Vertiv outlines 27% organic growth and $10.2B sales target for 2025 as AI demand accelerates
Oct. 22, 2025 6:04 PM ET
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Earnings Call Insights: Vertiv Holdings (VRT) Q3 2025
Management View- Executive Chairman David Cote stated, "We exceeded guidance across all metrics in a very convincing way. I continue to say I'm more excited now than ever, and you're seeing why. We're in the early stages of the digital age, and Vertiv's position today reflects the years of focus on customer relationships, disciplined investment, operational excellence and R&D expansion." He emphasized Vertiv's technology leadership and strategy, highlighting its advantages in the expanding AI and data center market.
- CEO Giordano Albertazzi reported, "Our adjusted diluted EPS of $1.24 was up about 63% year-over-year, driven by higher adjusted operating profit. Q3 organic sales grew 28% with a strong Americas up 43% and APAC up 21%. EMEA declined 4%, relatively in line with our expectations." He noted a 1.4x book-to-bill ratio, strong order momentum, and a $9.5 billion backlog, up 30% year-over-year.
- Albertazzi explained that Vertiv is "implementing regional restructuring programs" in EMEA to position for future growth, and is "accelerating manufacturing and service capacity investments across all regions and particularly in the Americas, while maintaining disciplined fixed cost management."
- CFO David Fallon stated, "Organic net sales were up 28% with continued momentum in the Americas, up 43%, while APAC was up 21% as we continue to drive top line expansion across that region. EMEA was down 4%. Our adjusted operating profit of $596 million was up 43% from last year and $86 million higher than guidance. Adjusted operating margin of 22.3% exceeded prior year by more than 200 basis points."
- Albertazzi announced a CFO transition, thanking David Fallon for his contributions and welcoming Craig Chamberlin as the incoming CFO.
Outlook- Vertiv raised full year 2025 guidance to adjusted diluted EPS of $4.10, net sales of $10.2 billion, adjusted operating profit of $2.06 billion, and adjusted free cash flow of $1.5 billion. Albertazzi stated, "Given our momentum heading into Q4, we are raising full year guidance for adjusted EPS, net sales, adjusted operating profit and adjusted free cash flow."
- For Q4, Fallon projected, "We expect adjusted diluted EPS of $1.26, up approximately 27% from prior year... net sales of $2.85 billion with organic growth of approximately 20%." Margin expansion is expected, despite tariff headwinds and increased growth investments.
- For 2026, Albertazzi said, "Based on our substantial backlog and clear visibility of pipeline, we anticipate continued significant organic sales growth in 2026." R&D spending is expected to grow 20% plus in 2026.
Financial Results- Adjusted diluted EPS for Q3 reached $1.24, up 63% year-over-year. Adjusted operating profit was $596 million, up 43% from last year and $86 million above guidance. Adjusted free cash flow was $462 million, up 38% year-over-year, with a 95% cash flow conversion rate.
- Organic net sales grew 28%, with Americas up 43%, APAC up 21%, and EMEA down 4%. Backlog increased to $9.5 billion, a 30% year-over-year rise. Net leverage was 0.5x, expected to decrease to 0.2x by year-end.
- Fallon noted, "Our year-over-year incremental margin in the third quarter was approximately 30%, a good indication that we continue the path towards full year adjusted operating margin target of 25% in 2029."
Q&A- Amit Daryanani, Evercore: Asked about drivers for the 60% order growth and timing for large customer orders to translate into Vertiv’s revenue. Albertazzi responded that the drivers are "a combination of things, a very good market, certainly the technology evolution in the market that goes in our direction," and explained that order and backlog timing for customers like Oracle may differ from Vertiv’s order intake.
- Scott Davis, Melius Research: Asked about the margin structure of services vs. equipment and growth rates. Albertazzi replied that services are "certainly accretive...generating a lot of recurring revenue," but noted that service growth typically lags product growth during hypergrowth periods.
- C. Stephen Tusa, JPMorgan: Queried about margin outlook and incremental margin targets post-tariff. Fallon stated, "Our path to the 25% long-term margin target in 2029 stays intact" and expects incremental margins in the 30% to 35% range.
- Jeffrey Sprague, Vertical Research: Sought clarification on EMEA recovery and restructuring. Albertazzi said, "I truly believe that they will come back because the market is in a bad need for capacity AI capacity... Pipelines are encouraging in terms of the total size of the pipeline."
- Andrew Kaplowitz, Citigroup: Asked about capacity investments and future CapEx. Albertazzi declined to provide explicit 2026 CapEx, but confirmed ongoing expansion, especially in North America, typically through expanding existing sites.
Sentiment Analysis- Analysts pressed for details on order timing, service margin structure, and EMEA recovery, reflecting a slightly positive but cautious outlook. Questions indicated strong interest in AI-driven growth and concerns about regional challenges and tariff impacts.
- Management maintained a confident tone in both prepared remarks and Q&A, consistently emphasizing "competitive advantage," "technology leadership," and "clear action plan" on tariffs. Albertazzi and Fallon used phrases like "we are very well positioned," "we are accelerating investments," and "we expect to materially offset current tariffs impacts."
- Compared to last quarter, management’s tone was more assertive about exceeding guidance and growth trajectory, while analysts maintained a consistent level of scrutiny regarding operational execution and regional performance.
Quarter-over-Quarter Comparison- Guidance was raised further, with EPS, net sales, operating profit, and free cash flow projections all moving higher. The prior quarter projected adjusted EPS of $3.80 and net sales of $10 billion, now increased to $4.10 and $10.2 billion, respectively.
- Order momentum accelerated, with Q3 orders up 60% year-over-year versus Q2's 15% increase. Backlog grew from $8.5 billion to $9.5 billion.
- Management highlighted more aggressive investments in capacity and R&D for 2026, compared to warnings of tariff-related costs and execution challenges in Q2.
- Analysts continued to focus on margin trajectory, order timing, and EMEA dynamics, reflecting ongoing concerns about execution risk and regional headwinds.
Risks and Concerns- Management cited EMEA sales decline due to "power availability and regulatory challenges" and noted that acceleration in the region "may not come until second half 2026."
- Tariffs remain a dynamic risk, but Albertazzi stated Vertiv expects to "materially offset current tariffs impacts as we exit Q1 2026."
- Fallon mentioned that Q4 margins were taken down versus prior guidance due to "incremental tariffs" and "accelerated fixed cost investment into Q4."
- Regional restructuring is underway to address market challenges and ensure readiness for anticipated growth.
Final Takeaway
Vertiv’s third quarter demonstrated robust momentum in AI-driven data center demand, with the company raising full year guidance for EPS, sales, and free cash flow. Management underscored its technology leadership, expanding backlog, and aggressive investment in capacity and R&D, while addressing ongoing tariff and EMEA challenges with clear mitigation strategies. The announced CFO transition signals a continued focus on execution and future growth as Vertiv eyes further expansion in 2026 and beyond.
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