GE Vernova is part of the spinoff that General Electric first announced in 2021 and later completed in 2024. The company broke up its three biggest segments into separate units: GE Healthcare was spun off first in 2023, GE Vernova for the Energy business was spun off in 2024 and began trading as GEV, and GE Aerospace was the business that remained with the existing stock ticker GE.
As you can imagine, coming from General Electric, GE Vernova is a massive company that can easily slip under the market’s radar given it does not have much history on the public markets. At the time the Energy segment was split up, it was seeing $33 billion in revenue and was helping to generate 30% of the world’s electricity with 55,000 wind turbines and 7,000 gas turbines.
This year, the company is expected to report $37 billion in revenue with strong earnings growth of 45.3%. The stock is not a hypergrowth profile, rather, is a quality, defensible position that could do well during any periods of doubt in the broader AI trend.
The defensibility is particularly attractive when you consider that gas turbines is the crux of the issue for expanding gas power plants. According to Bloomberg’s calculations, more than “$400 billion worth of gas-fired power plants through the end of the decade are in jeopardy of delay or cancellation because of the lack of capacity to meet future turbine orders.” The same article points toward GE Vernova filling orders as far out as 2030.
In the chart outlined below, GE Vernova is the world’s largest gas turbine supplier at 25% ahead of Schneider at 24%. Even still, GEV nearly tripled its gas turbine equipment this past quarter – a statement that has us sitting up in our seats. Per the earnings call: “Power orders grew 44%, led by Gas Power equipment nearly tripling year-over-year.”
Also, consider that we have been covering Bitcoin miners and other energy sources that can quickly help hyperscalers secure powered shells in the 1GW to 3GW range – yet GEV has 50 GW in backlog for gas equipment contracts with expectations the backlog will reach 60 GW by the end of this year. In other words, the chances that GEV is not a significant player in supplying energy to data centers for many years to come is nil.
In a bid to supply options quickly to alleviate bottlenecks, GEV is also shipping aeroderivative gas turbine packages and doing extensive R&D on a small modular reactor (SMR) design. As detailed below, how exactly GEV evolves to solve the crucial bottleneck around AI power consumption is not set in stone, rather the company is experimenting rapidly with how to leverage their deep experience in natural gas, electrification and renewables like wind to meet global demand.
Natural Gas Capacity to Reach 60GW Backlog by YE
The question of “how fast, and how much” sums up what any given management team in the energy space will be pressed on in the coming quarters.
In Q2, GEV signed 9GW of new gas equipment contracts with 2GW going directly to orders and 7GW going into what’s called a slot reservation. During the quarter, the company also converted 3GW into orders and shipped 5GW of equipment.
Management stated they would exit the year with 60GW “at better margins with significant momentum into ‘26.” Here is the breakdown from that comment:
- 29GW are in the backlog, same as last quarter
- Slot Reservation Agreements (SRA) grew from 21GW to 25GW
- Total backlog including SRAs is 55GW, up from 50GW guided in April
- Given this, the company expects to add another 5GW to its backlog to reach 60GW by end of the year.
- There was a discussion on the call that this represents 3 years of backlog: “And we've talked about the fact that we'll get to at least 60 gigawatts by the end of the year. So that's directionally 3 years of backlog.”
- There was mention of eventually seeing 80GW to 100GW in the backlog but no date or other details were discussed, other than that’s the goal over time.
Across both Power and Electrification, the backlog is at $129 billion across equipment and services. Wind is lagging for now compared to Power first and foremost, and Electrification is also reporting strong growth (more below). Management stated, “We now maintain a total backlog of $129 billion.”
When it comes to the equipment, GEV stated they booked 20 heavy-duty gas turbines up by 6 units compared to the year ago quarter. Of the 20 units, seven were the HA models which produce up to 571MW.
In the earnings call, management also clarified that the second half of the year will be stronger as there will be a higher value tied to the booked GWs: The combined cycles have gas turbines, heat recovery steam generators (HRSG) and steam turbines for a more complex, capital-intensive equation which results in the higher dollar value per MW.
“So you're going to see an orders dollar connection to gigawatts that will be larger in the second half of the year. The first half of the year has been more simple cycle orders. So that's where you've got to think about the gigawatt dollar connections and the mix between whether it's a simple cycle or a combined cycle deal and we'll have substantially more combined cycle orders in the second half of the year.”
As stated, GEV is not a hypergrowth stock, rather its bottom line is where the impact is most visible. Management hinted they would be discussing strong margins resulting from the backlog in their fiscal year call in January:
“We are growing this backlog at improved margins and consistent with prior communications, look forward to showing you at fourth quarter earnings next January, the full change in margin in the equipment backlog.”
The company also raised free cash flow by $1 billion due to the strength of the backlog: “In addition, we're raising our full year free cash flow guidance by approximately $1 billion to be in the range of $3 billion to $3.5 billion due to higher down payments from increased orders and our updated adjusted EBITDA outlook.”
The company also gets paid in its Services segment based on auction pricing from PJM, a United States transmission organization. Management pointed out they will benefit from current pricing: “When you even look at the PJM pricing that was confirmed yesterday with the capacity market, that's driving incremental demand for incremental services and frankly, justifies incremental pricing into our services book for upgrades that can create incremental capacity for things like those capacity markets.”
Small Modular Reactors and Aeroderivative Gas Turbines
GEV is working on releasing a 300MW small modular reactor (SMR) and is under construction in Ontario for the first project. The company stated they expect “more customer announcements with our SMR technology in the second half of the year.”
The first major announcement on aeroderivative gas turbine packages came in June from purchaser Crusoe, a Bitcoin miner that retrofitted its operations to become an AI data center with experience in utilizing what’s known as “stranded natural gas” that is burned off from oil fields.
According to the press release, ten aero units can produce 1GW of power. In the earnings call, management stated they have secured orders for 27 aero units compared to 1 unit last year. There were discussions that the aero units are particularly in high demand: “Well, there's a need for incremental bridge power and the beauty of aeroderivatives is, they can be commissioned faster and that's needed in the environment today and our customers are able to price at a premium for expedited power […] But in the near term, demand for aeroderivatives is very strong and that's in the U.S. but it's also in global markets”
Under the Electrification department, GEV also supplies synchronous condensers, which provide voltage support and frequency regulation during periods when the grid is unreliable. The company sees the market opportunity growing to $5 billion in a year’s time.
Financials
Revenue acceleration in 2026
GE Vernova is on a path to revenue acceleration in 2026 as its benefiting from the spending surge of hyperscalers. The company is a major beneficiary of the increasing energy requirements from the global AI infrastructure build-out, positioning the company as a key beneficiary of this secular trend. Notably, 25% of global electricity was generated using the company’s equipment.
The company’s Q2 revenue grew by 11% to $9.11 billion, beating estimates by 3.6%. Organically, revenue grew by 12% YoY to $9.04 billion, primarily due to higher equipment and services revenue. Analysts expect revenue to grow by 2.7% YoY in the next two quarters and revenue growth to accelerate to 8.8% in Q1 2026.
The company’s CEO, Scott Strazik, said in the Q2 earnings call, “We had a productive second quarter, positioning us well to continue to accelerate our growth and margin expansion. This era of accelerated electrification is driving unprecedented investments in reliable power, grid infrastructure and decarbonization solutions.”
On the back of strong demand for power and equipment, management has raised its full-year revenue guidance and expects 2025 organic revenue to come at the high end of the guidance of $36 billion to $37 billion. The power segment organic revenue guide is increased to 6-7%, up from the previous single-digit guide, and the electrification segment is expected to grow 20%, up from the previous mid-high teens percentage. On a side note, the wind segment is expected to be down mid-single digits due to the more challenging market conditions.
Revenue growth is set to accelerate over the next three years. Analysts expect a 6.4% increase in 2025, bringing the total revenue to $37.17 billion, a 5.1% growth in 2024. Momentum is projected to build further, with revenue climbing to $40.7 billion in 2026, up 9.5% and to $45.5 billion in 2027, up 11.9% YoY.
Adjusted EBITDA growth of 25%
Q2 adjusted EBITDA grew by 25% YoY to $770 million, driven by strong growth in the electrification and power segments. Adjusted EBITDA margin improved 210 basis points YoY to 8.5% driven by profitable volume, better pricing, and productivity gains. The company is witnessing an annual EBITDA margin expansion, increasing from 2.4% in 2023 to 5.8% in 2024, and management has further guided expansion in the range of 8-9% for 2025.
Q2 operating margin was 4.2%, an improvement from 0.5% in Q1, and was down from 6.4% in the same period last year due to the nonrecurrence of $300 million received related to an arbitration refund last year.
Strong EPS Growth, Firmly GAAP Profitable
Q2 GAAP EPS came at $1.86, beating estimates by a solid 14.3% driven by profitable volume, better pricing, and productivity gains. Analysts expect GAAP EPS of $1.85 for Q3 2025 compared to (-$0.35) in the same period last year. They expect GAAP EPS to grow 95.4% YoY to $3.38 in Q4 and 137.4% YoY to $2.16 in Q1 2026.
Analysts continue to expect strong EPS growth in the coming years. For the year 2025, analysts expect GAAP EPS to grow 45.3% YoY to $8.11, and 58.9% and 41% YoY in the subsequent two years, reaching $18.16 in 2027.
Cash Flow Guidance Raised by $1 Billion
The company’s free cash flows are expected to increase significantly in the year 2025. The strong cash flows are driven by growth in revenue, profits, and improvements in working capital management.
Most importantly, management has raised the full-year free cash flow guidance from a range of $2.0 billion to $2.5 billion to a new range of $3.0 billion to $3.5 billion. It was primarily driven by a higher profit outlook and increased down payments due to rising orders. Year-to-date, the company has generated $1.17 billion in free cash flow, implying a strong acceleration of free cash flow in the second half of the year to $2.1 billion.
- The company generated free cash flows of $194 million in Q2 compared to $821 million in the same quarter last year. The lower free cash flows in Q2 were due to tough comparables, as the company had benefited from a $300 million arbitration refund the previous year.
- The company had a working capital benefit of $600 million in the recent quarter, driven by strong down payments and slot reservation agreements in the Power segment. They were partly offset by cash taxes and capital investments to support the strong future growth.
- The management efforts to improve the billing and collections processes, thereby enhancing cash management, are proving successful. In the recent quarter, the day sales outstanding decreased by 2 days sequentially, resulting in an additional $200 million in free cash flow. Similarly, the company was able to increase its free cash flow by $150 million in Q1 due to the implementation of stronger daily cash management, which improved the timely payment of invoices.
- The company has a strong balance sheet. At the end of Q2, the company had cash of $7.9 billion and no debt. The financial strength was further validated during the first half of this year when both S&P and Fitch upgraded GEV’s credit ratings outlook to positive from stable and reaffirmed the company’s investment-grade credit rating.
- Demonstrating its commitment to the capital return strategy, the board of directors had authorized a share-repurchase plan of $6.0 billion in December 2024. Year-to-date, the company repurchased shares worth $1.6 billion, leaving $4.4 billion in remaining capacity for future buybacks.
Key Segments
Equipment and services drive power segment growth
The power segment revenue grew organically by 9% YoY to $4.76 billion in Q2. It was driven by power equipment revenue, which grew by 23% YoY and the increase in power services revenue, which benefited from higher transactional services volume and favorable prices. Management expects mid-single digit organic revenue growth in Q3, driven by higher equipment deliveries and continued services growth.
Power segment witnessed robust orders, which grew by 44% YoY to $7.1 billion, driven by strong demand for Gas Power equipment, which nearly tripled YoY. Management expects continued growth in gas equipment orders in Q3. The company is witnessing robust demand for its aeroderivative technology to support data centers, securing 27 aeroderivative units in the recent quarter compared to only one in the same period last year.
Power services orders increased by a mid-single-digit percentage during the quarter, led by strong performance in Steam Power. The growth was primarily driven by higher demand for life extension and upgradation at existing nuclear facilities. The hydro end market also witnessed an uptick in orders driven by higher demand for upgrades.
EBITDA margin improved 260 basis points YoY to 16.4% driven by increased price, productivity and higher volume, partially offset by additional expenses to support R&D, higher capacity, and inflation. Due to seasonality of services outages, both power revenue and EBITDA margin is expected to be lower sequentially in Q3.
Electrification segment grew 20%
Q2 electrification revenue grew by 20% organically YoY to $2.2 billion, primarily driven by strong volume and higher prices at Grid Solutions. Management expects Q3 revenue to grow 20% YoY, driven by growth in Grid Solutions and Power Conversion & Storage. Total orders were down (-31%) YoY to $3.3 billion due to the tough comparable and due to large equipment orders recorded in the second quarter of last year. Equipment orders continued to outpace revenue, expanding the equipment backlog to approximately $24 billion, an increase of over $6 billion YoY. Data center related demand also remained strong in this segment. The company received $500 million in orders in the first half of 2025 compared to $600 million for the full year 2024.
Most importantly, EBITDA margin was up 740 basis points YoY to 14.6%, primarily driven by profitable volume, increased productivity, and favorable pricing, primarily at Grid Solutions. Management expects significant YoY EBITDA margin expansion in Q3 with a margin rate slightly above Q2, mainly driven by higher volume, productivity gains, and favorable prices.
Wind segment EBITDA to approach breakeven in Q3
Q2 wind revenue grew by 9% organically to $2.25 billion due to higher onshore wind equipment volume in North America and partially offset by lower offshore wind revenue. Wind orders were down (-5%) YoY, driven by lower onshore wind equipment orders outside of North America. Sequentially, onshore orders improved led by equipment growth in North America.
EBITDA losses increased to (-$165 million) compared to (-$117 million) in the same period last year due to higher onshore wind services costs as the company deploys crew and cranes to improve the installed fleet performance, partially offset by more profitable onshore wind equipment volume. Offshore, the company incurred additional costs primarily due to the impact of tariffs.
Management expects the wind segment revenue to be down mid-teens percentage YoY in Q3. The company benefited from a one-time settlement from an offshore contract termination in Q3 last year; excluding this one-time adjustment implies wind revenue to be down in the low single digits. Most importantly, EBITDA losses are expected to improve substantially YoY and approach breakeven in Q3 driven by further improvement in the profitable onshore wind volume.
Key Metrics
Strong demand for gas power equipment driving orders
The company is the largest gas turbine production supplier in the world, with a 25% global market share. The top three suppliers account for 71% of the global production capacity. Due to the sudden surge in AI-related electricity demand, the orders for turbines are vastly outpacing demand. This raises concerns about whether current production capacity will be sufficient to meet the anticipated growth in global electricity needs.
Source: Bloomberg Bloomberg
Q2 orders grew by 4% YoY to $12.4 billion, primarily driven by continued strong demand in the power and electrification segments. Equipment orders grew by 5%, primarily driven by the Power segment, where orders doubled YoY. Electricity equipment orders, even though they were strong, were down YoY due to tough comparable. Service orders increased by 3%, driven by growth in Power and Onshore Wind.
Robust backlog to support long-term growth potential
Q2 backlog increased by 11.5% YoY to $128.7 billion, driven by strong orders. The growth has accelerated from 6.1% in the previous quarter. The equipment backlog grew from $45 billion in Q1 to $50 billion in Q2 and was up 16.3% YoY. The company’s CEO had earlier this year said the equipment capacity is effectively sold out through 2027, implying potential long-term revenue conversion.
Conclusion:
Looking ahead, energy stocks like GE Vernova could deliver attractive returns with relatively lower risk over the next several years as demand for power of all kinds – but especially natural gas – accelerates. We’ve outlined predictions around what kind of demand capex investors can expect in the coming year in more detail here: “Why Power is Critical for Data Centers and Their Hyperscaler Customers.”
GE Vernova is one of the largest companies powering the AI economy with 60GW in backlog. The company stated the backlog is likely to grow quite a bit in 2026, which forecasts “the incremental growth we expect in this company in 2029 and 2030.” How big will this backlog get, what percentage of capex will Big Tech spend on energy versus compute, and what will the government do to make sure companies like GEV can delivery quickly. I would imagine all of the above far exceeds current expectations and becomes a matter of national importance if the United States is going to beat out energy-plentiful China. Therefore, for these reasons, the chances that GEV is a quality, resilient stock over the next few years is higher than most stocks in the AI universe.
Equity Analyst, Royston Roche, contributed to this article.
Please note: The I/O Fund conducts research and draws conclusions for the Fund’s positions. We then share that information with our readers. This is not a guarantee of a stock’s performance. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis.
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