Hubbell (HUBB) Q3 2025: Electrical Segment Delivers 10% Growth as Grid Automation Drag Fades
Hubbell’s third quarter spotlighted robust electrical segment outperformance, broadening order momentum, and a clear inflection in grid automation headwinds. Management’s guidance raise and commentary signal a more constructive 2026 setup, with the DMC Power acquisition reinforcing strategic focus on high-margin grid infrastructure. Investors should watch for margin leverage and segment mix as utility growth normalizes and secular tailwinds accelerate.
Summary
- Electrical Segment Outpaces: High single-digit organic growth and margin expansion drive core earnings strength.
- Grid Automation Drag Easing: Order inflection and easier compares set up for utility growth acceleration in Q4 and 2026.
- Strategic M&A Focus: DMC acquisition and vertical alignment reinforce Hubbell’s positioning in high-growth, high-margin grid markets.
Performance Analysis
Hubbell’s Q3 results reflected a strong divergence between segment performance, with electrical solutions delivering double-digit sales and profit growth, while utility solutions faced continued grid automation softness. The electrical segment posted 10% sales growth and 140 basis points of margin expansion, powered by data center and light industrial verticals, as well as effective pricing and productivity measures. Grid infrastructure, which makes up about three-quarters of utility solutions, achieved high single-digit growth, but overall utility sales were muted by an 18% decline in grid automation due to large project roll-offs.
Pricing actions, averaging 3% across both segments, fully offset cost inflation and tariffs, supporting positive price-cost productivity. Free cash flow conversion hit 34%, keeping the balance sheet flexible even after the $825 million DMC Power acquisition. Management highlighted a surge in September and October T&D orders, signaling broad-based demand recovery. The company’s full-year EPS guidance was raised, with improved margin performance and a lower tax rate offsetting slower utility growth.
- Electrical Solutions Margin Expansion: Sustained outperformance driven by segment unification, new product introductions, and targeted sales force realignment.
- Utility Segment Order Acceleration: T&D order book growth in late Q3 underpins confidence in Q4 and 2026 utility rebound.
- Grid Automation Normalization: Four quarters of flat sales set the stage for the segment to stop dragging overall results in the next quarter.
Overall, Hubbell’s financial discipline and portfolio mix provided resilience, while the operational setup for Q4 and 2026 points to accelerating organic growth and margin leverage, especially as grid automation and smaller utility businesses stabilize.
Executive Commentary
"Our grid infrastructure businesses achieved high single-digit organic growth in the quarter. While the pace of inflection in grid infrastructure growth was steadier than we anticipated in our July outlook, markets and order activities are strong, and we anticipate further improvement in year-over-year organic growth in the fourth quarter."
Gerben Vocker, Chairman, President, and CEO
"The combination of growth in the electrical segment, growth in grid infrastructure, plus the flattening of grid automation is a good driver of Q4 and ultimately a good setup for 2026."
Bill Sperry, Executive Vice President and CFO
Strategic Positioning
1. Electrical Segment Transformation
Hubbell’s electrical solutions segment continues to outperform through strategic unification and targeted end-market focus. The company’s realignment of sales resources, vertical market specialization, and new product development—especially in data centers and light industrials—are driving both organic and inorganic growth. Margin expansion is being realized through productivity, pricing, and operational efficiencies.
2. Grid Infrastructure and Utility Franchise
Grid infrastructure remains the cornerstone of Hubbell’s utility segment, benefiting from secular megatrends in grid modernization and electrification. Transmission and distribution (T&D) markets are delivering double-digit growth, supported by utility investment in grid hardening, load growth, and data center interconnections. Recent order momentum provides visibility into a strong Q4 and robust 2026 pipeline.
3. M&A-Driven Portfolio Enhancement
The acquisition of DMC Power, a high-margin substation connector business, exemplifies Hubbell’s disciplined capital allocation strategy. DMC’s fit within the portfolio is expected to be accretive, with unique technology and strong market positioning. Management expects DMC to contribute approximately 20 cents to adjusted EPS in 2026, aligning with the company’s focus on high-growth, high-return investments.
4. Grid Automation and Smaller Utility Markets
Grid automation’s project-driven volatility is abating, with sales stabilizing after four quarters of sequential flatness. Management is repositioning this business toward more predictable, smaller projects and MRO (maintenance, repair, and operations) revenue, which should reduce lumpy results and improve profitability. Meters and AMI are also expected to return to growth, albeit modestly, as the business resets its cost structure and strategy.
5. Margin Leverage and Productivity
Ongoing restructuring and cost initiatives are embedded in Hubbell’s operating model, with management emphasizing a steady annual investment in productivity to drive long-term margin expansion. Price realization remains strong, supported by constructive customer relationships and a critical role in customer systems, while tariff pass-throughs are being managed effectively.
Key Considerations
Hubbell’s Q3 reflected the interplay of secular tailwinds, segment rotation, and disciplined execution, setting up a constructive path into 2026.
Key Considerations:
- Data Center and T&D Demand Surge: Data center buildout and utility grid investments are driving above-market growth and visibility in the electrical segment.
- Grid Automation Headwind Dissipation: Stabilization in grid automation and smaller utility markets removes a multi-quarter drag, enabling cleaner segment growth comparisons.
- Margin Expansion Through Productivity: Persistent productivity initiatives and price-cost management are supporting sustained margin gains across both segments.
- Capital Allocation Discipline: The DMC acquisition and ongoing M&A focus reinforce Hubbell’s strategy of building high-margin, high-growth platforms in core markets.
- Leadership Transition: Incoming CFO Joe Capozzoli brings segment-level operational expertise, supporting continuity in financial and strategic execution.
Risks
Hubbell’s outlook depends on continued utility CapEx strength, sustained data center demand, and effective grid automation repositioning. Risks include macroeconomic softness in non-residential and heavy industrial markets, potential delays in utility project pipelines, and the stickiness of recent price increases amid tariff and inflation volatility. Management flagged a normalization of the tax rate in 2026, removing a temporary tailwind.
Forward Outlook
For Q4, Hubbell guided to:
- 8% to 10% organic growth, with contributions from both electrical and utility segments
- Margin expansion in both segments
For full-year 2025, management raised and narrowed guidance:
- EPS range increased to $18.10 to $18.30, reflecting stronger margins and a lower tax rate
Management highlighted:
- Strong order momentum in T&D and data center markets underpinning Q4 and 2026 growth
- Grid automation drag fading, supporting cleaner organic growth comparisons ahead
Takeaways
Hubbell’s Q3 marks an inflection point as grid automation headwinds subside and electrical segment momentum accelerates. Capital deployment, segment mix, and productivity remain key levers.
- Segment Rotation Supports Growth: Electrical outperformance and utility order inflection set up for a stronger Q4 and 2026 acceleration.
- Strategic M&A and Portfolio Discipline: DMC Power acquisition and ongoing productivity investments reinforce high-margin, high-growth focus.
- 2026 Watchpoints: Investors should monitor margin leverage, price realization, and utility CapEx trends as secular tailwinds intensify.
Conclusion
Hubbell exits Q3 with broad-based segment strength, a fading grid automation drag, and reinforced strategic positioning through disciplined M&A. The company’s operational setup and order momentum support a constructive multi-year growth outlook, with 2026 set to benefit from both cyclical recovery and secular demand drivers.
Industry Read-Through
Hubbell’s results reinforce the accelerating demand for grid modernization, data center electrification, and utility hardening across North America. The company’s ability to pass through cost inflation, maintain price discipline, and drive margin expansion provides a template for peers facing similar tariff and supply chain dynamics. Segment rotation and project-driven volatility in grid automation are industry-wide phenomena, but Hubbell’s proactive repositioning and M&A discipline highlight the value of portfolio agility. Data center and T&D demand signals suggest continued strength for suppliers exposed to these verticals, while the normalization of utility and industrial project pipelines will be a key sector watchpoint heading into 2026.