Vertiv (VRT) Q3 2026 Earnings Call Transcript

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DATE

Wednesday, Oct. 28, 2026

CALL PARTICIPANTS

• Vice President, Investor Relations - Lynne Maxeiner
• Executive Chairman - David Cote
• Chief Executive Officer - Giordano Albertazzi
• Executive Vice President and Chief Financial Officer - Craig Chamberlin
• Executive Vice President of Manufacturing and Logistics - Mike Risher

TAKEAWAYS

• Net Sales -- $4,313 million, representing 61% growth driven by broad-based demand across all geographic regions.
• Organic Net Sales Growth -- 55% year over year, reflecting strong backlog execution and ongoing capacity expansion.
• Organic Orders Growth -- over 100% year over year, indicating significant market demand for artificial intelligence infrastructure.
• Adjusted Operating Margin -- 25.2%, an expansion of 290 basis points due to operational leverage on higher volume and manufacturing productivity.
• Adjusted Operating Profit -- $1.1 billion, up 83% year over year from increased revenue and operational efficiency.
• Adjusted Diluted EPS -- $2.21, an increase of 78% reflecting higher after-tax adjusted operating profit.
• Americas Net Sales -- $3 billion, up 75% total and 66% organically as sequential pipeline growth reached its fastest recorded rate.
• APAC Net Sales -- $779 million, up 50% total and 48% organically with specific strength reported in Australia and India.
• EMEA Net Sales -- $545 million, up 23% total and 19% organically with a pipeline that approximately doubled year over year.
• Adjusted Free Cash Flow -- $652 million, an increase of 50% year over year driven by higher operating profit.
• Full Year 2026 Net Sales Guidance -- $14.7 billion midpoint, an increase of $650 million from previous July guidance.
• Full Year 2026 Adjusted Diluted EPS Guidance -- $7.15 midpoint, representing 70% growth over 2025 results.
• Full Year 2026 Adjusted Free Cash Flow Guidance -- $2.7 billion, raised to reflect increased operating profit expectations.
• Q4 2026 Net Sales Guidance -- $4.4 billion midpoint, representing 53% growth versus the fourth quarter of 2025.
• Q4 2026 Adjusted Operating Margin Guidance -- 25.8% midpoint, an expected expansion of 260 basis points year over year.
• Capital Expenditures -- approximately 4.0% of revenue for the full year 2026, focused on global capacity investments.
• Net Leverage -- -0.2x at quarter end, providing strategic flexibility for future investments and acquisitions.
• Acquisition Contribution -- approximately 6% of third quarter net sales growth, following the closure of the Utility Innovation Group and King Environmental Services deals.
• Americas Adjusted Operating Margin -- 29.4%, a slight expansion from 29.3% in the prior year as operational leverage was partially offset by a large capacity ramp.
• APAC Adjusted Operating Margin -- 17.0%, representing an expansion of 380 basis points year over year due to improved facility utilization.
• EMEA Adjusted Operating Margin -- 28.0%, an increase of 920 basis points versus 18.8% in the previous year driven by improved commercial execution.
• Chiller Production Capacity -- on track to double by year-end to meet increasing thermal management demand.
• Design Phase Efficiency -- tenfold reduction through the use of pre-engineered reference designs and digital twin validation.
• 800-volt DC Roadmap -- validation phase expected in 2027 with market deployment planned for 2028.

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RISKS

• Albertazzi stated that growing at the company's current pace involves significant effort and noted that the execution process is "not always orderly," reflecting the complexity of rapid expansion.
• Chamberlin noted that the large ramp in capacity in the Americas segment led to temporary inefficiencies during the third quarter.
• Albertazzi noted that "power availability, permitting, general sentiment, and construction site skilled labor availability" are current pacing items for the industry.

SUMMARY

Vertiv Holdings Co (NYSE:VRT) reported an acceleration in demand for digital infrastructure, specifically within the data center market. Management stated that the company is expanding manufacturing capacity globally to support a record pipeline and order backlog. The company indicated that strategic initiatives focus on industrializing converged infrastructure and reducing time-to-first-token for artificial intelligence deployments. Management reported that while regional power availability and labor shortages exist, these factors are addressed through the company's modular and pre-engineered solution sets. The company reported that it is investing in next-generation technology, including 800-volt DC power systems, to maintain its market position.

• CEO Albertazzi stated, "We are in the middle of the largest infrastructure buildout and it's accelerating."
• The company reported that its time-to-first-token initiative reduces deployment time by up to half and can increase cumulative AI token output by 30% in the first 12 months.
• Management indicated that 800-volt DC native power infrastructure is currently in customer validation, with revenue generation expected to begin in 2027.
• The acquisition of Utility Innovation Group adds advanced microgrid solution capabilities and behind-the-meter power design to the powertrain portfolio.
• Executive Chairman Cote noted that the digital age foundation relies on data centers and indicated that "Vertiv supplies the picks and shovels" for this cycle.
• The new Johor, Malaysia factory is now operational, expanding the company's ability to serve the Southeast Asia and Australia markets.

INDUSTRY GLOSSARY

• Time-to-first-token: A metric indicating the speed at which an artificial intelligence data center starts generating revenue.
• Converged Infrastructure: Pre-engineered systems that integrate compute, storage, networking, and power/thermal management into a single solution.
• 800-volt DC: A high-voltage direct current power architecture designed to improve energy efficiency and power density in high-density data centers.
• Microgrid: A self-contained power system that can operate independently or in conjunction with the primary electrical grid.

Full Conference Call Transcript

Operator: Good morning. My name is Warren and I will be your conference operator today. At this time, I would like to welcome everyone to Vertiv's Third Quarter 26 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Please note that this call is being recorded. I would now like to turn the program over to your host for today's conference call, Lynne Maxeiner, Vice President of Investor Relations.

Lynne Maxeiner: Great. Good morning, and welcome to Vertiv's third quarter 2026 Earnings Conference Call. During the course of this call, we will make forward looking statements regarding future events, including the future financial and operating performance of Vertiv. These statements are subject to material risks and uncertainties, that could cause actual results to differ materially from those in the forward looking statements. We undertake no obligation to update these statements as a result of new information or future events. Please refer to the cautionary language included in today's earnings release and the risks disclosed in our annual and quarterly reports and other filings made with the SEC.

Additionally, non GAAP measures referenced today are defined and are in our earnings press release and in the investor slide deck found on our website at investors.vertiv.com. Finally, during the Q and A portion of the call, please be mindful of others in the queue and limit yourself to 1 question. With that, I will turn the call over to Executive Chairman, David Cote.

David Cote: Well, to paraphrase Mark Twain, the rumors of our demise have been greatly exaggerated. I am really pleased with the third quarter and our year to date performance. This performance is testament to how customers look at Vertiv is our thought leader, with leading technology and reliability undeniable ability to scale, and superior service performance and capabilities. This is reflected among other things in our strong Q3 organic orders, on top of very strong first half organic orders as Giordano will mention. Q3 organic orders are not only strong, but also very balanced across customer types. Orders are strong no matter how you look at them with or without Neocloud. Our customers clearly believe in us.

By the way, to be clear, we are not planning to share orders data going forward. This order strength and financial performance notwithstanding, he will be the first to say that we are relentlessly focused on further improving our customer and financial performance across the board. We can still be a lot better. Giordano is never satisfied. What you are seeing in these results is not something that happened overnight. This is the payoff from years of seed planting. Years of investing in technology, capacity, service, and all capabilities because we believe this opportunity was going to be big. Turns out, it is even bigger than most people imagined.

And we believe it is going to stay big for a long time. We are just at the beginning of the digital age. And we anticipate it has decades left to run. The foundation for it is data storage and processing which means data centers. No data centers, no digital age. And Vertiv supplies the picks and shovels. We are at the forefront of the technology change in those picks and shovels, and we intend to stay there. As you know, I have always believed it is important to have a great position in a good industry. Preferably with technology differentiation, and then develop a high performance culture so you then perform well for customers and investors.

Vertiv is doing that. I am pleased with how rapidly the high performance culture is developing at Vertiv. And the more technology changes, the better it is for us. it is exciting stuff. Like that famous book says, we are accomplishing 2 seemingly conflicting things at the same time. We are delivering very strong results today, while investing aggressively for tomorrow. that is generally hard to do. Most companies choose 1 or the other. Giordano and his team are doing both. And I believe the gap between us and everyone else just keeps getting wider. And the fact is we are still early. We ai not done yet. Not even close.

As you have heard me say in the past, buy now while supplies last. So let me hand it over to Giordano to take you through it all. Giordano?

Giordano Albertazzi: Well, thank you very much, David, and let us go to slide 3. A very strong quarter indeed. Net sales up 61% versus Q3 2025, with broad based trend across all regions. America's up 75%, APAC up 50%, and EMEA back to convincing growth at 23%. Organic net sales grew approximately 55% with an additional 6% from acquisitions. Disciplined execution drove adjusted operating margin to 25.2%, up 290 basis points year on year exceeding our guidance. Adjusted operating profit was over $1 billion up 83% year over year. Adjusted diluted EPS of $2.21 were up 78% primarily driven by higher volume and continued operational productivity.

Adjusted free cash flow was up 50% year on year, at $652 million Our net cash position continued with a negative leverage of 0.2x at quarter end. Remains very strong. We are raising our full year guidance across all key metrics. Net sales expected at $14.7 billion, $650 million up on July guidance and approximately 38% organic growth. Adjusted diluted EPS now expected at $7.15 up 70% from 2025. And adjusted operating profit guidance raised to more than $3.5 billion up 68% year on year. Full year adjusted operating margin expected to be 24% approximately 360 basis points higher than 2025. And adjusted free cash flow guidance raised to $2.7 billion.

And with that, let's move to Slide 4 Let's start with the market environment. Our pipeline remains very strong. Global. Demand signals are clear. And broad based across technologies, customer types, and regions. We expect another year of robust orders growth. We do not disclose orders. And we will continue not to. But it is worth sharing that our Q3 orders were more than 100% up year on year. Organically. This is to give a sense of what this strength practically translates into. Also, important to share that our customer mix call it hyper enterprise, new cloud, etcetera, very much represents the market mix.

As I now talk regionally, America's pipeline sequential quarter to quarter growth is the fastest we have seen ever. Translating into very strong organic Q3 orders. Yes, power availability, permitting, general sentiment, and construction site skilled labor availability, are pacing items. But not slowing down growth. We have been talking about the EMEA spring and coiling. In Q3, the pipeline in EMEA has approximately doubled year on year, and organic orders grew even more. Momentum is now in the market, and we see these dynamics carrying well into 2027 and beyond. When it comes to APAC, it is a broad based strength particularly in Australia and India. Organic orders were up substantially in the quarter in APAC.

China is showing encouraging green shoots. Commercial execution continues to be favorable, and we expect positive price cost in 2026. Including the current impact of tariffs and countermeasures. And now to the right of the slide, and let's talk about operations and supply chain. The sequential and year on year revenue growth you saw in the quarter reflects the combination of ongoing capacity expansion improving utilization, vertical operating system adoption, and overall disciplined backlog execution. It also reflect increasingly mature execution for complex converged infrastructure projects. We are making significant capacity investments globally to be well positioned to serve our customers and execute on a robust backlog.

In The Americas, we announced several new war facilities for infrastructure solutions, power management, thermal management, and rack systems. In EMEA, we are expanding our Slovakia campus for power and thermal management and infrastructure solutions scaling up our power facilities in Ireland. Sorry. We are also on track to doubling chiller production capacity by year end. In Asia Pacific, our new Johor Malaysia factory is now operational, strengthening our ability to serve customers across Southeast Asia and Australia. These capacity additions are already contributing to our Q3 and Q4 growth. And it is not just our own capacity.

We keep on proactively securing and expanding long term capacity agreements with key suppliers to ensure their scale in lockstep with our growth. I may also welcome Mike Risher, our new EVP of manufacturing and logistics. Mike brings very strong operational experience and capabilities and very strong lean expertise. Anders remains with us in a senior advisory capacity, focused on a successful handover and on special projects. And let us now go to slide 5. Time to first token matters a lot to our customers. It indicates how quickly an investment in AI data center and compute becomes revenue generating. I want to highlight the work we are doing with NVIDIA.

The OneCore Smartron system, and Polar Data Center to significantly reduce time-to-first-token. Accelerating every phase of the cycle. The design phase, for example, pre engineered, referent designs, are configured and validated in a digital twin. This reduces the design time by a factor of 10x. In the deployment phase, factory built and modularly deployed infrastructure significantly removes complexity from site. It happens in parallel with site preparation. This cuts deployment time by up to half. The result is up to 30% more cumulative AI token output in the first 12 months from project kickoff. Same installed capacity, just productive much sooner for our customers.

Olo Data Center is already applying this at the first 41-megawatt phase of its Heroya campus in Norway. And it is scalable to 100 megawatts. With that, over to you, Craig.

Craig Chamberlin: Thanks, Giordano. Let's move to Slide 6 and talk through our third quarter financial results in more detail. Our adjusted diluted EPS was $2.21, up $0.97 or 78% versus prior year, $0.41 above the midpoint of our guidance. The year over year improvement was driven by higher after tax adjusted operating profit, primarily from increased revenue and operating profit rate expansion. On the top line, sales were approximately $4.3 billion that is up approximately $1.6 billion or 61% versus prior year. Organic sales growth was approximately 55% with an additional 6% from acquisitions. By region, Americas grew 66% organically APAC grew 48% organically, and EMEA grew 19% organically. All regions were above the Q3 revenue guidance.

Moving to adjusted operating profit, we delivered approximately $1.1 billion, that is up $491 million or 83% versus prior year, and $169 million above the midpoint of our guidance. Adjusted operating margins of 25.2%, expanded 290 basis points year over year and came in 70 basis points above guidance. The margin expansion was driven by strong sales volume increase operating leverage, and continued productivity. The business teams continue to show the ability to scale operations while expanding margins. As we have mentioned in prior calls, we are continuing to invest in capacity in engineering R&D to support future business growth.

To round out the quarter, adjusted free cash flow was $652 million up $216 million or 50% from prior year, The improvement was driven by higher adjusted operating profit. Partially offset by working capital usage and higher net CapEx. Net leverage at quarter end was -0.2x, providing significant strategic flexibility. Flipping to slide 7, let's look at segment performance by region. Americas delivered an outstanding quarter. Net sales were approximately $3 billion, up 75% with organic growth of 66%. Organic sales growth remained robust in the quarter. Adjusted operating margin came in at 29.4%, driven by strong operational leverage. Moving to APAC, the region had strong results with net sales of $779 million, up 50% with organic growth of 48%.

Full year outlook remains positive, driven by strong end market demand and continued commercial execution. Adjusted operating margin of 17% expanded 380 basis points year over year primarily attributed to operating leverage. In EMEA, net sales were $545 million, up 23% with organic growth of 19%. The market continues to strengthen with accelerating pipeline conversion, positioning the region well for continued organic sales growth. Adjusted operating margin of 28% expanded 29 basis points year over year driven by improved operational leverage and commercial execution. It was very strong performance across all 3 regions in third quarter. Turning to Slide 8. Let's walk through our fourth quarter 26 guidance.

For Q4, we are projecting adjusted diluted EPS of $2.25 at the midpoint. That represents 65% growth versus prior year. The year over year improvement is driven by higher after tax adjusted operating profit, primarily from increased revenue and operating profit rate expansion. On net sales, we expect approximately $4.4 billion at the midpoint, that is up approximately 1.5 billion or 53% versus prior year. Organic sales growth is expected to be approximately 50% with an additional 3% from acquisitions. We expect continued strong organic growth across all regions, with Americas in the mid-50s APAC in the mid fifties, and EMEA in the low twenties.

Adjusted operating profit is expected to be $1.1 billion at the midpoint. that is up approximately $470 million or 70% versus prior year. Adjusted operating margin rate is expected to be 25.8% at the midpoint, that is up 260 basis points year over year. And that is driven by strong organic sales growth and operating leverage which is offsetting some small mix impact. As you can see, we expect another strong quarter, reflecting the ongoing excellent operational performance of our business teams. Now on to Slide 9, let's talk about updated full year 2026 guidance. We are raising our guidance across all key metrics.

Starting with the adjusted diluted EPS, we now expect $7.15 at the midpoint. that is up approximately $2.95 or 70% versus 2025, and an increase of $0.45 versus our prior guide. The year over year improvement is driven by higher after tax adjusted operating profit primarily from increased revenue and operating profit rate expansion. For net sales, we now expect $14.7 billion at the midpoint, that is up approximately $4.4 billion or 43% versus 2025 and an increase of $650 million versus our prior guidance. Organic sales growth is expected to be approximately 38%, with an additional 4% from acquisitions and 1% from favorable currency.

By region, we expect Americas organic growth in the high 40s, APAC in the mid thirties, EMEA in the low to mid single digits. Moving to adjusted operating profit, we now expect approximately $3.5 billion at the midpoint, that is up $1.4 billion or 68% versus 2025, an increase of $190 million versus our prior guidance. Adjusted operating margin is expected to be 24% at the midpoint, that is approximately 360 basis points of expansion from 2025 and 20 basis points above our prior guidance. The margin expansion is driven by strong organic sales growth continued operating leverage and ongoing productivity realization.

Finally, adjusted free cash flow is expected to be $2.7 billion at the midpoint, that is up $813 million or 43% versus 2025. The year over year improvement is driven by higher adjusted operating profit and cash interest favorability partially offset by higher net CapEx as we continue to invest in capacity expansion and operating capability. We are delivering strong results. Rating our outlook and executing with discipline. With that, I will hand it back to you, Giordano.

Giordano Albertazzi: Well, thank you, Craig. And let's go to slide 10 for some initial thoughts. on 2027. Data center demand is accelerating. This despite facing items like power availability, permitting some data centers sentiment headwinds, shortage of skilled labor for site activity. Many of these pacing items are not headwinds for us. They play directly to Vertiv's strengths, as we help the industry solve them. We got above backlog and strong pipeline visibility. We expect continued significant above market organic sales growth in 2027. We will continue investing in investing in engineering and R&D for the next generation technology.

Expanding capacity, and scaling our supply chain and services to widen our competitive lead and stay ahead of our customers' evolving needs and timelines. Growing at this pace, is a lot of work, and not always orderly. But we are clearly demonstrating the operational strength to deliver on this challenge. Despite an ongoing inflationary environment, we expect continued margin expansion powered by productivity, strong commercial execution, operational rigor, and increasingly deep vertical operating system adoption. We expect to continue generating significant adjusted free cash flow enabling strategic reinvestment in engineering and R&D while expanding and pursuing targeted acquisitions that drive shareholder value. The demand environment remains strong heading into 2027.

And we believe we are well positioned to capture it and gain market share. We expect strong growth across all financial net metrics. And let us go to slide 11 and wrap up. A strong Q3 performance exceeded guidance the team continues to raise the bar. We raised our 2026 guidance across all key metrics and feel good about how we will end the year and the momentum we carry into 2027. We closed the acquisition of Utility Innovation Group, adding microgrid solution advanced power controls and behind the meter power design capabilities. We also closed the acquisition of King Environmental Services expanding our fluid management and load testing services in Europe.

I also want to provide further evidence of the strength of our execution through a couple of examples. First, our long tenured partnership with EdgeConnects and the design engineering and construction management firm, Vantage Construction Europe Inc. They continue to expand globally with Vertiv as their preferred end to end powertrain thermal chain and services partner. Vertiv's innovation, quality, scale, and reliability are enabling the deployment of gigawatt scale facilities across multiple locations. We are proud of the trust this customer has inverted to deliver at scale. And next, our collaboration with the SGC Energy and KT Cloud on the Gunsan AI Data Center Project In South Korea. Designed to enable scalable high density AI data centers.

The project is, utilizing our converged infrastructure to accelerate time-to-token and deliver at scale. Global reach, technical depth, quality and reliability, scale, industry-leading services, define Virtu's value proposition. And, with that, I think it is time to go to the Q&A part.

Operator: We will now begin the question and answer session. In order to ask a question, press *1. On your telephone keypad. In the interest of time, please limit yourself to 1 question. And if you have a follow-up question, please rejoin the queue. We will pause for just a moment to compile the Q&A roster. The first question comes from Amit Daryanani with Evercore.

Amit Daryanani: Yep. Good morning. Good afternoon, everyone. Giordano, extremely impressive that our numbers for September quarter and you are seeing 100%+ order growth right now, which I think is well in excess of underlying gigawatts of capacity addition the AI ecosystem would do going forward. This would almost imply that Vertiv is actually picking up market share at this point. I think is very different from the investor concerns of it around throughout the quarter, around product quality and potential share loss.

Perhaps if you if you think about the strength in September, the 100%+ order growth, can you just talk about how much of this was catch up versus underlying demand getting better and to the extent you can focus in on your share within these AI deployments and how that is evolving, that would be really helpful. Thank you.

Giordano Albertazzi: Well, thank you, Amit. And as you are saying, we strongly believe that this growth is above the market growth. If you go back to the market model that we shared with you in May, we believe that is pretty intact in terms of outlook of the market than. That is squarely there. So if we continue to talk about orders and our orders trajectory, and we specifically talk about Q3 here, but as you as you heard, we are we are pretty positive about kind of a orders more broadly speaking. But it is it is, I think, a way to demonstrate that the industry believes in Vertiv and that our technology, our execution our customer.

Strength of our customer relationships, and our ability to deliver our are certainly serving our customers very, very well. Is it catch up? And they are not talking about catch up here. We are talking about orders.

Operator: So orders are a reflection of strength in the Your next question comes from the line of Scott Davis with Melius Research.

Scott Davis: Hey, guys. Good morning, everybody, and congrats on the very strong snapback in numbers here. Giordano, I want to just follow on a little bit on kind of Amit's question there. As it relates to some of the chatter out there of supply chain issues and such, and also product quality issues. You know, there is been chatter of compressors that have been burning out and heat levels and UPS machines or UPS systems that are overheating and would you. I mean, could you give us a little bit of color?

I mean, you know, there 1 could characterize as kind of normal product development challenges, and 1 could-- you know, characterize it as you know, a door opening for competitors. So how do you guys think about it? And should we have confidence given the numbers you just provided that these issues are all seemingly overblown. And we should just look onward. And I will I will I will pass it on after that. Thank you.

Giordano Albertazzi: Well, thank you, Scott. Well, again, best, best answer is our performance. Certainly, we operate at high levels of growth. And, in a very vibrant environment when it comes to new products being launched. Many of these new products are new to the industry, if you will. So this growth and this new product situation is always is always creating acceleration across the portfolio. But when we see-- when we look at the quality data we are, optimistic about what we see. We are. We feel good about the trajectory. We feel good about the direction.

When it comes to new products, it is true that if the new product mix is higher, then there is a kind of a higher let's say, statistically distributed, curve in the initial phase of new product. So there might be a mix there. But when we look at the way the infant phase of a new product quality evolves, how it evolves we see improvements, constant improvements. So we feel good about that. And it is it is a complicated industry. It is a complicated, set of products and that is true across the entire industry. it is not a it is not a Vertiv thing. So I feel pretty good at where we are. We are not perfect.

Absolutely. We are not perfect. But we believe that we continue to reinforce and focus on, quality and reliability as 1 of the competitive advantages for us. Thank you.

Operator: Your next question comes from the line of Steve Tusa with Wells Fargo.

Charles Stephen Tusa: Hi, good morning. Morning. Can we just get an update on the supply chain issues from the second quarter? How those played out and whether you are actually kind of like capturing that revenue into this year? And then just CapEx maybe a preview of CapEx for 2020?

Craig Chamberlin: So I would say thanks, Steve. On the kind of a recap of Q2, some of that revenue, the delayed revenue did filter into the third quarter number. So I think we capped it somewhere around 100 to 150 I think that was some of the recovery we felt in the third quarter. In terms of our feeling of where we sit right now, again, we are continuing to build up those resiliencies in those factories and ensuring that they can deliver the project level outcomes that we expect to. So we said before is going to be an ongoing thing that we are continuing to improve at.

Saw some definite improvements in third quarter, so that was what you felt come through, and we saw some recovery of that in the revenue basis. But we are we are gonna continue to work on making sure that we can deliver at a steady pace and an ongoing pace around those project level outcomes. So I think for us, it is continued effort there. And we did put the capacity in place as you saw. A little bit of that capacity does drive, you know, some of the margin things that we have talked about, but definitely put the capacity in place.

On your question, we will not highlight, you know, 2027 now from a an outlook on what our percentage of CapEx would be. Again, we have given a guide for that in the long term guidance, so we would update any of that as we cut through fourth quarter. Great. Thank you.

Operator: Your next question comes from Joe O'Dea with Vertical Research.

Joe O'Dea: Hi. Good morning. Thanks for taking my question. Can you just talk about the mixed dynamics in Americas and some of the margin spread there, even if not quantified? Just trying to think through the opportunities moving forward as you sort of gain some efficiencies on new products and thinking about what that could mean for margin expansion as you see a narrowing spread between some of these buckets.

Craig Chamberlin: Yeah. Yeah. I would say you are you are exactly right. So some of the margin you are seeing in Americas, again, the incrementals are a little bit lower in the second half than they were the first half because of some favorable comps. But you also see there, Joe, in the second half, that America's had a large ramp in capacity, which drives some inefficiency there. So And then on the point of the mix, the mix would be that the product side of that had more output than normal in terms of services. So you got a little bit of a mix factor there.

So as that balances back out, might have a little bit of a pickup on a mix there. And as we got better in terms of bringing our capacity online and getting through that learning curve, you have some potential, you know, there as well to continue to work through your margins. I would say, as we think about growing this business and the level we are growing it, and bringing on capacity, we are always, you know, being prudent about how we do that and creating capabilities. So we will continue to do that. And I think the 30% to 35% that we put out there is the right way to think about it.

30% always being when we are in the ramp mode and trying to make sure we stay there the high end of that being 35%. Thank you.

Operator: Your next question comes from the line of Andrew Obin with Bank of America.

Andrew Obin: Yes. Good morning. Hey. Good morning. Just maybe. Can we talk about your service organizations Seems like a big differentiator in the market. Can you share some KPIs and, getting quite a few questions about any difference in attachment rates on electrical and thermal, and how should we think about the opportunity there going forward? Thank you.

Operator: Well, thank you for your question.

Giordano Albertazzi: Because services is a very important differentiator for us. We have been vocal and we continue to believe, and we have proof of the fact that it is making a difference. And it is making a difference especially when the when the industry is complex, when there are a lot of new technology being, being deployed. So, in these times. We will not go into details of attach rates, but let's talk, directionally. We are pleased by the direction in which our attach rates, are evolving. that is a metric that we obsessively and obsessively and very granularly measure regionally product line, everything.

I would say that the they are not necessarily a dramatic difference between the and mechanical part. it is more, specific maybe to some product lines within the larger groups of technologies. But, again, if you heard us talk about, converged infrastructure, we talked about system level all things that create even further opportunities for attachment on a broader, installed base. So pleased with where we are going. Thank you.

Operator: Your next question comes from the line of Andy Kaplowitz with Citigroup.

Andrew Kaplowitz: Hey, good morning, everyone. Hey, Nick. Hey, Nick. Maybe you could further characterize the order pipeline for us. I think you suggested continues to grow, but does it continue to maybe widen out by geography as you go into 2027? Obviously, the biggest opportunity seems to continue to be in The U.S., how big of an opportunity is Europe these days, or interestingly, India, as you go into 2027 and beyond?

Giordano Albertazzi: I, you know, I go back to what I was saying in terms of pipeline. it is strength, the broad base of strength. Of course, we start from The Americas for us, which, of course, the center of gravity of The Americas for us is, and for the market is The US, that is intrinsically that and absolutely unequivocally, the largest market in the world. So I was very explicit about the fact that we are very pleased about pipeline growth in The Americas. Very pleased in terms of an acceleration of pipeline in The Americas in the in the third quarter. The. But the situation is certainly very, very, you know, convincing also outside.

So I think it is very widespread, though, of course, there is some in. Some markets starting point is smaller. Sometimes very much smaller than The Americas, but that is okay. Okay. it is the. it is relative growth that matters. We were talking about the strength in, in EMEA, and the acceleration in EMEA. I have already come comes specifically to India as you were asking. An extremely convincing landscape. An extremely convincing landscape in terms of the combination of the pipeline and strength in the market. So, please do not think that it is only The Americas. But please be convinced with us that The Americas is an absolutely strong market for us. Appreciate the color.

Operator: Your next question comes from Mark Delaney with Goldman Sachs.

Mark Delaney: Yes. Good morning. Congratulations on the strong results, I appreciate you taking the question. Giordano, was hoping you could give us a bit more of an update on the 800 volt momentum I know a number of different products that Vertiv is bringing to market with respect to 800 volt. Can you share a bit more around how that customer momentum is progressing and how impactful 800 volt products may be for revenue in 2027?

Giordano Albertazzi: Well, we were. Well, thank you for the question. Certainly, very important 1. We were pretty explicit about our road map, about what we see in the market when, in July, we dedicated 1 page of our earnings deck to the evolution of power infrastructure, including the 800 volt DC. Remember, we talked about, 3 model configurations it is probably more complex than that, but from the current infrastructure to the 800 volt DC to the rack and the row all the way to an end 800 volt DC. I would say the situation continues to be consistent with that. We are pleased with the directional travel as, as Vertiv.

And the demand in the market is evolving in the same direction that we described pretty much 3 months ago with a, let's say, initial 800 volt to the rack with medium voltage AC or low voltage AC with, with bass as an intermediate, if you will, configuration when going to the full 800 volt DC, being in the validation part as we speak, and started to be, revenue generated during 2027, and 2027 being the validation-- customer validation phase of the full native at 800 volt DC and then the deployment into the market in 2028. So pretty much the same picture we saw back then.

Pretty pleased about our trajectory and very consistent with what we shared in May and in July again.

Operator: Your next question comes from Amit Mehrotra with UBS.

Amit Mehrotra: Great. Thank you. Good morning. I guess I wanted to ask about maybe just overly tactical first. Usually, you see a pretty nice step up in revenue, Q3 to Q4. The guidance implies sort of more sequentially flat, obviously, Q3 was much better. So maybe you can just address that. And then as all this capacity is coming online and the pipeline is great and orders are great. Is that jump off point in 4Q in terms of organic growth sort of the right way to think about growth in 2027?

And maybe if you do not wanna answer it that precisely, is there any reason why organic growth does not accelerate in 2027 in light of capacity and order momentum sort of moving in the right direction?

Craig Chamberlin: Thanks, Amit. I will start with the second quarter to third quarter kind of delay that kind of raised up third quarter a little bit there. So we had that delay in second quarter revenue recognition. Came in third quarter, so brought third quarter up a little bit more than would have historically been there. So if you adjust for that, the $100 million to $150 million, you are more in a sequential nature that we have seen in the past from the third quarter to fourth quarter number if you look at that per the guide. So I think that is a little bit of a normalization there.

And, as you and I have said, as we have walked through these things, you know, there is always some prudence in the way that we look at our-- so our fourth quarter guide would be assessing for that as well. In terms of kinda where does it sit as going into to 2027, we feel good about where we are right now and exiting the year. We will not comment on 2027 of where it is going to go Just to point back to the fact of pipelines look good. As Gio mentioned, the order book looks good.

Feel confident about our ability to execute given the third quarter and what we have in front of us here in fourth quarter.

Giordano Albertazzi: By the way, Amit, I thought I saw I got you. Yeah. I loved your loved your headline today too. Well done. Thank you, sir. Have a good day, guys. Thank you, Matt.

Operator: Your next question comes from Tobey Okwara with Morgan Stanley.

Tobey Okwara: Thank you for the question. I wanted to talk about the inventory dynamic into the quarter. I noticed there was a pretty sizable ramp up over 100% year over year. Is that kind of just a reset of your normal operating positioning? Or is that part of transitional phase as you start to readjust supply chains to support modular? No. I mean, I think it is a little bit of both. it is definitely the ramp to support the growth that we have and ensuring that we have the right level of resiliency in the factors factory as well as we talked about last quarter.

So you are getting a kind of a feed through on both of those, Toby, that. that is causing that ramp in inventory. So it is definitely to support the go forward growth, but it is also to ensure that we have the right level of resiliency as we get more into this pattern of delivering the projects like a product level business. And then if I could follow-up on any commentary on mix of liquid cooling. Have you started to see that take greater share of your order book and revenues? And how should we think about potential margin impact there?

Giordano Albertazzi: We will not be specific. We are not being specific, but we. We have been in other occasion, vocals about our found let's say, satisfaction with the direction of travel. If you will. Of our liquid cooling business. And so not only liquid cooling is becoming a much taking a much bigger share of the let's say, first level heat extraction So the mix is definitely moving towards liquid cooling in the market, but we are also very satisfied about our role in the industry and our win rates and, did I say, leadership in the. In this part of in the. This part of the business.

It does not mean that air cooling is going away as we said several times. It is a small portion, smaller portion of, let's say, the total heat extracted from a high, a high density rack, there is still a lot of air being extracted. But I would say that as this evolves, what I think is extremely it becomes even more important prominent is the system level. So the coordination between the liquid cooling, the air cooling, the heat rejection, so the power. Sorry. The total thermal chain, chain, system. You were talking about will it. Is what direction is it mixing us from a margin standpoint? I would say we are pretty.

We are we are pretty pleased and fully factored in of course, the numbers that you see and the numbers that we guide for the rest of the year, but, we feel good about liquidity pool across the board, including the service attached side. Thank you.

Operator: Your next question comes from Nigel Coe with Wolfe Research.

Nigel Coe: Thanks. Good morning, everyone. Raj. Maybe talk about. there is obviously a lot of noise around your internal supply Maybe just talk about what kind of. What measures you took to enable, obviously, the incredible ramp up kind of in the third quarter And then maybe kind of touch on your sort of degree of satisfaction right now and where you are right now and where you can improve. Then just that leads me to my question around the hire of, you know, the new EDP manufacturing supply chain. What are you hoping that Mike brings to your organization and any problems that you are hoping you can solve? Thanks.

Giordano Albertazzi: When it comes to the dynamics, Craig explained a little bit the dynamics in terms of revenue recognition Q2, Q3, etcetera. We were very transparent and explicit about the fact that what we are doing in terms of bringing it into a factory incredible complexity that you have on-site requires building processes, building. Maturing modus operandi that is first to the market. And I would say unique still in our industry. We progressed well. I am pleased with the progress on our learning curve that is a combination of how we execute and how we really architect the entire system, how it works. So pretty pleased about that. Are we done?

Not yet, but not in terms of feeling nervous about the future, but feeling fully kind of, satisfied about having developed the perfect and having matured across the PERFORT process. That is something that will continue to evolve. And that is something that will continue to create a advantage for us. I think we are ahead in the industry. And still work to do, but please with the direction we are going. Your question about, about Mike, and as an opportunity to welcome again, Mike, and a big thank you for what every. Everything that Anders have done. We continue to we continue to expand. We continue to take the operational execution to the next level.

So there is nothing specific that I would say, oh, that is the 1 thing that will be addressed. This is a very convincing and, broad reaching evolution towards, operational excellence, towards fully mature vertical operating system, and that is the direction Mike will continue to drive towards. And he has extremely qualified for that.

Operator: Your next question comes from the line of Nicole DeBlase with Deutsche Bank.

Nicole DeBlase: Yeah. Thank you. Good morning, guys. Good morning. Nicole. Giordano, you highlighted a number of times some of the pacing power availability, permitting, moratoriums, etcetera. Just curious, like if you look from a higher level of, like, how the cadence of your shipments is coming together and when customers are asking for shipments. Are you seeing any evidence of data center construction projects pushing to the right because of these pacing items?

Giordano Albertazzi: What we see in terms of movements at project level is nothing out of the ordinary from what we have seen in the industry over the years. So it is a construction. Activity. So sometimes there are slippages. There are complexities on-site. Some of the complexity, of course, we are addressing changing the name of the game with, with our converged infrastructure. But we do not see those dynamics translating into the meaningful or, let's say, material out of the ordinary shifts Clearly, customers and the customers we work with are pretty savvy. I know that when they start a project, start procure material, and technology for that project when they know that the project can be taken to completion.

Thank you.

Operator: Your next question comes from the line of Luke Junk with Baird.

Luke Junk: Good morning. Thanks for taking the question. Giordano, maybe a little bigger picture I think you had previously said you were planning portfolio launches for 800 volt in second half of this year. Can you just comment on where that stands from an industrialization standpoint right now? And then secondarily, maybe if there is any color you could share on scope of that opportunity in terms of your relationship with ChipMaker versus HyperScale? Scalers and maybe we are most engaged right now or even what animating what might be going into backlog? Thank you.

Giordano Albertazzi: The. As I as I was saying, we are pleased with the with the progress right now. When it comes to the way we think about product launches today, we cannot think in terms of product launches separate from having the right capacity. Dedicated production line, dedicated supply chains with that. So that is an increase sorry. In. it is part of a of a of a of a new product and new technology, launched. So certainly, 100 volt DC in its various, guises, as I explained earlier when, answering to a previous question. Be it, it 800-volt DC to the RAC or the pod or it being the entire 800 volt DC. there is no exception to that.

If anything, it is certainly let's say, a pinnacle of, where we have to match supply chain footprint, capacity, and technology all at the same time, and, and that is what we were doing. So the industrialization is an intrinsic part of the product launch. When it comes to who are we, working with on customer and customer validation, standpoint, it is it is really a combination of, of, customers, either my hyperscalers and partners on the silicon side. But I will not be much more specific on that. That. Understood. Thank you.

Operator: Your next question comes from the line of Anand Baruah with Loop Capital.

Ananda Baruah: Yeah. Thanks, guys. Thanks for, taking the question. Really appreciate it. Giordano would just love to get your thoughts on the DSX pod that NVIDIA announced last week, which is intended to as you well know, because your partners, speed up speed up, kind of time to stand up. And they also have this broader, as you are aware, DSX AI factory platform If that if that gains any real momentum, does that help you guys faster to revenue, or is it more like the data center takes you know, sort of a set amount of time to set up and it. it is more time to first token for them. But not necessarily an impact to you.

But just wondering if it can increase your velocity of order to revenue. Thanks.

Giordano Albertazzi: Well, clearly, very much involved in everything DGX. Be it the DGX pod or the broader DSX AI factory data center design. Very, very involved and that is public information as you know. As you correctly say, the fundamental driver is time-to-token. And the value as I as I mentioned, as I mentioned in, 1 of the early slides, the value is, can be billions of dollars. For our for our customers. So clearly, there is an acceleration up very strong appetite for acceleration across the entire industry.

We were explicit, and we have been very explicit about our converged infrastructure modular converged infrastructure, where you have reference designs that then gets configured more and more, as I mentioned, using simulation and digital twin to compress not only the deployment time, but also the design time so that we do not design snowflakes, but we go about deploying things that have already been engineered and are just tailored on a specific data set. So what we are doing with the converged infrastructure, 1 core Smartron and what we are doing together with the NVIDIA on, the DSX, be it the pod of the broader is exactly going in the same direction. So we shared that ambition.

We shared that vision. And, you know, was talking about us. Accelerating the learning curve of, being operationally excellent in everything, complex, let's say, delivery, processes that is exactly going into the direction of creating a competitive advantage. Acceleration? Well, certainly, we believe that this will continue to expand our. Goes in the direction of us expanding market share. And certainly, works very well as a very strong technology pull through, vehicle for us. that is really great context. I really appreciate it. Thanks a lot. Thank you.

Operator: Your next question comes from Varun Govindaraj with Bernstein.

Varun Govindaraj: Good morning, everyone. Congratulations on the strong quarter, and thank you for the question. I had a quick question on ordersbacklog. You continue to see customers essentially widening the aperture to which they are willing to put in orders for? Is there another way? Are they just placing orders further down the timeline? And is that having any impact on the backlog? Because in the past, you have said 12 to 18 months. Is that still the range? Has it shifted around a little bit? Thank you.

Giordano Albertazzi: Well, thank you for the question. The-- it is an important question for us, and it is around what is the what is backlog what is backlog coverage here. The dynamics of orders in terms of, how far out orders are placed, that is not changed dramatically. I would say not changed a lot quarter to quarter or in the last few quarters. We are talking about that 12 to 18 months and can very be very, very much true right now. And it is. that is certainly 1 of the aspects that we analyze a lot. Clearly, as you will very well remember, we are very strict in what we call a backlog.

We do not call a capacity agreement a backlog. We only call backlog what is a squarely a purchase order. So no. I would say the shape of the backlog has not changed dramatically. Of course. Orders are very strong news as we were saying. So you cannot. You cannot imagine that reflecting our backlog. Understood. Thank you, Giordano. Yep.

Operator: Your next question comes from Andrew Buscaglia with BNP Paribas.

Andrew Buscaglia: Hey. Good morning, everyone. Good morning. Hey, Andrew. Just wondering on as we look into 2027, anything you would like to set us up with in terms of margins? And I say that because, you know, we have some noise in the back half of this year, but it seems like the setup with incremental volume and better mix and capacity going away Should set you up for, I think, what should be a really strong starting point. Do we see-- do we see these kinda exit margins as the starting point for next year?

Craig Chamberlin: No. I mean, we will not specifically talk about 2027 in terms of where we sit on incrementals I say, historically, what we have said and kinda go forward with what we laid out in the long term planning is we aim to be at the 30% to 35%. A lot of things can influence that, especially when you are going through growth. And if you go through growth, you tend to see a little bit lower of that. If you are more of a steady state, see a little bit of a higher of that based on where your volume is. I would say that is still the right framework to look at it through.

We would not change our framework at all, but I will not specifically comment on 2027 until, you know, we provide guidance for that at the end of next quarter. Got it. Thank you.

Operator: Your next question comes from Noah Kaye with Oppenheimer.

Noah Kaye: Good morning. Thank you. And just a follow-up there. You know, incremental margins sequentially from 3Q to 4Q are above the historical average. And I guess in the absence of any other factors that would imply know, you are getting more efficient as you ramp these new offerings. So maybe you can comment on if that is the right read or if there are any timing or expense related benefits in the quarter. And corollary to that is really the EMEA margins, which continue to step up. You know, are these levels sustainable? Thank you.

Craig Chamberlin: I mean, again, I think you do see a little bit of a pickup on the third quarter to fourth quarter incremental margins. I would not say it is significant. You are feeling a little bit of a pickup there from APAC getting I would say, their facilities online more. Do you see that a little bit? And, again, you still see some good pull through on EMEA. So again, I do not think it is materially different from third quarter to fourth quarter, but, definitely, your feeling the positive impacts of EMEA and you are feeling the positive impacts of APAC getting more let's say, their facility running at a more standard basis.

Operator: Your next question comes from David Tarantino with KeyBanc Capital Markets.

David Tarantino: Hey. Thanks. Good morning, guys. Maybe just on capital allocation and utility innovation group specifically, can you talk about the opportunities about moving up to the grid-interconnect part of the market? Has behind the meter power is increasing leverage? And then maybe more broadly on capital allocation, even incorporating these deals, the balance sheet is still pristine. Should we think about capital allocation moving forward? And you consider doing opportunistic buybacks in this kind of choppy market?

Craig Chamberlin: I will start with the capital allocation question. Question first. Again, I do not think our strategy will change there. We have, you know, cash on the balance sheet. We would like to have the dry powder to be able to do investments in both ourselves and investments in, you know, inorganic plays that we believe are scalable, and we believe those are the right levels of returns we would like. We will continuously look at things like, you know, buybacks, dividends, and stuff like that, but in terms of where we see the most value accretive nature is investing in our own capabilities and capacity and or inorganic plays.

On your question on UIG, think it was a strategic play that allows us to get at the table sooner. Allows us to get into the conversation of the architecture sooner. So that was a unique position where we could go up further the value chain and to start the conversation of how do you architect all the way back to the data center with Vertiv products. We think it is a great hit for us to be able to do that, and it will be very synergistic. To start the conversation earlier, what architectures in the data center and what architecture is at the microgrid. So. And I do not know, Giordano, if you wanted to add anything.

Giordano Albertazzi: I think you explained very well. So I am very, very pleased about that. I am looking forward to adding a segment to our powertrain. Great. Thanks, guys.

Operator: Thank you. There are no further questions at this time. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Giordano Albertazzi for any closing remarks.

Giordano Albertazzi: Well, thank you, Warren. And thank you all for the questions and for your time today. This was a quarter where the organization showed what it is made of. And the opportunity in front of us is significant and it is durable. Our customers are building at scale and complexity that the industry has never seen. And they need partners who can scale technology, execution, quality, reliability, and services. That is what the Vertiv team-- that is what the Vertiv team does. I am proud of what we accomplished this quarter. Proud and pleased, but certainly never satisfied. There is more ahead, and we are ready for it. With that, thank you all.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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