How broad-based is data center order growth?

  • Generac’s data center backlog rose from 1.6 billion dollars at the end of the second quarter to 4.5 billion dollars at the end of the third quarter, including an 2.4 billion-dollar Amazon deal announced during the quarter.
  • Excluding Amazon, JPMorgan estimates that backlog from other customers increased by approximately 600 million dollars, above the approximately 250 million to 300 million dollars added per quarter over the previous several quarters. These customers may primarily be operators providing data center colocation services.
  • JPMorgan believes the faster growth in orders outside the large deal indicates that demand remains strong and that customer contracting activity has not slowed because of the large-scale power executive order issued in August.

Revenue missed expectations, so why did profitability remain resilient?

  • Third-quarter revenue was approximately 2% below the market consensus, with commercial and industrial revenue approximately 4% below and residential revenue approximately 1% below.
  • Gross margin was 39.9%, approximately 1.5 percentage points above the market consensus: a favorable price-cost relationship improved gross profit, but changes in product mix offset some of the gains.
  • Adjusted EBITDA was 256 million dollars, roughly in line with the market consensus of 254 million dollars; adjusted earnings per share were 2.54 dollars, approximately 5% above consensus.

What changed in full-year guidance and institutional focus?

  • The company maintained its full-year 2026 revenue growth guidance in the mid-to-high teens; the market consensus is approximately 17%.
  • Adjusted EBITDA margin guidance narrowed from 20.0%–21.0% to 20.5%–21.0%: the lower bound rose while the upper bound remained unchanged, concentrating the guidance range toward the higher end of the previous range.
  • JPMorgan maintained its Overweight rating on Generac and is watching the company’s data center capacity expansion, progress toward its commercial and industrial business targets, and management’s views on the large-scale power executive order and residential business trends.