PresentationMichael HalloranRobert W. Baird & Co. Incorporated, Research Division Awesome. Hi, everybody. Mike Halloran here, and we are pleased to welcome Vertiv with us. Gio Albertazzi, CEO, is going to give some really brief prepared remarks, and then we're going to dive into Q&A. As you all know, I don't cover the company. I've got a lot of good questions. However, if there's anything you want to talk about, raise your hand. I'll call on you. Most people won't do that anymore. So send an e-mail to the c ...

Vertiv (NYSE:VRT) FY Conference Summary Industry Overview - Vertiv is a global leader in digital critical infrastructure, with 80% of its operations focused on the data center sector, which is experiencing strong and long-term growth [2][3] - The company has a comprehensive portfolio that includes power, thermal management, and prefabrication solutions, positioning it well in the market [2][3] Key Points and Arguments Market Position and Growth - Vertiv has a strong market position with a complete portfolio that allows it to engage with major players like NVIDIA and large colocation providers [3] - The company reported a 30% growth in backlog, indicating robust demand and a strong pipeline of future orders [5][6] - North America is currently the primary growth driver, but there are significant opportunities for expansion in other regions, particularly in AI capacity [7][8] Revenue and Order Visibility - The company has good visibility into 2026 due to strong Q3 orders and a healthy backlog, which resembles pre-existing growth patterns [5][6] - Large-scale projects, such as gigawatt-scale announcements, will be deployed in stages, with order-to-deployment cycles ranging from 9 to 15 months [10][11] Competitive Dynamics - The industry is consolidating, with several players merging, which Vertiv views positively as it leads to a more rational market [12][13] - There is no significant double ordering in the industry, as orders are tied to specific projects, reducing cancellation risks [16] Capacity Management - Vertiv is actively expanding its capacity to meet growing demand, with a focus on efficiency and productivity [17][18] - The company is addressing potential constraints in data center growth, such as power availability and skilled labor, which are being managed effectively [18][19] White Space Opportunities - The company sees significant potential in the "white space" of data centers, particularly with high-density racks that require advanced power and cooling solutions [20][21] - Recent acquisitions, such as Great Lakes, enhance Vertiv's capabilities in liquid cooling and high-voltage DC power distribution [21][22] Service and Technology Integration - Service is a critical component of Vertiv's value proposition, with a growing number of field engineers to support customer needs [27][28] - The company is investing in predictive maintenance and system optimization to enhance service offerings [28] Financial Outlook - Vertiv aims for mid-20s margin growth by the end of the decade, driven by operational leverage and efficiency improvements [30][31] - The company has a strong balance sheet, allowing for continued investment in technology and capacity expansion, including potential M&A opportunities [32][33] Collaboration and Future Technologies - Vertiv collaborates with hyperscalers and companies like NVIDIA to pioneer future technologies, such as 800 volt DC power systems [34][36] - The company is positioned to manage the transition between existing and new technologies, ensuring it remains competitive [36] Enterprise Growth Potential - There is potential for enterprise growth, particularly in leased and colocation spaces, as AI adoption increases [37] Additional Important Insights - The prefabrication capabilities of Vertiv are crucial for reducing time to market for data center owners, addressing on-site construction challenges [24][25] - The company emphasizes the importance of technology in driving growth and addressing industry challenges [25][28]

Core Insights - The article emphasizes the importance of conducting personal in-depth research and due diligence before making investment decisions, highlighting the inherent risks involved in trading [3]. Group 1 - The analysis is intended for informational purposes only and should not be considered as professional investment advice [3]. - There is a clear disclaimer regarding the lack of any stock or derivative positions in the companies mentioned, indicating a neutral stance [2]. - The article expresses the author's personal opinions and does not reflect the views of Seeking Alpha as a whole [4].

Core Viewpoint - Vertiv is positioned for growth in the data center infrastructure sector, driven by increasing AI-related investments, but current stock valuation may not reflect its earnings potential due to external cost pressures like tariffs [1][4][8]. Company Overview - Vertiv is a leader in data center infrastructure, providing power, thermal management, and IT equipment, and is collaborating with Nvidia on new power-system solutions for high-voltage direct current data centers set to launch in 2027 [2][4]. - The company has experienced a stock price increase of over 67% this year, with a market capitalization of $69 billion [3][4]. Financial Performance - Vertiv has raised its full-year sales forecast consistently, with a current guidance of $10.2 billion in sales for 2025, reflecting a 10.9% increase from earlier estimates [6]. - However, the increase in sales guidance has not translated into proportional increases in operating profit and free cash flow, with adjusted operating profit expectations rising only 6.5% and free cash flow expectations increasing by 15.4% [5][6]. Cost Challenges - The company has faced cost headwinds due to tariffs, which have impacted its ability to achieve expected profit margins. Management anticipates that these tariff-related challenges will not persist into the next year [8][11]. - The CFO has indicated that achieving low 30% incremental margins is crucial for reaching a 25% operating margin target by 2029, with an expected organic revenue CAGR of 12%-14% from 2024 to 2029 [11][12]. Market Outlook - Analysts predict a sales increase of approximately $2 billion in 2026, with an expected $638 million rise in operating profit, indicating a 32% incremental increase [9]. - The growth in AI and data center spending is expected to accelerate, with management projecting a 27% organic revenue growth in 2025 [12]. Investment Consideration - While Vertiv's current earnings may not suggest significant undervaluation, the potential for growth driven by AI and data center investments could justify its valuation if tariffs do not continue to hinder profitability [13].

Core Insights - Vertiv (VRT) and Applied Digital (APLD) are significant players in the data center infrastructure market, with Vertiv focusing on thermal and power management systems, while Applied Digital specializes in high-performance data centers optimized for AI and high computing workloads [1][2] Market Overview - The data center infrastructure management market was valued at approximately $3.06 billion in 2024 and is projected to grow at a CAGR of 17.3% from 2025 to 2030, presenting substantial growth opportunities for both Vertiv and Applied Digital [2] Vertiv (VRT) Analysis - VRT's product portfolio includes thermal systems, liquid cooling, UPS, switchgear, busbars, and modular solutions, with organic orders increasing by about 21% and a book-to-bill ratio of 1.4 times in Q3 2025, indicating strong growth prospects [3][4] - The backlog for VRT grew 12% sequentially and 30% year-over-year to $9.5 billion, driven by the rapid adoption of AI and the need for data centers to support digital transformation [3][5] - VRT's recent acquisition of Purge Rite Intermediate for approximately $1.0 billion aims to enhance its liquid-cooling and thermal-management services for AI and high-performance data centers [4] - In the Americas, VRT's organic sales surged 43% in Q3 2025, while APAC saw a 21% increase, highlighting strong demand driven by AI adoption [5] Applied Digital (APLD) Analysis - APLD is experiencing robust demand for data center infrastructure, particularly with a focus on energy efficiency [6] - The partnership with CoreWeave, initially contracted for 250 megawatts and later expanded to 400 megawatts, represents a total contract value of $11 billion over 15 years, providing strong revenue visibility [7][9] - APLD's ability to shorten construction timelines from 24 months to 12-14 months enhances its capacity to meet urgent demands from hyperscalers, who are expected to invest over $350 billion in AI infrastructure in 2025 [8][9] Stock Performance and Valuation - Year-to-date, Vertiv's shares have increased by 61.1%, while Applied Digital's shares have surged by 306.8%, attributed to strong demand and strategic partnerships [10] - Both companies are currently considered overvalued, with Vertiv trading at a trailing Price/Book ratio of 19.94X compared to Applied Digital's 8.15X [12] - The Zacks Consensus Estimate for Vertiv's 2025 earnings is $4.11 per share, reflecting a 7.31% increase over the past 30 days, while APLD is projected to report a loss of 31 cents per share [14][16] Earnings Performance - Vertiv has consistently beaten earnings estimates in the trailing four quarters, with an average surprise of 14.89%, while Applied Digital has missed estimates in two of the last four quarters, with a negative average surprise of 104.22% [17] Conclusion - Both Vertiv and Applied Digital are positioned to benefit from the data center infrastructure boom, but Vertiv's stronger earnings momentum and diversified growth drivers suggest it may offer greater upside potential in the near term [18] - Applied Digital faces challenges with rising loss estimates and customer concentration, which may temper its near-term prospects [18][19]

Core Insights - Vertiv (VRT) shares have increased by 29.4% over the past three months, outperforming the broader Zacks Computer and Technology sector's growth of 15.8% and the Zacks Computers - IT Services industry's rise of 1.5% [1][9] Company Performance - Vertiv's shares have outperformed peers such as Super Micro Computer (SMCI) and Hewlett-Packard Enterprise (HPE), which saw gains of 17.1% and 1.3% respectively in the same period [2] - The company's organic orders grew approximately 21% in the trailing 12 months, with a book-to-bill ratio of 1.4 times for Q3 2025, indicating strong prospects [4] - Vertiv's backlog increased by 12% sequentially and 30% year-over-year to $9.5 billion, driven by the rapid adoption of AI and the growing need for data centers [4] Product Portfolio and Acquisitions - Vertiv's extensive product portfolio includes thermal systems, liquid cooling, UPS, switchgear, busbars, and modular solutions, with acquisitions playing a significant role in its expansion [3][7] - The company announced the acquisition of Purge Rite Intermediate for approximately $1.0 billion, enhancing its thermal management and liquid cooling services for AI and high-performance data centers [8] - In August, Vertiv acquired Waylay NV to improve AI-driven monitoring and optimization capabilities for its power and cooling systems [10] Strategic Partnerships - Vertiv's partnership with NVIDIA is a strategic advantage, with the introduction of gigawatt-scale reference architectures aimed at accelerating generative AI deployment by up to 50% [11] - The collaboration with NVIDIA also includes advancements in 800 VDC power architectures for next-generation AI factories [12] Financial Guidance - For Q4 2025, Vertiv expects revenues between $2.81 billion and $2.89 billion, with organic net sales projected to increase by 18% to 22% [13] - For the full year 2025, revenues are anticipated to be between $10.16 billion and $10.24 billion, with organic net sales growth expected between 26% and 28% [14] Earnings Estimates - The Zacks Consensus Estimate for Q4 2025 earnings is $1.28 per share, reflecting a year-over-year increase of 29.29% [15] - The estimate for 2025 revenues is $10.21 billion, indicating a growth of 27.47% year-over-year, with earnings expected to rise by 44.21% from 2024 [16] Valuation - Vertiv is currently trading at a trailing 12-month Price/Book ratio of 19.70X, significantly higher than the broader sector average of 11.89X and its peers [17] Conclusion - Vertiv's strong portfolio and partnerships are driving order growth, justifying its premium valuation, and the company holds a Zacks Rank 1 (Strong Buy) with a Growth Score of A, indicating a strong investment opportunity [19]

Core Viewpoint - Vertiv Holdings announced its acquisition of HVAC services firm PurgeRite Intermediate for approximately $1 billion, aiming to enhance its liquid cooling services portfolio in the data center power equipment sector [1] Group 1: Acquisition Details - The acquisition is valued at around $1 billion, indicating a significant investment by Vertiv Holdings to expand its service offerings [1] - PurgeRite Intermediate specializes in HVAC services, which aligns with Vertiv's strategy to enhance its capabilities in liquid cooling solutions [1] Group 2: Strategic Implications - This move reflects the growing demand for advanced cooling solutions in data centers, highlighting a trend towards more efficient and sustainable technologies in the industry [1] - By integrating PurgeRite's services, Vertiv aims to strengthen its market position and provide comprehensive solutions to its clients [1]

Core Viewpoint - Vertiv Holdings Co has announced a planned acquisition of Purge Rite Intermediate, LLC for approximately $1.0 billion, aimed at enhancing its leadership in next-generation thermal chain services for high-density and AI-driven environments [1][2]. Financial Summary - The acquisition price of approximately $1.0 billion represents about 10.0x expected 2026 EBITDA, which may decrease if additional performance-based payments of up to $250 million are made [1]. - The transaction is expected to close in the fourth quarter of 2025, subject to customary closing conditions and regulatory approvals [7]. Strategic Importance - This acquisition is seen as a strategic expansion of Vertiv's fluid management capabilities, enhancing its ability to support high-density computing and AI applications where efficient thermal management is critical [4]. - PurgeRite's services will integrate with Vertiv's existing offerings to provide comprehensive thermal management solutions, improving system performance and reducing downtime risks [6][4]. Industry Context - The demand for liquid cooling technology is increasing due to high-performance computing and AI applications, necessitating effective fluid management to maximize cooling performance [3]. - PurgeRite is recognized as an industry leader in mechanical flushing, purging, and filtration services for mission-critical data center applications, with strong relationships across hyperscalers and Tier 1 colocation providers [3].

Investment Rating - The industry investment rating is "Outperform the Market - A" and the rating is maintained [6] Core Insights - The report highlights that overseas AI implementation is accelerating, with a global resonance in the software sector [1] - IDC's leading orders have reached a historical high, with plans to double capacity by 2029 to meet the demand of over 900MW retail and xScale customers [1] - North American cloud providers are showing positive Capex guidance, with significant growth in cloud business [2][3][4] - ServiceNow's performance exceeded expectations, with AI contracts projected to reach $1 billion by 2026 [4] Summary by Sections Industry Insights - In Q3 2025, Equinix reported revenue of $2.32 billion, a year-on-year increase of 5%, with total bookings reaching a historical high of $394 million [1] - Google reported Q3 2025 revenue of $31.2 billion, a 9% year-on-year increase, with cloud revenue growing by 34% [2] - Microsoft achieved Q1 FY26 revenue of $77.7 billion, an 18% year-on-year increase, with cloud revenue exceeding $49 billion [2] - Amazon's Q3 2025 revenue was $180.2 billion, a 12% increase, with AWS revenue growing by 20.2% [3] - Meta's Q3 2025 revenue reached $51.2 billion, a 26% increase, driven by advertising revenue growth [3] Performance Metrics - ServiceNow's Q3 2025 subscription revenue was $2.599 billion, a 21.5% year-on-year increase, with cRPO at $11.35 billion [4] - The report suggests focusing on AI-related stocks in the US market, such as Salesforce, Vertiv, and Coreweave [4][16] Market Review - The report notes that the computer sector outperformed the Shanghai Composite Index by 2.55% this week [17] - The computer sector index increased by 2.66% year-to-date, significantly outperforming the overall market [18]

Core Insights - Vertiv Holdings (VRT) reported a solid quarter with double-digit growth in its topline, driven by continued expansion in AI infrastructure [1] Company Performance - The company is recognized as a mission-critical player in the expansion of AI infrastructure [1] - The growth in revenue is attributed to strong performance across various segments [1] Industry Context - The technology and industrial sectors are highlighted as areas of interest for investment, particularly companies with strong foundations [1]