Vertiv Holdings Co Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Vertiv delivered strong results in the fourth quarter and full year 2025, with organic fourth quarter orders up 152% year over year and 117% sequentially. Backlog stood at $15 billion, more than double the prior year.
• Key product solutions highlighted include OneCore, an end-to-end full data center solution, and Vertiv SmartRun, a converged and prefabricated white space infrastructure solution. These solutions simplify and accelerate the customer journey.
• Service portfolio orders grew north of 25% year on year. The PerchRight acquisition strengthened Vertiv's fluid management capabilities, which is critical in chilled water and liquid-cooled AI data centers.
• The company emphasized strategic investments, engineering innovation, and deep customer partnerships as drivers of their strong performance and momentum heading into 2026.

Segment Performance

• The Americas: Sales were up 50% with 46% organic growth. Adjusted operating profit was $568 million, up 77%, and margin rate expanded by 450 basis points. This growth was driven by broad-based strength across products and customer segments, strong end-market demand, and Vertiv's ability to deliver.
• APAC: Sales were down 10%, 9% organically primarily due to macroeconomic conditions in China. Adjusted operating profit was $49 million, resulting in an adjusted operating margin of 9.9%, which was down 270 basis points versus the prior year, pressured primarily by volume deleverage.
• EMEA: Sales were down 8%, 14% organically due to continued softness in the market. Fourth-quarter adjusted operating profit was $111 million with an adjusted operating margin of 22.1%, a decline from the prior year's 26.6% given the 14% organic sales decline. The margin pressure reflects lower operating leverage, and EMEA was expected to return to sales growth in 2026.

Guidance

• For 2026, Vertiv projects adjusted diluted EPS of $6.02 on organic sales growth of 28% with an adjusted operating margin of 22.5%.
• 2026 Q1 projected adjusted diluted EPS is $0.98, with net sales expected to be $2.6 billion or 22% organic growth at the midpoint. Adjusted operating profit is expected to be $495 million, up 47% at the midpoint, with a margin rate of 19%.
• The company expects continued growth in The Americas, with APAC also showing acceleration, while EMEA is expected to reaccelerate in the market in 2026.

Risks

• No specific risks detailed in the transcript beyond the general cautionary language regarding forward-looking statements being subject to material risks and uncertainties that could cause actual results to differ from forward-looking statements, as referenced in the earnings release and SEC filings.

Question and Answer

Q: On the dollar value of the orders and the $3 to $3.5 per megawatt framework, is there creep in content to the upside bolstering orders?

A: Giordano Albertazzi said currently, the $3 to $3.5 per megawatt framework can be used, and as technology evolves, the complexity is good from a TAM per megawatt standpoint, but it's premature to say there's creep in content to the upside yet.

Q: How should we think about the CapEx number and its relation to sales growth?

A: Giordano Albertazzi mentioned CapEx is stepping up to 3-4% of sales in 2026 from historical 2-3%, and the correlation between growth and CapEx is an important element, but CapEx expansion doesn't happen in big steps.

Q: Were there any particularly large projects or unusual factors in the quarter regarding orders?

A: Giordano Albertazzi said there were quite a few large orders, but they were a reflection of normal market demand and customers' trust in Vertiv's ability to deliver at scale, not anything dramatically unusual.

Q: Key operational steps to convert backlog into revenues and EPS?

A: Giordano Albertazzi stated they are accelerating capacity expansion through both CapEx and increasing productivity, with factories being expanded and working actively with the supply chain to execute on the backlog.

Q: On Europe and Asia, changes on the ground and China's situation?

A: For EMEA, there's a palpable acceleration of investment with pipelines expanding and sales cycles accelerating. For Asia, market demand isn't very strong currently, not attributable to Western players being excluded but to general market conditions.

Q: Visibility into future data center workflow/architecture from customer relationships?

A: Giordano Albertazzi said they have strong relationships with customers and ecosystem players, working with them to look out 2-3 years, architecting together to understand the best technology for customers' strategies.

Q: Backlog and service headcount increase?

A: Giordano Albertazzi said service headcount is approaching 5,000, with field capacity following delivery capacity, and they're evolving technology and digitizing services. Craig Chamberlain added excitement about the services portfolio as a superpower to build out.

Q: Backlog increase in 2026 and CapEx going forward?

A: Giordano Albertazzi said they believe they will continue to build backlog directionally. Craig Chamberlain mentioned CapEx is expected to be around 2-3% on a normalized basis, with 2026 being a bit higher than normal.

Q: Orders, cash flow, and deferred revenue?

A: Craig Chamberlain said the slide shows working capital outcomes are positive but less so year over year, and the mix of orders impacts deferred revenue, but it's not marginally different from historically.

Q: Cooling product mix and business opportunity evolution?

A: Giordano Albertazzi said technology evolution is favorable for content, with a hybrid cooling and thermal chain infrastructure. Trim coolers optimized for high temperatures are important, and CDUs are likely to remain a long-term element of the thermal chain.

Q: Core incrementals and operating leverage?

A: Craig Chamberlain said there's a higher level of investment, guiding at the lower end of the 30% to 35% range, and they'll reiterate long-term guidance at the investor day. Giordano Albertazzi added the long-term trajectory is unchanged.

Q: Utilization of existing production capacity and product lead times?

A: Giordano Albertazzi said demand is strong, utilization of capacity is satisfactory with a 20-25% wiggle room, and lead times have expanded a bit in some product lines but are generally good.

Q: Pipeline and what makes an order a backlog?

A: Giordano Albertazzi said the pipeline hasn't depleted and continues to grow. An order becomes backlog when it's a binding purchase order, often with advanced payment.