Q2 Momentum Meets a Strategic Buy: EPS Beat and the Great Lakes Close#
Vertiv [VRT] reported an operational beat this summer — adjusted EPS of $0.95 in Q2 2025, above street consensus near $0.83 — while management advanced a major capability play by completing the acquisition of Great Lakes Data Racks for roughly $200 million in August 2025. The two developments together crystallize the company’s transition from a systems supplier to a tighter, factory-integrated provider for high-density AI deployments: the beat signals expanding demand and margin leverage today, while Great Lakes closes a stack gap that supports higher-margin, bundled solutions tomorrow. The company also disclosed a backlog and order environment that underpinned a raised full‑year revenue range approaching $9.98B–$10.08B, pointing to sustained AI-related demand and execution momentum into 2026 (see Q2 commentary and investor releases) Nasdaq Vertiv press release.
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Financial performance: growth with improving cash conversion#
Vertiv’s FY2024 financials show a clear step‑change versus the prior two years. Revenue rose to $8.01B from $6.86B in 2023 — a calculated year-over-year increase of +16.77%. Net income increased to $495.8MM, up +7.74% year-over-year, while reported EBITDA in 2024 was $1.19B, yielding an EBITDA margin of 14.85% on our calculation. Most notable is free cash flow: FY2024 free cash flow came in at $1.14B, translating to a 14.23% FCF margin relative to revenue — a strong conversion ratio for a capital-intensive infrastructure supplier and a primary enabler of the company’s recent capital allocation choices.
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The table below summarizes the core income statement trend we used for the calculations.
| Fiscal Year | Revenue (USD) | Net Income (USD) | EBITDA (USD) | EBITDA Margin (calc) |
|---|---|---|---|---|
| 2024 | 8,010,000,000 | 495,800,000 | 1,190,000,000 | 14.85% |
| 2023 | 6,860,000,000 | 460,200,000 | 1,020,000,000 | 14.87% |
| 2022 | 5,690,000,000 | 76,600,000 | 616,700,000 | 10.84% |
| 2021 | 5,000,000,000 | 119,600,000 | 483,800,000 | 9.68% |
Sources: FY financial statements (accepted dates and filing dates as provided in company filings).
Free cash flow strength enabled active balance sheet management last year. Cash and cash equivalents rose to $1.23B at year-end 2024 from $780.4MM in 2023 — an increase of +57.60% — while net debt declined from $2.35B to $1.92B (a reduction of -18.30%). The balance sheet/cash-flow summary below highlights these shifts and the company’s 2024 financing actions.
| Fiscal Year | Cash (USD) | Net Debt (USD) | Free Cash Flow (USD) | Share Repurchases (USD) | Dividends Paid (USD) |
|---|---|---|---|---|---|
| 2024 | 1,230,000,000 | 1,920,000,000 | 1,140,000,000 | -599,900,000 | -42,200,000 |
| 2023 | 780,400,000 | 2,350,000,000 | 765,900,000 | 0 | -9,500,000 |
| 2022 | 260,600,000 | 3,110,000,000 | -263,800,000 | 0 | -3,800,000 |
| 2021 | 439,100,000 | 2,690,000,000 | 126,300,000 | 0 | -3,800,000 |
Sources: Company cash flow statements (accepted dates and filing dates as provided).
Our calculations show management used a majority of 2024 FCF to repurchase stock and return cash: share repurchases of $599.9MM accounted for ~52.63% of FY2024 free cash flow, while dividends were modest at $42.2MM. Net cash used in financing activities (approximately -$652.1MM) mirrors these capital returns and modest liability changes.
Earnings-quality check and the margin story#
The underlying quality of the 2024 earnings is supported by operating cash flow growth: operating cash flow improved to $1.32B in 2024 from $900.5MM in 2023, a calculated increase of +46.51%, consistent with the company’s reported operating cash flow growth metric. That divergence between net income growth (+7.74%) and operating cash flow expansion (+46.51%) points to working capital normalization and improved cash conversion as backlog converts to revenue.
Margins expanded in 2024: operating income margin rose to ~17.21% (operating income $1.38B on revenue $8.01B) from 13.21% in 2023. The improvement comes from a combination of higher sales mix, better factory productivity, and leverage on SG&A — selling, general & administrative expenses grew modestly relative to revenue. The net margin remained moderate at ~6.19%, reflecting tax and non‑operating items, but the direction is positive.
One reconciliation to note: the dataset reports a TTM net debt to EBITDA of 0.96x, but our FY2024 point-in-time calculation (net debt $1.92B / EBITDA $1.19B) yields ~1.61x. This difference is not contradictory once the timespan is considered: the TTM ratio uses trailing twelve-month EBITDA that includes subsequent quarters (including 2025 quarters with elevated demand and margin expansion), inflating the EBITDA denominator relative to the 2024 year-end EBITDA figure. Investors should treat the 0.96x TTM figure as a forward-leaning liquidity snapshot and the FY calc as a strictly historical balance — both are useful but represent different windows.
Strategic moves: Great Lakes acquisition and the NVIDIA alignment#
Vertiv’s August 2025 acquisition of Great Lakes Data Racks for approximately $200M is a strategic choice that fills a capability gap in the physical stack: racks and cabinets engineered specifically for very-high-density AI racks. The addition converts Vertiv’s product set into a more complete, factory-integrated offering: pre-engineered racks with integrated busways, power connections and liquid‑cooling interfaces that materially reduce field work and deployment timelines for hyperscalers and colocation providers Vertiv press release DataCentre Magazine.
Strategically, the acquisition is less about immediate top-line scale and more about margin mix and competitive positioning. Management’s public commentary and third‑party reports indicate the purchase price implied mid‑high single-digit to low double‑digit EBITDA multiples once synergies are accounted for, and the company explicitly expects cross-sell and factory-integration economics to lift margins on new AI projects over time. Combined with Vertiv’s reference-architecture work with NVIDIA — including co‑developed designs for high-density GPU platforms and emerging 800 VDC power architectures — the company is attempting to own a larger share of the per-rack economics under hyperscaler projects Vertiv GTC materials DataCenter Frontier.
The NVIDIA alignment is operationally material: validated reference architectures reduce customer integration risk and shorten procurement-to-production timelines. For customers buying NVIDIA compute platforms, validated infrastructure is a procurement accelerant — Vertiv’s co‑engineered designs for liquid cooling and high‑voltage distribution are meant to be a precursor to larger, higher‑margin systems sales and recurring service/upgrade revenue.
Competitive dynamics: who benefits and who is at risk?#
Vertiv’s competitive differentiation is breadth: it owns the physical environment (racks, power, cooling) that allows networking and silicon players (e.g., Arista, Astera Labs) to perform. Whereas pure-play networking or silicon-adjacent vendors compete on point solutions, Vertiv aims to sell integrated subsystems — a position that can command higher average deal sizes and better margin capture in turnkey white space projects.
However, this advantage depends on two execution elements: first, the company must scale factory integration without creating supply bottlenecks; second, it must translate reference designs into reproducible, margin-improving product lines rather than bespoke engineering projects. Early signs — expanded backlog, elevated organic order growth (management cited organic orders up ~15% YoY in Q2), and the orderbook supporting raised guidance — suggest Vertiv is gaining commercial traction. The market will watch for consistency in delivery timelines and margin accretion on bundled deals as proof points.
Capital allocation: buybacks, dividends and acquisitions#
Capital allocation in 2024 and early 2025 demonstrates a balance between shareholder returns and strategic reinvestment. Our calculations show Vertiv used roughly 52.63% of FY2024 free cash flow for share repurchases and a modest portion for dividends. At the same time, the company completed the Great Lakes acquisition (~$200M) and continues to invest in R&D (R&D in 2024 was $352.1MM, up from $303.5MM in 2023), signaling a dual approach: commit to short-term EPS accretion via buybacks while funding capabilities to capture AI infrastructure economics.
Net debt fell by ~$430MM in 2024, and total debt levels remain moderate (total debt ~$3.15B in 2024). The combination of a stronger cash balance and improving operating cash flow gives Vertiv room to execute incremental M&A while maintaining capital returns. The key metric to track going forward is FCF yield on an evolving revenue base and the percentage of FCF consumed by buybacks versus reinvestment into higher-margin product lines.
Risks and mitigants#
Vertiv’s most salient near-term risks are operational scaling and margin pressure. Scaling factory-integrated rack production while ensuring consistent quality and supply-chain continuity is non-trivial; the company has signaled moves to diversify manufacturing footprints, including Mexico capacity expansion, as a partial mitigation. Tariff and input-cost volatility remain a headwind to near-term gross margins, and the company flagged these as contributors to short-term margin variability even as revenue grows.
Energy and regulatory constraints are medium-term structural risks in the AI deployment cycle. High-density racks require more advanced cooling and substantial power; customers and regulators will increasingly focus on efficiency and water/energy use. Vertiv’s investments in liquid cooling and 800 VDC architectures are aimed directly at this pressure, but adoption cycles and local permitting can create project timing uncertainty.
Finally, valuation sensitivity is a risk: multiples imply growth expectations are already priced in. The market’s forward PE compression (forward PE estimates move from higher trailing multiples to lower forward multiples as EPS grows) reflects both optimism and the need for consistent execution to justify premium valuations.
What this means for investors#
Key takeaways from the data and strategic developments are straightforward. First, Vertiv is executing a profitable growth trajectory: revenue acceleration (+16.77% YoY in 2024) is accompanied by margin expansion and, crucially, exceptional FCF conversion ($1.14B FCF in 2024). Second, the Great Lakes acquisition and the NVIDIA partnership are complementary strategic moves that can lift both win rates and deal sizes for high-density AI deployments by offering factory-validated, integrated solutions. Third, capital allocation shows the company is returning cash to shareholders while still investing in growth capabilities, a balancing act that reduces headline leverage and signals confidence in the sustainability of cash flows.
The critical near-term monitors are execution metrics: delivery timelines on large AI racks, margin development on bundled deals, and the cadence of backlog conversion into booked revenue. Additionally, keep an eye on capital allocation discipline — continued high levels of buybacks are sensible only if they don’t starve reinvestment in the higher-margin product integrations that underpin the strategic case.
Key takeaways#
Vertiv enters the AI-infrastructure inflection with improving fundamentals and targeted capability expansion. FY2024 shows meaningful margin recovery and outstanding cash conversion, while Q2 2025 beats and an ~$200M strategic acquisition for rack capability sharpen the company’s addressable offering. The combination of validated architectures with NVIDIA and a more integrated product portfolio addresses a clear market need for faster, predictable AI deployments, but the success of this strategy will depend on supply‑chain execution, sustained order flows, and converting higher mix into durable margin upside.
For further reading, Vertiv’s investor materials and the company’s GTC/NVIDIA reference-design information are publicly available: see Vertiv’s investor site and their GTC coverage for design details and partnership statements Vertiv press release Vertiv GTC.