Generac Holdings Inc. (GNRC) Earnings & Analysis

Latest quarter

Generac reported Q3 FY2026 revenue of $1.3 billion, up 16.2% from $1.1 billion a year earlier, but below the consensus. Its adjusted earnings of $2.54 per share exceeded the consensus estimate of $2.38.

The company’s filing said commercial and industrial sales rose to $553.0 million, driven primarily by increasing sales of data center products. Residential sales grew to $744.1 million as home standby and portable generator growth more than offset lower energy storage shipments.

Generac reported gross margin of 39.9%, compared with 38.3% a year earlier. The filing attributed the increase to favorable price and cost effects, including lower tariff costs, partly offset by an unfavorable sales mix. Operating margin rose to 12.4% from 9.25%.

Diluted earnings per share increased to $1.83 from $1.12, while free cash flow rose to $131.8 million from $96.5 million. CFO York Ragen attributed the cash flow increase primarily to higher operating earnings, partly offset by capital spending on commercial and industrial capacity.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Aaron Jagdfeld said Generac’s agreement to supply Amazon with data center backup generators helped lift its data center product backlog to approximately $4.5 billion. He said initial deliveries under the agreement are expected to total $2.4 billion across 2027 and 2028, while orders from non-hyperscale customers also expanded geographically.

Jagdfeld said initial production began at the Sussex, Wisconsin, large-generator facility at the end of the third quarter, with build rates expected to increase in the fourth quarter. He said Generac was also investing in packaging capacity in Belvedere, Illinois, and expanding manufacturing and service capacity internationally. In the question-and-answer session, analysts pressed him on the production ramp and supply-chain readiness. Jagdfeld said the company was sourcing major components from multiple suppliers, except for high-horsepower diesel engines, where global supply is limited.

On residential demand, Jagdfeld said a more normal outage environment helped home standby and portable generator shipments grow. He said installations returned to growth in September, while energy storage sales declined after the completion of a Puerto Rico program. Higher interest rates and a more challenging policy environment continued to weigh on solar and storage demand, he said.

CFO York Ragen said residential home standby sales growth was mostly driven by volume, with pricing contributing a smaller portion. He also said lower tariff rates helped gross margin. Jagdfeld said longer lead times for domestic industrial distributor products reflected a manufacturing relocation, and he expected them to return to more normal levels in the first quarter of 2027.

Asked about an executive order concerning foreign components, Jagdfeld said its final wording remained uncertain. He said Generac’s engine supplier was evaluating domestic production options and that the company would accelerate those plans if the final interpretation affected it. For the fourth quarter, Ragen said a higher projected share of data center sales and other inflationary pressures would affect gross margin.

Guidance

Generac raised the lower end of its full-year FY2026 adjusted EBITDA margin guidance while keeping the upper end unchanged. Jagdfeld said the company now expects nearly $500.0 million in FY2026 data center revenue, up from its previous expectation.

Ragen raised the FY2026 free cash flow expectation to approximately $450.0 million from $350.0 million, citing higher operating earnings, lower working capital use and incremental data center customer deposits.