Financial Data and Key Metrics Changes - Adjusted diluted EPS for Q3 was $1.24, up approximately 63% year over year, driven by higher adjusted operating profit [8][14] - Q3 organic sales grew 28%, with the Americas up 43% and APAC up 21%, while EMEA declined 4% [8][14] - Adjusted operating profit reached $596 million, up 43% year on year, with a margin of 22.3% [9][14] - Adjusted free cash flow was $462 million, up 38%, translating to approximately 95% free cash flow conversion [16] Business Line Data and Key Metrics Changes - The Americas segment delivered strong organic growth of 43%, driven by accelerated AI demand [16][17] - APAC saw 21% organic growth, supported by AI infrastructure demand [16] - EMEA experienced a 4% decline in organic sales, but there are expectations for recovery in the second half of 2026 [17][18] Market Data and Key Metrics Changes - The overall market growth is accelerating, particularly in the colo cloud segment, which is the fastest-growing area [8] - The total backlog now stands at $9.5 billion, up about 30% year on year and 12% sequentially, indicating strong visibility into 2026 [10][21] Company Strategy and Development Direction - The company is focused on maintaining technology leadership through R&D investments and operational excellence [4][6] - A restructuring program is being implemented in EMEA to prepare for future growth, although acceleration may not occur until the second half of 2026 [10][17] - The company plans to accelerate investments in supply chain and services capabilities to meet evolving customer needs [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a multi-year period of significant growth and value creation, driven by digital transformation and AI demand [6][22] - The company anticipates continued significant organic sales growth in 2026, supported by a substantial backlog and market indicators [22][24] - Tariffs are viewed as a dynamic input cost, with mitigation strategies in place to offset their impacts [11][22] Other Important Information - The company is raising full-year guidance for adjusted EPS, net sales, adjusted operating profit, and adjusted free cash flow [20][21] - The engineering and R&D spending is expected to grow by over 20% in 2026 to maintain competitive advantage [24] Q&A Session Summary Question: What is driving the order uptake and when will big announcements flow into orders for Vertiv? - Management indicated that strong market conditions, technology evolution, and reliable execution are driving order growth, but the timing of large customer announcements translating into orders can vary [29][31] Question: Can you provide more color on the services opportunity and its margin structure? - Management emphasized that the service business is a unique competitive advantage and is expected to catch up as product systems grow, with a strong focus on technology and customer experience [37][39] Question: What is the outlook for EMEA margins and the path back to mid-20s? - Management stated that a combination of sales acceleration and restructuring efforts will facilitate improved margins in EMEA, with expectations for significant improvement in Q4 [91][92] Question: How does the company view the competitive environment and recent innovations? - Management expressed confidence in their innovation capabilities and the importance of staying ahead in the market, viewing recent innovations as opportunities rather than threats [108]

Summary of Conference Call Notes Industry Overview: Semiconductors Key Insights - **Stability in Demand**: The semiconductor industry is experiencing stable trends in Q3 and Q4, with diversified semiconductor sales expected to grow 6.5% QoQ in Q3, which is 180bps above seasonal trends. However, Q4 is projected to be flat QoQ, 290bps above a historical decline of -3% [1][2] - **Cyclical Recovery**: Despite expectations for a broad-based recovery, demand remains tepid, particularly in the automotive sector, which is still facing challenges [1][2][3] - **Utilization Rates**: Commentary on utilization rates in Q4 and Q1 will be critical for assessing vendor confidence in recovery [1] Sector-Specific Trends - **Industrial Semiconductors**: Companies like TXN and ADI are expected to grow 13% and 21% YoY in CY25, respectively. However, all major PMIs are currently below 50, indicating potential impacts on recovery confidence [2] - **Automotive Semiconductors**: The automotive sector shows mixed signals, with strong performance in China but ongoing struggles in the US and Europe. Companies like NXPI are favored due to their unique product offerings [3] - **AI and Data Center Demand**: Fast-growing segments such as data centers and defense are expected to drive upside, with companies like MCHP and ON benefiting from AI-related sales [1][2] Company-Specific Insights Texas Instruments (TXN) - **Outlook**: TXN is rated as Underperform with a price objective of $190. Q3 results are expected to be in line, but Q4 may face headwinds due to muted cyclical trends [11][12] - **Sales Projections**: Expected Q3 sales of $4.64 billion (+4.2% QoQ) and Q4 guidance could be below consensus [12][13] NXP Semiconductors (NXPI) - **Outlook**: NXPI is rated as a Buy with a price objective of $270. Q3 sales are expected to be in line with consensus at $3.16 billion (+8.1% QoQ) [14][15] - **Segment Performance**: The automotive segment is expected to drive growth, with potential upside from channel refill and EV tax credit pull-ins [16] ON Semiconductor (ON) - **Outlook**: ON is rated Neutral with a price objective of $52. Q3 results are expected to beat consensus, while Q4 is projected to be in line [17][18] - **Sales Expectations**: Anticipated Q3 sales of $1.51 billion (+3.2% QoQ) with potential upside from automotive demand [19] Microchip Technology (MCHP) - **Outlook**: MCHP is rated Neutral with a price objective of $70. Q3 results are expected to be in line, with potential upside in Q4 [20][21] - **Sales Forecast**: Expected Q3 sales of $1.14 billion (+6.1% QoQ) with a focus on strategic defense and data center businesses [22] Allegro MicroSystems (ALGM) - **Outlook**: ALGM is rated Buy with a price objective of $34. Q3 results are expected to show upside, while Q4 is projected to be in line [23][24] - **Sales Projections**: Anticipated Q3 sales of $211 million (+3.5% QoQ) with strong design-win momentum in the automotive sector [25] Additional Considerations - **Tariff and Trade Tensions**: Ongoing tariff uncertainties and trade tensions are impacting demand and pricing strategies across the semiconductor sector [1][2][3] - **China Market Dynamics**: The Chinese market remains a focal point for growth, particularly in the automotive sector, but poses risks due to geopolitical tensions and local competition [9][34] - **Memory Demand**: The demand for memory chipsets is expected to remain strong, driven by major tech companies and AI applications [10] This summary encapsulates the key points from the conference call, highlighting the current state of the semiconductor industry and specific company outlooks.