Solar stocks took a hit on Friday as Enphase Energy (ENPH) released its earnings report with a disappointing outlook for the rest of the year. As a result, ENPH stock slid 14.7% to 82.09, contributing to the overall decline in the solar industry.

Enphase Energy reported a 13% year-on-year decrease in revenue, reaching $551 million. Furthermore, the company projected fourth-quarter sales to fall between $300 million to $350 million, significantly lower than the $579 million that analysts had anticipated prior to the report.

The decline in demand was primarily attributed to Europe, as Chief Executive Badrinarayanan Kothandaraman mentioned during the earnings call that the region had experienced a substantial reduction in demand. Additionally, the U.S. market, particularly California, also witnessed a decline.

Enphase Energy's bearish outlook weighed heavily on solar stocks as a whole. The Invesco Solar ETF (TAN), which tracks the industry, plunged 4.5%, further exacerbating the already challenging year for solar companies.

Enphase Energy's shares have experienced a decline of approximately 65% this year. The California-based company, known for its microinverters and battery systems, had seen a significant 45% gain in shares in the previous year.

The solar industry has been facing numerous obstacles, including rising interest rates and concerns about the broader economy, particularly in Europe. Furthermore, California's recent alteration in the net-metering process, known as Net-Metering 3.0 (NEM 3.0), has also impacted solar companies negatively, as it provides lesser credits for excess solar energy put back into the grid.

Kothandaraman acknowledged the challenges faced by Enphase Energy but expressed optimism for the long-term future. He pointed to government incentives aimed at boosting solar production and the increasing adoption of electric vehicles as factors that could drive growth.

Meanwhile, solar stocks across the board suffered losses. SolarEdge (SEDG) fell 7.7% following Enphase Energy's decline, while residential solar developer Sunrun (RUN) experienced a 9% drop. Utility-scale manufacturer First Solar (FSLR) also took a hit, losing 5% in stock value.

The Invesco Solar ETF has had a challenging year, losing around 40% of its value, reflecting the broader struggles faced by the solar industry.

As investors grapple with the current challenges faced by solar companies, attention will now turn to potential government initiatives and industry advancements that could provide a much-needed boost to the sector.