Evercore ISI: Vertiv’s third-quarter results beat expectations, with order growth supporting the 2027 outlook

What drove the third-quarter beat?

Third-quarter 2026 revenue was 4.31 billion dollars and adjusted earnings per share were 2.21 dollars, both above market expectations of 3.75 billion dollars and 1.82 dollars, respectively. Revenue rose 61.2% year over year, including organic growth of 55%, while acquisitions contributed approximately 6 percentage points.
Capacity expansion, higher capacity utilization and improved backlog execution drove revenue growth; approximately 100 million to 150 million dollars of that revenue had been deferred from the second quarter because of execution on multistage projects and supply chain issues.
Revenue rose 74.5% year over year in the Americas and 49.9% in Asia-Pacific; Europe, the Middle East and Africa grew 22.8%, supported by the conversion of project opportunities.

The third-quarter adjusted operating margin was 25.2%, up 294 basis points year over year. Operating leverage from higher revenue and improved manufacturing productivity offset some product-mix pressure.
Adjusted free cash flow was 652 million dollars, up 50% year over year; higher operating profit provided support, partially offset by increases in working capital and capital spending. The cash contribution from deferred revenue fell from 1.17 billion dollars in the second quarter to 490 million dollars in the third quarter.
The company raised the midpoint of its full-year 2026 adjusted free cash flow guidance from 2.5 billion dollars to 2.7 billion dollars. Capital spending is still expected to be approximately 4% of sales.

The midpoints of the company’s fourth-quarter revenue and adjusted earnings per share guidance were 4.413 billion dollars and 2.25 dollars, respectively, above market expectations of 4.31 billion dollars and 2.21 dollars; the revenue guidance implies approximately 50% year-over-year organic growth.
The midpoints of full-year revenue and adjusted earnings per share guidance were raised to 14.65 billion dollars and 7.15 dollars, respectively, from 14 billion dollars and 6.70 dollars; the full-year organic sales growth forecast rose from approximately 31% to approximately 38%.
The midpoint of fourth-quarter adjusted operating margin guidance is approximately 25.8%. Organic growth and operating leverage provide support, but product-mix pressure and investment in capacity, engineering and research and development will partially offset the improvement.

Management said third-quarter organic orders rose more than 100% year over year, with balanced performance across customer segments including colocation providers, hyperscalers and emerging cloud providers. Evercore ISI believes orders and operating performance could drive 2027 growth above the previous framework of 20% to 22%.
The company has not yet issued formal 2027 guidance, but management expects the demand environment to remain strong and the company’s organic sales growth to outpace the market as it gains share; power constraints, local opposition to projects and labor supply continue to affect project progress.
Management expects margins to expand in 2027 despite inflation and investment in capacity and research and development, targeting an incremental margin of 30% to 35% on additional revenue. Evercore ISI maintained its Outperform rating and 325 dollar price target.
Evercore ISI believes earnings per share could exceed 10 dollars in 2027; the bank’s model forecast in its report table is 9.46 dollars for 2027.