NVT Q3 2025: Data Center Orders Surge 65%, Doubling Liquid Cooling Capacity for AI Build-Out
Invent’s Q3 marked a structural inflection as data center orders soared 65% organically, driving record backlog and prompting a doubling of liquid cooling capacity. The company’s portfolio shift toward high-growth infrastructure and AI-driven demand is now evident in both revenue mix and capital allocation. Management’s raised guidance and capacity investments signal confidence in sustained momentum, but margin headwinds from tariffs and M&A require monitoring as the business scales for next-generation infrastructure cycles.
Summary
- AI Data Center Demand Accelerates: Record orders and backlog reflect rapid infrastructure vertical expansion.
- Capacity Doubling Underway: Liquid cooling manufacturing footprint to double, supporting next-gen AI deployments.
- Margin Discipline Faces Test: Investments and tariff inflation offset by pricing, but M&A mix dilutes near-term operating leverage.
Performance Analysis
Invent delivered its first-ever $1 billion quarter as sales rose sharply, led by infrastructure verticals—particularly data centers and power utilities. Organic sales growth was 16%, with total sales up 35% year over year, propelled by both volume and price, and aided by $139 million in acquisition contribution. New products, notably in liquid cooling and modular data center solutions, accounted for over five points of year-to-date sales growth, with 66 launches so far in 2025.
Operating leverage remains robust, with adjusted operating income up 27% and EPS up 44%. However, inflation and $30 million in tariff costs pressured margins, partially offset by price and productivity gains. Free cash flow surged 77% to $253 million, supporting ongoing facility expansions and R&D. Segmentally, Systems Protection led with 50% sales growth, while Electrical Connections grew 11%, each reflecting both organic and acquisition-driven momentum. Americas and Europe posted double-digit organic growth, while Asia Pacific was modestly negative.
- Infrastructure Vertical Outpaces: Over 40% organic sales growth, now the company’s largest and fastest-growing segment.
- Acquisition Integration Adds Scale: EPG and Trachte contributed 18 points to growth, with EPG outperforming initial synergy targets.
- Tariff and Inflation Headwinds: Price increases and productivity offset inflation, but margin dilution from M&A and investments continues.
With backlog at record levels and organic orders up high single digits excluding data centers, Invent’s pivot toward electrification and digitalization is translating into tangible financial outcomes, though mix and cost headwinds remain a watchpoint.
Executive Commentary
"Our portfolio transformation to become a more focused, higher growth electrical connection and protection company is delivering results and accelerating our growth. We had record sales and adjusted EPS in the third quarter. For the first time, quarterly sales were more than $1 billion. Adjusted EPS was 91 cents. Both sales and EPS exceeded our guidance. We also had record orders and backlog in the quarter. Organic orders were up approximately 65%, primarily driven by large orders for the AI data center build-out."
Beth Wisnack, Chair and Chief Executive Officer
"Inflation was more than $45 million, including nearly $30 million in tariff impact. Price plus productivity offset inflation, and we also continued to make investments for growth, particularly for data centers and our recent acquisitions. Q3 adjusted EPS was 91 cents up 44% and above the high end of our guidance range. We generated robust free cashflow of $253 million up 77% year over year."
Gary Corona, Chief Financial Officer
Strategic Positioning
1. Data Center and AI Infrastructure Focus
Invent is now structurally positioned as a core supplier to the AI data center build-out, with liquid cooling solutions and modular systems at the center of its infrastructure vertical. Orders for data center solutions nearly tripled, and the company is expanding both its customer base and product suite to address hyperscalers, colocation providers, and enterprise clients. The upcoming launch of 10+ new liquid cooling products and a new Minnesota manufacturing facility will double production capacity, supporting visibility into 2026 and beyond.
2. Portfolio Transformation and M&A Integration
The shift away from legacy thermal management toward higher-growth, higher-margin infrastructure is evident. Recent acquisitions (EPG, Trachte) are outperforming expectations, contributing double-digit growth and enabling cross-selling into utility and data center applications. Management reports both revenue and margin synergies, though acquired businesses initially dilute margins due to structurally lower baseline profitability. Integration playbook focuses on operational optimization, supply chain leverage, and capacity expansion.
3. Margin Management and Capital Allocation
Margin discipline is a top priority as investments ramp for capacity, R&D, and new product launches. Tariff and inflationary pressures are being offset by price and productivity, but incentive compensation and acquisition mix are near-term headwinds. Free cash flow strength supports continued investment and shareholder returns, with $351 million returned year-to-date. Balance sheet remains healthy, with leverage just below target and ample liquidity for further growth initiatives.
Key Considerations
This quarter marks a step-change in Invent’s growth profile, but also raises new operational and financial questions as the business scales into AI-driven demand cycles.
Key Considerations:
- AI Build-Out Visibility: Large, multi-year data center orders provide line of sight into 2026 and some into 2027, supporting sustained infrastructure vertical momentum.
- Product Mix Evolution: Modular liquid cooling and power distribution units broaden addressable market and customer base, with potential for higher-margin distribution channel growth over time.
- Acquisition Synergy Realization: EPG and Trachte are exceeding initial synergy and margin targets, but integration and optimization remain ongoing priorities.
- Inflation and Tariff Management: Price and productivity actions are crucial as tariff costs are set to rise further in Q4, with guidance assuming continued offset.
- Seasonality and Channel Inventory: Q4 guidance reflects typical seasonal step-down and potential distribution channel inventory adjustments, despite robust end-market demand.
Risks
Margin compression from ongoing M&A dilution and inflation remains a key risk, particularly if price realization or productivity gains falter. Large, lumpy data center orders could introduce revenue volatility if hyperscaler demand normalizes or if new cooling technologies disrupt current architectures. Tariff exposure is increasing, with $90 million in annual impact assumed, and further trade or regulatory shocks could pressure cost structure. Execution risk around capacity expansion and integration of acquired businesses is elevated as the company scales rapidly.
Forward Outlook
For Q4 2025, Invent guided to:
- Reported sales growth of 31% to 33%, with organic growth of 15% to 17%
- Adjusted EPS of $0.87 to $0.89, nearly 50% above prior year’s Q4
For full-year 2025, management raised guidance:
- Reported sales growth of 27% to 28%, organic growth of 10% to 11%
- Adjusted EPS of $3.31 to $3.33, up 33% to 34% year over year
Management highlighted several factors that underpin the outlook:
- Backlog and order momentum in AI data centers and power utilities
- Continued price and productivity gains to offset inflation and tariffs
Takeaways
Invent’s transformation into a high-growth infrastructure and AI supplier is now reflected in both results and pipeline.
- Structural Demand Shift: AI and electrification trends are reshaping the company’s revenue mix, with infrastructure now the dominant engine.
- Execution Challenge: Scaling capacity, integrating acquisitions, and managing cost inflation require operational discipline to sustain margin expansion.
- Future Watchpoint: Investors should track the pace of margin recovery, order lumpiness, and the ability to monetize new product launches across broader customer segments.
Conclusion
Invent’s Q3 results validate its portfolio pivot toward AI-driven infrastructure, with record orders and backlog supporting a robust multi-year growth trajectory. While margin headwinds and operational complexity are rising, the company’s proactive investments and clear demand visibility position it as a key beneficiary of electrification and data center cycles.
Industry Read-Through
The surge in AI data center build-out is driving a step-change in demand for electrical connection, protection, and advanced cooling solutions, with Invent’s results confirming that infrastructure suppliers with modular, scalable offerings are best positioned. Tariff and inflationary pressures remain sector-wide challenges, but those able to offset with price, innovation, and productivity gain share. Acquisition-driven growth and integration discipline will be a key differentiator as the supply chain scales for next-gen digital infrastructure. Industry participants should monitor both the durability of AI-related orders and the ability to manage cost and margin pressures through the cycle.