Gerdau S.A. (GGB) | The Buildout — AI Infrastructure
The Verdict
Gerdau S.A. is the largest Brazilian steel producer and a leading producer of long steel in the Americas, with operations in Brazil, North America, and South America. It produces rebar, structural beams, merchant bars, and other long-steel products, primarily from electric-arc furnaces using scrap as its main input. For the AI infrastructure buildout, Gerdau's North American mills supply structural steel beams, rebar, and solar-tracker piles used in data-center construction and the electrical grid expansion that supports AI workloads.
| Market Cap | — |
| Revenue (TTM) | $12.9B |
| Revenue Growth | +8.9% |
| EBITDA Margin (TTM) | 14.0% |
| Net Debt | $1.9B |
| Earnings Beats | 0 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- North America generated 64% of segment EBITDA in FY2025, driven by record shipments and a backlog of ~90 days.
- Management launched a BRL1.2 billion share buyback program in February 2026, targeting ~2.9% of outstanding shares.
- The Miguel Burnier mining platform, about to begin operations, is expected to generate ~BRL1.1 billion in annual EBITDA at full ramp and structurally lower Brazil’s cost curve.
- 2026 capex was reduced by BRL1.4 billion to BRL4.7 billion, reflecting a pivot to cash generation and shareholder returns.
- Leverage remained low at 0.76x net debt/EBITDA, providing flexibility to weather the Brazil downturn.
What We’re Watching
- Brazil’s Q1 2026 EBITDA margin guided to ~7%; whether it can reach double-digit for the full year hinges on Miguel Burnier ramp-up and HRC antidumping measures by mid-2026.
- New U.S. rebar capacity from Nucor and CMC (CMC’s West Virginia mill starting June 2026) could pressure North American rebar spreads.
- Coal costs rose over 20% quarter-over-quarter into Q1 2026, with a 90–180 day lag, potentially delaying Brazil margin recovery.
- The definitive HRC antidumping decision expected by June/July 2026 is a binary event for Brazil’s price environment.
The investment case is under stress from Brazil’s collapse, but the North American engine is firing on all cylinders, and management is responding with cost discipline and shareholder returns. The thesis’s recovery depends on whether the Miguel Burnier mine and trade defense can restore Brazil margins towards double digits in the second half of 2026 — without North America deteriorating.
Earnings
In Q1 2026, revenue reached $3,228 million, up 6.7% year-over-year, with gross margin expanding to 13.7% from 10.9% in the prior quarter. EBITDA was $513 million, yielding a 15.9% margin, as cost improvements and North American strength offset continued Brazil pressure.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.2B | $3.1B | $3.0B | +6.7% |
| Gross margin | 13.7% | 10.9% | 11.2% | +250bps |
| EBITDA | $513M | $390M | $392M | +30.8% |
| EPS | $0.10 | $-0.12 | $0.06 | +52.8% |
We are more optimistic about the progress of the trade defense measures … I’m very confident that this HRC antidumping should become a definite measure come June and July.— Gustavo Werneck, CEO, February 24, 2026
Management tone: Management's tone shifted from disappointment over slow trade defense in mid-2025 to cautious optimism, reflecting confidence that definitive HRC antidumping measures would arrive by mid-2026. They defended North American margins vigorously and were transparent about near-term coal and election headwinds.
Management Guidance
For 2026, management reduced capex to BRL4.7 billion (down BRL1.4 billion from 2025), guided Brazil's Q1 2026 EBITDA margin to ~7%, and stated that full-year double-digit margins are possible if the Miguel Burnier mine delivers cost reductions and HRC antidumping measures take effect. South America margins are expected to recover to mid-teens, and North American profitability is expected to remain stable with no substantial reduction.
Trajectory
Consolidated revenue has grown to $12.9 billion over the last twelve months, up 8.9% year-over-year, driven by North American strength. Gross margin has expanded to 13.7% in Q1 2026 from 10.9% in Q4 2025, reflecting better utilization and scrap costs. However, the recovery is uneven: Brazil's segment EBITDA margin remained near 7% due to record imports, while North America continues to post mid-to-high teen margins with a 90-day backlog.
The Model
The model projects FY+1 revenue of $13,300 million and EBITDA of $2,062 million, representing a 15.5% margin, anchored by North American order backlog persistence and Brazil cost improvements. FY+2 revenue rises to $13,900 million with EBITDA of $2,224 million (16.0% margin), driven by the full ramp of the Miguel Burnier mine and potential trade defense easing in Brazil.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $12.7B | $13.3B | $13.9B |
| YoY Growth | — | +4.4% | +4.5% |
| EBITDA | $1.7B | $2.1B | $2.2B |
| EBITDA Margin | 13.3% | 15.5% | 16.0% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.5% below analyst consensus.
For 2026, management reduced capex to BRL4.7 billion (down BRL1.4 billion from 2025), guided Brazil's Q1 2026 EBITDA margin to ~7%, and stated that full-year double-digit margins are possible if the Miguel Burnier mine delivers cost reductions and HRC antidumping measures take effect. South America margins are expected to recover to mid-teens, and North American profitability is expected to remain stable with no substantial reduction.
What Could Go Right — and Wrong
- Brazil EBITDA margin reaches double digits in FY2026 as Miguel Burnier and trade defense take hold.
- North American backlog extends further beyond 100 days, sustaining high capacity utilization and mid-to-high teen margins.
- HRC antidumping becomes definitive and reduces import pressure, lifting domestic steel prices in Brazil.
- Noncore asset monetization results in substantial cash returns, enhancing shareholder value.
- The Mexico greenfield special-steel mill receives a go-ahead, adding long-term growth.
- Brazil margins stay at 7% or lower as trade defense fails and coal costs remain high.
- New U.S. rebar capacity from Nucor and CMC compresses spreads, hurting North American mill profitability.
- A U.S. construction downturn shortens the backlog to 60–70 days, eroding earnings.
- Miguel Burnier ramp-up delays cause the full EBITDA uplift to slip beyond FY2026.
- Long-dated Ouro Branco maintenance is accelerated, requiring a major capex cycle that consumes free cash flow.
Looking Ahead
Over the next twelve months, Gerdau will test whether the cost-curve transformation from Miguel Burnier and potential trade defense measures can revive its Brazilian segment. The definitive HRC antidumping decision in mid-2026 is the most immediate catalyst, while early contributions from the mine in H2 2026 will indicate whether a return to double-digit margins is achievable. Meanwhile, North American demand signals from neighbors confirm continued strength, but added rebar supply and scrap inflation are emerging risks.
- April 28, 2026Q1 2026 Earnings — Management updates on Brazil margin stabilization at ~7% and Miguel Burnier startup.
- H1 2026Miguel Burnier mine startup — Integrated test phase begins; cost reduction expected in H2 2026.
- June/July 2026HRC antidumping ruling — Definitive measure expected to curb flat steel imports.
- June 2026USMCA review begins — Outcome could green-light or shelve Mexico special-steel mill.
- June 2026CMC micromill start — New West Virginia rebar micromill begins operations.
- H2 2026Brazil double-digit margin test — Depends on Burnier ramp and trade protection.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $12.1B | $12.7B | $12.9B | +5.4% |
| Gross Margin | 13.7% | 11.4% | 12.0% | 232bps |
| EBITDA | $1.8B | $1.7B | $20.0B | -3.7% |
| EBITDA Margin | 14.6% | 13.3% | 14.0% | 126bps |
| Net Income | $858M | $254M | $317M | -70.3% |
| Free Cash Flow | $968M | $221M | $6.4B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)12.0%
- EBITDA Margin (TTM)14.0%
- Net Margin (TTM)2.5%
- ROIC7.3%
- FCF Conversion24.7%
- SBC / Revenue0.0%
The Company
Gerdau S.A. is the largest Brazilian steel producer and a leading producer of long steel in the Americas, with a product line that spans rebar, structural beams, merchant bars, wire rod, flat steel, and special bar quality engineered steel. Its steel is the backbone of construction, infrastructure, and energy projects, including the data centers and grid expansion tied to AI infrastructure.
Gerdau operates with a highly integrated business model: around 70% of its steel is made in electric-arc-furnace mini-mills using scrap as primary input, making it the largest recycling company in Latin America. The company also owns iron ore mines in Minas Gerais, Brazil, primarily to supply its Ouro Branco integrated mill. Its operations are spread across 29 steelmaking plants in Brazil, the United States, Canada, Argentina, Peru, and Uruguay, with a consolidated crude steel capacity of approximately 15.7 million tonnes.
Business Segments
Competitive Landscape
Gerdau operates in a fragmented global steel market, competing against both integrated mills and mini-mills. In Brazil, it faces competition from ArcelorMittal, Simec, CSN, and others across long and flat steel products. In North America, its main competitors are Commercial Metals (CMC), Nucor, and Steel Dynamics. Gerdau’s competitive edge lies in its structural beam products, which are difficult to import due to size and weight, and its vertically integrated scrap supply chain.
- ArcelorMittalNamed in 20-F as a competitor in Brazil long and flat steel; neighbor call noted Brazil prices 'also responding' constructively.
- Commercial Metals (CMC)North America competitor; recently opened a new rebar micromill in West Virginia starting June 2026, adding supply.
- NucorNorth America competitor; record shipments, new rebar micromills now EBITDA-positive.
- Steel DynamicsNorth America competitor; record shipments and strong fabrication orders; scrap pricing rising.
- CSNCompetitor in Brazil long and flat steel, named in 20-F.
Supply Chain
Gerdau sits in the middle of the steel supply chain, converting scrap and iron ore into long steel products. Its primary inputs are scrap, coal/coke, and energy, while customers span construction, infrastructure, and manufacturing.