Investment Rating - The report assigns a "Buy" rating for stocks, expecting a relative return of over 20% within six months [51] - The industry investment rating is "Outperforming the Market," anticipating an industry index increase of over 5% in the same timeframe [51] Core Insights - The report highlights the ongoing evolution of AI applications in China, with major companies like Tencent and Alibaba advancing from chatbot applications to AI Agent products, suggesting a potential second wave of opportunities in 2025 [2] - Concerns about a possible U.S. economic recession impacting AI investments are noted, yet companies like Google and ServiceNow have reported better-than-expected earnings, indicating resilience in the enterprise IT sector [3] - Google's Q1 2025 revenue reached $90.2 billion, exceeding expectations, with a net profit of $34.5 billion, marking a 46% year-on-year increase, while maintaining a capital expenditure guidance of $75 billion for the year [28][32] - Tesla's Q1 2025 revenue was $19.33 billion, down 9% year-on-year, with a gross margin of 16.3%, indicating challenges in meeting market expectations [36] - ServiceNow's Q1 2025 subscription revenue grew by 20% year-on-year to $3.005 billion, driven by strong demand for AI products [42] - Vertiv's Q1 2025 revenue was $2.036 billion, surpassing expectations, with a 25% year-on-year organic sales growth, reflecting strong market demand [46] Summary by Sections AI Development in China - Major Chinese tech firms are launching AI products, indicating a shift towards AI Agent applications, with potential for significant market opportunities in 2025 [2] AI Market in the U.S. - Despite economic concerns, companies like Google and ServiceNow have shown strong financial performance, alleviating fears about the future of AI investments [3] Company Performance Highlights - **Google**: Q1 2025 revenue of $90.2 billion and net profit of $34.5 billion, with a capital expenditure guidance of $75 billion [28][32] - **Tesla**: Q1 2025 revenue of $19.33 billion, down 9% year-on-year, with a gross margin of 16.3% [36] - **ServiceNow**: Q1 2025 subscription revenue of $3.005 billion, up 20% year-on-year [42] - **Vertiv**: Q1 2025 revenue of $2.036 billion, with a 25% year-on-year organic sales growth [46]

Core Viewpoint - Vertiv Holdings Co. reported strong first-quarter 2025 earnings, driven by robust demand for AI infrastructure, leading to a significant stock price increase and raised sales forecasts [2][11][14]. Financial Performance - Net sales for Q1 2025 reached $2.036 billion, a 24% year-over-year increase, surpassing the $1.94 billion consensus estimate [2][3]. - Adjusted diluted earnings per share were $0.64, a 49% increase from Q1 2024, exceeding the $0.62 analyst consensus [3]. - Operating profit rose by 43% to $291 million, with adjusted operating profit growing by 35% to $337 million, resulting in an adjusted operating margin of 16.5% [3]. Demand and Orders - First-quarter orders increased by approximately 13% year-over-year and about 21% from the previous quarter, leading to a book-to-bill ratio of approximately 1.4x [4]. - Vertiv's backlog grew to $7.9 billion, a 10% increase since the end of 2024 and 25% higher than in Q1 2024, attributed to strong market demand, particularly in AI deployments [4][5]. Forecast and Guidance - Vertiv revised its full-year 2025 net sales guidance upward by $250 million, now anticipating net sales between $9.325 billion and $9.575 billion, exceeding the previous outlook and analyst consensus of approximately $9.2 billion [6][7]. - The company maintained its prior full-year guidance for adjusted operating profit and adjusted diluted EPS, indicating potential margin compression due to ongoing international tariffs [7][8]. Market Reaction - The stock price surged following the Q1 earnings report, with shares increasing over 8% by midday on April 24, reflecting strong investor sentiment driven by the AI infrastructure narrative [11][12][14]. - The market's enthusiasm appears to focus on current performance and demand indicators rather than slight variations in Q2 EPS guidance [12][13]. Strategic Positioning - Vertiv's partnerships with companies like NVIDIA and projects such as "iGenius" in Italy highlight its capabilities in the rapidly expanding AI sector [5]. - The underlying growth narrative, supported by secular trends and strategic partnerships, remains compelling despite potential headwinds like tariff uncertainties [15].

Core Insights - The article emphasizes the importance of conducting personal in-depth research and due diligence before making investment decisions [3]. Company and Industry Summary - The analysis is intended for informational purposes only and should not be considered as professional investment advice [3]. - There is a clear statement that past performance does not guarantee future results, indicating a cautious approach to investment recommendations [4]. - The article highlights that the views expressed may not reflect those of the platform as a whole, suggesting a diversity of opinions among analysts [4].

Core Insights - The AI computing power industry chain is experiencing significant growth, with impressive Q1 performance across various sectors, indicating a high level of market activity and investment opportunities [2][3]. Group 1: Domestic Developments - ByteDance's Volcano Engine launched multiple Agent tools and AI data lake services to accelerate Agent development and operations for vertical enterprises [1][3]. - Meituan announced AI recruitment for various roles, aiming to develop a Native AI Agent product [1][3]. - Companies like Guanghuan Xinnet and Baoxin Software are investing in new projects, reflecting a growing demand for AIDC (AI Data Center) [1][3]. Group 2: AI Computing Power Performance - Haiguang Information reported a contract liability of 3.237 billion yuan in Q1 2025, a year-on-year increase of 113,510.65% [2]. - Huajin Technology achieved revenue of 34.998 billion yuan in Q1 2025, up 115.65% year-on-year [2]. - New Yisheng's net profit reached 1.573 billion yuan in Q1 2025, marking a 384.54% increase year-on-year [2]. Group 3: International Developments - Google Cloud generated revenue of $12.3 billion in Q1 2025, a 28% year-on-year increase, with an operating profit margin of 17.7%, up 8.4 percentage points [3]. - Viavi Solutions saw a 13% year-on-year increase in orders in Q1 2025, with a 21% quarter-on-quarter growth, indicating strong demand from data centers [3]. Group 4: Investment Recommendations - Recommended stocks in AIDC construction include Xinyi Network Group, Yingweike, and Baoxin Software [5]. - Recommended stocks in IT include Unisoc and ZTE Corporation, with beneficiaries like Cambrian and Haiguang Information [5]. - Recommended stocks in cloud computing include China Mobile, China Telecom, and China Unicom, with beneficiaries like Yunse Intelligent and Runjian Technology [5].

Group 1 - Vertiv Holdings (VRT) is a significant contributor to the global development of AI factories, particularly in providing data center cooling technology [1] - The GPUs essential for AI operations require multiple interoperabilities of various innovative technologies [1]

Core Insights - Vertiv Holdings (VRT) reported strong first-quarter 2025 results, with non-GAAP earnings of 64 cents per share, exceeding estimates by 3.23% and showing a year-over-year increase of 48.8% [1] - Net sales reached $2.04 billion, a 24.2% increase year over year, surpassing estimates by 6.26% [1] Financial Performance - VRT has consistently beaten earnings estimates over the past four quarters, with an average surprise of 10.42% [2] - Organic orders rose 20% year over year, with a book-to-bill ratio of approximately 1.4x, and a backlog of $7.9 billion, up 10% from the end of 2024 and 25% from the previous year [2] Revenue Breakdown - Product revenues, which accounted for 81% of total revenues, increased by 29.9% year over year to $1.65 billion [3] - Service revenues grew 4.7% year over year to $386.3 million [3] - Revenues from the Americas increased 28.1% year over year to $1.19 billion, while APAC revenues surged 34.6% to $447.2 million, and EMEA revenues rose 5.7% to $403.5 million [3][4][5] Operating Details - SG&A expenses rose 10.3% year over year to $346.3 million, but as a percentage of sales, they decreased by 210 basis points to 17% [6] - Adjusted operating profit increased 35.4% year over year to $336.7 million, with a non-GAAP operating margin of 16.5%, up 140 basis points [6] Regional Performance - Adjusted operating profit in the Americas surged 38.3% to $259.7 million, while EMEA's profit increased 11.9% to $78.7 million, and APAC's profit jumped 50.3% to $45.7 million [7] Balance Sheet and Cash Flow - As of March 31, 2025, cash and cash equivalents totaled $1.47 billion, up from $1.23 billion at the end of 2024, while long-term debt slightly decreased to $2.904 billion [8] - Cash flow from operating activities was $303.3 million, down from $425.2 million in the prior quarter, with free cash flow at $265 million [9] 2025 Guidance - For 2025, VRT expects revenues between $9.325 billion and $9.575 billion, with organic net sales growth projected between 16.5% and 19.5% [10] - Adjusted operating profit is anticipated to be between $1.885 billion and $1.985 billion, with an operating margin of 19.75-21.25% [10] - Non-GAAP earnings per share are expected to range from $3.45 to $3.65, indicating a year-over-year growth of 21.75% [10] Second Quarter Outlook - For Q2 2025, revenues are expected between $2.325 billion and $2.375 billion, with organic net sales growth projected between 19% and 23% [11] - Adjusted operating profit is anticipated to be between $420 million and $450 million, with an operating margin in the 18-19% range [11] - Non-GAAP earnings per share for Q2 are expected to be between 77 cents and 85 cents, suggesting year-over-year growth of 29.85% [12]

Core Viewpoint - Jim Cramer has identified data centers as a top investment sector for 2025, despite mixed trading signals and potential market corrections [1][2][3][8] Group 1: Investment Sentiment - Cramer believes that data center stocks are undervalued, indicating that the current trading levels do not reflect the true potential of the sector [2] - The data center theme has been a significant investment narrative, with ongoing changes in market sentiment that may not be immediately visible in broader indices [3] Group 2: Company Performance - Vertiv, a data center infrastructure provider, experienced a notable stock rally, with shares increasing over 18% in pre-market trading following a strong quarterly report and positive guidance, ultimately closing up 8.64% at $78 [4] Group 3: Market Concerns - There are emerging concerns that the data center sector may be approaching a bubble, as indicated by Microsoft scaling back on projects and Alibaba's Joe Tsai warning of potential market corrections reminiscent of the Dot-com bubble [5][6]

Financial Data and Key Metrics Changes - In Q1 2025, adjusted diluted EPS increased by 49% to $0.64, driven by higher adjusted operating profit and lower interest expenses [31][32] - Organic net sales rose by 25% year-over-year, exceeding sales guidance by over $100 million [32][33] - Adjusted operating profit increased by 35% to $337 million, with a 130 basis point expansion in adjusted operating margin [16][33] - Adjusted free cash flow reached $265 million, up 162% year-over-year, indicating strong cash generation [17][34] - Net leverage improved to 0.8%, with an investment-grade credit rating recently assigned by Fitch [35][36] Business Line Data and Key Metrics Changes - Strong growth was observed in both the Americas and APAC regions, while EMEA's growth lagged due to slower AI infrastructure build [37] - Adjusted operating margin increased across all three regions, with the Americas showing a 160 basis point expansion [38] Market Data and Key Metrics Changes - The trailing 12-month organic orders growth was reported at 20%, with Q1 orders up 21% sequentially and 13% year-over-year [15][16] - The backlog expanded to $7.9 billion, up $1.6 billion year-over-year, supporting the growth narrative [22] Company Strategy and Development Direction - The company is focused on capitalizing on the digital revolution and robust data center demand, particularly in AI infrastructure [8][14] - A strong emphasis on operational excellence and supply chain resilience has been established to navigate tariff challenges [23][28] - The company raised its full-year sales growth guidance to 18%, reflecting confidence in business fundamentals despite tariff uncertainties [17][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to handle market challenges and emphasized the importance of execution and operational flexibility [10][11] - The outlook for 2025 remains strong, with expectations for continued growth driven by demand signals from customers and technology partners [20][52] Other Important Information - The company is actively working on tariff mitigation strategies, including supply chain reconfiguration and pricing adjustments [25][28] - A significant project with NVIDIA to deliver a prefabricated AI factory was highlighted, showcasing the company's capabilities in advanced infrastructure [54][57] Q&A Session Summary Question: How do you see the mitigation efforts phasing in through '25? - Management indicated that countermeasures will improve throughout the year, with pricing actions on new contracts and existing backlog repricing being key components [61][64] Question: What is driving the impressive performance on orders? - Management noted that growing pipelines and order durability are key factors, with a stable pipeline velocity indicating sustained demand [72][74] Question: Can you provide details on China import exposure? - Management refrained from disclosing specific numbers but confirmed that a small percentage of sourcing comes from China, with ongoing supply chain adjustments [79][82] Question: How are you managing production given market dynamics? - Management stated that demand remains strong across various segments, allowing for increased capacity and delivery to the market [98][100] Question: Can you discuss the ability to reprice the backlog? - Ongoing conversations with customers regarding repricing are taking place, with a general understanding of the unique challenges posed by tariffs [103][105] Question: Will Europe start to contribute to bookings this year? - Management expressed cautious optimism about European growth, while the Americas continue to be a strong growth engine [114][115] Question: What is the total gross tariff-related pressure for 2025? - Management did not disclose specific figures but emphasized a focus on reducing the gross impact through pricing and supply chain countermeasures [89][90] Question: Why was there no stock repurchase activity? - Management highlighted the importance of maintaining a strong balance sheet during uncertain times and indicated an active M&A pipeline [92][94] Question: Are you seeing any signs of cloud and colo demand slowing down? - Management confirmed that demand in the cloud and colo segments remains strong, with growth expectations aligned with previous forecasts [132][134]

Part I [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Vertiv reported a significant Q1 2025 turnaround with **$164.5 million** net income on **$2.04 billion** net sales [Condensed Consolidated Statements of Earnings (Loss)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings%20(Loss)) Q1 2025 net sales grew **24.2%** to **$2.04 billion**, driving **$164.5 million** net income from a prior-year loss Q1 2025 vs. Q1 2024 Statement of Earnings (in millions, except per share data) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $2,036.0 | $1,639.1 | 24.2% | | Operating profit (loss) | $290.7 | $202.6 | 43.5% | | Net income (loss) | $164.5 | $(5.9) | N/A | | Diluted EPS | $0.42 | $(0.02) | N/A | - The significant swing from net loss to net income was partly due to the absence of a **$176.6 million** loss from the change in fair value of warrant liabilities, which was recorded in Q1 2024[12](index=12&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets reached **$9.45 billion**, with cash at **$1.47 billion** and total equity at **$2.67 billion** Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,467.3 | $1,227.6 | | Inventories | $1,383.5 | $1,244.4 | | Total assets | $9,451.1 | $9,132.5 | | Long-term debt, net | $2,904.1 | $2,907.2 | | Total liabilities | $6,784.7 | $6,698.2 | | Total equity | $2,666.4 | $2,434.3 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 operating cash flow more than doubled to **$303.3 million**, while financing cash outflow significantly decreased Cash Flow Summary (in millions) | Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $303.3 | $137.5 | | Net cash used for investing activities | $(38.8) | $(36.5) | | Net cash used for financing activities | $(24.9) | $(603.1) | - The significant decrease in cash used for financing activities is primarily due to a **$599.9 million** repurchase of common stock in Q1 2024 that did not recur in Q1 2025[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes detail business segments, revenue recognition, debt, and legal contingencies, including a securities class action - The company operates in three business segments: Americas; Asia Pacific; and Europe, Middle East & Africa, providing critical digital infrastructure and services[25](index=25&type=chunk) - The company's effective tax rate was **38.0%** for Q1 2025, influenced by a valuation allowance for legislative changes, compared to **54.6%** in Q1 2024, which was impacted by non-deductible changes in warrant liabilities[40](index=40&type=chunk) - The company is party to a securities class action lawsuit, derivative lawsuits, and is responding to a subpoena from the SEC and a document request from the U.S Attorney's Office related to the allegations[69](index=69&type=chunk)[70](index=70&type=chunk)[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **24.2%** net sales growth driven by AI demand, **43.5%** operating profit increase, and strong liquidity [Outlook and Trends](index=23&type=section&id=Outlook%20and%20Trends) The company is expanding capacity and product offerings to meet AI-driven demand while enhancing supply chain resilience - Increased maturity and adoption of AI and high-performance compute is driving technology innovation and has led to increased demand for the company's products and services[93](index=93&type=chunk) - The company is expanding manufacturing capacity to meet customer demand, including doubling capacity for switchgear and busbar since late 2021 and opening new facilities in India and South Carolina in 2024[87](index=87&type=chunk)[88](index=88&type=chunk) - Vertiv is managing geopolitical and macroeconomic uncertainties by pursuing a supply chain strategy of supplier and geographic resilience, including adding regional sourcing and manufacturing capabilities[85](index=85&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q1 2025 net sales grew **24.2%** to **$2.04 billion**, leading to **$164.5 million** net income despite a slight gross margin decrease - Net sales increased by **$396.9 million (24.2%)** YoY, primarily due to higher sales volumes[90](index=90&type=chunk) - Gross margin slightly decreased from **34.6%** to **33.7%** YoY, primarily due to the mix of product and service sales and the impact of tariffs[92](index=92&type=chunk) - SG&A as a percentage of sales decreased from **19.2%** in Q1 2024 to **17.0%** in Q1 2025, indicating improved operating leverage[94](index=94&type=chunk) - Interest expense decreased by **$13.7 million** YoY due to Term Loan amendments and higher interest income[97](index=97&type=chunk) [Business Segments](index=26&type=section&id=Business%20Segments) All three geographic segments, Americas, Asia Pacific, and EMEA, reported strong sales and operating profit growth with improved margins Americas Segment Performance (in millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $1,185.3 | $925.0 | 28.1% | | Operating profit | $259.7 | $187.8 | 38.3% | | Margin | 21.9% | 20.3% | +1.6 p.p. | Asia Pacific Segment Performance (in millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $447.2 | $332.3 | 34.6% | | Operating profit | $45.7 | $30.4 | 50.3% | | Margin | 10.2% | 9.1% | +1.1 p.p. | Europe, Middle East & Africa Segment Performance (in millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $403.5 | $381.8 | 5.7% | | Operating profit | $78.7 | $70.3 | 11.9% | | Margin | 19.5% | 18.4% | +1.1 p.p. | [Capital Resources and Liquidity](index=29&type=section&id=Capital%20Resources%20and%20Liquidity) The company maintains strong liquidity with **$1.47 billion** cash and **$784.2 million** credit availability, projecting **$250-300 million** in 2025 capital expenditures - As of March 31, 2025, the company had **$1,467.3 million** in cash and cash equivalents and **$784.2 million** of availability under its ABL Revolving Credit Facility[111](index=111&type=chunk) - The company expects capital expenditures (including capitalized software) to be between **$250.0 million** and **$300.0 million** for the full year 2025[108](index=108&type=chunk) - Net cash from operating activities increased by **120.6%** YoY to **$303.3 million** in Q1 2025, driven by higher net income and improved working capital[113](index=113&type=chunk)[114](index=114&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in quantitative and qualitative market risk disclosures were reported since the 2024 Form 10-K - There have been no material changes in market risk disclosures since the 2024 Form 10-K[118](index=118&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes - The CEO and CFO concluded that as of March 31, 2025, the Company's disclosure controls and procedures were effective[120](index=120&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect internal controls[121](index=121&type=chunk) Part II [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) Vertiv faces a securities class action, derivative lawsuits, and government inquiries regarding alleged false statements - A putative securities class action lawsuit alleges that the company made materially false or misleading statements regarding inflationary and supply chain pressures between February 2021 and February 2022. Some claims have been dismissed, while others remain pending[123](index=123&type=chunk) - Shareholder derivative lawsuits have been filed and consolidated, alleging breach of fiduciary duty by certain directors and officers related to the same issues as the class action. These actions are currently stayed[124](index=124&type=chunk) - In November 2023, the company received a subpoena from the SEC and a parallel request for documents from the U.S Attorney's Office for the Southern District of New York related to the allegations in the lawsuits[126](index=126&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The company's risk factors remain materially unchanged from those disclosed in its 2024 Form 10-K - The Company's risk factors have not materially changed from those described in its 2024 Form 10-K[130](index=130&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales or share repurchases occurred in Q1 2025, with **$2.4 billion** remaining under the program - The Board of Directors approved a stock repurchase program of up to **$3.0 billion** through December 31, 2027[133](index=133&type=chunk) - During the first quarter of 2025, Vertiv made no share repurchases. As of March 31, 2025, **$2.4 billion** was available for repurchase[134](index=134&type=chunk)

First Quarter 2025 Results April 23, 2025 Cautionary Statement Regarding Forward-Looking Statements This presentation, and other statements that Vertiv may make in connection therewith, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to Vertiv's future financial or business performance, strategies or expectations, and as such are not historical facts. This includes, without limitation, statements regarding Vertiv's financial posi ...