What happened
Vertiv, which supplies power and cooling systems for data centers, reported 24% year-over-year revenue growth in the second quarter. The company's trailing-12-month revenue has nearly doubled to $11.5 billion over three years, and analysts expect revenue to approach $22 billion by 2028.
Why it matters
Data centers expanding to support AI face a severe power shortage—the U.S. will need more than 230 gigawatts of new generating capacity over the next five years, more than double what utilities are expected to deliver. Vertiv's technology helps hyperscalers extract maximum efficiency from limited power, making it a direct play on AI infrastructure investment that has been overlooked compared to chip stocks. The company's adjusted operating margin is projected to expand from about 20% in 2025 to 23.8% at the midpoint of full-year 2026 guidance, supporting accelerating earnings growth.
What to watch
Analysts project roughly 37% annualized earnings growth over the next several years. Vertiv competes with larger players like Schneider Electric and Eaton, but maintains switching costs—once a data center installs its power systems, replacing them is costly and time-consuming, effectively locking in customers.
Summaries like this, in your inbox every morning.
The AI boom has spotlighted semiconductor and memory stocks, but the article argues that power management—a less visible constraint—may offer equal or greater investment opportunity. Data centers expanding at scale to support AI chips face a fundamental bottleneck: the U.S. electricity grid cannot keep pace with demand. Bank of America analysts project a shortfall of over 230 gigawatts of new generating capacity over five years, forcing hyperscalers to maximize efficiency from existing power supplies. Vertiv addresses this constraint directly by selling power and cooling systems that squeeze more compute output per watt, explaining its consistent 20%-plus quarterly revenue growth. The company's trailing-12-month revenue has nearly doubled to $11.5 billion in three years, and Wall Street expects further growth to nearly $22 billion by 2028.
Vertiv's margin expansion reinforces the case for upside. Adjusted operating margin is forecast to rise from about 20% in 2025 to 23.8% by full-year 2026, as the company spreads fixed costs across a growing revenue base. Analysts project roughly 37% annualized earnings growth over the next several years, which the article argues justifies the stock's forward price-to-earnings ratio of 41. A structural moat—switching costs and the expense of replacing installed power systems—protects Vertiv against larger competitors like Schneider Electric and Eaton. As AI adoption accelerates and chip density in data centers increases, demand for advanced thermal management will likely intensify, reinforcing Vertiv's position as a core infrastructure play.
For example, today's edition would include:
AI-summarized, only the topics you pick: one digest a day via Email, LINE, or Slack.
Free · 30 seconds with Google · unsubscribe anytimeWhat is AIToday? →
Ask AI anything about this article. The AI reads this article, earlier AIToday articles, and Wikipedia, and cites its sources. Q&As are published on this page for other readers too.
