How strong is gas turbine demand, and how far out are orders booked?

  • GE Vernova’s Power segment orders in the third quarter of 2026 totaled 21.8 billion dollars, up 178% year over year on an organic basis. These included orders for 112 gas turbines, representing 16.6 gigawatts of generating capacity.
  • At the end of the quarter, gas turbine backlog rose to 64 gigawatts from 53 gigawatts at the end of the second quarter, while capacity slot reservation agreements fell to 58 gigawatts from 63 gigawatts. Their combined total rose to 122 gigawatts from 116 gigawatts. The company raised its expectation for combined capacity at the end of 2026 to at least 130 gigawatts from at least 125 gigawatts.
  • The company sold multiple capacity slots in the third quarter for delivery in 2032. About eighty percent of its customers are traditional power customers and twenty percent are associated with data center applications. The company expects contracted capacity and its gas turbine equipment backlog to continue growing in 2027.

How do higher prices translate into profit?

  • GE Vernova’s third-quarter gas power equipment order prices rose by more than 20% compared with the fourth quarter of 2025. Its Power segment EBITDA margin for the quarter was 21.4%, up 8.3 percentage points year over year.
  • The third quarter is typically the seasonally weakest quarter for service revenue, but equipment with more favorable pricing began shipping at scale. Price increases and volume growth exceeded the incremental costs from capacity investments, research and development, and inflation. The company reached a shipment rate of 5 gigawatts per quarter and said it had made progress in expanding capacity.
  • The company raised its full-year 2026 organic revenue growth guidance from 18%–20% to 19%–21%, and its EBITDA margin guidance from 17%–19% to 19%–21%. It also considers the second half of 2026 a reasonable baseline for the 2027 outlook.

How does each of the two Japanese companies benefit?

  • Mitsubishi Heavy Industries competes with GE Vernova in large gas turbine combined-cycle power generation systems, and capacity slots for its new gas turbine orders are also booked into the early 2030s. Goldman Sachs believes GE Vernova’s results confirm a favorable pricing environment amid persistently tight supply and demand, helping Mitsubishi Heavy Industries improve profitability.
  • Goldman Sachs expects Mitsubishi Heavy Industries’ energy systems business margin for the fiscal year ending in March 2027 to be 16.7%, above the company’s guidance of 15.5%. A concentration of low-margin projects or substantial one-off costs could weigh on the energy business’s profitability.
  • Japan Steel Works supplies large specialty steel components for large gas turbines and nuclear power applications. Goldman Sachs believes growing global gas turbine demand and faster production directly benefit the company. Its memorandum of understanding with GE Vernova Hitachi Nuclear Energy on the BWRX-300 project could also expand future nuclear power order opportunities.
  • Japan Steel Works’ constraints include production delays in its materials and engineering business and higher-than-expected fixed costs from large-scale capacity expansion. Goldman Sachs maintains buy ratings on both companies, with 12-month price targets of 6,200 yen for Mitsubishi Heavy Industries and 11,500 yen for Japan Steel Works.