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    VRT
    Earnings call· Sep 2025(Q3 FY25)

    Vertiv Holdings Co VRT

    Oct 22, 2025 Source

    Executive summary

    Vertiv Q3 FY25 — Strong Performance Exceeds Guidance with Robust Orders and Backlog

    Vertiv delivered a very strong Q3 FY25, significantly exceeding guidance across all key metrics, driven by robust organic sales growth and exceptional order momentum, particularly in the Americas. The company is strategically investing in capacity and R&D to capitalize on accelerating AI and data center demand, while actively managing tariff headwinds and regional challenges in EMEA.

    Highlights

    5

    • Adjusted diluted EPS of $1.24 was up 63% year-over-year, driven by higher adjusted operating profit.

    • Organic sales grew 28%, with Americas up 43% and APAC up 21%.

    • The book-to-bill ratio was 1.4x, with Q3 orders up 60% year-over-year and 20% sequentially.

    • Adjusted operating profit reached $596 million (22.3% margin), exceeding guidance by $86 million.

    • Adjusted free cash flow of $462 million was up 38% year-over-year, translating into approximately 95% free cash flow conversion.

    Concerns

    3

    • EMEA sales declined 4% due to power availability and regulatory challenges, with reacceleration not expected until H2 2026.

    • Tariff impacts continue to be a headwind, though expected to be materially offset by the exit of Q1 2026.

    • Q4 adjusted operating margin of 22.4% is only 10 basis points higher than Q3 despite higher sales, due to new tariffs and accelerated growth investments.

    Guidance & targets

    19
    CategoryTargetConfidence
    Full-year adjusted diluted EPS
    $4.10
    high materiality
    High
    Full-year net sales
    $10.2 billion
    high materiality
    High
    Full-year organic sales growth
    27%
    high materiality
    High
    Full-year adjusted operating profit
    $2.06 billion
    high materiality
    High
    Full-year adjusted operating margin
    20.2%
    high materiality
    High
    Full-year adjusted free cash flow
    $1.5 billion
    high materiality
    High
    Full-year free cash flow conversion
    95%
    high materiality
    High
    Q4 adjusted diluted EPS
    $1.26
    medium materiality
    High
    Q4 net sales
    $2.85 billion
    medium materiality
    High
    Q4 organic sales growth
    20%
    medium materiality
    High
    Q4 adjusted operating profit
    $639 million
    medium materiality
    High
    Q4 adjusted operating margin
    22.4%
    medium materiality
    High
    EMEA sales reacceleration
    rebound in the second half of 2026
    medium materiality
    Medium
    Tariff impact offset
    materially offset current tariffs impacts
    high materiality
    High
    Long-term adjusted operating margin target
    25%
    high materiality
    High
    Long-term incremental margin
    30% to 35%
    medium materiality
    High
    R&D spending growth
    20% plus
    medium materiality
    High
    800-volt DC portfolio release
    release in the second half of 2026
    high materiality
    High
    Net leverage
    0.2x
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Americas
    Driven by accelerated AI demand across product lines and customer segments, despite tariff headwinds, due to operating leverage, productivity, and positive price/cost.
    		—43%—expanded 400 basis points
    APAC
    Operating leverage was critical for margin expansion as AI infrastructure continues to drive current and future expected growth.
    		—21%——
    EMEA
    Due to continued industry challenges, though sales were higher than expectations. Margin was at a low point, driven by deleverage on lower sales and higher fixed costs from regional capacity investments. Expects reacceleration in H2 2026.
    		—-4%—significantly below prior year

    Operational metrics

    12
    Adjusted diluted EPS
    $1.24up 63% YoY
    Q3 FY25

    Driven by higher adjusted operating profit.

    Adjusted operating profit
    $596 millionup 43% YoY
    Q3 FY25

    Exceeded guidance by $86 million. Driven by operational leverage on higher sales, positive price/cost, and productivity, partially offset by tariffs and supply chain inefficiencies.

    Adjusted operating profit vs guidance
    $86 millionhigher than guidance
    Q3 FY25

    Adjusted operating profit exceeded prior guidance.

    Adjusted operating margin vs guidance
    230 basis pointshigher than guidance
    Q3 FY25

    Aided by operational leverage on higher sales and strong operational execution.

    Free cash flow conversion
    95%
    Q3 FY25

    Consistent with long-term expectations.

    Net leverage
    0.5x
    Q3 FY25 end

    Provides significant flexibility with future capital deployment.

    Year-over-year incremental margin
    30%
    Q3 FY25

    Good indication of path towards full-year adjusted operating margin target of 25% in 2029.

    EMEA restructuring program cost
    $30 million
    Q3 FY25

    Global program primarily in EMEA, also impacting other regions.

    EMEA restructuring annualized benefit
    $20 million
    Annual

    Expected benefit from the restructuring program.

    R&D spending growth
    20% plus
    2026

    With flexibility to accelerate further, to strengthen industry leadership and stay multiple GPU generations ahead.

    TAM per megawatt
    $3M-$3.5M
    Current

    Narrowing on the upper end of the spectrum, driven by technology.

    Field engineers
    4,400-4,500
    Current

    Expected to continue to expand to support service capacity.

    Industry KPIs

    6
    MetricValueDetails
    Book to bill ratio1.4x
    Orders bookings growth60%%
    M a acquisition contribution—
    Backlog by segment end market$9.5 billionUSD
    Data center exposure pipelinetracking at the higher end
    Incremental flow through margin30%%

    Orderbook & backlog

    3
    Total backlog$9.5 billionQ3 FY25 end

    up 30% YoY, 12% sequentially

    Provides strong visibility into 2026. Phasing remains consistent with historical patterns, indicating healthy market dynamics rather than elongation.

    Trailing 12-month organic orders growth21%Q3 FY25 end

    Demonstrates strong momentum.

    Q3 orders growth60% YoYQ3 FY25

    20% sequentially

    Outpacing the strong market.

    Product announcements

    1
    ProductTypeDetails
    800-volt DC portfolioroadmap

    Deals & partnerships

    2
    WeeleayAcquisition to enhance service capabilities with AI-enabled analytics.

    The Weeleay acquisition accelerates Vertiv's advantage by analyzing real-time machine data, identifying operational trends, and proposing predictive actions from maintenance to energy optimization.

    Great LakesAcquisition to strengthen IT systems offering and white space presence.

    The Great Lakes acquisition strengthens Vertiv's IT systems offering and deepens its white space presence, with a playbook for scaling these capabilities.

    Risks & headwinds

    3
    Tariff impactsQ4 FY25; materially offset by exit of Q1 2026

    negative impact; Q4 adjusted operating margin 10 bps higher than Q3 despite higher sales due to new tariffs (Section 232)

    Mitigation: Comprehensive mitigation actions, pricing programs, optimizing supply chain and manufacturing footprint.

    EMEA market challengesQ3 FY25; reacceleration expected H2 2026

    EMEA sales down 4% organically

    Mitigation: Implementing regional restructuring programs to align with future growth, investing in regional capacity for anticipated market recovery.

    Operational and supply chain inefficienciesQ3 FY25

    partially offset adjusted operating margin; 230 bps higher than guidance aided by addressing these more quickly than expected

    Mitigation: Progressing well in addressing challenges experienced in Q2; accelerating manufacturing and service capacity investments.

    What to watch in Q4 FY25

    5

    EMEA sales reacceleration

    H2 2026
    CurrentDown 4% organically in Q3 FY25
    TargetRebound in H2 2026

    Why it matters

    EMEA's recovery is crucial for overall growth, driven by latent AI infrastructure demand and data sovereignty requirements.

    EMEA remains softer, and we expect it to rebound in the second half of 2026.

    Q&A highlights

    5

    Analyst asks about the drivers of the 60% YoY order uptick and how large announcements like Oracle's $300 billion-plus RPO or OpenAI's 10-gigawatt deal translate into orders and revenues for Vertiv, suspecting these haven't fully flowed into the ecosystem yet.

    Gio attributes the order growth to a strong market, technology evolution, and Vertiv's ability to scale and competitive advantages. He clarifies that large customer backlogs, often service agreements, differ from Vertiv's infrastructure build-out, which is rapid but gradual, with orders flowing in as projects mature for deployment.

    “The dynamics of the orders to Vertiv or to the likes of us relative to the dynamics of the order intake and the backlog of our customers can be very different, but there are 2 sides of the same very positive coin, if you will, but they beat to a slightly different drum.”

    asked by Amit Daryanani · answered by Giordano Albertazzi

    2 min read6 chapters

    Detailed Narrative

    01

    Market Dynamics and AI Acceleration

    The digital transformation and AI adoption are accelerating, driving significant demand in data centers. Vertiv is positioned to lead this multi-year growth period, with market growth tracking at the higher end of previous ranges, especially in the Colo Cloud segment. The scale and speed of AI and data centers today are seen as a preview of what's ahead, with data continuing to increase rapidly.

    02

    Strategic Investments and Capacity Expansion

    Vertiv is accelerating investments in supply chain, services capabilities, and manufacturing capacity across all regions, particularly in the Americas, to stay 6-12 months ahead of demand. This expansion predominantly focuses on existing sites to leverage established systems and experienced teams, enabling faster deployment and scalability. The company aims to maintain technology leadership while driving operational efficiency.

    03

    Services as a Competitive Advantage

    Services are highlighted as a 'superpower' and a unique competitive advantage, offering accretive, recurring revenue. Vertiv supports the complete customer journey from consultancy to optimization, leveraging an advanced technology platform with remote monitoring, predictive analytics, and energy optimization. The integration of AI-enabled capabilities with established field service, combined with global scale, becomes increasingly advantageous as rack densities and system complexity rise.

    04

    Tariff Management and Supply Chain Optimization

    Tariffs remain a dynamic challenge, but Vertiv has a clear action plan with comprehensive mitigation actions and pricing programs. The company expects to materially offset current tariff impact🌐s by the exit of Q1 2026 through ongoing supply chain optimization and adjustments to its manufacturing footprint. Operational inefficiencies experienced in Q2 due to supply chain countermeasures are being addressed.

    05

    Innovation and Technology Leadership

    Vertiv is committed to staying multiple GPU generations ahead through aggressive R&D investments, with spending projected to grow 20% plus in 2026. This includes accelerating funding for the system layer, connecting critical infrastructure elements, and planning the release of an 800-volt DC portfolio in H2 2026, aligning with NVIDIA's 2027 platform rollout. The company views innovation as a key driver for maintaining favorable pricing and competitive advantage.

    06

    Capital Deployment and M&A Strategy

    A strong balance sheet, with net leverage at 0.5x at quarter-end and expected to reach 0.2x by year-end, provides significant flexibility for future capital deployment. Vertiv pursues opportunistic bolt-ons and larger strategic acquisitions to strengthen its complete system solution offering, expand its Total Addressable Market (TAM), and enhance global reach, maintaining a vibrant M&A pipeline across technologies, regions, and deal sizes.

    AI-generated summary of the company’s earnings call. Not investment advice.