Vertiv Holdings Co (VRT) | The Buildout — AI Infrastructure
The Verdict
Vertiv sells the physical equipment that keeps data centers running: power trains, thermal systems, prefabricated and converged infrastructure, and the services that install and maintain them. It is not a chip or software company — its exposure is the concrete build-out of data center capacity, where AI racks require enormous power density and thermal management. Management describes the business as "picks and shovels for the digital age" and says the industry is still in the early stage of the AI infrastructure build-out. That puts Vertiv in the layer that has to be delivered for compute to be switched on.
| Market Cap | — |
| Revenue (TTM) | $11.5B |
| Revenue Growth | +26.2% |
| EBITDA Margin (TTM) | 22.1% |
| Net Debt | $146M |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- FY2026 guidance was raised twice — to $14B net sales and a $6.70 adjusted EPS midpoint, up from a $6.20 EPS midpoint before the Q1 2026 call.
- Net leverage was negative 0.1x at the end of Q2 2026, a net cash position, improving from 0.2x at the end of Q1.
- Q2 2026 adjusted free cash flow was $925M, up 234% y/y, and cash conversion exceeded 150%.
- Adjusted operating margin was 22.6% in Q2 2026, up 410 bps y/y; the FY2026 guide is 23.8%, up about 340 bps.
- Capex is guided at the high end of a range of 4% of 2026 sales, with Johor/Malaysia online, five large Americas plant expansions, and EMEA chiller capacity increases.
What We’re Watching
- Q2 2026 net sales of $3.274B came in below the prior guide midpoint of $3.35B on multiphase project execution and supply-chain congestion; management declined to size the revenue pushed out. H2 2026 guidance assumes some congestion continues.
- Orders and backlog are no longer reported with quarterly earnings, cutting the data investors can use to verify the demand narrative.
- EMEA organic sales were still negative, at minus 2%, in Q2 2026; management expects a return to organic growth in H2 2026.
- 800V DC adoption timing is uncertain — management would not comment on a rumored 2029 customer pushout — and the solid-state transformer central to the data-hall-level architecture is "in project development phase."
The thesis reads as intact on fundamentals but newly dependent on execution. Two consecutive quarters of guidance raises, a swing to net cash, and expanding margins point to a strengthening business; the Q2 top-line miss and the removal of order and backlog disclosure cut the other way. The open question is whether the Q2 revenue shortfall was a one-quarter timing event, as management frames it, or the first sign of a slower learning curve on very large projects — and how much of the guided H2 ramp rests on it.
Earnings Beat
Q2 2026 net sales were $3.274B, up 24% y/y (organic +18%, acquisitions +5%, FX +1%), and gross margin was 37.7%. Adjusted operating profit rose 51% to $738M, and adjusted operating margin was 22.6%, up 410 bps y/y. Adjusted diluted EPS was $1.52, up 60%. The top line came in below the prior guide midpoint of $3.35B on what management called minor timing shifts from multiphase project execution and temporary supply-chain dynamics, while profit, margin, and EPS all beat.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.3B | $2.6B | $2.6B | +24.1% |
| Gross margin | 37.7% | 37.7% | 32.2% | +550bps |
| EBITDA | $712M | $548M | $526M | +35.2% |
| EPS | $1.27 | $0.99 | $0.83 | +52.4% |
| Adjusted free cash flow | $925M | $653M | $277M | +234% |
| Net leverage | negative 0.1x | 0.2x | n/a | — |
I am more confident in our trajectory today than I have ever been.— Giordano Albertazzi, CEO, 2026-07-29
Management tone: The tone shifted from pure momentum after a clean Q1 2026 beat-and-raise to execution and learning-curve language in Q2 2026. Management rejected the word "disruption" for the revenue timing issue and used "minor timing shifts," "complexity," "interdependencies," and "learning curve" instead. Albertazzi closed the Q2 call with strong confidence language, and Executive Chairman David Cote said the future is "so bright we have to wear shades." Management also acknowledged that H2 guidance embeds execution slack, saying "we are not assuming all stars align."
Management Guidance
Management guided FY2026 net sales to a $14B midpoint, up 37% y/y (organic +31%, acquisitions +5%, FX +1%); adjusted EPS to $6.70 ($6.65–$6.75, up 60%); adjusted operating profit to $3.325B (up about 59%); adjusted operating margin to 23.8% (up about 340 bps); and adjusted free cash flow to $2.5B (up 182%). CapEx is expected at the high end of a range of 4% of 2026 sales. Regional full-year organic guidance is Americas high 30s, APAC low 30s, and EMEA low single digits. For Q3 2026, the company guided net sales to a $3.75B midpoint (up 40% y/y; organic about +35%), adjusted EPS to $1.80, adjusted operating profit to $918M, and adjusted operating margin to 24.5%. Management said the second half assumes some supply-chain congestion continues, and attributed the ramp to operational acceleration on complex projects, capacity coming online, and strong backlog coverage.
Trajectory
Quarterly revenue has stepped up sharply: net sales went from $2,650M in Q1 2026 to $3,274M in Q2 2026, a 23.6% sequential increase, and trailing-twelve-month revenue is $11,479.6M. Organic growth ran +23% in Q1 2026 and +18% in Q2, while guidance implies a step up to roughly +35% organic in Q3 and +31% for the full year — so the story depends on a much stronger second half. Gross margin held at 37.7% in both Q1 and Q2 2026, and EBITDA margin was 21.7% in Q2 versus 19.9% a year earlier. Management ties the coming ramp to strong backlog coverage, capacity coming online, EMEA recovery, and favorable pricing, and expects positive price/cost in 2026 including tariffs and countermeasures.
The Model
The model projects FY+1 revenue of $14,100M with EBITDA of $3,384M, a 24.0% margin, and FY+2 revenue of $18,200M with EBITDA of $4,696M, a 25.8% margin. The near term rests on the guided H2 2026 ramp and on capacity coming online in Malaysia, the Americas, and EMEA. FY+2 embeds a further step in both revenue and margin as large-project execution matures and newer power and thermal architectures move from validation toward deployment.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $10.2B | $14.1B | $18.2B |
| YoY Growth | — | +37.8% | +29.1% |
| EBITDA | $2.2B | $3.4B | $4.7B |
| EBITDA Margin | 21.2% | 24.0% | 25.8% |
Projections are the median of 5 independent model runs. The model’s revenue sits 3.2% below analyst consensus.
Management guided FY2026 net sales to a $14B midpoint, up 37% y/y (organic +31%, acquisitions +5%, FX +1%); adjusted EPS to $6.70 ($6.65–$6.75, up 60%); adjusted operating profit to $3.325B (up about 59%); adjusted operating margin to 23.8% (up about 340 bps); and adjusted free cash flow to $2.5B (up 182%). CapEx is expected at the high end of a range of 4% of 2026 sales. Regional full-year organic guidance is Americas high 30s, APAC low 30s, and EMEA low single digits. For Q3 2026, the company guided net sales to a $3.75B midpoint (up 40% y/y; organic about +35%), adjusted EPS to $1.80, adjusted operating profit to $918M, and adjusted operating margin to 24.5%. Management said the second half assumes some supply-chain congestion continues, and attributed the ramp to operational acceleration on complex projects, capacity coming online, and strong backlog coverage.
What Could Go Right — and Wrong
- The guided H2 2026 revenue acceleration lands — Q3 organic of about +35% and full-year organic of +31% — confirming the Q2 timing shift was a one-quarter event.
- EMEA returns to organic sales growth in H2 2026, lifting the regional mix.
- 800V DC adoption broadens from customer validation into deployment, expanding Vertiv's content opportunity per megawatt.
- Capacity additions in Malaysia, the Americas, and EMEA convert into shipped revenue going into 2027.
- The UIG acquisition closes and adds behind-the-meter power architecture from grid interconnect to chip.
- Large-project execution and supply-chain complexity persists, pushing the guided H2 revenue acceleration into a later period.
- With orders and backlog no longer disclosed, the demand narrative is unverifiable, so a second revenue-timing miss would be hard to see coming.
- 800V DC adoption slips — a rumored 2029 customer pushout — or a 400V path takes more share, changing the content-per-megawatt mix.
- EMEA organic sales stay negative and the regional recovery stalls.
- Tariffs and broad component inflation pressure margins, while the roughly $1.45B cash UIG outlay sits inside the zone that can trigger a leverage-covenant step-up to 4.50:1.00.
Looking Ahead
The next twelve months turn on whether Vertiv converts a strong backlog and new capacity into the steep second half it has guided. Q3 2026 results will show whether the Q2 timing delays resolved. EMEA organic growth, the move of 800V DC from customer validation in 2026 toward deployment in 2027, and the close and integration of the UIG acquisition are the other signposts. Management still expects "another year of robust orders growth," though it will not report order or backlog numbers to confirm it.
- Q3 2026Q3 results vs guide — Tests whether Q2 timing delays resolved and the H2 ramp holds.
- H2 2026EMEA organic recovery — Watch EMEA organic turning positive after minus 2% in Q2.
- 2026800V rack/pod validation — Customer validation of 800V DC at rack and pod level.
- 2027800V rack/pod deployment — Deployment planned after 2026 customer validation.
- 12- and 24-month periods post-closeUIG earnout targets — EBITDA targets measured over 12 and 24 months after close.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $8.0B | $10.2B | $11.5B | +27.7% |
| Gross Margin | 34.2% | 34.5% | 37.5% | +35bps |
| EBITDA | $1.7B | $2.2B | $2.5B | +31.2% |
| EBITDA Margin | 20.6% | 21.2% | 22.1% | +57bps |
| Net Income | $496M | $1.3B | $1.7B | +168.8% |
| Free Cash Flow | $1.1B | $1.9B | $2.9B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)37.5%
- EBITDA Margin (TTM)22.1%
- Net Margin (TTM)15.1%
- ROIC35.4%
- FCF Conversion115.1%
- SBC / Revenue0.5%
The Company
Vertiv makes critical digital infrastructure for data centers, communication networks, and commercial and industrial sites. The product set spans AC and DC power management, switchgear, busbar, racks, single-phase UPS, rack power distribution, air-cooled and liquid-cooled thermal management, integrated modular solutions, energy storage, and hardware and software for managing IT equipment. It also sells prefabricated and converged systems — SmartRun, OneCore, and the Vertiv Smart IT solution — plus a services business covering preventative maintenance, project management, acceptance testing, fluid management, training, and spare parts. AI data centers require enormous power density and thermal management, and Vertiv sells both the power train and the thermal chain.
Vertiv reports through three geographic segments — Americas, Asia Pacific, and EMEA — and operates roughly 300 locations in more than 40 countries, with significant manufacturing and operations in each region. It is vertically integrated in infrastructure solutions, putting its own products into prefabricated systems, and it has been adding capability through deals: PurgeRite for fluid management, ThermoKey for heat rejection, Strategic Thermal Labs for server-side liquid cooling, and the announced UIG acquisition for behind-the-meter power.
Business Segments
Competitive Landscape
The 10-K splits Vertiv's competition into two groups: niche players such as Delta Electronics, Stulz, Johnson Controls, and Socomec, and large-scale global competitors such as Schneider Electric, Eaton, Legrand, and Huawei.
- Schneider Electric S.E.Named in the 10-K as a large-scale global competitor; the criticality assessment cites it as a capacity-constrained peer if Vertiv could not deliver.
- Named in the 10-K as a large-scale global competitor; also cited among capacity-constrained peers in the criticality assessment.
- Delta Electronics, Inc.Named in the 10-K as a niche competitor; not otherwise discussed.
- Named in the 10-K as a niche competitor.
- Huawei Investment & Holding Co., Ltd.Named in the 10-K as a large-scale global competitor; not otherwise discussed.
Supply Chain
Vertiv sits at the physical infrastructure layer: it buys steel, copper, aluminum, electronic components, and some single-source parts, then assembles power, thermal, and converged systems for hyperscalers, colocation providers, neoclouds, and enterprises. Caterpillar is a named partner on behind-the-meter power.
More on VRT: Earnings recap