Vertiv’s third-quarter organic growth of 55%: delivery improves, full-year guidance raised

Why did the third quarter restore confidence in delivery?

Vertiv’s third-quarter revenue was 4.313 billion dollars, up approximately 61% year over year, including organic growth of approximately 55%; revenue was approximately 563 million dollars above the midpoint of company guidance. Adjusted earnings per share were 2.21 dollars, approximately 0.41 dollars above guidance.
After second-quarter results fell short of expectations, Bernstein focused on whether the company could complete its delivery ramp-up in the second half of the year. Third-quarter organic growth in the Americas accelerated to 66%, while supply-chain improvements, capacity expansion in Europe and India, and the start of production at the Malaysian plant strengthened the firm’s confidence in execution.
Third-quarter revenue also included approximately 100 million to 150 million dollars in revenue delayed from the second quarter. Management said production ramp-ups for new products remain underway; the company is improving supply-chain resilience by increasing inventory and capacity and securing supplier capacity agreements.

Third-quarter organic orders grew more than 100% year over year, with growth across hyperscale cloud customers, colocation data centers and enterprise customers, as well as across a broad geographic area. Management expects orders to continue growing strongly over the coming year.
The lead time for orders in the backlog remained roughly 12 to 18 months, with no significant change from before; Bernstein therefore believes order growth was not simply the result of customers placing orders earlier for more distant demand. The company requires firm purchase orders, rather than general sales opportunities, for inclusion in its backlog.
Management expects organic sales to continue growing significantly faster than the market in 2027, citing a substantial backlog, sales opportunities and market-share gains; the company has not yet provided formal quantitative guidance for 2027.

The third-quarter adjusted operating margin was 25.2%, approximately 0.7 percentage points above company guidance and approximately 2.9 percentage points higher than a year earlier, even as the company continued investing in capacity expansion.
The company raised the midpoint of its 2026 revenue guidance by 650 million dollars to 14.65 billion dollars and increased the midpoint of adjusted earnings per share guidance from 6.70 dollars to 7.15 dollars; the midpoint of full-year adjusted operating margin guidance rose approximately 0.2 percentage points to 24.0%.
The midpoint of fourth-quarter revenue guidance was 4.413 billion dollars, implying organic growth of approximately 50%, and the midpoint of adjusted earnings per share guidance was 2.25 dollars. Capacity expansion also requires funding: management said capital expenditure in 2026 would be approximately 4% of sales, and the product mix results in a slightly lower incremental margin.

As rack density rises, management believes liquid cooling’s share of total heat dissipation will increase and says Vertiv is gaining a larger share; air cooling will remain, but its share will shrink.
Vertiv is involved in Nvidia’s DSX POD and broader DSX AI Factory designs. Management believes the gradual adoption of configurable reference designs for modular infrastructure will help the company gain share; Bernstein believes modular solutions still account for a small share of the overall backlog and have room to grow.

Bernstein raised its adjusted earnings per share forecasts for 2026 and 2027 from 6.60 dollars and 9.06 dollars to 7.15 dollars and 9.63 dollars, respectively. The firm has heard that some investors’ expectations for 2027 are close to or above 11 dollars, while some are around 10.50 dollars, above its own forecast.
Bernstein maintained its outperform rating and raised its price target from 368 dollars to 376 dollars: it lowered the enterprise value to forward 12-month EBITDA multiple used in its valuation from 27 times to 24 times, while rolling the EBITDA valuation period forward by one quarter.