Gerdau S.A. (GGB) | The Buildout — AI Infrastructure
The Verdict
Gerdau melts scrap — and, at its integrated mill, iron ore — into crude steel, then rolls it into long products: rebar, merchant bars, wire rod, and structural shapes and beams. The AI buildout reaches it indirectly. Its North American structural and long steel goes into data-center construction, power generation, transmission towers and semiconductor-fab building work. Gerdau sits at the first link of that chain, a steel supplier rather than a maker of any AI-specific product.
| Market Cap | — |
| Revenue (TTM) | $13.2B |
| Revenue Growth | +8.4% |
| EBITDA Margin (TTM) | 15.2% |
| Net Debt | $1.9B |
| Earnings Beats | 0 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- North America was 75% of consolidated EBITDA in Q1 2026, and its adjusted EBITDA rose a further 15% q/q in Q2 2026 with shipments up 7% y/y.
- Management says the three-project bundle — Miguel Burnier, Pindamonhangaba and Midlothian — adds about BRL 1.4-1.5 billion of annual EBITDA at full operation.
- Leverage fell to 0.69x net debt/EBITDA at Q2 2026 from 0.76x at end-2025, with BRL 2.4 billion returned through dividends and buybacks in 2025.
- Two U.S. price increases announced just before the Q2 2026 call are not in the outlook; the CFO called the unbooked upside risk 'not negligible.'
- The North American franchise sells at the heavy end, where imports are marginal — management says large merchant bars and beams are hard to ship in.
What We’re Watching
- Miguel Burnier's start, guided for Q3 2026, and the Q4 2026 Ouro Branco cost effect; its 2026 contribution was cut from a soft-guided BRL 400 million.
- The HRC antidumping case returns end-August and is expected to complete by year-end; long and flat cases are 'updated in the second half.'
- The Brazil transformation plan, promised 'in a few months' — whether it carries specific mills, capacity and a cost target, funded without new leverage.
- Input costs: scrap seasonality into year-end, and North American freight up 8.5% q/q, which management expects to persist.
Earnings are strengthening from a weak 2025 base. Two consecutive quarters have run above the FY2025 quarterly EBITDA average, North America is carrying the result, and Brazil is the drag the company is only starting to address. The 2027 step-up rests on projects that have already slipped once and on trade-defense decisions Gerdau does not control. The open question is how much of the North American demand is AI-linked — and what the story looks like if it is not.
Earnings
Gerdau reported Q2 FY2026 revenue of $3,457 million and a gross margin of 15.8%, up from 11.6% a year earlier. Management called it the best consolidated adjusted EBITDA since the third quarter of 2023 — BRL 3.4 billion — and put adjusted net income at BRL 1.5 billion, up 45% quarter-on-quarter. Free cash flow was positive BRL 237 million, which the CFO described as 'timid.'
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.5B | $3.2B | $3.2B | +7.1% |
| Gross margin | 15.8% | 13.7% | 11.6% | +420bps |
| EBITDA | $622M | $513M | $441M | +41.0% |
| EPS | $0.14 | $0.10 | $0.08 | +82.3% |
| Net debt/EBITDA | 0.69x | 0.74x | n/a | — |
In North America, we continue to see steel demand at high levels with a strong order backlog driven by solid consumption in segments such as renewable energy and data centers.— Gustavo Werneck, CEO, 2026-08-05
Management tone: Management was confident on North America and candid about Brazil. The CEO said Brazil's future scenario is 'much tougher' than today, and the CFO said the company is 'accumulating losses since the second half of last year in Brazil' with no tax profit there. The CEO also said the company is 'being more conservative on the macro side,' and the CFO noted that two U.S. price increases are not in the outlook and called the unbooked upside 'not negligible.'
Management Guidance
Gerdau gives no consolidated revenue or EBITDA guidance. The published investment plan is BRL 4.7 billion for 2026, and management said on the Q2 2026 call the pace is 'slightly below' guide and 'maybe it would be BRL 4.5 billion,' with CapEx drifting toward 'close to BRL 4 billion in the coming years.' Maintenance CapEx is guided at about BRL 3 billion a year over the next five years, and management said there is 'room actually to reduce' it, with the difference going to competitiveness rather than debt reduction or shareholder returns. Miguel Burnier's start is guided for Q3 2026, with ramp complete by year-end or early 2027 and full benefit in 2027; its 2026 contribution was cut from a soft-guided BRL 400 million.
Trajectory
Revenue accelerated through the first half of FY2026, from $3,228 million in Q1 to $3,457 million in Q2. Gross margin widened to 15.8% in Q2 from 13.7% in Q1, and EBITDA margin reached 18.0% against 13.7% a year earlier. North America is carrying the improvement: segment adjusted EBITDA rose 18% in FY2025 and a further 15% q/q in Q2 2026, with shipments up 7% y/y. Brazil remains the drag — management sees no unit-price improvement there and points instead to mix, four extra business days in Q3 and a Q4 ore-cost step-down from Miguel Burnier.
The Model
The model projects FY+1 revenue of $13,627.5 million and EBITDA of $2,412 million, a 17.7% margin, then FY+2 revenue of $14,600.0 million and EBITDA of $2,767 million, an 18.95% margin. The near-term anchor is North American volume plus the two U.S. price increases management says are not yet in its own outlook. The FY+2 step-up leans on the three-project bundle — Miguel Burnier, Pindamonhangaba and Midlothian — which management says adds about BRL 1.4-1.5 billion of annual EBITDA at full operation.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $12.7B | $13.6B | $14.6B |
| YoY Growth | — | +7.0% | +7.1% |
| EBITDA | $1.7B | $2.4B | $2.8B |
| EBITDA Margin | 13.3% | 17.7% | 18.9% |
Projections are the median of 4 independent model runs. The model’s revenue sits 2.2% below analyst consensus.
Gerdau gives no consolidated revenue or EBITDA guidance. The published investment plan is BRL 4.7 billion for 2026, and management said on the Q2 2026 call the pace is 'slightly below' guide and 'maybe it would be BRL 4.5 billion,' with CapEx drifting toward 'close to BRL 4 billion in the coming years.' Maintenance CapEx is guided at about BRL 3 billion a year over the next five years, and management said there is 'room actually to reduce' it, with the difference going to competitiveness rather than debt reduction or shareholder returns. Miguel Burnier's start is guided for Q3 2026, with ramp complete by year-end or early 2027 and full benefit in 2027; its 2026 contribution was cut from a soft-guided BRL 400 million.
What Could Go Right — and Wrong
- The two unbooked U.S. price increases land across both the fast-repricing distribution channel and the slower industrial channels, lifting North American realised pricing.
- Miguel Burnier starts on schedule in Q3 2026 and delivers its roughly $30/tonne cash cost at Ouro Branco, producing the Q4 2026 cost reduction management pointed to.
- The HRC antidumping case completes by year-end and long, flat and wire-rod measures land in the second half, moving Brazil from mix-and-business-days arithmetic to price.
- The Brazil transformation plan, promised 'in a few months,' arrives with specific mills, capacity and a cost target, funded without new leverage.
- Data-center, power and CHIPS Act demand keeps the North American backlog strong and lets shipments keep growing on capacity that already exists.
- Miguel Burnier slips again, or ramps without the Q4 2026 Ouro Branco cost effect, pushing the 2027 earnings step-up out.
- Antidumping cases are delayed past year-end, narrowed, or fail, leaving Brazil in the same import-flooded condition and raising the odds of further restructuring charges.
- North American demand breaks — a visible slowdown in data-center, power or CHIPS-related construction — which would show up late because none of that revenue is disclosed separately.
- Scrap seasonality into year-end raises the largest input cost while North American freight stays elevated.
- Further Brazil impairments: the company has already written off all of its Brazil goodwill, and management calls the future Brazilian scenario 'much tougher' than today.
Looking Ahead
The next 12 months turn on four events management has named: the Brazil transformation plan, promised 'in a few months'; trade-defense decisions in Brazil, with the HRC case returning end-August and completing by year-end; the Miguel Burnier start in Q3 2026 and its ramp into 2027; and the USMCA review, now at a technical level with no final agreement. The only date-certain item is the Q3 2026 earnings call on October 27, 2026. Nothing external has confirmed any of it since the August 5, 2026 call — the source's watch-events feed has been empty since 2026-02-24 and its news digest records zero press releases and zero 8-Ks since 2026-08-04.
- End-August 2026HRC antidumping return — Case returns; completion expected by year-end 2026.
- Q3 2026Miguel Burnier start-up — First ore; the ~$30/t cash cost at Ouro Branco is the test.
- 2H 2026Brazil trade-defense decisions — Long and flat investigations 'updated in the second half.'
- 27 October 2026Q3 2026 earnings call — Tests the Q4 Ouro Branco cost effect and whether U.S. price hikes land.
- In a few monthsBrazil transformation plan — Management to present the plan; specifics are the test.
- 2027Miguel Burnier full benefit — About BRL 1.1 billion a year at full ramp, per management.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $12.1B | $12.7B | $13.2B | +5.4% |
| Gross Margin | 13.7% | 11.4% | 13.1% | 232bps |
| EBITDA | $1.8B | $1.7B | $2.0B | -3.7% |
| EBITDA Margin | 14.6% | 13.3% | 15.2% | 126bps |
| Net Income | $858M | $254M | $441M | -70.3% |
| Free Cash Flow | $968M | $221M | $658M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)13.1%
- EBITDA Margin (TTM)15.2%
- Net Margin (TTM)3.3%
- ROIC8.4%
- FCF Conversion33.0%
- SBC / Revenue0.0%
The Company
Gerdau is described in its own 20-F as the largest Brazilian producer of steel, a leading producer of long steel in the Americas, and one of the world's leading suppliers of special steel. It melts scrap and iron ore into crude steel and rolls it into long products — rebar, merchant bars, wire rod, structural shapes and beams, drawn products — plus specialty steels and, at one plant in Brazil, flat products. Around 70% of its steel comes from scrap, and it is the largest recycling company in Latin America. For the AI buildout, the relevant output is North American structural and long steel used in data-center construction, power generation, transmission towers and CHIPS Act semiconductor plants.
Gerdau runs a mostly electric-arc-furnace mini-mill network across three reporting segments — Brazil, North America and South America — with one large integrated blast-furnace mill at Ouro Branco in Minas Gerais. The 20-F counts 29 steel-producing facilities with installed capacity of roughly 15.7 million tonnes of crude steel and 15.0 million tonnes of rolled products a year, and lists several plants as temporarily idle. Earnings now sit in North America, which management said accounted for 75% of consolidated EBITDA in Q1 2026, while Brazil is run as a restructuring story.
Business Segments
Competitive Landscape
The source describes a steel market where Gerdau competes on service and logistics rather than on a proprietary product. Management argues its North American position is best protected at the heavy end: penetration of imports in beams is 'marginal, very small,' and large merchant bars are hard to import, while the lighter merchant and commercial profiles are 'the ones being imported.' In Brazil, imports hit a record in 2025, up 7.5% year on year, with Q1 2026 import penetration at 22.7%, and management lists that as the reason for its restructuring.
- Named in the 20-F as a competitor in Brazilian long steel and Brazilian flat steel, and among the companies with iron-ore mining operations.
- CSNNamed in the 20-F as a Brazilian long-steel and flat-steel competitor and an iron-ore miner.
- Listed in the 20-F among Gerdau's North American competitors.
- Listed in the 20-F among Gerdau's North American competitors.
- Listed in the 20-F among Gerdau's North American competitors.
Supply Chain
Gerdau sits at the first link of the chain: it buys scrap, iron ore, coking coal and energy, then melts and rolls steel for distributors and fabricators. No customer is named in the filing, and no neighbor mentioned it by name.
More on GGB: Earnings recap