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].