Generac Expects Data Center Revenue to Exceed $2 Billion in 2027
Key Facts
Generac expects revenue from products sold to the data center market to exceed $2 billion in 2027, after raising its estimate for revenue from the market in 2026 to about $500 million, from about $450 million previously. The new estimate comes as its backlog of data center product orders reached about $4.5 billion, according to the company's third-quarter results. Chief Executive Aaron Jagdfeld said the backlog grew after the Amazon agreement, alongside deals with new and existing customers. The Amazon agreement includes expected initial deliveries totaling $2.4 billion during 2027 and 2028. These figures reflect expanding demand for backup power generators for data centers, as the company prepares to increase production capacity.
The company said the backlog of about $4.5 billion relates to products intended for sale to the data center market, not its total orders. It estimated that sales to this market in 2026 would approach $500 million, up from its previous forecast of about $450 million. In the third quarter, Generac's total sales rose 16% to a record $1.29 billion, compared with $1.11 billion in the same period of 2025. Sales in its commercial and industrial segment also rose about 28% to $553 million, from $432.4 million a year earlier. The company attributed the segment's growth mainly to higher revenue from products sold to the global data center market.
Adjusted earnings before interest, taxes, depreciation and amortization margin improved to 19.8% of sales in the third quarter, compared with 17.3% in the corresponding period of 2025. The figure totaled $256 million, compared with $193 million a year earlier. Generac posted adjusted earnings per share of $2.54, beating Wall Street's estimate of $2.43. But revenue of $1.29 billion came in below analysts' expectations of $1.32 billion. The stock fell 1.31% in premarket trading on October 28, after closing the October 27 session at $193.71.
The growth outlook requires manufacturing expansion, with Generac working to triple its global production capacity for large generators. Initial production at its large-generator facility in Sussex, Wisconsin, began at the end of the third quarter, and the company expects production rates to accelerate significantly in the fourth quarter of 2026. Its new packaging facility in Belvidere, Illinois, is also expected to begin operating in early 2027. The facility is intended to support increased value-added production and improve margins on large megawatt generators. Jagdfeld said plans to expand production capacity are continuing to support growth in the data center market.
The company raised its forecast for its adjusted earnings before interest, taxes, depreciation and amortization margin for 2026 to a range of 20.5% to 21.0%, from the previous range of 20.0% to 21.0%. For the fourth quarter, it expects a gross margin of 37% to 38% and an adjusted earnings margin of about 20%. It said gross margin would decline from the previous quarter due to a higher share of data center sales and other inflationary pressures. It also raised its full-year free cash flow forecast to about $450 million. The company linked this to improved operating earnings, lower use of working capital and customer payments tied to data center orders.