Vertiv Holdings Co (VRT): AI Infrastructure Demand, Cash Conversion and the Waylay Inflection

A market re‑rating triggered by beats and software M&A#

Vertiv [VRT] closed at $136.74, up +8.89% intraday on the latest move after a run of quarterly earnings beats and visible progress on the company’s software and AI infrastructure strategy. The stock now carries a $52.22B market capitalization, a level that presumes sustained high‑growth execution from an industrial company that only recently reoriented toward integrated, software‑enabled data center infrastructure. That reorientation — and a targeted acquisition to accelerate operational intelligence — is the most consequential development for the company’s growth and multiple compression prospects in the next 12–24 months.

Vertiv’s recent operational performance gives the market reasons for optimism: FY2024 revenue rose to $8.01B, a +16.77% increase versus FY2023, and the company generated $1.14B of free cash flow in 2024, up roughly +48.86% year‑over‑year. Those two statistics — top‑line acceleration and step‑change cash conversion — are the central facts that connect strategy to valuation, but they also raise questions about sustainability, margin durability and whether the business can convert AI‑driven orders into recurring, higher‑margin software and services revenue.

What happened: beats, orders and a software inflection#

Vertiv has reported a steady string of quarterly earnings beats through 2025 (actual EPS of $0.95 vs. estimate $0.832 on 2025‑07‑30; other beats on 2025‑04‑23 and 2025‑02‑12), with management attributing a meaningful portion of order growth to deployments tied to AI and high‑density compute. At the same time, the company announced the acquisition of Waylay NV — a targeted software deal that supplies hyperautomation and generative AI capabilities for operations and predictive maintenance. The Waylay transaction is designed to accelerate Vertiv’s move from selling hardware components toward offering integrated hardware + Operational Intelligence stacks for AI data centers Vertiv Waylay acquisition report.

That combination of stronger order flow, visible margin expansion and an M&A move into software is the immediate narrative driving the re‑rating. The structural question remains whether Vertiv can convert elevated order books into a durable shift in revenue mix toward higher‑margin software and recurring services while maintaining the cash generation profile that impressed markets in 2024.

Financial performance: growth, margins and cash — recalculated#

To evaluate the quality of the improvement, we recompute the key financial metrics from provided annual statements (FY2021–FY2024). The company’s reported numbers point to a multi‑year improvement in scale and margin.

Income statement trends (FY2021–FY2024)#

The arithmetic shows a clear inflection in 2023–2024: revenue accelerated +16.77% year‑over‑year in 2024, gross margin expanded to 34.33% (from 32.33% in 2023) and operating margin widened to 17.23% (from 13.22%). Net income increased +7.74% to $495.8M in 2024. These margin gains track with management’s messaging that higher‑value, higher‑density equipment and services, coupled with operating leverage, are improving profitability.

Balance sheet and leverage (FY2024 recalculation)#

*FY2023 and earlier current ratios are reproduced from the dataset; we report FY2024 current ratio as 5.10 / 3.10 = 1.65x after recalculation.

Using FY2024 closing balances, Vertiv’s debt profile shows total debt of $3.15B and net debt of $1.92B. Calculated on a simple FY basis (FY2024 net debt / FY2024 EBITDA), net leverage equals ~1.62x (1.92 / 1.19). That is higher than some TTM metrics published elsewhere in the dataset (which show net debt/EBITDA ~0.96x) — a discrepancy explained by differing denominators (trailing‑twelve‑months EBITDA versus full‑year EBITDA, timing of cash balances and intra‑period adjustments). We highlight the FY‑basis calculation because it uses the same fiscal year closing values for debt, cash and EBITDA.

Cash flow dynamics#

Vertiv’s cash performance is the clearest sign of operational improvement. Net cash provided by operating activities rose to $1.32B in 2024 (from $900.5M in 2023), a +46.51% increase, and free cash flow expanded to $1.14B in 2024 (from $765.9M), a +48.86% increase. Capital expenditure was modest at $184.1M in 2024, leaving room to fund both organic investments and capital return programs. The company repurchased $599.9M of stock in 2024 and paid $42.2M in dividends, actions that materially reduced cash available for balance sheet repair but highlight management’s shift toward shareholder returns as cash flow stabilizes.

Valuation and multiples — calculated from the same dataset#

Vertiv’s current share price of $136.74 implies a market cap of $52.22B. Using the FY2024 numbers and a simplified enterprise value (EV = market cap + total debt - cash), Vertiv’s EV approximates $54.14B (52.22 + 3.15 - 1.23). Calculated on FY2024 EBITDA of $1.19B, that produces an FY EV/EBITDA of ~45.48x (54.14 / 1.19). By contrast, the dataset provides an EV/EBITDA TTM figure of 33.64x, and reported forward P/E ratios (analyst averages) that decline from 35.49x (2025) to 19.31x (2028) as EPS ramps in the consensus model. The gap between our simple FY EV/EBITDA (45.48x) and the dataset’s TTM figure (33.64x) again reflects differences in timing and in the EBITDA denominators (FY vs TTM vs forward estimates).

The current market multiple — whether measured by P/E (~64x using recent EPS) or EV/EBITDA depending on the basis used — clearly embeds elevated growth expectations tied to AI infrastructure demand and the company’s ability to extract higher margins from software and services.

Strategy and competitive positioning: hardware + Operational Intelligence#

Vertiv’s strategic pivot is deliberate: move up the stack from selling power and cooling hardware to offering factory‑validated, modular systems bundled with Operational Intelligence software. The Waylay NV acquisition (announced in 2025) supplies generative AI and hyperautomation capabilities to turn telemetry into automated remediation and predictive maintenance, an important capability for high‑density AI data centers where thermal events and downtime carry outsized costs Vertiv Waylay acquisition report.

That acquisition and product packaging (examples cited publicly include the ONECore modular platform and advanced liquid cooling architectures) are designed to address three buyer needs simultaneously: speed of deployment, interoperability with leading compute platforms, and operational cost control. Vertiv competes with incumbents such as Schneider Electric, Eaton and Siemens, while also facing partial disintermediation from hyperscalers that internalize some infrastructure capabilities. Vertiv’s differentiator is the combined hardware breadth, a services footprint for colocation and enterprise customers, and now a nascent software stack that aims to convert CAPEX sales into higher‑margin recurring revenue.

Execution questions and risk anchors#

Several execution points will determine whether the current momentum becomes durable. First, supply‑chain and delivery execution: a backlog driven by AI orders is useful only if Vertiv can ship at scale without margin erosion. Second, software integration and go‑to‑market: embedding Waylay’s capabilities across installed hardware and ensuring customers adopt the Operational Intelligence suite will require sales‑motion changes and potentially new pricing models. Third, capital allocation: management returned nearly $600M to shareholders via buybacks in 2024 while still carrying net debt; balancing buybacks, M&A and potential strategic investments will be a governance and execution test. Finally, valuation sensitivity: the multiple the market assigns to Vertiv is predicated on successful mix shift to software and services — if software revenue growth disappoints, the high current multiples could re‑rate sharply.

Historical context: pattern of improvement and prior inflection points#

Vertiv’s financial history shows a multi‑year recovery from low‑margin years in 2021–2022 to materially improved 2023–2024 results. Revenue has grown from $5.00B in 2021 to $8.01B in 2024, a compound visible acceleration that coincided with product refreshes, margin improvement and more robust cash generation. The 2024 step‑up in operating margin to 17.23% marks the strongest operating performance in the recent sample and reflects both price/mix and operating leverage. Historically, the company has demonstrated it can expand gross and operating margins as it scales, but converting that into a durable software recurring revenue base is the new test that differentiates this chapter from past product-led improvements.

What this means for investors#

Vertiv’s data‑center infrastructure business is at a strategic inflection where three forces converge: secular AI/HPC demand (driving higher‑density racks and advanced cooling), a shift to software and services (via Waylay and in‑house buildouts) and materially improved cash conversion. The arithmetic is straightforward: stronger top‑line growth plus higher margins plus larger free cash flow creates the conditions for a higher multiple — but only if revenue mix shifts and recurring revenue grows meaningfully.

From a financial vantage point, the key indicators to watch in coming quarters are (1) the revenue composition — software & services as a percent of total revenue, (2) incremental gross and operating margin contribution from AI‑targeted solutions, (3) cadence of backlog conversion into shipped revenue without margin dilution, and (4) free cash flow trajectory net of buybacks and M&A. Management has demonstrated balance‑sheet discipline in 2024 by materially increasing cash and reducing net debt, but the sizable buyback program means future capital allocation choices will materially influence investor returns and leverage metrics.

Key takeaways#

Vertiv has moved from a hardware‑centric vendor to a hardware + Operational Intelligence operator, a change reinforced by the Waylay acquisition. The company produced $8.01B revenue and $1.14B FCF in FY2024, with operating margin expanding to 17.23%. Calculated net leverage at FY‑end sits near ~1.62x net debt/EBITDA (FY basis), and our FY EV/EBITDA calculation is ~45.48x using FY2024 EBITDA — both figures highlight why the market is sensitive to execution. Continued order strength from AI workloads and successful integration of software capabilities are the primary variables that will validate the premium multiples priced into the stock.

Near‑term catalysts and monitoring checklist#

Investors and analysts should monitor: sequential quarterly order trends for signs of sustained AI demand; the split of revenue into hardware vs software & services; margin progression on a per‑segment basis; operating cash flow and free cash flow generation; and disclosure on Waylay integration milestones and ARR metrics if/when management provides them. Quarterly beats will matter less than consistent evidence of a durable mix shift and predictable software economics.

Closing observation#

Vertiv’s recent financials and targeted software M&A create a credible path from components supplier to integrated AI‑infrastructure provider. The company’s improved cash generation and expanding margins are real achievements that justify closer attention. The remaining challenge is scale and conversion: turning promising order momentum and software capabilities into a predictable, higher‑margin recurring revenue stream that justifies the elevated multiples currently reflected in the market price. Execution on backlog conversion, disciplined capital allocation and clear software monetization benchmarks will determine whether Vertiv’s re‑rating is durable or simply a cyclical premium.

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Sources: Vertiv FY2024 financial statements (reported figures and filing dates in dataset, filings through 2025‑02‑18); company earnings release and quarterly results (earnings surprise dates listed in dataset); strategic acquisition reporting on Waylay NV [Vertiv Waylay acquisition report](https://vertexaisearch.cloud.google.com/grounding-api-redirect/AUZIYQGc7SopU_2COgfw8SW6_hsOivDY45BbYNOpxikD4RqHcw62Ws0wMFrrM13IZ1YUap8lbRjEJj5H3kf19wdm-LvTVnlNwy4f1iTid2zAksRdXG9wg1ss9bWRxi7Q8P_vMHpVum40iQOH3CDJj2uE3ljuZf7uB6zO-_2UnXezWC_ppo8nhkXIl9hKFU6qRtR03Q_lH0NQ2Ddapyg=.