Generac Q2 revenue rises 11% on data center demand surge

Generac Holdings Inc. reported second-quarter revenue of $1.17 billion, up 11% from a year earlier, as data center demand fueled a 29% surge in commercial and industrial sales.

"The results reflect continued momentum in our C&I segment driven by strong data center market revenue," Chief Executive Officer Aaron Jagdfeld said.

Adjusted earnings per share came in at $2.91, compared with $1.65 a year earlier. Gross profit margin expanded to 44.5% from 39.3%, helped by tariff refunds that contributed about 6 percentage points. Residential segment sales slipped 2% to $621.3 million, as lower portable generator and energy storage shipments offset growth in home standby generators.

The company raised its adjusted EBITDA margin forecast for the full year to 20% to 21%, up from a prior range of 18.5% to 19.5%, citing the tariff refund benefit. Generac's backlog for products serving the data center market has swelled to about $1.6 billion, and it plans to triple production capacity for large megawatt generators over the next 12 months.

Generac secured two multi-year supply agreements with hyperscale customers during the quarter, including a global supply agreement with a second hyperscale client. Since its prior update, the company received approximately $1 billion in additional orders from both new and existing customers.

C&I segment adjusted EBITDA rose to $81.5 million, or 14.6% of sales, from $53.3 million, or 12.4%, a year earlier. The improvement reflected tariff refunds of about 2 percentage points, favorable acquisition impacts and improved operating leverage, partially offset by an unfavorable sales mix shift and strategic investments.

Residential adjusted EBITDA jumped to $215.4 million, or 34.7% of sales, from $146.4 million, or 23.1%, helped by tariff refunds that contributed roughly 9 percentage points, favorable sales mix and operational efficiencies.

Generac now expects C&I segment sales to grow in the low 30% range for the full year, up from prior guidance, while residential sales are projected to increase in the high-single digit range. Net income margin is forecast at 9% to 10%, compared with an earlier outlook of 8% to 9%. Total net sales growth is still expected in the mid-to-high teens percent range.

The guidance raise shows management expects data center demand to sustain its acceleration. Investors will watch the company's capacity expansion progress and any further hyperscale customer wins in the second half.

This article is for informational purposes only and does not constitute investment advice.