Vertiv Outlook: Can Data Center Boom Support Margins?

Every quarter, Wall Street is looking for the same answer: Has the AI construction boom truly translated into book profits?

Today, the answer is up to Vertiv. The company that provides power and cooling systems for global data centers will release its financial results for the first quarter of 2026 before the market opens. Analysts expect revenue of $2.65 billion and a year-over-year increase in EPS to $1.01.

However, after the stock price has outperformed the industrial sector by about 288 percentage points in the past year, the market is not looking for a passing grade, but for evidence that can support the current valuation to move forward.

Exceeding expectations is already a basic requirement

The consensus forecast for this quarter's revenue is $2.64 billion, and adjusted EPS is $1.01. However, JPMorgan forecasts revenue of $2.71 billion and EPS of $1.05, which is about 4% higher than the consensus, and directly states in its report: "We expect both revenue and profits for the first quarter to exceed expectations and maintain full-year forecasts above market consensus and company guidance, expecting the company to gradually increase guidance."

Bank of America Securities analyst Andrew Obin also gives a buy rating with a target price of $330, pointing out that in the past six months, market forecasts for capital expenditure in 2027 have been revised up by more than $321 billion (an increase of 63%) — and every dollar of this revised spending requires Vertiv's power cabinets and cooling racks to support.

The company previously gave an official guidance range for the first quarter: revenue between $2.5 billion and $2.7 billion, organic growth of 18% to 26%, with North America at more than 30% growth and Europe expected to decline by about 20%, adjusted EPS of $0.95 to $1.01, and an incremental margin guidance of only 28%. The latter is the single most watched number today.

The moment to verify the repair of profit margins

In 2025, due to the superimposed impact of tariffs and the transition costs of supply chain reorganization, Vertiv's full-year incremental profit margin was dragged down to 24%, below the lower limit of the company's long-term target range of 30% to 35%. J.P. Morgan calculated that, if normalized at 30%, tariffs collectively dragged down the full-year profit margin by about 100 to 150 basis points. Management promised on the fourth quarter earnings call of 2025, "When calculated at the exit rate, the unfavorable impact of tariffs on profit margins for the first quarter of 2026 will be largely offset."

JPMorgan expects an incremental profit margin of 29% for the first quarter; if the actual figure hits or breaks 30%, it will be a clear upward signal. If it falls below this level, management will need to provide a convincing explanation, especially after the significant pressure on the stock price in the second quarter of 2025 due to a similar reduction in profit margins.

After the disappearance of order data, pay attention to management's statement

This quarter's financial report has a structural change: Vertiv announced that it will no longer disclose quarterly order and backlog data, retaining only annual historical backlog disclosure in the annual 10-K form. This decision led to a brief market anxiety when announced in 4Q25 - at that time, the backlog jumped from $8.5 billion to $15 billion, with an order-to-shipment ratio as high as 2.9 times.

Data from Bank of America Securities dispelled some doubts: in January to February 2026, the construction start-up amount of data centers in the United States reached $36.9 billion, while in the same period of 2025, it was only $1.4 billion; data from the U.S. Census Bureau showed that data center construction expenditure has been running at an annualized rate of $47 billion, with a year-over-year increase of 31%; in addition, in Q1 2026 alone, the total construction start-up of data centers in the United States exceeded $48 billion, including intensive groundbreaking of major projects including Amazon, Meta, and Compass.

JPMorgan's self-built DC pipeline tracking system showed that the cumulative tracked projects in the United States have reached 415GW, with more than 50GW added in Q1 2026 alone, following the 200GW added in 2025. The report clearly points out that the market is shifting from the "project announcement phase"