continues to be very healthy. Energy storage around $3.5 billion in order backlog. And so we have a reasonably long view on our energy storage pipeline and the margins. And with that, I think everybody recognizes that there's continued price pressures. But I think by diversifying our supply chain and giving ourselves a lot of flexibility in our supply chain that we're, we're confident in our pipeline and in the margins associated with that. We do know that there is fluctuations in the commodity pricing and in lithium pricing. So we may see some improvements on that, but perhaps more of a cautious approach in how we present our forecasted numbers with that in mind.
Allen Lau
Understood. So wonder if the going forward, the local production of the battery pack would help the margins.
Colin Parkins (CEO)
Yeah, I think everything we're doing to control our own supply chain is giving us very good strategic advantage, but also control of all aspects. Logistics, manufacturing costs and seamless project integration. So it continues to be our strategy to grow our capabilities all the way from our lithium cell manufacturing through our, our complete battery systems. But Also in our total ESS solutions. So total integrated ESS solutions including software technology, the PCs, the battery themselves and supporting that with a very strong engineering and execution team as part of our strategy to also deliver lots of value for our customers and also as we mentioned in the prepared remarks, our long term service contracts to support this is also very valuable to our customers and to us as it continues to be ongoing recurring business for our energy storage business.
Allen Lau
Understood. So last question from Anders. So is there any difficulty or any challenges in expanding the cell capacities given there were some rumors saying that the export of solar cell capacities might be prohibited, et cetera. So I wonder if when you're expanding your capacity to 6.3 gigawatt, wonder if you get any challenges in getting your equipment in place.
Sean Hsu
So far we don't see that challenge. I know what you are talking about and I hope that President Biden's visit to Beijing. I believe he just shook hands with presidency of China several hours ago. I hope that visa will help to smooth out the career relationship. However, so far we don't see any challenges for our phase two equipment deliveries. We haven't started to take deliveries of the phase 2 solar cell equipment. As we mentioned phase 1 we plan to ramp up in Q3 and phase 2 we'll start to move in equipment in Q4 probably in October, November time frame and we'll start ramp up of the phase two of Jeffersonville early next year. So we haven't taken deliveries of those machines yet. So far we don't have. We haven't seen any restriction, at least not to our contract. By the way, we signed the related equipment contract for the phase two machineries very early. So that was before any noise around this issue. So I believe that the fact we have already signed those equipment contracts, we have also paid some down payment also give us advantage if there's any restriction. I think restriction may be to the future equipment, not for our machines. I think our machine is more or less grandfathers whatever if there's any restriction come out. However, I do hope that President Biden's visa will help to further clear any of the uncertainties in this area.
Allen Lau
Thanks Sean. It's very clear and hope things go smooth in the expansion as well. So thanks a lot. I'll pass on. Thank you.
Sean Hsu
Thank you Adam.
OPERATOR
Thank you. Our next question comes from the line of Maheb Mandaloy with Mizuho Securities. Please proceed with your question.
Maheb Mandaloy
Hey. Hello everyone. Thanks for taking questions here. Just question on the guidance. If you could talk about like the mix of manufacturing versus recurrent in Q2 that's similar to what we saw in Q1 and also for the US North America exposure. How to think about the mix in Q2 versus Q1.
Sean Hsu
Yeah, I will not call him to address his question.
Colin Parkins (CEO)
Well, I think first of all thank you for your question with respect to the guidance. We are reiterating our US Guidance from last quarter so we feel confident in our current execution. So we don't expect any significant downside on our reiterated guidance as we put out in our prepared remarks.
Maheb Mandaloy
Gotcha. Just curious on the mix in Q2 versus Q1 as you for the manufacturing which is recurrent and North America versus
Colin Parkins (CEO)
I think most of our, if I understand the question correctly, most of our our shipments are to third parties, very little to our recurrent operations in terms of our product shipment. I'm not sure if that is at the root of your question.
Maheb Mandaloy
That's a follow up offline on detail on that. But separately a question on the E storage business. How much of the backlog is North America for you guys and for Canadian for CS Powertech? And also are you seeing any interest or any order in the pipeline from data center customers or hyperscalers looking to deploy batteries on site?
Colin Parkins (CEO)
Thanks. Yeah, two good questions. I appreciate you raising the about 40% of our business is in the US right now and obviously we're seeing that demand increase both build out of infrastructure front of the meter and now we're starting to see a lot of progression into behind the meter opportunities. So today we, you know, we're pretty happy about our global pipeline and that we're diversified. We have just to talk before I come back to the US and the data center question, you know, we have about 60% of the US or sorry the Canadian battery market, we have over I think four and a half gigawatt hours contracted there. I think in the leading position in the UK market. We're starting to see a lot of progress in Europe now as those key markets in Europe are starting to become very active. Similarly in Japan as the best markets maturing in Japan, we're seeing a lot of opportunity for that market. And as well we continue to be steady with a couple of gigawatt hours a year in Australia. So having that diversification I think is good for our E storage business. But with respect to the question about aidc, well we have been working on this for quite a while. Last quarter we announced a front of the meter infrastructure project, two and a half gigawatt hours to support data center growth and we have developed very focused business development and technology teams focusing on making sure that our solutions have the right technical requirements, the stringent requirements for fast response for data centers and the other requirements. And that's getting a lot of traction as well as the fact that we're able to offer fully customers compliance solutions for data centers. So while we cannot actually disclose who we're working with, I can tell you that we're very engaged right now on data center opportunities and that's a big part of our program and our focus and we expect it to yield some pretty exciting results for us in the next quarters that hopefully we'll be able to be a little more forthcoming about as we get further along in the contracting processes.
Maheb Mandaloy
That's great. I appreciate the detailed color on the on the different markets as well and maybe just one last one on the guidance for the rest of the year. I know you obviously haven't guided for Q3, Q4 the full year, but directionally, like how should we think about the business here, the US factories ramping up? Should we be looking something similar to last year's cadence or something different here? Any color would be helpful, thank you.
Colin Parkins (CEO)
Well, I guess if we look at the solar side first, there's been a lot of volatility in that market. There continues to be a lot of volatility. And our approach, as you know, has been to focus on profitable business over volume. And so we're on that basis we've been reserving guidance but keeping an opportunistic position to strike with more volume as the markets support it. So we see, I think on the solar side, hopefully some improvements that we can take advantage in terms of volume on the second half, but reserving a little bit our position on guidance and focusing on the US where we have a strong line of sight on our volumes and our guidance with storage, our pipeline remains strong as we've mentioned. And we have also in our prepared remarks expressed that we will hit record deliveries in our storage side for the second half of this year. And these are projects that go through a very sophisticated level of planning and logistics. And it's based on that that we're very confident in the second half of the year on our storage side. We don't see, barring any unexpected circumstances, a very strong second half for our energy storage business, probably in record.
Maheb Mandaloy
Thank you. Appreciate the color. Call in and congratulations on the appointment.
Colin Parkins (CEO)
Thank you. Thank you very much.
OPERATOR
Thank you. Ladies and gentlemen. That concludes our time allowed for questions. I'll turn the floor back to management for any final comments.
Sean Hsu
Thank you for joining us today and for your continued 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. Thank you, everybody.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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