Item 1A. Risk Factors
ITEM 1A . Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risks set forth below and the risk factors as described in Part I, Item 1A, “Risk Factors”, in our Annual Report on Form 10-K/A for the year ended December 31, 2025 (the “2025 Form 10-K/A”) and Part II, Item 1A, “Risk Factors,” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 (the “Q1 2026 Form 10-Q”). Other than the risk factors set forth below, there have been no material changes to the risk factors previously disclosed in the 2025 Form 10-K/A and Q1 2026 Form 10-Q.
Changes in the global trade environment, including the United States trade environment, such as the increase or imposition of import tariffs, could adversely affect the amount or timing of our revenue, results of operations or cash flows.
We depend on the ongoing availability of certain raw materials and components to assemble our products. Since 2025, the United States has imposed significant new tariffs on a broad range of imported products and components and may adopt additional tariffs, trade restrictions or other measures in the future. Although certain tariffs previously imposed under the International Emergency Economic Powers Act were invalidated by the Supreme Court of the United States (the “U.S. Supreme Court”) in February 2026 and subsequently rescinded, other trade measures remain in effect or have been implemented as replacements.
In addition, following the U.S. Supreme Court's ruling, the U.S. Administration imposed a temporary import surcharge under Section 122 of the Trade Act of 1974 (“Section 122”). The surcharge was initially set at 10% ad valorem on substantially all imports, with a statutory ceiling of 15%, subject to carve-outs for certain goods (e.g., electronics and critical minerals) and products qualifying under the United States-Mexico-Canada Agreement. The surcharge took effect on February 24, 2026, for a maximum period of 150 days. On May 7, 2026, the U.S. Court of International Trade held that the Section 122 proclamation was invalid. This ruling has been appealed, and the U.S. Court of Appeals for the Federal Circuit issued a temporary stay of the ruling pending resolution of the appeal. The evolving legal status and expiration of the Section 122 tariffs create additional uncertainty regarding our tariff exposure and any potential recovery of Section 122 duties paid during the quarter. If the Section 122 proclamation is ultimately held invalid and refund mechanisms are established, we may be eligible to recover some or all the Section 122 that we have paid. However, the outcome of the appeal and the availability, timing and amount of any potential refunds remain uncertain and are subject to further judicial and administrative proceedings.
Most recently, with the expiration of Section 122 tariffs, in July 2026, the U.S. Administration imposed additional tariffs under Section 301 of the Trade Act of 1974 (“Section 301”) on imports from numerous trading partners, with rates generally ranging from 10% to 12.5%, subject to specified exemptions and exceptions. These tariffs are in addition to existing duties and may apply alongside other trade measures, including Section 301 tariffs applicable to imports from China, tariffs under Section 232 of the Trade Expansion Act of 1962, antidumping and countervailing duties, and any future tariffs or trade restrictions that may be adopted. As with the Section 122 surcharge discussed above, these Section 301 tariffs may also be subject to legal challenge, and we cannot predict the outcome of any such challenge or its effect on our tariff exposure.
In addition, on July 28, 2026, the Federal Communications Commission (the “FCC”) updated its “Covered List,” maintained under the Secure and Trusted Communications Networks Act, to include power inverters produced in foreign countries, effective immediately and prospectively for new product authorizations. Under this action, new inverter models that do not qualify as “domestic end products” (as defined under the Buy American Act, 48 C.F.R. § 25.101(a)) are generally prohibited from receiving the FCC equipment authorizations required to import, market, or sell such products in the United States. The FCC’s order applies to new inverter models and certain equipment modifications requiring FCC equipment authorization in the future and generally does not impact products that were authorized by the FCC prior to this order. We believe that SolarEdge inverter products continue to be eligible for sale and installation under the new order. We continuously evaluate the impact of this and other trade restrictions on our business. Inability to comply with such trade restrictions would have a material adverse effect on our business, financial condition, results of operations and cash flows.
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We have relocated our contract manufacturing to the United States, where we now manufacture the substantial majority of our products. We continue to manufacture a minor portion of our products in Israel, at our Sella 1 facility. However, certain components and subcomponents necessary for our products continue to be sourced from suppliers outside the United States, and imports of such items may be subject to existing or future tariffs or other trade restrictions. It is unknown whether and to what extent these tariffs will remain in place or if other new laws or regulations will be adopted. In addition, retaliatory measures may be imposed by foreign governments on products exported from the United States to markets in which we sell our products.
The scope, duration and impact of current and future tariffs and trade measures remain uncertain and may increase our cost of revenue, disrupt supply chains, create cost volatility, reduce demand for our products, adversely affect our customers, suppliers, contract manufacturers and other business partners, or impair our ability to compete effectively. Continuing uncertainty regarding trade policy may also cause customers to accelerate, delay or cancel purchases, resulting in sales volatility and fluctuations in operating results.
In particular, if tariffs increase the cost of components imported into the United States, increase the cost of manufacturing our products, or increase the cost of solar power systems generally, solar power systems may become less economically attractive, which could reduce demand for our products and adversely affect our gross margins. It is difficult to predict what additional trade-related actions may be taken by the United States or other governments, including further tariff increases, new trade restrictions, or retaliatory measures. Any such actions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Disruption to our business operations as a result of the evolving conflict in Israel and other conditions in Israel that affect our operations may limit our ability to develop, produce and sell our products.
Our headquarters and principal research and development center are located in Israel. As a result, political, economic, and military conditions in Israel directly affect our business, operations, and workforce.
Israel has been involved in a number of armed conflicts and has been the target of terrorist activity, including threats from Gaza, Iran, the Houthi militants in Yemen, Hezbollah militants in Lebanon, Iranian militias in Syria, and others. Violence between Hamas and Israel intensified on October 7, 2023, when the terrorist group launched an unprecedented attack on Israel. On October 8, 2023, the Israeli Government announced that the Security Cabinet of the State of Israel approved a war situation in Israel. Since that time, and in connection with subsequent regional hostilities, the ongoing state of war has disrupted and continues to disrupt our business operations.
In the second quarter of 2025, Israel and the Islamic Republic of Iran engaged in a 12‑day war, which subsequently stabilized due to a brokered ceasefire. More recently, during the first half of 2026, Israel was again engaged in direct military conflicts with Iran and in significant hostilities with Hezbollah in Lebanon. Although hostilities have since moderated, it is unknown whether any ceasefires or periods of relative calm will endure, or whether conflicts involving Gaza, Lebanon, Iran, Yemen, or other parts of the region may reemerge or escalate in the future.
Because our headquarters and a substantial portion of our workforce are based in Israel, these conflicts have impacted, and may continue to impact, the availability of our workforce. Some of our employees, executive officers, and directors residing in Israel are obligated to perform reserve duty in the Israeli military and are subject to being called to active duty under emergency circumstances. In the year ended December 31, 2025, approximately 279 employees, or 13% of our workforce in Israel, and in the second quarter of 2026, approximately 179 employees, or 7%, were called to active reserve duty for varying periods, which adversely affected workforce availability. Additional employees may be called to reserve duty in the future.
Any future armed conflict, political instability, or violence in Israel or the surrounding region may impair our ability to manage our business effectively, operate our manufacturing plant in northern Israel, conduct research and development activities, or otherwise carry out our operations. In the event of a significant escalation of existing hostilities or the outbreak of additional conflicts, we may be forced to cease or significantly curtail operations, which could delay the distribution and sale of our products.
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The majority of our key employees and officers are residents of Israel. If any of our offices or facilities in Israel were damaged, destroyed, or rendered inoperable as a result of war, hostile actions, terrorist attacks, earthquakes, fire, floods, storms, power outages, employee malfeasance, or other natural or man‑made events, our ability to conduct research and development, manufacture products, and operate our business could be materially adversely affected. Any resulting delay in the achievement of our development or commercialization objectives could harm our business, prospects, financial results, and reputation.
In addition, several countries, principally in the Middle East, restrict business dealings with Israeli companies, and other countries or groups may impose similar restrictions if hostilities or regional political instability persist or intensify. If instability in neighboring states results in the establishment of fundamentalist Islamic regimes or governments more hostile to Israel, it could be subject to additional political, economic, or military constraints, which could materially adversely affect our operations and our ability to sell products in the region.
Any interruption or curtailment of trade between Israel and its current trading partners, or a significant downturn in Israel’s economic or financial condition, could have a material adverse effect on our business, financial condition, and results of operations. Since the start of the war with Hamas, we have become aware of pressure being placed on some of our customers not to engage in business with us due to our affiliation with Israel. In addition, adverse developments in foreign policy toward Israel could negatively impact our ability to do business with suppliers and customers, which could, in turn, harm our reputation, results of operations, or financial condition.
While our offices and facilities worldwide, including in Israel, remain open and, to date, we have not experienced material disruptions to our ability to manufacture and deliver products and services to customers, any reemergence or escalation of conflicts in Israel or the surrounding region could materially adversely affect our business, financial condition, and results of operations.
Additionally, in 2023, the Israeli government announced plans to significantly reduce the Israeli Supreme Court's judicial oversight, including reducing its ability to strike down legislation that it deems unreasonable, and plans to increase political influence over the selection of judges. Although the Israeli Supreme Court partially struck down these plans, the current government has vowed to make other changes to law that limit the powers of the Supreme Court. If such government plans are eventually enacted, they may cause operational challenges for us since we are headquartered in Israel and many of our employees are located in Israel.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
ITEM 3 . Defaults upon Senior Securities.
None
ITEM 4 . Mine Safety Disclosures
Not applicable.
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