Vertiv (VRT)

Data center products and services company Vertiv (NYSE:VRT) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 29% year on year to $2.68 billion. Guidance for next quarter’s revenue was better than expected at $2.85 billion at the midpoint, 0.8% above analysts’ estimates. Its non-GAAP profit of $1.24 per share was 24.9% above analysts’ consensus estimates.

Company Overview

Formerly part of Emerson Electric, Vertiv (NYSE:VRT) manufactures and services infrastructure technology products for data centers and communication networks.

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.

Companies with similar offerings as Vertiv include Eaton (NYSE:ETN), Emerson Electric (NYSE:EMR), and Schneider Electric (EPA:SU)

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Vertiv’s sales grew at an incredible 18% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Vertiv’s annualized revenue growth of 20.7% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Vertiv’s recent performance shows it’s one of the better Electrical Systems businesses as many of its peers faced declining sales because of cyclical headwinds.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Vertiv’s organic revenue averaged 21% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Vertiv reported robust year-on-year revenue growth of 29%, and its $2.68 billion of revenue topped Wall Street estimates by 3.4%. Company management is currently guiding for a 21.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.7% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and suggests the market is forecasting success for its products and services.

Vertiv’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 33.6% gross margin over the last five years. That means for every $100 in revenue, roughly $33.59 was left to spend on selling, marketing, R&D, and general administrative overhead.

In Q3, Vertiv produced a 37.8% gross profit margin, up 1.3 percentage points year on year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Vertiv has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Vertiv’s operating margin rose by 9.8 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q3, Vertiv generated an operating margin profit margin of 19.3%, up 1.4 percentage points year on year. The increase was encouraging, 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.

Vertiv’s EPS grew at an astounding 43.2% compounded annual growth rate over the last five years, higher than its 18% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Vertiv’s earnings can give us a better understanding of its performance. As we mentioned earlier, Vertiv’s operating margin expanded by 9.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

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 Vertiv, its two-year annual EPS growth of 59.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Vertiv reported adjusted EPS of $1.24, up from $0.76 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Vertiv’s full-year EPS of $3.82 to grow 20.3%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Vertiv has shown impressive cash profitability, enabling it to ride out cyclical downturns more easily while maintaining its investments in new and existing offerings. The company’s free cash flow margin averaged 8.7% over the last five years, better than the broader industrials sector.

Taking a step back, we can see that Vertiv’s margin expanded by 7.9 percentage points during that time. This is encouraging because it gives the company more optionality.

Vertiv’s free cash flow clocked in at $462 million in Q3, equivalent to a 17.3% margin. This result was good as its margin was 1.1 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Vertiv’s five-year average ROIC was 15.8%, beating other industrials companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Vertiv’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Vertiv reported $1.40 billion of cash and $2.92 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.02 billion of EBITDA over the last 12 months, we view Vertiv’s 0.8× net-debt-to-EBITDA ratio as safe. We also see its $100.1 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Vertiv blew past analysts’ organic revenue expectations this quarter, leading to a convincing EPS beat. We were also glad its Q4 revenue guidance and full-year EPS guidance trumped Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 8.6% to $190.01 immediately following the results.

Updated: December 3, 2025 at 9:18 PM EST

Before investing in or passing on Vertiv, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Vertiv is truly a cream-of-the-crop industrials company. To begin with, its revenue growth was exceptional over the last five years, and its growth over the next 12 months is expected to accelerate. On top of that, its organic revenue growth has been marvelous, and its rising cash profitability gives it more optionality.

Vertiv’s P/E ratio based on the next 12 months is 36.6x. Scanning the industrials landscape today, Vertiv’s fundamentals clearly illustrate that it’s an elite business, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $194.67 on the company (compared to the current share price of $178.73), implying they see 8.9% upside in buying Vertiv in the short term.