GNRC Q2 Deep Dive: Data Center Opportunity, Energy Solutions, and Margin Outlook

August 12, 2025 at 23:33 PM EDT

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Power generation products company Generac (NYSE: GNRC) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 6.3% year on year to $1.06 billion. Its non-GAAP profit of $1.65 per share was 24.6% above analysts’ consensus estimates.

Is now the time to buy GNRC? Find out in our full research report (it’s free).

Generac (GNRC) Q2 CY2025 Highlights:

Revenue: $1.06 billion vs analyst estimates of $1.03 billion (6.3% year-on-year growth, 3.4% beat)
Adjusted EPS: $1.65 vs analyst estimates of $1.32 (24.6% beat)
Adjusted EBITDA: $187.6 million vs analyst estimates of $159.1 million (17.7% margin, 17.9% beat)
Operating Margin: 10.5%, in line with the same quarter last year
Market Capitalization: $11.67 billion

StockStory’s Take

Generac’s second quarter results were met with a notably positive market reaction, reflecting management’s emphasis on commercial and industrial (C&I) product sales and demand for residential energy storage systems. CEO Aaron Jagdfeld highlighted strong shipments to industrial distributors and robust sales of residential energy technology as core drivers. Growth in portable generators was attributed to market share gains at key retailers, while gross margins benefited from favorable pricing and lower input costs. Jagdfeld underscored, “Adjusted EBITDA margins came in well ahead of our prior forecast for the quarter as a result of continued strong gross margin performance and better-than-expected operating leverage on the higher shipment volumes.”

Looking forward, Generac’s updated outlook centers on the expanding opportunity in backup power for data centers, as well as strategic recalibration in its residential solar and storage investments. The company expects to benefit from increased visibility into C&I product demand, especially as shipments for large megawatt generators begin internationally and domestically. Management pointed to operating leverage from the scaling C&I business and ongoing cost reduction initiatives as key to sustaining margins. Jagdfeld explained, “Given increased visibility into our full year 2025 financial results, including our second quarter outperformance and lower than previously anticipated tariff-related price increases in the second half, we are narrowing our full year net sales growth assumption and increasing the low end of our adjusted EBITDA margin guidance range.”

Key Insights from Management’s Remarks

Management credited C&I product momentum, residential energy storage growth, and new market entries as drivers of the second quarter’s performance, while also noting evolving tariff impacts and the early stages of Generac’s data center push.

C&I and Data Center Expansion: The quarter saw strong C&I sales, particularly through industrial distributors and telecom channels, with initial shipments of large megawatt generators for data centers driving a new backlog of over $150 million. Management sees the data center segment as a potentially transformative market, with a structural deficit in backup power equipment creating urgency for rapid scale-up.
Residential Energy Storage Growth: Shipments of residential energy technology, including energy storage solutions and ecobee smart thermostats, grew significantly. The ecobee platform reached over 4.5 million connected homes, and recurring revenue from subscriptions increased, contributing to improved margins in the residential segment.
Portable Generators and Retail Channel Wins: Portable generator sales outperformed despite fewer outage events, thanks to increased placement and shelf space with major retailers. Generac expects these gains to support a higher baseline for future demand, even as comparisons in the second half of the year become more challenging.
Product Innovation and Launches: The company introduced its next-generation home standby generator line, including a 28-kilowatt air-cooled model, focused on lower ownership costs, improved efficiency, and enhanced diagnostics. The PWRcell 2 energy storage system began shipping, with the PWRmicro microinverter line set to launch later in the year.
Tariff and Pricing Dynamics: Management noted that favorable price realization offset tariff-related cost pressures. While tariff levels are expected to remain, Generac is optimizing pricing and supply chain strategies to maintain margins. Lower-than-anticipated tariffs have already contributed to improved gross margins in the quarter.

Drivers of Future Performance

Generac’s outlook is shaped by accelerating demand for data center backup solutions, ongoing product innovation, and active management of tariff and supply chain costs.

Data Center Demand Acceleration: Management expects large megawatt generators for data centers to become a major revenue driver, given industry-wide shortages and increasing global demand. Generac’s backlog in this segment is expected to convert into shipments starting in the second half of the year, with a significant impact projected for 2026 and beyond.
Recalibration of Clean Energy Investments: The company is adjusting investment levels in residential solar and storage as incentives phase out and market size contracts. Management remains committed to integrating these solutions with the ecobee platform, but aims to reduce the drag on profitability from clean energy products by tapering development costs and focusing on scalable, profitable offerings.
Margin Sustainability Focus: Generac plans to sustain and potentially expand margins through continued pricing discipline, supply chain efficiencies, and leveraging growth in higher-margin segments like recurring subscription revenues. Management acknowledged risks from evolving tariffs and changing market dynamics, but expressed confidence that structural improvements will help maintain strong margins.

Catalysts in Upcoming Quarters

We will be closely watching (1) the pace of large megawatt generator adoption within the data center sector, (2) the ability of Generac’s new product launches—such as PWRcell 2 and the next-generation home standby line—to drive incremental sales and margin improvement, and (3) the effectiveness of cost containment and supply chain strategies in offsetting tariff and market headwinds. Shifts in residential solar and storage demand will also be vital signposts.

Generac currently trades at $198.62, up from $151.32 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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