ABB Ltd (ABB) | The Buildout — AI Infrastructure
The Verdict
ABB is an industrial electrification and automation company. For the AI buildout it supplies the electrical equipment that data centers and the grid around them need: switchgear, medium-voltage UPS, DC switches, DC breakers and DC components, drives and motors inside cooling systems, and grid-stabilization hardware such as synchronous condensers. It is a picks-and-shovels vendor rather than an AI software or model company — it does not report an AI segment, and its exposure runs through the data-center end market rather than a dedicated product line.
| Market Cap | — |
| Revenue (TTM) | $31.3B |
| Revenue Growth | +8.5% |
| EBITDA Margin (TTM) | 17.1% |
| Net Debt | $5.1B |
| Earnings Beats | 5 of 8 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Q2 2026 orders reached about $12bn for the first time, up 28% comparable, and backlog hit a record $30bn, up 28%, giving visibility into 2027 and 2028.
- Electrification orders rose 58% to above $7bn for the first time, with segment book-to-bill of 1.39 — a sixth consecutive positive quarter — and segment backlog up 59% to $13.7bn.
- Data-center orders grew at a triple-digit pace in Electrification, while orders outside data centers still grew double digits, so the AI pull-through sits on top of a broad base.
- Management raised FY2026 comparable revenue growth guidance to low double-digit to low teens and said capacity coming online is the reason.
- The Rotork offer would add about 3% to ABB's 2025 revenue and about 20 basis points to group Operational EBITA margin, and would make the Automation segment about 12% larger.
What We’re Watching
- Management flagged order lumpiness after six record-type quarters: "You will see some variation in the order intake."
- Motion margin fell 130 basis points to 18.5% and is guided to recover in H2 2026, with the Q3 guide only "similar to Q2."
- 800V DC has zero orders in backlog, and commercial impact is guided to late 2027 or 2028, gated on NVIDIA components.
- Rotork's return case was challenged in Q&A; management disputed the framing but did not quantify a bridge, and close is guided to H1 2027.
The thesis is strengthening on demand and intact on portfolio direction. Record orders, a record backlog and two consecutive upward guidance revisions describe a business whose order book is still building, with the data-center pull-through as the standout driver. The soft spots look specific rather than systemic: Motion's margin is compressing and its recovery has been guided to H2 twice. The open question is whether data-center order growth can hold near triple digits when management itself has flagged variation, and whether Motion's recovery finally lands.
Earnings Beat
In Q2 2026 ABB reported record revenue of $9.5bn, up 12% comparable, alongside records on orders of about $12bn, up 28%, and a group book-to-bill of 1.27. Gross margin was 40%, down 50 basis points year-on-year, held back mainly by unrealized derivatives on FX and commodities plus a residual gap on the price-cost balance. Operational EBITA rose 20% to $1.9bn, a 20.2% margin, up 90 basis points.
| Metric | Q2 FY2023 | Q1 FY2023 | Q2 FY2022 | YoY |
|---|---|---|---|---|
| Revenue | $8.2B | $7.9B | $7.3B | +12.6% |
| Gross margin | 35.4% | 34.6% | 31.6% | +380bps |
| EBITDA | $1.5B | $1.4B | $846M | +82.0% |
| EPS | $0.50 | $0.57 | $0.20 | +151.8% |
| Book-to-bill | 1.27 | n/a | n/a | — |
| Backlog | $30bn | n/a | n/a | +28% comparable |
We have zero order in the backlog for 800 volt DC data centers. Nobody has, because there is waiting for the availability of components from NVIDIA and the like.— Morten Wierod, CEO, 2026-07-16
Management tone: On the Q2 2026 call management stayed confident on demand but added explicit caution about the order streak — Wierod said he could not promise the record pace would continue. The call carried two things the 2025-10-16 call did not: a large strategic acquisition and a raised full-year growth guide. Management also volunteered negatives, including zero 800V DC orders and hyperscaler pricing leverage, alongside the records.
Management Guidance
For FY2026 management guides comparable revenue growth of low double-digit to low teens and an Operational EBITA margin that improves from last year even when excluding the Q1 2026 real estate gain. For Q3 2026 it guides comparable revenue growth of low- to mid-teens and a sequential margin improvement that it said is above normal Q2-to-Q3 seasonality. By segment for Q3 2026: Electrification revenue at least similar to Q2 with margin improving from 24.9%; Motion revenue mid-to-high single digit with margin similar to Q2; Automation revenue improving in the mid-single-digit range with margin up year-on-year. Management reaffirmed price versus input cost at least neutral for the full year in Electrification and free cash flow improving from last year's $4.6bn.
Trajectory
Comparable revenue growth stepped up to 12% in Q2 2026 from 9% like-for-like in the 2025-10-16 period, with higher volumes the main driver and price adding close to 2%. Group Operational EBITA margin rose 90 basis points to 20.2%, above the 16%-19% long-term target range, and Electrification set a record 24.9%. The drags sit underneath: gross margin fell 50 basis points to 40% on unrealized FX and commodity derivatives, and Motion's margin fell 130 basis points to 18.5% on Gamesa Electric dilution and High Power inefficiencies.
The Model
The model projects FY+1 revenue of $32,861M and EBITDA of $6,063M, an 18.45% margin. For FY+2 it projects revenue of $35,300M and EBITDA of $6,672M, an 18.9% margin. The near-term anchor is the record $30bn backlog and the capacity management says is coming online; the FY+2 step-up depends on converting that backlog, on the Rotork deal closing in H1 2027, and on the first 800V DC orders that management dates to late 2027 or 2028.
| Metric | FY2022 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $29.4B | $32.9B | $35.3B |
| YoY Growth | — | +11.6% | +7.4% |
| EBITDA | $4.3B | $6.1B | $6.7B |
| EBITDA Margin | 14.6% | 18.5% | 18.9% |
Projections are the median of 4 independent model runs.
For FY2026 management guides comparable revenue growth of low double-digit to low teens and an Operational EBITA margin that improves from last year even when excluding the Q1 2026 real estate gain. For Q3 2026 it guides comparable revenue growth of low- to mid-teens and a sequential margin improvement that it said is above normal Q2-to-Q3 seasonality. By segment for Q3 2026: Electrification revenue at least similar to Q2 with margin improving from 24.9%; Motion revenue mid-to-high single digit with margin similar to Q2; Automation revenue improving in the mid-single-digit range with margin up year-on-year. Management reaffirmed price versus input cost at least neutral for the full year in Electrification and free cash flow improving from last year's $4.6bn.
What Could Go Right — and Wrong
- Data-center orders stay near triple-digit growth and the ex-data-center Electrification business holds its double-digit pace.
- Motion's margin recovery lands in H2 2026 as guided, removing the Gamesa Electric and High Power drag.
- Price versus input cost turns neutral by year-end, lifting gross margin from the current 40%.
- Rotork closes on schedule and its 24.6% adjusted operating margin mixes into the Automation segment.
- The 800V DC ramp begins on the guided late-2027 or 2028 timeline, with the first orders booked.
- Data-center orders plateau or decline after six record-type quarters, compressing the headline order number.
- Hyperscaler pricing leverage holds realized price near 2% or lower on the highest-growth segment.
- Motion's margin recovery slips a third time; the Q3 guide is only flat sequentially.
- Automation's 14% order decline proves cyclical rather than comp-driven, pointing to softer process markets.
- Rotork's return case fails to hold once standalone data is available, or the deal slips on shareholder vote or regulatory approvals.
Looking Ahead
Over the next year the tests are specific rather than general. The 24 September data-center webcast is the first chance for a data-center revenue or order share number, which management has so far declined to give at the group level. A Capital Markets Day in November and FY2027 guidance in January 2027 set the longer-range frame. The Robotics sale to SoftBank is guided to close in H2 2026, removing a stranded-cost headwind, and E-mobility is guided to reach quarterly breakeven by end-2026. Rotork's close is guided to H1 2027.
- 24 SeptemberDC investor webcast — First chance at a disclosed data-center revenue or order share.
- NovemberCapital Markets Day — Longer-range financial framing from management.
- H2 2026Robotics sale closes — Removes the ~40bps stranded-cost margin headwind.
- End 2026E-mobility breakeven — Tests whether quarterly breakeven lands as guided.
- January 2027FY2027 guidance — First full-year frame on the post-Robotics portfolio.
- H1 2027Rotork close — Shareholder vote, regulatory approvals, ROIC case.
Financials
Annual Summary
| Metric | FY2021 | FY2022 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $28.9B | $29.4B | $31.3B | +1.7% |
| Gross Margin | 32.7% | 33.0% | 34.4% | +23bps |
| EBITDA | $6.6B | $4.3B | $5.4B | -35.1% |
| EBITDA Margin | 22.8% | 14.6% | 17.1% | 827bps |
| Net Income | $4.5B | $2.5B | $3.5B | -45.6% |
| Free Cash Flow | $2.5B | $525M | $1.8B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)34.4%
- EBITDA Margin (TTM)17.1%
- Net Margin (TTM)11.2%
- ROIC19.4%
- FCF Conversion33.0%
- SBC / Revenue0.0%
The Company
ABB is an industrial electrification and automation company with more than 105,000 employees and a history of more than 140 years, as its 2024 20-F describes. It sells medium- and low-voltage electrical components, switchgear, circuit breakers, digital devices and enclosures through Electrification; motors, generators, drives and traction converters through Motion; and control systems such as the ABB Ability System 800xA DCS through Automation. For the AI buildout, the relevant products are switchgear, medium-voltage UPS, DC switches and breakers, drives and motors inside cooling systems, and grid-stabilization equipment.
ABB operates as a middle-layer equipment maker, with production and development facilities spread across China, the U.S., Germany, Finland, Austria, Sweden, Italy, Canada, Poland, India and Mexico, per the 20-F. Management describes a local-for-local manufacturing posture and says tariff-related impacts have been "limited to the tens of millions." It is adding capacity in the U.S., China, India and Europe — a $200m expansion announced in Q2 2026 for Europe, plus $250m-plus in the U.S. and $100m in Canada this year.
Business Segments
Competitive Landscape
ABB competes in a crowded electrical-equipment field. Its own 20-F lists Eaton, Schneider Electric, Siemens, Vertiv, Hubbell, nVent and others as Electrification competitors, and the calls describe a dense set around data-center power. Management argues its edge is reliability and breadth rather than an exclusive product: Wierod said ABB does not take orders it cannot deliver on time, and called that "helping us winning share." The competitive risk the evidence highlights is 800V DC, where Vertiv, Eaton and GE Vernova have public roadmaps and ABB has zero orders.
- VertivNamed in the 20-F among Electrification competitors, and appears as both customer and supplier in the relationship map. Has a public 800V roadmap with NVIDIA's Vera Rubin.
- EatonNamed in the 20-F among Electrification competitors. Positions a full-stack 800V architecture with $3.4m content per megawatt.
- GE VernovaAppears in the peer read-through as a competitor making public 800V roadmap claims; data-center Electrification orders were $2.7bn in Q2.
- Schneider ElectricNamed across the 20-F's Electrification, Motion and Process Automation competitor lists.
- SiemensNamed across the 20-F's Electrification, Motion, Process Automation and Robotics competitor lists.
Supply Chain
ABB sits in the middle of the chain. It buys copper, electrical steel, rare earths and power semiconductors, and sells finished electrical and automation equipment to hyperscalers, utilities, cooling-equipment makers and industrial plants. No neighbor transcript in the packet names ABB by name.
More on ABB: Earnings recap