GE Vernova (GEV)

Energy transition company GE Vernova (NYSE:GEV) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 11.8% year on year to $9.97 billion. On the other hand, the company’s full-year revenue guidance of $36.5 billion at the midpoint came in 1.8% below analysts’ estimates. Its GAAP profit of $1.64 per share was 11.5% below analysts’ consensus estimates.

Company Overview

Born from the energy business of industrial giant General Electric in a 2023 spin-off, GE Vernova (NYSE:GEV) designs, manufactures, and services power generation equipment and grid technologies to help customers build more reliable and sustainable electric systems.

Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.

GE Vernova faces competition from Siemens Energy, Mitsubishi Power, and Hitachi Energy in power generation and grid solutions. In the wind turbine market, its main rivals include Vestas, Siemens-Gamesa, and Nordex, while its electrification business competes with Schneider Electric and ABB.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last four years, GE Vernova grew its sales at a sluggish 3% compounded annual growth rate. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about GE Vernova.

Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. GE Vernova’s annualized revenue growth of 8.9% over the last two years is above its four-year trend, suggesting some bright spots.

GE Vernova also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. GE Vernova’s backlog reached $135.3 billion in the latest quarter and averaged 7.3% year-on-year growth over the last two years. Because this number is lower than its revenue growth, we can see the company fulfilled orders at a faster rate than it added new orders to the backlog. This implies GE Vernova was operating efficiently but raises questions about the health of its sales pipeline.

This quarter, GE Vernova reported year-on-year revenue growth of 11.8%, and its $9.97 billion of revenue exceeded Wall Street’s estimates by 8.9%.

Looking ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

GE Vernova has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 15.8% gross margin over the last five years. That means GE Vernova paid its suppliers a lot of money ($84.17 for every $100 in revenue) to run its business.

In Q3, GE Vernova produced a 19% gross profit margin, up 4.9 percentage points year on year. GE Vernova’s full-year margin has also been trending up over the past 12 months, increasing by 2.3 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Although GE Vernova was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 2% over the last four years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out.

On the plus side, GE Vernova’s operating margin rose by 12.6 percentage points over the last four years, as its sales growth gave it operating leverage. Still, it will take much more for the company to show consistent profitability.

This quarter, GE Vernova generated an operating margin profit margin of 3.7%, up 7.7 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

GE Vernova’s full-year EPS flipped from negative to positive over the last four years. This is a good sign and shows it’s at an inflection point.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For GE Vernova, its two-year annual EPS growth of 220% was higher than its four-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, GE Vernova reported EPS of $1.64, up from negative $0.35 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects GE Vernova’s full-year EPS of $6.14 to grow 89.5%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

GE Vernova has shown weak cash profitability over the last three years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.3%, subpar for an industrials business.

GE Vernova’s free cash flow clocked in at $733 million in Q3, equivalent to a 7.4% margin. The company’s cash profitability regressed as it was 3.5 percentage points lower than in the same quarter last year, but it’s still above its three-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends trump temporary fluctuations.

Companies with more cash than debt have lower bankruptcy risk.

GE Vernova is a profitable, well-capitalized company with $7.95 billion of cash and no debt. This position is 4.4% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly GE Vernova blew past analysts’ adjusted operating income expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its EPS missed and its full-year revenue guidance fell short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock remained flat at $663.08 immediately after reporting.

Before making an investment decision, investors should account for GE Vernova’s business fundamentals and valuation in addition to what happened in the latest quarter.

There are a lot of things to like about GE Vernova. Although its revenue growth was weak over the last four years, its growth over the next 12 months is expected to be higher. And while GE Vernova’s operating margins reveal poor profitability compared to other industrials companies, its expanding operating margin shows the business has become more efficient. On top of that, its astounding EPS growth over the last four years shows its profits are trickling down to shareholders.

GE Vernova’s P/E ratio based on the next 12 months is 60.9x. This multiple tells us that a lot of good news is priced in. Add this one to your watchlist and come back to it later.

Wall Street analysts have a consensus one-year price target of $755.38 on the company (compared to the current share price of $663.08).