GE Vernova Inc. (GEV) Earnings

Management highlights

- **Overall Business Demand and Positioning** * The long-cycle electric power industry is in the early stages of a multi-decade growth super cycle driven by accelerating electricity demand, electrification, data center expansion, and grid modernization, with GE Vernova well-positioned to capture value. * Total company orders hit $24.2 billion in 2Q26 (up 88% YoY) with a 2x book-to-bill ratio; total backlog grew to $176 billion (up $13 billion sequentially), on track to reach $200 billion in 2027, split evenly between equipment and services backlog. * Year-to-date 2026 free cash flow reached ~$10 billion (more than 2.5x 2025 full-year results), with a $13 billion cash balance; the company has returned ~$4 billion to shareholders year-to-date, exceeding full-year 2025 returns. - **Gas Power Capacity and Demand Execution** * 2Q gas power orders and slot reservation agreements (SRAs) reached 20 gigawatts, bringing total gigawatts under contract to 116 gigawatts (up from 100 gigawatts sequentially); more than half of contracted gigawatts are high-efficiency HA turbines, expected to drive long-term high-margin services growth. * The company is expanding annual gas power production capacity to 20 gigawatts in 2026, 24 gigawatts in 2028, and 30 gigawatts in 2030, all through capital-efficient lean improvements and incremental machinery within existing factory footprints, funded largely by customer down payments. The company expects to be mostly sold out of 30 gigawatts of 2030 production capacity by end-2026, with more than half of 2031 production capacity also contracted by year-end. * HA turbine fleet has reached 4 million operating hours, with the fleet size expected to double over the coming years based on current contracts, creating a strong foundation for long-term services growth. - **Electrification Growth and New Product Development** * Data center orders for electrification reached $5 billion in H126, more than doubling full-year 2025 levels; full ownership of Prolec has allowed the company to book $800 million in U.S. transformer orders H126 that it could not have secured prior to full acquisition. * Air-insulated switchgear backlog is $5 billion, supporting multi-year revenue growth; output is being expanded via lean processes, additional shifts, and automation within existing facilities. * A 5 megawatt solid-state transformer (SST) prototype for indoor hyperscaler use is complete and will be delivered to the customer later in 2026; development of a 6 megawatt outdoor SST prototype is underway, and medium voltage uninterruptible power supply (UPS) solutions for data centers are also in development. - **Wind Segment Discipline** * Onshore wind services has delivered three consecutive quarters of year-over-year margin expansion, driven by focused operational discipline; the U.S. onshore new equipment market remains soft due to permitting delays and tariff uncertainty, with clarity expected in H226. * Installation and commissioning of Dogger Bank B offshore wind is progressing on track, with project costs tracking to expectations. - **Cross-Company Operational Improvements and Capital Allocation** * H126 adjusted company margin reached 10.5%, up 360 basis points from H125, driven by volume, pricing, productivity, and lean improvements; the company has realized ~20% savings on $300 million of consolidated sourcing spend, with more savings expected in future periods. * Completed the small acquisition of Robotech Automation in July 2026 to accelerate factory automation and productivity; completed disposition of remaining stake in China XD grid for $600 million pre-tax proceeds, simplifying the portfolio. * Restructuring actions to deliver $250 million in annual G&A savings are substantially complete, with the company on track to hit a $600 million total G&A cost reduction target by 2028.

Guidance

- Full year 2026 revenue guidance is raised to $45.5–$46.5 billion, a $1 billion upward revision from prior guidance, driven by stronger expected growth in the Power and Electrification segments. - Full year 2026 adjusted EBITDA margin guidance is maintained at 12%–14%. By segment: Power EBITDA margin is expected to be 17%–19%, Electrification EBITDA margin is expected to be 18%–20%, and Wind is expected to deliver a full-year EBITDA loss of ~$400 million, all unchanged from prior guidance. - Full year 2026 free cash flow guidance is raised sharply to $11.5–$12.5 billion, up from the prior guidance of $6.5–$7.5 billion, driven by stronger than expected order conversion and higher customer down payments for gas power SRAs. - 3Q26 expected performance: Total revenue is expected to grow year-over-year with expanding adjusted EBITDA margin; Power revenue is expected to grow 17%–19% YoY with an EBITDA margin of 17%–18%; Electrification revenue is expected to reach $3.8–$4 billion with margin modestly above 2Q26 levels; Wind revenue is expected to decline low double-digits YoY with EBITDA near break-even. - 2026 full year results are expected to be more second-half weighted than 2025, with the highest revenue and EBITDA in 4Q26, driven by higher gas turbine shipments and typical seasonal peak in gas power outage activity.

Segment performance

1. **Power Segment**: Orders more than doubled year-over-year, driven by a 4x increase in gas power equipment orders and 12% growth in power services orders. Revenue grew 14% year-over-year: equipment revenue rose on higher gas turbine volume and favorable pricing, with 29 gas turbines shipped (38% YoY growth, 16 aero derivatives), while services revenue grew from nuclear and gas power expansion. Adjusted EBITDA margin expanded 320 basis points to 18.8%. Power contributes approximately 45% of GE Vernova's total 2026 expected revenue. 2. **Electrification Segment**: Orders grew 66% year-over-year to $6.3 billion, with a book-to-bill ratio of 1.7x. North American equipment orders grew 4x YoY, making North America the largest portion of the segment's equipment backlog, which reached $41 billion (up 69% YoY). Revenue grew 68% on a reported basis (including Prolec) and 29% organically, with $900 million of revenue from Prolec. Adjusted EBITDA more than doubled YoY, with margin expanding 700 basis points to 18.4%. Electrification is expected to contribute 32-33% of GE Vernova's total 2026 expected revenue. 3. **Wind Segment**: Orders declined 40% YoY, driven by lower onshore equipment orders in North America, partially offset by higher services orders. Revenue declined 11% YoY due to lower onshore equipment deliveries, partially offset by higher onshore services and offshore revenue from Dogger Bank B installations. The segment reported an adjusted EBITDA loss of $275 million, in line with expectations, with the wider YoY loss driven by lower onshore deliveries and higher offshore project costs, partially offset by improved onshore services margins. Wind is expected to contribute a low double-digit percentage of total 2026 revenue.

Risks & headwinds

- U.S. onshore wind new equipment demand remains soft, with ongoing permitting delays and tariff uncertainty creating unclear visibility for a near-term inflection in orders. - Conversion of gas power slot reservation agreements to firm orders is dependent on customer and EPC partner progress on project development and permitting, which can impact the timing of order booking and revenue recognition. - Inflation continues to put upward pressure on costs, though management notes that current pricing, volume, and productivity improvements are more than offsetting inflationary impacts to date.

Analyst Q&A

• Q: The new plan for 30 gigawatts of annual gas power capacity by 2030 was announced. Can you confirm that major new factory builds are still off the table, and provide an update on the Greenville factory expansion? /

  A: The ramp to 5 gigawatts per quarter (20 gigawatts annualized) starting 3Q26 is on track, with 325 new production machines already installed and 400 expected by end-2026. All capacity expansion up to 30 gigawatts will happen within existing factory footprints via lean process improvements, automation, and incremental machinery, with very modest required capex relative to expected backlog. Capacity expansion is also partially driven by future expected growth in HA turbine outage demand, as the growing installed fleet will require more service shop capacity by the mid-2030s. Labor was pre-hired and trained more than a year ago to support the capacity ramp, so the transition is expected to be smooth.\n\nQ: Demand for data center solutions has grown far faster than original expectations. What is the updated revenue opportunity (entitlement) for this customer segment as new products launch? / A: Data center orders reached $5 billion in H126, accounting for a large share of total first half orders. Current scope per gigawatt of data center demand is ~$300 million, but the addition of new products including solid-state transformers (SST) and medium voltage uninterruptible power supply (MVUPS) will increase this to 2-3x current levels. Most of this incremental opportunity is expected to hit orders in 2027 rather than 2026, based on current product development timelines and customer discussions.\n\nQ: Is 2026 expected to be the peak year for gas turbine orders, and what is the longer-term growth outlook? / A: Management expects to continue growing total contracted gigawatts beyond 2026, reaching at least 125 gigawatts by end-2026 with further healthy growth in 2027. Growth will depend on how quickly customers and EPC partners convert slot reservation agreements to firm orders, but the current pipeline supports continued growth. All incremental new gas turbine equipment will also drive sustained long-term growth in high-margin services revenue over the coming decade.\n\nQ: How are you approaching the development and commercialization of solid-state transformers, and is there risk sharing with early customers? / A: The first 5 megawatt indoor SST prototype is being developed with shared R&D costs with a hyperscaler customer, which will receive the unit for testing later this year. A 6 megawatt outdoor prototype for a second hyperscaler also uses R&D cost sharing; after testing is complete, future orders will follow traditional commercial terms. Large-scale adoption of SST will depend on how quickly AI data centers shift to 800-volt DC architecture, with meaningful orders not expected before 2027. MVUPS solutions are on track to enter orders sooner than SST.