Vertiv (VRT) Q2 2025: Orders Top $3B as Backlog Climbs 21%, Powering Data Center Expansion

July 30, 2025 | By EarningsIQ Research

Vertiv’s Q2 saw orders surge past $3 billion and backlog expand 21%, underscoring intensifying demand for data center infrastructure. The company is navigating tariff-driven margin pressure and operational friction, but management is raising guidance and signaling sustained growth. Strategic investments in R&D, modular solutions, and the Great Lakes acquisition position Vertiv to capitalize on AI-driven infrastructure cycles and evolving customer needs.

Summary

• Orders Surpass $3B Mark: Backlog growth and a 1.2x book-to-bill ratio reinforce multi-year demand visibility.
• Margin Headwinds from Tariffs: Tariff costs and operational inefficiencies weigh on near-term profitability, but resolution is expected by year-end.
• AI and Modular Shift Accelerate: Strategic bets on prefabrication, liquid cooling, and power innovation set up Vertiv for next-gen data center cycles.

Performance Analysis

Vertiv’s Q2 performance demonstrates robust top-line momentum as organic sales grew 34% year-over-year, with the Americas and APAC regions delivering mid-40% and mid-30% growth, respectively. The company’s Q2 orders crossed $3 billion for the first time, up 15% YoY and 11% sequentially, driving backlog to $8.5 billion—a 21% YoY increase. This order strength is translating into a book-to-bill ratio of 1.2x, signaling persistent demand for hyperscale, co-location, and AI-driven data center projects.

Margin dynamics, however, reflect the cost of growth and external shocks. Adjusted operating margin contracted by 110 basis points YoY to 18.5%, as tariffs and supply chain reconfiguration introduced inefficiencies and temporary cost overruns. The company’s adjusted operating profit and free cash flow both improved YoY on a first-half basis, but Q2 free cash flow was down due to working capital timing. Management responded by raising full-year sales, EPS, and free cash flow guidance, reflecting confidence in backlog conversion and operational normalization.

• Americas and APAC Drive Volume: These segments delivered over 80% of incremental sales, leveraging hyperscale and co-location demand.
• EMEA Lags but Pipeline Healthy: EMEA growth slowed to 7% with execution challenges, but a strong pipeline is expected to support reacceleration in 2026.
• Tariff and Transition Costs Impact Margins: Temporary supply chain and manufacturing changes to mitigate tariffs are expected to normalize by year-end.

Vertiv’s operational scale and backlog give it a clear runway to execute, but the near-term story is one of balancing growth with cost discipline as the company invests ahead of demand.

Executive Commentary

Strategic Positioning

1. Backlog and Orders Visibility

Vertiv’s record $8.5 billion backlog and 1.2x book-to-bill ratio reflect a market with multi-year demand visibility. Management emphasized that the mix and duration of backlog remain stable, with some customers requesting earlier deliveries. The pipeline is described as “nicely actionable,” supporting both near-term and multi-year growth ambitions. The company will shift to annual orders disclosure, aiming to reduce market volatility tied to quarterly lumpiness.

2. Margin Recovery and Tariff Management

Margin compression is a key theme, driven by tariffs and supply chain transition costs. Management expects these headwinds to “materially moderate” by year-end as new manufacturing footprints and supplier localization efforts take hold. Operational inefficiencies—such as premium freight and overtime—are being addressed through capacity expansion and process improvement. The company reaffirmed its 25% operating margin target by 2029, with Q4 2025 margin expected to exceed 23%.

3. Modular and Prefabricated Solutions

Vertiv is leaning into modularity and prefabrication, with its “SmartRow” and related solutions reducing data center deployment time and complexity. Prefabrication is not a standalone business, but rather a value-added wrapper around Vertiv’s core technologies—power, cooling, and controls—enabling faster, more reliable customer fit-outs. This approach is increasingly favored as labor shortages and speed-to-market pressures intensify for hyperscale and AI customers.

4. Technology Leadership in AI and Power

Strategic collaborations with CoreWeave, Dell, and Oklo highlight Vertiv’s position at the forefront of AI infrastructure. The company is delivering reference designs for NVIDIA’s latest GPU platforms and co-developing power and thermal architectures for advanced nuclear-powered data centers. Management sees regular refresh cycles in both IT and supporting mechanical/electrical infrastructure as density and complexity rise, positioning Vertiv as the “connective tissue” between facilities and IT.

5. M&A and Capital Allocation

The pending Great Lakes acquisition extends Vertiv’s portfolio in high-end rack solutions and enhances capacity in the U.S. and Europe. Management signaled that M&A will remain an active lever for technology leadership and capacity expansion, with a robust pipeline and disciplined approach to capital deployment. Free cash flow strength supports ongoing investment and future deal activity.

Key Considerations

Vertiv’s Q2 reflects a business scaling rapidly to meet AI-fueled demand, but not without growing pains. The following considerations frame the company’s evolving risk-reward profile for investors:

Key Considerations:

• Backlog and Pipeline Durability: Persistent order strength and backlog expansion provide multi-year revenue visibility, mitigating cyclical risk.
• Tariff and Supply Chain Fluidity: The dynamic tariff environment is creating cost and operational friction, with normalization expected in 2026.
• Margin Trajectory: Margin compression is temporary, with Q4 and 2026 set for rebound as operational issues resolve and scale efficiencies return.
• Innovation and Modularization: Investments in prefabrication, liquid cooling, and high-voltage power distribution align the portfolio with next-gen data center requirements.
• Capital Allocation Flexibility: Free cash flow generation and a net leverage ratio of 0.6x provide ample room for M&A and organic investment.

Risks

Vertiv’s outlook is not without risks. Tariff volatility and ongoing supply chain reconfiguration could prolong margin pressure if market conditions shift or new tariffs are imposed. Execution risk remains as the company scales manufacturing and integrates acquisitions. EMEA’s near-term sales decline and delayed AI adoption could weigh on segment performance if pipeline conversion slips. Lastly, concentration in hyperscale and AI customer segments introduces exposure to shifts in technology cycles or procurement strategies.

Forward Outlook

For Q3 2025, Vertiv guided to:

• Adjusted EPS of $0.97, up 28% YoY
• Organic sales growth of 22%, led by Americas and APAC
• Adjusted operating margin of 20%, improving sequentially

For full-year 2025, management raised guidance:

• Net sales of $10 billion (up $550 million from prior)
• Organic growth of approximately 24%
• Adjusted EPS of $3.80, a 33% YoY increase
• Adjusted free cash flow of $1.4 billion

Management emphasized margin normalization, backlog conversion, and continued investment in R&D and capacity as key drivers for H2 and 2026. The company expects Q4 margin to exceed 23%, with operational inefficiencies and tariff impacts largely behind it entering 2026.

Takeaways

Vertiv’s Q2 confirms its leadership in a structurally growing market, but also highlights the challenges of scaling amid external shocks and rapid demand shifts.

• Data Center Demand Drives Multi-Year Visibility: Record orders and backlog provide confidence in sustained top-line growth, underpinned by AI and cloud infrastructure cycles.
• Temporary Margin Compression, Long-Term Expansion: Tariff and operational headwinds are expected to resolve by year-end, setting up for margin rebound and progress toward 2029 targets.
• Strategic Investments Set Up Next Phase: Prefabrication, liquid cooling, and power innovation are positioning Vertiv as an end-to-end partner for next-generation data centers, with M&A supporting technology depth and market reach.

Conclusion

Vertiv’s Q2 2025 underscores its ability to capture surging demand from the AI and cloud buildout, even as it navigates near-term cost and execution challenges. Management’s raised guidance, deep backlog, and strategic investments provide a compelling setup for continued outperformance as the digital infrastructure cycle matures.

Industry Read-Through

Vertiv’s results reinforce the structural tailwinds driving the data center ecosystem, with hyperscale and AI infrastructure spend accelerating across regions. The company’s commentary on modular construction, liquid cooling, and power distribution highlights where value is shifting in the supply chain. Competitors in thermal management, power systems, and prefabrication should expect intensified competition and customer expectations for integrated, rapid-deployment solutions. Tariff and supply chain volatility remain industry-wide risks, but Vertiv’s proactive mitigation may set a template for peers. The broadening of AI demand into sovereign and enterprise segments signals a multi-year upcycle for infrastructure providers.

VRT Industrials Electrical Equipment Data centers AI infrastructure Modular Tariffs Backlog