How significant was the third-quarter beat?

  • Vertiv reported third-quarter revenue of 4.313 billion dollars, above market expectations of 3.749 billion dollars and its previous guidance range of 3.65 billion to 3.85 billion dollars. Revenue rose 32% quarter over quarter, and organic revenue grew 55% year over year.
  • Adjusted operating profit was 1.087 billion dollars, compared with market expectations of 922 million dollars. The adjusted operating margin was 25.2%, 0.6 percentage points above market expectations. Adjusted earnings per share were 2.21 dollars, compared with market expectations of 1.82 dollars.
  • Not all growth came from new deliveries in the quarter: the company said approximately 100 million to 150 million dollars of revenue delayed in the second quarter was recovered in the third quarter. Third-quarter adjusted free cash flow was 652 million dollars.

Why did growth extend beyond the Americas to other regions?

  • In the third quarter, organic revenue grew approximately 66% year over year in the Americas, approximately 48% in Asia Pacific, and 19% in Europe, the Middle East and Africa. In the previous quarter, the three regions had grown 21%, grown 26% and declined 2%, respectively. The company’s overall organic growth rate also rose from 18% in the previous quarter to 55%.
  • Organic orders grew more than 100% year over year in the third quarter. The company said its pipeline of opportunities had expanded and growth momentum was continuing into 2027. It is also addressing the supply-chain issues that affected revenue in the previous quarter: execution improved in the third quarter, and new capacity is being brought online.
  • Goldman Sachs believes investment in data-center infrastructure and Vertiv’s portfolio spanning power, cooling, products and services support its growth.

What limits remain in the margin outlook after the guidance increase?

  • The company raised its 2026 revenue guidance from 13.8 billion to 14.2 billion dollars to 14.45 billion to 14.85 billion dollars, and its organic growth outlook from 30%–32% to 37%–39%. The new guidance midpoint of 14.65 billion dollars is above market expectations of 14.008 billion dollars.
  • Full-year adjusted operating profit guidance rose to 3.475 billion to 3.555 billion dollars, and adjusted earnings per share guidance rose to 7.10 to 7.20 dollars. Adjusted free cash flow guidance also increased from 2.4 billion to 2.6 billion dollars to 2.6 billion to 2.8 billion dollars.
  • The midpoint of fourth-quarter revenue guidance, at 4.413 billion dollars, is above market expectations of 4.307 billion dollars, but adjusted operating margin guidance remains unchanged at 25.3%–26.3%. Its midpoint of 25.8% is below market expectations of 26.0%. The company expects pricing relative to costs to remain favorable in 2026, with tariff effects and mitigating actions included.

How did Goldman Sachs revise its earnings and valuation views?

  • Based on higher revenue and margins, Goldman Sachs raised its earnings-per-share forecasts for 2026, 2027 and 2028 from 6.75, 9.25 and 11.55 dollars to 7.17, 9.85 and 12.50 dollars, respectively.
  • Goldman Sachs maintained its buy rating and raised its 12-month price target from 301 dollars to 313 dollars. The enterprise value-to-EBITDA multiple used for the target fell from 22 times to 20 times, reflecting lower peer valuation multiples.
  • Goldman Sachs noted that spending on traditional enterprise-owned data centers, revenue growth among cloud and hyperscale customers, and market share all affect revenue growth. Competition, business mix, execution and tariffs may affect its expectations for margin expansion.