Hubbell (HUBB) Q4 2025: Data Center Revenue Soars 60%, Powering Margin Expansion
Hubbell’s Q4 marked a decisive acceleration in data center and grid infrastructure demand, propelling double-digit sales and profit growth while validating the company’s grid modernization thesis. Strategic capital deployment, operational productivity, and a robust M&A pipeline underpin confidence in multi-year growth, even as select legacy businesses reach a cyclical bottom. Guidance for 2026 signals sustained organic growth, margin gains, and continued investment in high-return verticals, positioning Hubbell at the intersection of electrification and utility transformation.
Summary
- Data Center Momentum: Q4 data center sales surged, now exceeding 10% of segment revenue and driving structural outperformance.
- Grid Infrastructure Strength: Transmission and substation markets delivered double-digit growth, offsetting legacy softness.
- Capital Deployment Focus: Management prioritizes high-return investments and disciplined M&A, sustaining multi-year growth levers.
Performance Analysis
Hubbell delivered robust Q4 results, with 12% total sales growth and 19% adjusted operating profit expansion, powered by high-value verticals and disciplined execution. The company’s Electrical Solutions segment, which now counts data center markets as more than 10% of sales, posted 13% organic growth, while Utility Solutions saw 7% organic growth, propelled by grid infrastructure strength. Notably, data center revenue spiked over 60% in the quarter, reflecting both end-market demand and targeted capacity investments in modular power distribution and connectors.
Margin expansion was broad-based, with adjusted operating margins up 140 basis points company-wide and both major segments contributing. Price realization and productivity more than offset mid-single-digit cost inflation, including higher metals and input costs. Free cash flow conversion remained strong at 90%, supporting ongoing reinvestment and capital allocation flexibility. While grid automation and metering businesses continued to decline, management emphasized these areas have likely stabilized at a lower base, setting the stage for modest recovery.
- Data Center Outperformance: Over 60% growth in Q4, driven by project wins and capacity expansion, demonstrates Hubbell’s ability to capture secular electrification tailwinds.
- Grid Infrastructure Leadership: Transmission and substation strength, up 12% organically, offset grid automation weakness and signals durable demand visibility.
- Cost Discipline and Productivity: Pricing and automation investments neutralized inflation, while restructuring initiatives promise future margin tailwinds.
Overall, Hubbell’s results reflect a portfolio increasingly aligned with high-growth, high-margin markets, while legacy businesses are being repositioned or right-sized to support more resilient earnings power.
Executive Commentary
"Our core utility and electrical markets remain strong as data center build-outs, load growth, and aging infrastructure resiliency investments generate robust project activity in front and behind the meter. Hubbell's portfolio of critical components and solutions is uniquely positioned at the intersection of grid modernization and electrification megatrends."
Gervin Bakker, Chairman, President & CEO
"While cost inflation accelerated in the fourth quarter as anticipated, our pricing and productivity actions have been successful in more than offsetting these costs. Our strong positions in attractive markets and our execution in proactively managing our cost structure drove positive price-cost productivity in the quarter."
Joe Capozzoli, Chief Financial Officer
Strategic Positioning
1. Electrification and Grid Modernization Megatrends
Hubbell is increasingly concentrated in markets benefiting from secular electrification and grid upgrade cycles. Over 80% of the Utility Solutions portfolio is now tied to electric transmission and distribution (T&D) components, with data center and light industrial verticals driving outperformance in Electrical Solutions. Management’s commentary underscores multi-year visibility as utilities invest in new capacity, grid hardening, and resiliency projects to support both load growth and renewables integration.
2. Operational Leverage Through Automation and Productivity
Strategic investments in automation and workflow redesign are yielding tangible productivity gains. Recent examples include the Burndy brand’s automation work cells, which reduced production time from days to minutes and freed up factory space. These initiatives not only support capacity expansion in high-growth areas but also underwrite margin expansion, with restructuring paybacks typically realized within two to three years.
3. Capital Allocation and M&A Discipline
Hubbell’s capital deployment strategy remains balanced across high-return CapEx, targeted acquisitions, and opportunistic share repurchases. The DMC Power acquisition, with 40% operating margins, exemplifies management’s focus on bolt-ons that expand scope in core markets. The M&A pipeline remains robust, with management noting that even as multiples rise, synergy capture and portfolio fit sustain attractive returns. Share repurchases and dividends supplement returns when acquisition activity is lower.
4. Segment Portfolio Realignment
Legacy businesses, such as grid automation and metering, have been reshaped to focus on core markets where Hubbell has a competitive advantage. Management acknowledged that large project activity in advanced metering infrastructure (AMI) remains subdued, but the business has stabilized at a lower base and is poised for modest growth. Portfolio review is ongoing, but the core grid infrastructure and data center businesses continue to gain share and margin.
5. Pricing Power and Inflation Management
Hubbell continues to demonstrate pricing discipline, with Q4 incremental price actions and a 3% full-year price contribution. Management expects wraparound price and modest additional actions in 2026 to keep price-cost productivity at least neutral, even as metals and component costs remain volatile. Tariff exposure, while material, is being actively managed through both sourcing and pricing levers.
Key Considerations
Hubbell’s Q4 results and 2026 outlook reflect a business increasingly levered to durable secular trends, but also navigating legacy headwinds and cost pressures with disciplined execution.
Key Considerations:
- Data Center Demand Inflection: Sustained double-digit growth expected in 2026, with project pipeline visibility and capacity investments supporting upside.
- Grid Infrastructure Backlog: Transmission and substation markets continue to deliver high single to low double-digit growth, with backlog building in certain businesses and multi-year project visibility.
- Margin Expansion Levers: Automation, restructuring, and pricing actions are structurally expanding margins, with further runway as new initiatives ramp.
- Legacy Business Stabilization: Metering and AMI have reached a cyclical bottom, with management pivoting focus to core muni and co-op markets and cost containment.
- Capital Allocation Flexibility: 2026 free cash flow of $900 million to $1 billion supports ongoing CapEx, M&A, and shareholder returns, with a robust pipeline for bolt-on deals.
Risks
Key risks include continued softness or delayed recovery in grid automation and metering, commodity inflation (especially metals), and potential tariff volatility. While management has shown discipline in passing through costs, a sharp reversal in data center or utility project activity would pressure both growth and margins. M&A integration and execution risk remains, particularly as deal multiples rise and synergy capture becomes more critical.
Forward Outlook
For Q1 2026, Hubbell expects:
- Strong organic sales growth, especially in T&D and data center verticals
- Margin expansion in both major segments, with front-loaded restructuring investments
For full-year 2026, management guided:
- 5% to 7% organic growth company-wide, with total sales growth of 7% to 9%
- Adjusted EPS of $19.15 to $19.85
- 90% free cash flow conversion on adjusted net income
Management highlighted continued investment in automation, data center capacity, and high-return M&A as drivers of 10% adjusted operating profit growth. Price-cost productivity is expected to be neutral to positive, with cost inflation managed through pricing and productivity levers.
- Data center and T&D project pipelines remain robust, supporting multi-year growth visibility
- Legacy businesses expected to stabilize and modestly recover from a lower base
Takeaways
Hubbell’s Q4 and 2026 outlook reinforce its strategic pivot toward electrification, grid modernization, and data center infrastructure, underpinned by operational discipline and capital allocation rigor.
- Portfolio Shift: High-growth, high-margin markets now dominate the business mix, with legacy drags contained and positioned for recovery.
- Execution Edge: Automation, price discipline, and targeted M&A are expanding margins and enhancing resilience to inflation and market cycles.
- Visibility and Optionality: Multi-year project pipelines in T&D and data centers, combined with robust free cash flow, give Hubbell both growth visibility and capital deployment flexibility for shareholder value creation.
Conclusion
Hubbell’s Q4 results and 2026 guide confirm a business in transition, with secular tailwinds, operational outperformance, and disciplined capital allocation driving both near-term growth and long-term value creation. Investors should monitor data center and grid infrastructure momentum as primary growth levers, while watching for stabilization in legacy segments and continued productivity gains from automation and restructuring.
Industry Read-Through
Hubbell’s results underscore the accelerating demand for electrification infrastructure, with data center build-outs and grid modernization emerging as the sector’s defining growth engines. Suppliers with deep utility relationships, automation capabilities, and exposure to high-growth verticals are best positioned to capitalize on multi-year investment cycles. Legacy metering and automation markets remain challenged, but stabilization signals a bottoming process sector-wide. Rising input costs and tariff volatility remain universal risks, reinforcing the value of pricing power and operational flexibility across the electrical equipment and utility supply chain.