Vertiv Holdings Reports Strong Growth and Future Opportunities
Vertiv Holdings (VRT) stands as a $36 billion provider of essential digital infrastructure solutions, including datacenter power and thermal management.
In recent years, Vertiv has demonstrated impressive revenue growth, increasing by 20% in 2023 and 16.6% in 2024. This year, it is anticipated to exceed $9.2 billion, marking a growth rate of approximately 15%.
Profits have also shown strong momentum, with the consensus projecting a 26% increase in earnings to $3.59 by 2025.
The company’s wide-ranging customer base features major players in various sectors, including telecommunications and cloud service providers. Key clients consist of AT&T, Verizon, China Mobile, Equinix, Alibaba Cloud, Tencent, Deutsche Telekom, Ericsson, Siemens, and Vodafone.
Beyond this diverse exposure in Asia and Europe, Vertiv also serves prominent agencies such as NASA and the Department of Defense.
AI Infrastructure Opportunities Ahead
Although Vertiv does not explicitly list major US cloud service providers like AWS, Azure, Google Cloud, and Oracle as clients, it is understood they support edge deployments and high-density AI workloads that many of these companies likely use. This strategy aligns with their focus on developing scalable and efficient infrastructure.
Considering the ongoing growth of prominent hyperscalers, including Meta, OpenAI, and Tesla—who are increasing their datacenter spending by 35-40% this year—Vertiv appears well-positioned to sustain revenue growth in the high teens.
As a leader in the modular data center market, valued at $30 billion and projected to reach $80 billion by 2030, Vertiv faces substantial competition from Dell, Schneider Electric, Johnson Controls, Eaton, Huawei, and ABB.
Looking ahead, Vertiv targets the burgeoning $1.5 trillion AI infrastructure market over the next five years, as highlighted by CRN, an IT channel research group.
Partnerships and Collaborative Innovations
This projection for expansion may be amplified by Vertiv’s partnership with NVIDIA (NVDA), which is pursuing a $1 trillion opportunity to upgrade aging datacenter systems from CPU-based to GPU-driven platforms.
NVIDIA collaborates with Vertiv for high-density power and cooling solutions, incorporating them as part of the NVIDIA Partner Network as a Solution Advisor.
Moreover, Cisco, a leader in networking and edge computing, is working with Vertiv on infrastructure development for IoT and edge computing solutions. Additionally, HPE Hybrid Cloud Solutions is joining forces with Vertiv on modernization efforts from edge to cloud.
Vertiv’s collaboration with Compass Datacenters is particularly significant, focusing on AI-ready infrastructure and liquid cooling for high-density computing. The two companies have entered into a multi-year, multi-billion-dollar agreement concerning the deployment of Vertiv’s CoolPhase Flex cooling solutions.
As noted by DataCenterFrontier.com, The Vertiv CoolPhase Flex may be the first packaged system that seamlessly integrates liquid cooling with refrigerant-based air-cooling technologies.
This innovative solution combines both cooling methods into a compact unit, adaptable to the evolving needs of next-generation data centers. This flexibility enables data center operators to efficiently shift between air and liquid cooling while supporting sustainability initiatives.
Another key partnership lies with Ballard Power Systems, known for hydrogen fuel cells, aimed at developing zero-emission UPS systems to bolster sustainability efforts.
Lastly, Vertiv has established a firm presence in Scandinavia through SEC DATACOM, which acts as its official distributor in Denmark, Sweden, Norway, and Finland.
Market Reactions and Future Outlook
In recent discussions regarding datacenter and AI stocks, I have also commented on the market fluctuations since the emergence of the DeepSeek AI threat.
Buying Vertiv shares when prices dipped in February resulted in a volatile experience.
Following the company’s Q4 earnings report on February 12, market estimates have remained consistent. However, Vertiv shares have recently declined amid concerns regarding a potential reduction in AI infrastructure investment. A research note from UBS Securities on February 25 labeled the market’s reaction as excessive.
According to UBS, “The recent sell-off is way overdone, as it implies a more than 30% reduction in data center capacity growth compared to what was anticipated just a month ago.”
The bank’s analysis suggests that Vertiv shares are trading at lower growth than current consensus forecasts would imply.
The consensus projects annual revenue growth of 13% and annual profit growth of 18% for Vertiv from 2024 to 2028. This contrasts starkly with UBS’s valuation framework, which indicates that subpar revenue growth is priced in, forecasting only 9% growth in revenue and 13% growth in profit over the same period. This discrepancy translates to a projected shortfall of $1.7 billion in revenue and $550 million in cumulative EBITDA in comparison to consensus expectations.
UBS deduces this revenue distortion into data center capacity growth, estimating a $3.5 million addressable market per megawatt and a 10% market share for Vertiv. Based on the consensus, Vertiv’s anticipated $5.1 billion in revenue growth from 2024-2028 would yield 14,600 megawatts of new data center capacity.
However, UBS’s lower estimate of $3.4 billion in revenue indicates that expected capacity growth would decrease to 9,700 megawatts, reflecting a reduction of 4,900 megawatts in projections.
In summary, UBS posits that the market is unfairly discounting significant downward revisions in hyperscaler capex, contrary to my recent analyses.
UBS maintains a buy rating for Vertiv, assigning a price target of $135. I, too, hold a long position in VRT and plan to increase my stake if it falls below $85.
Exclusive Insights and Recommendations
For just $1, access all of Zacks’ Buys and Sells.
Years ago, we surprised our members by offering them 30-day access to our comprehensive picks for only $1—no further obligation required.
Numerous investors have seized this opportunity, while others remained cautious, suspecting a catch. The reason for this offer is simple: we want you to familiarize yourself with our portfolio services, including Surprise Trader, Stocks Under $10, Technology Innovators, and others, which have collectively achieved 256 positions with double- and triple-digit gains in 2024 alone.
For the latest recommendations from Zacks Investment Research, download our report on the 7 Best Stocks for the Next 30 Days. Click here for this free analysis.
Vertiv Holdings Co. (VRT): Free Stock Analysis report
NVIDIA Corporation (NVDA): Free Stock Analysis report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
