GEV Q2 2025: Electrification EBITDA at 15%, backlog fuels margin gains
- Electrification Growth Catalyst: Management highlighted nearly 15% EBITDA margins in Q2 with expectations for sequential improvement and a robust order backlog, supporting strong future growth in the electrification segment.
- Robust Gas Power Demand & Pricing: Q&A responses emphasized solid gas power performance with strong equipment orders, positive pricing dynamics on both equipment and services, and growing conversion of simple cycle orders to higher-value contracts.
- Productivity and Efficiency via Automation: The discussion on scaling robotics and automation in both manufacturing and field services underscored potential for substantial productivity improvements and cost efficiencies, further bolstering long‑term profitability.
- Electrification Margin Concerns: Management noted that pricing is decelerating, particularly in Europe, and the current pricing environment may not sustain the high margin expansions experienced over the past 18 months.
- Wind Segment Headwinds: The discussion highlighted that wind orders are declining (down approximately 5% YoY) with expectations of mid‐teens revenue decreases in Q3 and continued tariff impacts in offshore wind, which could pressure margins further.
- Order Backlog Conversion Uncertainty: Several Q&A comments emphasized reliance on converting slot reservation agreements (SRAs) and large, lumpy projects into actual orders, raising concerns that execution delays or mix issues could postpone revenue realization and margin improvement.
| Metric | YoY Change | Reason |
|---|---|---|
Orders Growth | Significant increase | Robust Q1 2025 performance in the Power segment and overall capacity expansion drove orders higher compared to Q1 2024. Prior period strengths helped build a momentum that resulted in noticeably increased orders this period. |
Revenue Growth | Significant increase | Revenue grew in Q1 2025 driven by improved order intake and expanded operations in key segments such as Electrification and Power. The Electrification segment, while benefiting from growth, faced a tough comparison due to a large order in Q1 2024. |
Free Cash Flow | Positive improvement | Improved operational efficiencies and margin expansion boosted free cash flow in Q1 2025 compared to the previous year. Increased investments and disciplined cost management contributed to this enhancement relative to Q1 2024. |
Equipment Backlog | +$2 billion growth | The equipment backlog grew by about $2 billion in Q1 2025, reflecting a surge in orders and enhanced capacity investments, particularly in the Electrification segment. This increase builds on previous period efforts and points to a strong future pipeline. |
Wind Segment | Lower orders, improved margins | Despite experiencing lower orders in Q1 2025 due to challenging market conditions, the Wind segment achieved improved EBITDA margins through cost efficiencies. This reflects a shift from previous conditions where higher orders did not necessarily translate into better profitability. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2025 | Expected to be in the range of $36 billion to $37 billion | Trending towards the higher end of the original guidance range of $36 billion to $37 billion | raised |
Adjusted EBITDA Margin | FY 2025 | Anticipated to expand to high single digits | Increased guidance to a range of 8% to 9% | raised |
Free Cash Flow | FY 2025 | $2 billion to $2.5 billion | Raised guidance by approximately $1 billion to a range of $3 billion to $3.5 billion | raised |
Tariff Costs | FY 2025 | Estimated cost increase of $300 million to $400 million | Estimated impact trending towards the lower end of $300 million to $400 million | lowered |
Restructuring Costs | FY 2025 | no prior guidance | $250 million to $275 million | no prior guidance |
Power Organic Revenue Growth | FY 2025 | Mid-single-digit organic revenue growth | Increased guidance to 6% to 7% | raised |
Power EBITDA Margin | FY 2025 | between 13% and 14% | raised guidance to a range of 14% to 15% | raised |
Wind Revenue | FY 2025 | expected to decline mid-single digits | expected to decline by mid-single digits | no change |
Wind EBITDA Losses | FY 2025 | projected between $200 million and $400 million | trending towards the bottom of the $200 million to $400 million range | lowered |
Electrification Organic Revenue Growth | FY 2025 | Mid- to high-teens organic revenue growth | increased guidance to approximately 20% | raised |
Electrification EBITDA Margin | FY 2025 | between 11% and 13% | raised guidance to a range of 13% to 15% | raised |
Revenue Growth (Quarterly) | Q3 2025 | Continued year-over-year growth expected | Continued year-over-year growth expected | no change |
Adjusted EBITDA Margin Expansion (Quarterly) | Q3 2025 | Anticipated sequential margin expansion | Expected to continue, including the estimated impact of tariffs | no change |
Free Cash Flow (Quarterly) | Q3 2025 | Positive free cash flow expected, though lower year-over-year due to a $300 million nonrecurring arbitration refund | Positive free cash flow expected for the sixth consecutive quarter | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Electrification Growth and Margin Dynamics | Q1 2025 highlighted strong orders, revenue growth of 18%, and 680 bps margin expansion. Q4 2024 emphasized 12% revenue growth with 500 bps margin expansion and steady backlog growth. Q3 2024 noted 24% revenue increase and nearly 700 bps margin expansion. | Q2 2025 reported 20% revenue growth, orders at 1.5x revenue, a backlog expanded to $24 billion, and 740 bps margin expansion; modest incremental improvements expected. | Consistently strong growth and margin expansion across periods with improved operational performance in Q2 2025. |
Gas Power Demand, Order Pipeline, and Service Opportunities | Q1 2025 showed significant gas turbine orders and strong service growth with orders for aeroderivative units and a 30% surge in steam services. Q4 2024 discussed building 20 GW orders and diversified turbine unit orders. Q3 2024 reported 34% growth in orders and a robust pipeline with 70% services revenue contribution. | Q2 2025 emphasized 9 GW of new gas equipment contracts, conversion of SRAs to orders, heavy-duty and aeroderivative unit bookings, and strong growth in services with a 30% increase in steam services. | Robust demand and order pipeline remain consistent while aeroderivative orders and service opportunities continue to gain traction. |
Wind Segment Softness and Declining Orders | Q1 2025 noted a 43% decline in onshore orders due to policy uncertainty and permitting delays along with offshore challenges. Q4 2024 observed a 41% decline in orders and significant offshore contract losses balanced by modest onshore profitability. Q3 2024 reported a 19% drop in orders despite onshore profitability improvements. | Q2 2025 described a 5% year-over-year decline in orders (improved sequentially in onshore) with rising EBITDA losses and challenges in offshore wind while noting potential growth pending tax credit clarity. | Persistent challenges with softness and declining orders continue, though some quarters show onshore profitability gains; overall sentiment remains cautious. |
Order Backlog Conversion and Slot Reservation Challenges | Q1 2025 detailed a robust backlog of 29 GW with 21 GW in slot reservations expected to convert as EPC contracts finalize. Q4 2024 highlighted a significant equipment backlog growth with capacity expansion plans addressing conversion timelines. Q3 2024 discussed a large overall backlog and capacity measures for gas turbines. | Q2 2025 noted conversion of 3 GW of previous slot reservations into orders, a steady 29 GW backlog, and growth in reservations from 21 to 25 GW with expectations to reach 60 GW by year-end. | Consistent focus on converting backlog remains with ongoing capacity challenges, while strategic order mix adjustments are anticipated to improve conversion efficacy. |
Tariff and Inflation Risks Impacting Margins | Q1 2025 mentioned tariffs and inflation pressures increasing costs by $300–$400 million, with cost-mitigation and pricing actions underway. Q4 2024 briefly noted inflation impacts being offset by better volume and productivity. Q3 2024 referenced inflation offset by increased volume and productivity, with no explicit tariff mention. | Q2 2025 described tariffs impacting offshore wind, trending to the lower end of $300–$400 million and inflation headwinds in Power, with mitigating actions such as new sourcing strategies yielding margin support. | Stable cost pressures continue, with proactive measures in place; current discussions are more detailed on tariff impacts especially in offshore wind compared to previous periods. |
Production Capacity Constraints and EPC/Execution Challenges | Q1 2025 discussed capacity expansion in Electrification via added shifts and highlighted EPC challenges delaying conversion of slot reservations. Q4 2024 focused on ramping heavy-duty turbine production from 48 to 70–80 units and stressed EPC alignment for on-time delivery. Q3 2024 emphasized capacity expansion (70–80 turbines) and noted execution delays in offshore wind projects due to manufacturing issues. | Q2 2025 reported incremental investments in Electrification (e.g., 250 additional jobs, increased shifts) to target doubling output by 2028, alongside Gas Power capacity efforts and noted EPC challenges including permitting bottlenecks and tax bill impacts. | Ongoing efforts to expand production capacity are evident; while execution challenges persist across EPC processes and permitting, incremental process improvements (especially in Electrification) are being implemented. |
Emerging Automation and Robotics for Productivity Improvements | N/A (Not mentioned in Q1, Q4 2024, or Q3 2024) | Q2 2025 introduced initiatives focusing on deploying automation in lean factories and exploring robotics in wind turbine maintenance, with investments planned from 2026 onward. | Newly introduced topic with a forward-looking approach aimed at bolstering productivity and reducing manual inefficiencies. |
New Nuclear Energy Opportunities | Q1 2025 reported SMR license progress in Ontario and discussions on U.S. SMR deployment and nuclear site upgrades. Q4 2024 detailed acceleration of BWRX-300 deployment with collaborations with major U.S. utilities and set timelines starting 2029. Q3 2024 highlighted opportunities in the existing installed base and indicated SMR commission milestones for Canada in 2029 with expected early 2030s revenue contributions. | Q2 2025 focused on progress in the 300 MW SMR program with construction underway in Ontario, increased R&D spend, and noted strong demand for nuclear upgrades (with a 30% rise in steam services orders). | Growing strategic emphasis on nuclear energy with significant progress in SMR projects and nuclear upgrades, laying the groundwork for long‑term incremental capacity growth. |
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Electrification Outlook
Q: Electrification demand, margins, pricing impacts?
A: Management is pleased with electrification performance—currently near 15% EBITDA in Q2 with modest sequential gains expected—citing regional differences and a robust backlog that will help widen margins over time. -
Service Pricing
Q: How are services pricing trends?
A: They noted a favorable pricing environment driven by capacity market signals, enabling incremental pricing on both the installed base and new deals to gradually improve margins over the next 12–24 months. -
Power Orders Mix
Q: What drives higher power order revenue?
A: Although gigawatt orders were lower, improved pricing dynamics—especially in heavy duty and aeroderivative units—boosted revenue by around $700 million sequentially, underscoring the positive mix effect. -
Capacity Impact
Q: Incremental capacity’s revenue effect?
A: Management explained that investments like the $100 million expansion at the Pennsylvania plant, along with added shifts and jobs, will elevate production capacity across factories to meet growing electrification demand. -
Services Upgrades & Aero
Q: Scope for service upgrades and aeroderivatives?
A: They expect significant growth in services upgrades—projecting at least 50% expansion by decade’s end—with strong near-term demand for agile aeroderivative solutions driving premium pricing. -
Robotics & Automation
Q: How will automation improve operations?
A: Management is piloting “lighthouse” projects for robotics in both factories and field installations, anticipating enhanced productivity and cost reduction starting in 2026 and beyond. -
Tax Impact
Q: What effects from the July 4 tax bill?
A: While it’s early, the tax bill has spurred increased activity in wind and solar segments; however, the long-term outlook remains bullish for gas demand, as shifting strategies favor more incremental gas orders. -
Margin & Nuclear
Q: Why lower service margins and nuclear revenue?
A: They attributed lower service gross margins to a temporary mix shift toward equipment revenue, and the dip in nuclear revenue is due to a focus on fuel servicing until new SMR projects advance.