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GE Vernova (GEV) is trading sharply lower despite a Q2 report that reinforced the strong tailwinds from rising global electricity demand, including robust demand for gas turbines, grid equipment, and data center infrastructure. GAAP EPS of $2.47 missed expectations, while revenue jumped 21.9% yr/yr to $11.10 bln, nicely above expectations. GEV also raised its FY26 revenue outlook to $45.5-46.5 bln from $44.5-45.5 bln and lifted free cash flow guidance to $11.5-12.5 bln from $6.5-7.5 bln. However, GEV maintained its adjusted EBITDA margin outlook of 12-14%.

• Orders: Orders increased 88% organically to $24.2 bln, with book-to-bill above 2.0x. Power orders surged 134% to $16.7 bln, led by Gas Power equipment and services on higher volume and pricing. Electrification orders increased 66% to $6.3 bln, driven by growing demand for substations, switchgear, transformers, and other grid equipment.
• Profitability: Adjusted EBITDA increased 61% yr/yr to $1.2 bln, while adjusted EBITDA margin rose to 11.3%, representing 340 bps of organic expansion. Power EBITDA margin expanded 320 bps organically to 18.8%, while Electrification margin expanded 700 bps organically to 18.4%, reflecting higher volume, favorable pricing, and productivity.
• Backlog and capacity: Backlog rose $13.0 bln sequentially and $47.6 bln yr/yr to $176.3 bln, including $111.6 bln in Power and $44.6 bln in Electrification. Gas Power gigawatts under contract increased to 116 GW from 100 GW in Q1, with at least 125 GW expected by year-end. GEV has reached a 20-GW annualized production rate and targets 24 GW in 2028 and 30 GW by 2030.
• Wind: Wind remained the soft spot, with orders declining 40% yr/yr to $1.2 bln, primarily due to lower North American Onshore equipment demand. Revenue fell 11% to $2.0 bln, while the segment's EBITDA loss widened to $275 mln from $165 mln on lower Onshore equipment volume and higher Offshore project costs. The loss was in line with management's expectations.
• Q3 outlook: Power expects 17-19% organic revenue growth and a 17-18% EBITDA margin. Electrification expects revenue of $3.8-4.0 bln and modest sequential margin expansion, while Wind expects revenue to decline by low double digits but EBITDA to improve to approximately breakeven.

Briefing.com Analyst Insight

The selloff appears to reflect the high bar facing GEV following the stock's substantial run rather than a deterioration in demand across its core businesses. Power and Electrification delivered strong orders, revenue growth, pricing, and margin expansion, while backlog and Gas Power gigawatts under contract continued to climb. However, the EPS miss, continued Wind weakness, and unchanged 12-14% adjusted EBITDA margin outlook may have disappointed investors looking for greater near-term earnings leverage. Stronger pricing and productivity are supporting margins, although GEV is also incurring higher expenses to support capacity expansion and R&D. The longer-term outlook remains supported by higher-priced gas orders, expanding production capacity, and growing grid and data center demand, but the stock may need evidence of further margin upside to satisfy elevated expectations.