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Vertiv Holdings Co (VRT) Q1 2025 Earnings Summary

Executive Summary

  • Vertiv delivered strong Q1 2025: net sales $2.036B (+24% YoY), adjusted diluted EPS $0.64 (+~49% YoY), adjusted operating margin 16.5% (+130 bps YoY), with book-to-bill ~1.4x and backlog at $7.9B (+10% vs Q4, +25% YoY) .
  • Management raised FY 2025 net sales guidance by $250M at the midpoint to $9.325–$9.575B, while maintaining the midpoint for adjusted operating profit ($1.935B) and adjusted EPS ($3.55) but widening ranges due to tariff uncertainty .
  • Near-term headwind: tariffs will compress Q2 adjusted operating margin to 18.0–19.0%, with mitigation through supply chain repositioning (USMCA qualification, rebalancing) and pricing actions; target to be “tariff neutral” exiting 2025 .
  • Catalyst for the stock: robust AI-driven demand (iGenius sovereign AI project; NVIDIA GB200/GB300 reference designs), strong orders (+21% seq, +13% YoY), and investment-grade rating (Fitch BBB-) support the multi-year growth narrative despite tariff noise .

What Went Well and What Went Wrong

  • What Went Well

    • Orders strength and backlog expansion: Q1 orders +13% YoY and +21% sequential; book-to-bill ~1.4x; backlog $7.9B (+10% vs Q4, +25% YoY) .
    • Execution and profitability: adjusted operating profit $337M (+35% YoY), adjusted FCF $265M (~>100% conversion), net leverage ~0.8x; Fitch initiated BBB- IG rating, enhancing flexibility .
    • AI infrastructure positioning: CEO highlighted accelerated AI deployments; Vertiv’s NVIDIA-backed reference designs (GB200/GB300 NVL72) and the iGenius sovereign AI factory underscore solution leadership at high-density liquid-cooled workloads .
    • Quote: “We continue to see accelerated scaling of AI deployments… Our partnership with NVIDIA… positions Vertiv at the forefront of AI factory deployment at industrial scale.” — CEO Giordano Albertazzi .

  • What Went Wrong

    • Tariffs compress near-term margins: Q2 adjusted operating margin guided to 18.0–19.0%, ~110 bps below last year on net tariff impact despite underlying expansion drivers .
    • EMEA lagged in growth vs Americas/APAC due to slower AI buildouts; management remains cautious near-term despite growing pipelines .
    • Tariff mitigation lag: pricing and supply chain countermeasures take time to accrue, making Q2 the peak dollar impact; neutrality targeted by year-end 2025 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Billions)$2.074 $2.346 $2.036
GAAP Diluted EPS ($)$0.46 $0.38 $0.42
Adjusted Diluted EPS ($)$0.76 $0.99 $0.64
Operating Profit ($USD Millions)$371.6 $457.2 $290.7
Adjusted Operating Profit ($USD Millions)$416.9 $504.3 $336.7
Adjusted Operating Margin (%)20.1% 21.5% 16.5%
Q1 2025 Actual vs Company GuidanceGuidance (from 2/12/25)ActualResult
Net Sales ($USD Billions)$1.900–$1.950 $2.036 Beat
Adjusted Diluted EPS ($)$0.57–$0.63 $0.64 Beat
Segment Net Sales ($USD Millions)Q1 2024Q1 2025YoY ΔOrganic Δ%
AMER$925.0 $1,185.3 +$260.3 28.8%
APAC$332.3 $447.2 +$114.9 36.4%
EMEA$381.8 $403.5 +$21.7 7.2%
Total$1,639.1 $2,036.0 +$396.9 25.3%
Segment Adjusted Op Margin (%)Q1 2024Q1 2025Δ
AMER20.3% 21.9% +1.6%
APAC9.1% 10.2% +1.1%
EMEA18.4% 19.5% +1.1%
Vertiv15.2% 16.5% +1.3%
Product vs Services ($USD Millions)Q1 2024Q1 2025Δ
Products$1,237.4 $1,611.1 +$373.7
Services & Spares$401.7 $424.9 +$23.2
Total Net Sales$1,639.1 $2,036.0 +$396.9
KPIs (Q1 2025)Value
Orders Growth~+13% YoY; ~+21% sequential
Book-to-Bill~1.4x
Backlog$7.9B; +10% vs Q4; +25% YoY
Adjusted Free Cash Flow$264.5M
Liquidity$2.3B
Net Leverage~0.8x
Cash & Equivalents$1,467.3M
Capital Expenditures (Q1)$36.5M; FY forecast ~$275M (~3% of sales)

Guidance Changes

MetricPeriodPrevious Guidance (2/12/25)Current Guidance (4/23/25)Change
Net Sales ($B)FY 2025$9.125–$9.275 $9.325–$9.575 Raised range; +$0.250B midpoint
Organic Net Sales Growth (%)FY 202515–17 16.5–19.5 Raised
Adjusted Operating Profit ($B)FY 2025$1.910–$1.960 $1.885–$1.985 Range widened; midpoint maintained
Adjusted Operating Margin (%)FY 202520.8–21.2 19.75–21.25 Lowered midpoint (~20.5%)
Adjusted Diluted EPS ($)FY 2025$3.50–$3.60 $3.45–$3.65 Range widened; midpoint maintained ($3.55)
Adjusted Free Cash Flow ($B)FY 2025$1.275–$1.325 $1.250–$1.350 Range widened; midpoint maintained
Net Sales ($B)Q2 2025N/A$2.325–$2.375 Initiated
Adjusted Operating Profit ($M)Q2 2025N/A$420–$450 Initiated
Adjusted Operating Margin (%)Q2 2025N/A18.0–19.0 Initiated
Adjusted Diluted EPS ($)Q2 2025N/A$0.77–$0.85 Initiated
Dividend per Share ($)Q2 2025N/A$0.0375 (payable 6/26/25) Declared

Earnings Call Themes & Trends

TopicQ3 2024 (Oct)Q4 2024 (Feb)Q1 2025 (Apr)Trend
AI/Technology InitiativesLiquid cooling revenue acceleration; AI pipelines growing Reaffirmed 5-year framework; strong data center demand iGenius sovereign AI project; NVIDIA GB200/GB300 reference designs; AI factory modular deployment Strengthening
Supply ChainCapacity expansion (Pelzer, SC) —Resilience playbook; USMCA qualification; rebalancing supply to low/no tariff regions; strategic relocation Proactive mitigation
Tariffs/Macro—2025 guide did not reflect new tariffs Q2 margin compression on net tariff impact; mitigation to neutrality by exit-2025 Headwind peaking Q2, easing H2
Product PerformanceBroad portfolio enablement for AI —Liquid cooling demand linked to Blackwell shipments; 3–6 month lead vs chips Scaling
Regional TrendsEMEA strong in Q3 Americas/APAC strong; EMEA moderated Americas/APAC strong incl. China reaccel; EMEA lagging bookings but pipelines robust Mixed; improving pipelines
Credit/Rating——Fitch BBB- IG rating; net leverage ~0.8x Strengthening balance sheet
ER&D/CapacityCapex framework 2.5–3.0% of sales 2025 capex ~$275M (~3%) Ongoing ER&D and capacity expansion to support AI deployments Sustained investment

Management Commentary

  • CEO tone: confident in data center demand and multi-year AI trajectory; “We are uniquely positioned to capitalize… pipelines continue to grow sequentially across all regions… backlog expanded and stands strong at $7.9B” .
  • Tariff plan: detailed mitigation via pricing (new contracts and backlog repricing where needed) and supply chain actions (USMCA qualification, rebalancing production); impact declines sequentially through 2025; target tariff neutrality exiting the year .
  • Executive Chairman: emphasized execution and ability to navigate tariff environment; “We’re still early… there’s so much more potential ahead” .
  • CFO: highlighted beats vs guidance (sales >$100M above, EPS +$0.04 vs guide), FCF strength ($265M), and Fitch BBB- rating; reiterated Q2 tariff-driven margin pressure, but underlying expansion continues ex-tariffs .
  • Strategic AI positioning: Vertiv and NVIDIA co-developing AI factory reference designs (GB200/GB300 NVL72); iGenius Colosseum deployment showcases integrated power and liquid cooling at high density .

Q&A Highlights

  • Tariff mitigation phasing: Two levers—pricing and supply chain—will accrue benefits across 2025; net tariff dollar impact peaks in Q2, then declines; margin impact improves further with H2 volume leverage .
  • Orders durability: Pipelines growing sequentially (next-12 months and beyond), lumpiness remains, but long-term trajectory intact; book-to-bill expected >1x for 2025 .
  • China exposure & market share: Single-digit U.S. sourcing from China; mitigation a combination of price and supply chain; management believes Vertiv is gaining share across portfolio due to technology leadership and scale .
  • Backlog repricing: Case-by-case based on contracts; customer understanding acknowledged; risk fairly assessed in guidance ranges .
  • Liquid cooling tracking: Blackwell shipments are a useful proxy; Vertiv deliveries often lead 3–6 months, with CDU alignment when in-rack .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2025 and Q2 2025 was unavailable via our data source; therefore, estimate comparisons could not be made.*
  • Company guidance comparisons indicate beats in Q1: net sales $2.036B vs $1.900–$1.950B guided; adjusted EPS $0.64 vs $0.57–$0.63 guided .
  • Forward estimates likely need to reflect: higher FY sales (raised range), margin compression near-term from tariffs (lowered margin midpoint), and management’s mitigation trajectory; sell-side may revisit margin and EPS ranges consistent with updated guidance disclosures .

* S&P Global consensus data unavailable for the specified periods.

Key Takeaways for Investors

  • Near-term: Expect Q2 margin compression on tariffs despite continued top-line momentum; underlying margin drivers remain intact ex-tariffs .
  • Mid-term: Raised FY sales range and robust backlog/pipelines support the multi-year AI buildout; guidance maintains adjusted EPS midpoint despite tariff noise, signaling resilience .
  • Execution edge: Vertiv’s NVIDIA-aligned AI factory designs and liquid cooling leadership are differentiators as high-density workloads scale globally .
  • Cash and balance sheet: Strong FCF conversion and IG rating (Fitch BBB-) provide flexibility for capex, tariff mitigation, and potential opportunistic capital allocation (with a quarterly dividend declared) .
  • Regional mix: Americas/APAC growth robust (incl. China reaccel); EMEA near-term lag but improving pipelines—watch for timing of European acceleration .
  • Tariff mitigation: Track progress on USMCA qualification, supply shifts, and pricing actions; neutrality target by exit-2025 is a key milestone .
  • Corporate continuity: CFO retirement announced with reaffirmed guidance and planned transition, reducing execution risk on 2025 targets .

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