Data center products and services company Vertiv (NYSE: VRT) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 35.1% year on year to $2.64 billion. On top of that, next quarter’s revenue guidance ($2.55 billion at the midpoint) was surprisingly good and 5.2% above what analysts were expecting. Its non-GAAP profit of $0.95 per share was 13.9% above analysts’ consensus estimates.

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"Vertiv's second quarter performance demonstrates the strength of our market position and our ability to execute at scale," said Giordano Albertazzi, Vertiv's Chief Executive Officer.

Company Overview

Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Vertiv’s 17% annualized revenue growth over the last five years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Vertiv’s annualized revenue growth of 19.3% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Vertiv’s recent performance shows it’s one of the better Electrical Systems businesses as many of its peers faced declining sales because of cyclical headwinds.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Vertiv’s organic revenue averaged 19.6% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Vertiv reported wonderful year-on-year revenue growth of 35.1%, and its $2.64 billion of revenue exceeded Wall Street’s estimates by 12%. Company management is currently guiding for a 23% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.5% over the next 12 months, a deceleration versus the last two years. Still, this projection is admirable and suggests the market sees success for its products and services.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Vertiv has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Vertiv’s operating margin rose by 10.2 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q2, Vertiv generated an operating margin profit margin of 16.8%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Vertiv’s EPS grew at an astounding 60.3% compounded annual growth rate over the last five years, higher than its 17% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Vertiv’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Vertiv’s operating margin was flat this quarter but expanded by 10.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Vertiv, its two-year annual EPS growth of 66.1% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q2, Vertiv reported EPS at $0.95, up from $0.67 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Vertiv’s full-year EPS of $3.34 to grow 19.8%.

Key Takeaways from Vertiv’s Q2 Results

We were impressed by how significantly Vertiv blew past analysts’ organic revenue expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 11.4% to $159.11 immediately after reporting.

Sure, Vertiv had a solid quarter, but if we look at the bigger picture, is this stock a buy? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.