Innio Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
October 27, 2026

Key Takeaways

  • Positive Sentiment: Record third-quarter performance: Revenue rose 57% year over year to $1.2 billion, while adjusted EBITDA increased 70% to $245 million, lifting the margin to 21% as pricing, volume, and operating leverage improved.
  • Positive Sentiment: Demand visibility remains exceptionally strong. Equipment order intake reached $6.1 billion year to date, backlog climbed 142% to $8 billion, and the company cited firm orders and slot reservations extending into 2029–2031.
  • Positive Sentiment: INNIO raised its 2026 outlook, now expecting revenue of $3.9–$4.0 billion and adjusted EBITDA of $780–$800 million. Capacity expansion at its Jenbach and Waukesha sites is intended to support growth from 3.5 gigawatts of annual capacity in 2025 to more than 10 gigawatts by 2030.
  • Positive Sentiment: The services business grew revenue 20% and adjusted EBITDA 37% in the quarter, with margins reaching 32%. Management expects newer data-center installations to generate higher service intensity—more than $50,000 per megawatt annually on average versus approximately $30,000 for the existing fleet.
  • Neutral Sentiment: Management emphasized that demand is exceeding available capacity and that data-center projects have not been meaningfully canceled or delayed, but acknowledged ongoing execution and permitting considerations. The company also said it will not pay cash dividends in the near term as it prioritizes reinvestment and deleveraging.
AI Generated. May Contain Errors.
Earnings Conference Call
Innio Q3 2026
00:00 / 00:00

Transcript Sections

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Operator

Good day, and thank you for standing by. Welcome to the INNIO Third Quarter 2026 Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. If you join via device audio, click the Raise Hand button on your screen. To withdraw your question, please press star one and one again, or click the Lower Hand button. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tim Furcillo, VP Investor Relations at INNIO. Please go ahead.

Tim Furcillo
VP of Investor Relations at INNIO

Hello, everyone, and welcome to INNIO's third quarter 2026 earnings call. My name is Tim Furcillo, Vice President of Investor Relations at INNIO. I am joined by our CEO, Olaf Berlien, and our CFO, Dennis Schulze. With us in the room are also Martin Widner, leading global sales for data centers and power solutions at INNIO, Andreas Eberharter, responsible for product management and marketing, and Carl Richers, head of global services. Let's have a quick look at today's agenda. First, Olaf and Dennis will present the third quarter results. Then you will have approximately 30 minutes for your questions. Please note that this conference call is being recorded today, October 27th, 2026. Before we get started, please do mind the disclaimer. Our conference call remarks will include both GAAP and non-GAAP financial results.

Tim Furcillo
VP of Investor Relations at INNIO

Reconciliations of our non-GAAP measures to the most directly comparable GAAP measures can be found in our Form 10-Q for the period ended September 30th, 2026, our quarterly earnings release, and the corresponding presentation slides, all of which are available on our IR website. We will be making forward-looking statements about our business, market position, and future performance. These statements are made only as of today's date. We do not undertake any obligation to update these statements except as may be required by law. These statements involve known and unknown risks and uncertainties that may cause our actual results to differ materially from those anticipated or implied today. For additional information on risks and uncertainties, please refer to our SEC filings.

Tim Furcillo
VP of Investor Relations at INNIO

Unless otherwise specified, all comparisons refer to Q3 2026 versus Q3 2025. The remarks are presented using AI-generated voice replicas. The Q&A session will be conducted live with the CEO and CFO. With that, I will hand the call over to Olaf.

Olaf Berlien
CEO at INNIO

Thank you, Tim. Hello, everyone, and welcome to INNIO's third quarter earnings call. INNIO delivered a record quarter, exceeding $1 billion in quarterly revenue for the first time. Our teams continued to execute with great discipline, driving growth while improving productivity across the business. The market environment remains highly supportive. Our strong order momentum reflects long-term customer demand, with more than $6 billion in equipment order intake year-to-date. As AI and data center expansion accelerates, the need for power continues to grow. INNIO is well-positioned to capture this opportunity with reliable, flexible, and sustainable power solutions, and we are expanding capacity to meet that demand. Just recently, we reached an important milestone at our Waukesha site, assembling our first Jenbacher generator. With that, let's turn to the key highlights of the quarter. Let me walk you through the key figures on the top of this page.

Olaf Berlien
CEO at INNIO

First, record revenue. Total revenue for the quarter was up 57% year-over-year. Second, profitable growth. Adjusted EBITDA grew even faster than revenue, rising by 70% year-over-year, driven by increased operating leverage. Dennis will discuss this in more detail later. Third, disciplined execution. Equipment revenue grew 86%, reflecting strong backlog conversion. Let me emphasize, our projects are progressing as planned with no delays or cancellations. Fourth, excellent revenue visibility. Equipment order backlog reached $8 billion, up 142% year-over-year. With $2.2 billion in Q3 equipment orders, our last 12-month book-to-bill ratio stands at 3.3x. Building on this performance, we are raising our full-year Adjusted EBITDA guidance by $60 million at the midpoint to between $780 million and $800 million. Dennis will walk you through our outlook in more detail later. On the next slide, I'll highlight three major order milestones that reinforce this momentum.

Olaf Berlien
CEO at INNIO

Starting on the left, a 620 MW follow-on order from a leading data center developer. We also entered into a long-term service agreement covering the first 500 MW of previously ordered capacity. In the center, we secured a 450 MW order from Liberty Energy to provide behind-the-meter power for large-scale data center projects in North America. Delivery is scheduled for 2028. On the right, we extended our strategic partnership with Aggreko through 2031. The agreement includes a minimum of 450 MW of Jenbacher engine capacity to be ordered and delivered by the end of 2027. It also includes access to agreed capacity levels for the remainder of the agreement and a multi-year service agreement for the existing fleet. Together, these commitments show that customers are building their long-term strategies around INNIO and support sustained profitable growth. On the next slide, let's take a closer look at INNIO's business.

Olaf Berlien
CEO at INNIO

As a reminder, this slide, which we shared last quarter, shows our two business segments, equipment and services. On the bottom left, you can see equipment represented 58% of revenue over the last 12 months, up six percentage points from full year 2025. With 67% of equipment order intake, data centers offer a significant growth opportunity for INNIO. At the same time, our longstanding core markets remain strong. Services, on the bottom right, contributed 42% of revenue. Over the next decades, our growing installed base is expected to generate attractive, recurring, high-margin revenue. The equipment backlog and the higher service intensity of data center applications provide further support for long-term profitable services growth. With that, let me explain how these two segments reinforce each other. Here you can see one of the key strengths of the INNIO business model, our service flywheel.

Olaf Berlien
CEO at INNIO

We shared this slide also last quarter, so let's keep this short. On the left, equipment order intake increased from $3.9 billion in 2025 to $6.8 billion over the last 12 months. This drove our backlog to a record $8 billion, providing excellent revenue visibility. On the right, our expanding installed base delivered $1.5 billion in services revenue over the last 12 months. Over its lifetime, each engine generates around 2.5x its original equipment EBITDA in services EBITDA. As our installed base grows, so does our long-term services opportunity. Let's now look at the next slide to see why AI data center customers choose INNIO. INNIO's technology delivers a compelling value proposition for AI power. Let me remind you why customer demand for our solutions is so strong. There are six key reasons. First, our solutions allow for modular deployment, which shortens the time to power.

Olaf Berlien
CEO at INNIO

Second, we have a proven technology with a large and global installed base of 44 GW installed over decades. Third, our solutions have the ability to follow rapid AI load swings. Fourth, we have competitive life cycle costs. Fifth, our solutions have operational flexibility across multiple use cases. Sixth, we deliver strong environmental performance, including near zero water consumption. This is part of a comprehensive sustainability strategy. For the fifth consecutive year, EcoVadis awarded us its platinum rating, placing INNIO among the top 1% of all companies assessed. Let's now look at where our solutions fit into the broader power value chain and the opportunities this creates for INNIO. This slide illustrates the full energy value chain and highlights strong demand on both sides of the meter.

Olaf Berlien
CEO at INNIO

On the left, in front of the meter, rising electricity demand and grid constraints drive the need for flexible power solutions that support grid stability. We expect our addressable power solutions market to grow by 30% annually through 2030. Increased gas production is also expected to drive 14% annual growth in our addressable compression market through 2030. On the right, behind-the-meter, rapid data center expansion fuels demand for fast, reliable on-site power independent of the grid. Here, we expect our addressable market to grow by 65% annually through 2028. For INNIO, this creates a significant and sustained growth opportunity. Our success in data centers builds on decades of experience powering industrials, utilities, and gas infrastructure. This diversified foundation gives us proven technology and an established network to support customers for the long term.

Olaf Berlien
CEO at INNIO

We will now take a closer look at one of the most important drivers of behind-the-meter demand, the rapid build-out of AI data centers. Let's move to the next page. The rapid growth in power demand is creating a major challenge for the U.S. electricity grid. Expanding the grid will take time, and capacity constraints are likely to persist. Let me highlight a few numbers that illustrate the scale of the problem. First, on the left. Average grid connection waiting times have increased from less than two years between 2000 and 2007 to more than six years today. On the right, the U.S. could face a shortfall of up to 80 GW of firm power capacity by 2030, increasing the risk of reliability problems. This creates a long-term opportunity for INNIO. Our on-site power solutions allow customers to secure electricity without having to wait for the grid.

Olaf Berlien
CEO at INNIO

On the next slide, I will explain why gas engines are particularly well-positioned to meet this demand. This slide summarizes why customers choose our gas engines. It compares our gas engines with simple cycle gas turbines, combined cycle gas turbines, and fuel cells across five key criteria: fast start and load following, part load efficiency, low redundancy requirements, fast and flexible deployment, and CapEx. Gas engines offer a strong combination. They respond quickly to changing power demand, maintain high efficiency at part load, and allow customers to add capacity in modular steps. They also require less CapEx than fuel cells. For AI data centers, this combination is particularly valuable. Customers need reliable power that can follow rapid load changes and scale with their growth while limiting upfront investments. On the next slide, let me double-click on one of the criteria that is becoming increasingly important, water usage.

Olaf Berlien
CEO at INNIO

Water use is attracting growing attention, and our engines need almost none. On the left, U.S. media coverage highlights growing concerns about the water demands of data centers and their power supply. Water availability is an increasingly important issue across political parties in our largest market, the United States. On the right, the comparison shows our advantage. INNIO's Type 6 engines use less than 0.1 liter of water per megawatt hour, compared with approximately 200 liters for the turbines shown. This near zero water consumption is a clear advantage for customers, particularly where water availability is constrained. Turning to the next slide, we will bring these advantages together with the economics and long-term customer commitments. This slide shows how leading economics and proven performance translate into long-term customer commitments. Customer commitments provide the strongest evidence that INNIO is being selected for lasting value beyond near-term equipment availability.

Olaf Berlien
CEO at INNIO

Starting on the left, economics. BloombergNEF puts the levelized cost of electricity of gas engines at $103 per megawatt hour. This is the lowest cost among behind-the-meter technologies and 26% below fuel cells. In the middle, performance. Customer and industry statements highlight our fast response to changing power demand and a reduced need for battery support. On the right, customer commitments. Customers are reserving capacity well into the future with non-cancellable, non-tradable slots. They are also signing multi-year supply agreements that anchor long-term relationships. These commitments reflect INNIO's operational flexibility and extensive service network. Our service agreements cover major overhauls, extending engine lifetimes, and supporting continued operation, and these advantages remain relevant even after customers connect to the grid. Let me explain why on the next slide. Even if grid access becomes available, there are compelling reasons for customers to choose behind-the-meter power solutions.

Olaf Berlien
CEO at INNIO

Starting on the left, behind-the-meter solutions provide backup during grid disruptions and have the ability to adapt to rapidly changing AI loads. They also reduce exposure to grid charges and rising electricity costs. On the right, based on the assumptions shown, BloombergNEF puts the marginal generation cost of a gas engine at $43 per megawatt hour. That is 51% lower than the $89 for grid power. Together, these economic and operational advantages support continued engine operation long after grid connection, and this value proposition resonates across a broad and growing customer base. Let's move to page number 16. What matters here is simple. Our customer base is broadening, and our routes to market are becoming more diversified. On the left, you see two different routes to market. When we sell equipment directly to a customer, demand can naturally be more concentrated.

Olaf Berlien
CEO at INNIO

When we sell to Energy-as-a-Service companies, rental companies, and channel partners, the customer base becomes more diversified. Behind those partners is a broad range of end customers, leading hyperscalers, oil and gas companies, and critical infrastructure providers. Broader routes to market mean more end customers across more markets. Many of these engines are installed on-site to power data centers. The underlying need for power extends beyond any individual intermediary, and our engines are designed to serve these sites for decades. The strength of our technology puts us in a privileged position, allowing us to be highly selective when choosing customers. We prioritize customers that have either secured long-term offtake agreements with hyperscalers or frontier AI labs or have a clear line of sight to securing such agreements. We can also confirm that we have not allocated any meaningful volumes to neocloud operators.

Olaf Berlien
CEO at INNIO

Let's move on to the right-hand side, where we show how our equipment order intake is evolving. Our largest customer accounted for approximately 20% of order intake in 2024 and 41% in 2025. In our preliminary near-term outlook, the largest customer share is approximately 21%. INNIO's growth is built on a broad base of strong customers and partners, backed by firm orders and long-term commitments. With that, let me hand over to Dennis for the financial discussion.

Dennis Schulze
CFO at INNIO

Thank you, Olaf, and hello, everybody from my side as well. I will walk you through four main topics today. First, the financial highlights of the quarter. Second, the performance of our equipment business and the visible operating leverage that is coming through. Third, our services business and how we are laying the foundation for future growth. Lastly, our financial policy and our increased full year 2026 guidance. Let's start with page 18. INNIO's relentless operational execution is translating into improving metrics across the board as it is shown on this page. Based on very strong order intake, equipment order backlog reached $8 billion in Q3. This reflects 2.4x last year's level, with a last 12 month book-to-bill ratio of 3.3x. Moving to the third line, total revenue. We delivered a strong backlog increase and book-to-bill performance while our equipment sales reached a new record.

Dennis Schulze
CFO at INNIO

Total revenue was $1.2 billion for the quarter, up 57% year-over-year. Year-to-date, revenue reached $2.8 billion, up 46%. This top-line development is driven by our strong backlog conversion as well as continuously added production capacity supporting higher deliveries. Adjusted EBITDA was $245 million for the quarter, up 70% year-over-year, with the margin expanding 1.6 percentage points to 21%. EBITDA grew faster than revenue on the back of realized operating leverage. I will talk more about that in a few minutes. Year-to-date, Adjusted EBITDA reached $540 million, up 34%, at a 19.5% margin, which includes the growth investments made in the first half of the year. We are well on track to over-deliver on our margin targets for the full year and midterm. Let's now turn to page 19. As you can see, both segments are contributing to our strong growth.

Dennis Schulze
CFO at INNIO

Equipment revenue increased 86% year-over-year to $778 million for the quarter. Services revenue increased 20% year-over-year to $390 million. Together, they combine a rapidly expanding equipment business with recurring earnings from the installed fleet. Total Adjusted EBITDA reached $257 million for the quarter, up 65% year-over-year, with a margin of 22% compared with 21% a year ago and 20% last quarter. Year-to-date, Adjusted EBITDA was $578 million, up 36%, at a 21% margin. There are two key points to understand about the margin development. First, third quarter profit growth exceeded revenue growth. Better pricing in the backlog is reaching earnings and higher volumes are improving the absorption of our operating costs, and services is benefiting from a favorable mix and scale. Second, the year-to-date margin has stepped up quarter-over-quarter in line with our plan.

Dennis Schulze
CFO at INNIO

We invested in capacity, people, and our U.S. footprint ahead of revenue to prepare for our growth journey, and equipment now represents a larger share of sales. As volumes rise, we are absorbing those growth investments more efficiently. The third quarter results show that improvement, while the group margin will continue to reflect a balance between equipment and higher margin services. Let me now double-click on our equipment segment. year-to-date, equipment revenue was $1.7 billion, up 70% year-over-year. As you can see, data center deliveries are the main driver of that growth, now representing 60% of equipment revenues during Q3. We are seeing very strong demand across data centers, power solutions, and compression, with customer requests exceeding the capacity we can supply in each business line. Quarterly revenue mix and growth reflect how we allocate available capacity and do not indicate underlying demand.

Dennis Schulze
CFO at INNIO

We prioritize projects based on customer commitments, delivery readiness, and attractive returns. Let me now move to page 21. Equipment order intake was $2.2 billion for the quarter. Year-to-date, we generated $6.1 billion of equipment order intake, up 91% year-over-year. Within this, data center orders grew 29% to $1.8 billion, and compression orders almost doubled to $116 million. Power solutions orders were $265 million in the quarter and $1.3 billion year-to-date, up 23%. As you can see, the order book is broad-based and demand is growing strongly across every business line. We also had record equipment order backlog of $8 billion at the end of the quarter, up 142% from $3.3 billion a year ago and up $1.4 billion in this quarter alone. Our equipment orders continue to exceed rising deliveries. There are a few points that indicate the quality of our backlog.

Dennis Schulze
CFO at INNIO

First, pricing in the backlog continues to improve. As orders convert, this is expected to have a sustained positive impact on our bottom line. Second, most equipment orders are take-or-pay, with associated down payments and cancellation fees. These terms demonstrate customer commitment and provide certainty as we allocate capacity. Now, turning to our services segment on page 22. Our services segment provides recurring high-margin earnings from the installed fleet. In addition, there is a clear path to further outsized growth as we convert our backlog. Services revenue grew 20% to $390 million. Year-to-date, it grew 21% to $1.1 billion. Adjusted EBITDA grew 37% to $124 million at a margin of 32% up from 28%. Year-to-date, the services margin stands at 31%.

Dennis Schulze
CFO at INNIO

The quarter benefited from a higher share of parts relative to labor and from better absorption of our investments in service personnel and parts capacity. That mix can vary by quarter. Looking further ahead, the data center engines we are installing today add decade-long maintenance demand as they operate, with first larger service events expected around 2030. Our services revenue is nondiscretionary and recurring. We deliver spare parts, perform maintenance, overhauls, and upgrades on an installed base of around 44 GW as of year-end 2025. Let me spend two pages on why this matters so much. Customers can buy services transactionally, by part or service event, or through a multi-year agreement with an agreed scope. Both models create opportunities for repeat business. Customers depend on uptime, proprietary engine parts, performance upgrades, and trusted local service.

Dennis Schulze
CFO at INNIO

The cost of any disruption at a customer site makes reliable support critical throughout the engine's life. Particularly for our larger engines and in data center applications, we expect to capture the vast majority of the full service part scope, whether customers choose transactional service or a multi-year agreement. Customers rely on our proprietary parts and specialist expertise throughout the engine life cycle. The key message here is that regardless of the model through which we serve our customers, whether through transactional service or multi-year agreements, our services business is sticky and long-term. Let me now quantify the service opportunity ahead of us. Our installed base of around 44 GW generates around $30,000 of services revenue per megawatt per year. Last quarter, we provided some color about the makeup of our backlog and slot reservations.

Dennis Schulze
CFO at INNIO

Today, that combined number stands at about 19 GW compared to the over 15 GW figure last quarter. As a reminder, this is the combined figure across our equipment order backlog and slot reservations. These slot reservations are distinguished from our equipment order backlog but are still non-cancelable and non-tradable. As these engines enter operation, they expand the installed base. The engines we have in backlog and across reserved slots are expected to create a larger service opportunity per megawatt. Most of these engines are prime power, so they run around the clock and sit at the higher end of our product range. That means more operating hours than the average engine in our current installed base of about 44 GW.

Dennis Schulze
CFO at INNIO

We also expect the service scope on these installations to reach beyond the engine into adjacent parts of the installation, which increases the value we capture throughout the engine life cycle. On average, we expect annual service revenue of more than $50,000 per megawatt for our added installed base, around 70% higher than the approximately $30,000 generated by our existing fleet. On the right-hand side, we show how service revenue builds over an engine's operating life. Illustratively, cumulative service revenue exceeds $500 million per gigawatt over the first 10 years, with further substantial revenue beyond that. Our recently signed long-term service contract covering 500 MW with a major data center operator confirms these assumptions. It includes a major overhaul and extends into a second life cycle, evidencing the customer's long-term commitment to our solution.

Dennis Schulze
CFO at INNIO

Based on our current capacity expansion and these dynamics, we strive to quadruple our adjusted service EBITDA till the mid-2030s. Let me now come back to our profitability and discuss the mechanics behind the margin expansion. Let me take you through how this builds up, starting with revenue. Power delivered rose from 0.7 GW in Q1 to 1.2 GW in Q3, so volume is the first driver of our revenue growth. On top of volume, scope, and pricing add to revenue per gigawatt. Second, our overhead is not growing in line with revenue. On the right, adjusted SG&A as a share of total revenues fell from 19% in the first quarter to 16% in the second, and 11% in the third. The cost base for the ramp is largely in place. The people, the sites, the supply chain organization. Revenue is now growing into it.

Dennis Schulze
CFO at INNIO

That is operating leverage. We expect this ratio to improve further as we move into 2027 based on continued expected growth. Third, this shows up in our margins. On the left, you can see that equipment-adjusted segment EBITDA margin increased from 7.1% in Q1 to 17.1% in Q3, fueled by the explained operating leverage and pricing. This more than offsets a negative mix effect driven by scope. We also expect our higher-margin backlog to increasingly contribute to an even better overall margin profile. Put together, this is what supports adjusted equipment EBITDA per gigawatt delivered, which more than tripled from $33 million in Q1 to $106 million in Q3. We are delivering more power and generating significantly more earnings per gigawatt, underpinned by price, scope, and operating leverage. Capacity execution is what allows us to keep delivering this operating leverage.

Dennis Schulze
CFO at INNIO

Our expansion projects in Jenbach and Waukesha remain well on track as we scale from 3.5 GW of annual capacity in 2025 toward our expectation of more than 10 GW by 2030. As Olaf mentioned, we recently built the first Jenbacher generator unit at the Waukesha site, an important milestone toward realizing our planned capacity growth. We will release additional slots in measured, conservative stages tied to the ramp meeting timing and specification requirements. This links customer commitments to capacity we can deliver with our quality promise central to the plan. Before I come to the full-year guidance, a short word on our financial policy. Our net leverage stands at 2.1x as of this quarter, down from 3.6x at the end of 2025. Our strong operating cash flow is funding the capacity expansion as well as our deleveraging profile.

Dennis Schulze
CFO at INNIO

Against that backdrop, our capital allocation framework has three priorities. First, invest in profitable organic growth to meet customer demand. We also continue to review M&A opportunities with value creation central to the assessment. Second, reduce leverage. We target net leverage below 2x over the medium term with continued annual deleveraging. At 2.1x, we are approaching that target. We retain flexibility for selective value accretive M&A that may temporarily increase pro forma net leverage to 2.5x. Third, assess returns of capital alongside our investment opportunities. We do not intend to pay cash dividends in the near term as we reinvest in the business. We will continue to assess capital returns to shareholders subject to market and other conditions. This brings me to our full-year outlook. We are raising it today on both revenue and adjusted EBITDA.

Dennis Schulze
CFO at INNIO

On revenue, we now expect between $3.9 billion and $4 billion for the full year, up from the $3.8 billion to $3.9 billion we guided to in July. That is growth of around 50% at the midpoint versus 2025, with equipment at around 63% of the mix. On volumes, we are targeting deliveries of approximately 4.5 GW for full year 2026, which corresponds to approximately 1.5 GW in the fourth quarter. On profitability, we now expect Adjusted EBITDA to come in between $780 million and $800 million, plus $60 million versus our guide last quarter. At the midpoint, that is growth of 44% versus the $549 million in 2025, and a group margin of approximately 20%, up from the approximately 19% we guided to in July. Our raised full-year outlook implies that we sustain the substantial step-up in earnings achieved in Q3 through year-end.

Dennis Schulze
CFO at INNIO

At the midpoint, fourth quarter Adjusted EBITDA would be broadly consistent with Q3 and more than 60% above the prior year, reflecting continued conversion of our backlog into profitable growth. Our confidence rests on the orders already secured, the pricing in our backlog, and the production ramp demonstrated this quarter. We expect pricing, scope, and better cost absorption to support fourth quarter delivery. This concludes our prepared remarks. Back to you, Tim.

Tim Furcillo
VP of Investor Relations at INNIO

Before we open the line, I ask everyone to ask just one question so we can get to as many people as possible. Operator, please open the line for questions.

Operator

Thank you. To ask a question, you will need to press star one and one on your telephone, or if you have joined via device audio, click the Raise Hand button and wait for your name to be announced. To withdraw your question, please press star one and one again, or click the Lower Hand button. We are now going to take our first question. This question comes from David Arcaro from Morgan Stanley. Please go ahead.

David Arcaro
David Arcaro
Analyst at Morgan Stanley

Oh, hi. Good morning, good afternoon. Thanks so much for taking my question. Let me see. How do you expect orders to trend after three quarters now of very strong order patterns here? Great to see. How do you expect orders to trend through the rest of the year? When you consider slot reservations that you have, how far out are you reserved at this point? Where are customers incrementally putting in reservations now on the margin?

Olaf Berlien
CEO at INNIO

Thanks, David, for the question. Let me start and then maybe we add Martin and Dennis if I forget something. I think we have still a very strong pipeline. I do not see any slowdown for the next years. I'm talking about with customer about projects in 2029, 2030, and already with 2031. In this case, it's a strong pipeline for the next years, and it's a combination about firm orders and slot reservations. This brings us really for strong years ahead.

Dennis Schulze
CFO at INNIO

Yeah. Maybe to add, Olaf. On the slot reservations, as Olaf said, we have a line of sight up to 2029, 2030, 2031. Slot reservations are already signed for that period of time. We still have capacity available for 2029 and 2030 as capacity will be released. With that, our slot reservation, let's say, will turn into order between six months from now and 18 months from now, depending on how far out they are for the reserve timing.

David Arcaro
David Arcaro
Analyst at Morgan Stanley

Okay, great.

Olaf Berlien
CEO at INNIO

I hope that answered the question.

David Arcaro
David Arcaro
Analyst at Morgan Stanley

Thank you so much. Very helpful.

Olaf Berlien
CEO at INNIO

Very helpful. Thanks, David.

Operator

Thank you. We are now going to take our next question, and this one comes from Joe Ritchie from Goldman Sachs. Please go ahead.

Joe Ritchie
Joe Ritchie
Analyst at Goldman Sachs

Hey, good afternoon, everybody.

Dennis Schulze
CFO at INNIO

Good afternoon.

Olaf Berlien
CEO at INNIO

Hi, Joe. How are you?

Joe Ritchie
Joe Ritchie
Analyst at Goldman Sachs

My first question, or I guess my only question is, you take a look at your dollar per kilowatt that came through equipment revenue this quarter. It was roughly around $650 per kilowatt. That's a really big ramp from the second quarter. Recognize that part of that is going to be pricing. Part of it is probably going to be mixing up into your containerized solution. Can you just maybe unpack that number for us to some degree? How much of it was just mix versus pricing? And then is that a good jumping-off point as we progress beyond Q3?

Dennis Schulze
CFO at INNIO

Hey, Joe. Dennis Schulze speaking. Let me take that one. We obviously don't deconstruct the number since we're not giving separate revenue numbers for the container and for the equipment. I think it's a fair assumption to say that the majority of the increase is really scope-driven, as we are increasing our deliveries into the data center market, which comes at higher containerization levels. So there's a lot of scope into that increase. At the same point in time, margin is increasing. To reconfirm the joint understanding here, we are increasing the margin for the container itself. We are increasing the margin for the equipment piece, so for the engine in itself. Overall, you will see then the mixed effect that is resulting to the numbers that we are looking at.

Dennis Schulze
CFO at INNIO

In terms of your question of if this is the right starting point, I would say overall containerization ratio has been pretty strong in Q3. But overall, for the next couple of quarters on average, this is a good starting point to take it up with. There might be some swings up and down based on the concrete cut-offs and the deals delivered in each respective quarter, but you should definitely look forward to see numbers north of 600 going forward. I hope it answered the question, Joe.

Joe Ritchie
Joe Ritchie
Analyst at Goldman Sachs

Great. Thank you, Dennis.

Dennis Schulze
CFO at INNIO

Yep.

Joe Ritchie
Joe Ritchie
Analyst at Goldman Sachs

Yes. Perfect. Thank you.

Dennis Schulze
CFO at INNIO

Thanks.

Operator

Thank you. Our next question comes from the line of Chris Dendrinos from RBC Capital Markets. Please go ahead.

Chris Dendrinos
Chris Dendrinos
Analyst at RBC Capital Markets

Yeah, good afternoon, and congratulations on the strong quarter. I wanted to dial in a bit more to the structure of the relationships with your data center customers and your Energy-as-a-Service customers that are servicing those data centers. I guess specifically, can you speak to the average attach rate of the long-term service agreements? Do these agreements kind of extend beyond that first major, or first equipment, major equipment overhaul? Could it be like a multi-lifespan agreement? Thanks.

Olaf Berlien
CEO at INNIO

Thanks, Christopher. I would say Martin will start, and maybe Carl, you can add if something from service we should add.

Martin Widner
VP of Global Sales at INNIO

Good morning. Our contracts and our full service contracts, we were able to sign and negotiate with our customers from the data centers, from the co-locators, and from the Energy-as-a-Service providers, are including the major overhaul. Not all of them, but the majority is including the major overhaul, and reach 10 years and even up to 15 years.

Olaf Berlien
CEO at INNIO

Carl?

Carl Richers
Head of Global Services at INNIO

Yes. As you asked, Christopher, there is no real difference between the data center direct customer, Energy-as-a-Service customer, or the renter fleet customer. We all have the same long-term service contracts with these customers.

Martin Widner
VP of Global Sales at INNIO

To add, which I forgot before, the reason for that is that when we sign the new unit contracts with them, there is a back-to-back normally. When they sign then with us the service agreement, they have a back-to-back. Majority is, at the moment, 15 years with their end customers. That allows them, of course, to sign with us a long-term service agreement going further out of the major overhaul.

Olaf Berlien
CEO at INNIO

I hope that answered the question, Christopher.

Chris Dendrinos
Chris Dendrinos
Analyst at RBC Capital Markets

Yes. Thank you very much.

Olaf Berlien
CEO at INNIO

Thanks.

Martin Widner
VP of Global Sales at INNIO

Thanks.

Operator

Thank you. We are now going to take our next question, and this one is from Mark Strouse from JPMorgan. Please go ahead.

Mark Strouse
Mark Strouse
Analyst at JPMorgan

Yes. Good afternoon. Thank you for taking our questions. I appreciate the new slide on page 24. I am curious if you can also talk about the service margins, at least directionally speaking. It sounds like with, at least with the ASPs going higher, that we should expect margins to go higher as well. I am just curious though, kind of directionally, is that slightly higher, materially higher over time? And if you can provide some color around that, maybe around customers. We are hearing some feedback that customers might be looking to self-perform some more of this. What you are seeing there is some of that self-performance maybe in some of the lower margin parts of service, like the EPC work. Just anything directionally speaking on margins would be great. Thank you.

Olaf Berlien
CEO at INNIO

Okay. Carl, maybe you start. First of all, Mark, thank you for the question. I think you mean page 22. You see the margin expansion in service from 29 last year to 31.1 this quarter in 2026.

Carl Richers
Head of Global Services at INNIO

I think it is this.

Olaf Berlien
CEO at INNIO

Carl, maybe-

Carl Richers
Head of Global Services at INNIO

I think it is a combination, probably. Overall, we see, for the near term, moderate positive margin developments because, of course, we continue to invest into ramping up our service infrastructure as well. As we look further out, and that is probably what you are referring to on page 24, as the minor overhauls then take a stronger share in the service business. This will then be the time where we see stronger increases of margins. That is probably also answering then the second part of your question, which was around, okay, where do we expect part of the services to potentially be covered by our customers?

Carl Richers
Head of Global Services at INNIO

The scope that would potentially be covered outside is the labor scope, and it is typically lower margin than the parts scope. That's why, as Dennis also pointed out on the page earlier, service business is very sticky in the most important portion of it, which is the parts business.

Olaf Berlien
CEO at INNIO

I hope it-

Mark Strouse
Mark Strouse
Analyst at JPMorgan

Very helpful. Thank you.

Olaf Berlien
CEO at INNIO

answered the question, Mark.

Mark Strouse
Mark Strouse
Analyst at JPMorgan

Yes, it did. Thank you, Olaf. Thank you, team.

Olaf Berlien
CEO at INNIO

Thanks, Mark.

Operator

Thank you. We are now going to take our next question, and this one is from David Ridley-Lane from Bank of America. Please go ahead.

David Ridley-Lane
David Ridley-Lane
Analyst at Bank of America

Yes. Thank you. This is David Ridley-Lane on for Andrew Obin. Very much appreciate the additional disclosure that you have not allocated meaningful capacity to neoclouds. Could you also just describe your credit underwriting in taking slot reservation agreements? Any additional disclosure you can understand? Obviously, the last couple of weeks in credit markets have focused extensively on credit risk around new data center developers. Any additional disclosure you can give for investors to have more comfort in the quality of your backlog than 19 GW? Thank you.

Olaf Berlien
CEO at INNIO

Yeah. Maybe I give the answer together with Martin. As I said in my remarks, we do not have orders with neoclouds. We are not involved in their financial issues or risk from this point of view because we are dealing with the big hyperscalers and with the co-locators, and they have already their financing. In this case, there is, from our point of view, not this credit risk because as I said, we do not have business with neocloud provider. But Martin, maybe you add on.

Martin Widner
VP of Global Sales at INNIO

Good morning, David. Yeah, as Olaf said, we are not working with neocloud providers. We are working with hyperscalers, co-locators, Energy-as-a-Service companies. You saw Aggreko as a rental company and as well IPPs. We usually do not work with land developers, as I already specified or mentioned here last time, the last earnings call. The neoclouds very often work with land developers. The reason we are not working with them is because they are very far away from the end customer. When they order the equipment, there is normally no back-to-back. We are very carefully, which we mentioned throughout all the time here.

Martin Widner
VP of Global Sales at INNIO

We are very carefully with giving the orders and as well the slot reservations to customers where we see that there is already a back-to-back or there is a very strong sight of having a back-to-back contract with, at the end, the hyperscaler. Due to that, so far, we never worked with them. So both on slot reservations and definitely not on firm backlog orders.

Olaf Berlien
CEO at INNIO

David, Andrew, does it answer your question, or should we add something on?

David Ridley-Lane
David Ridley-Lane
Analyst at Bank of America

No, thank you very much. Really appreciate it. Thank you.

Martin Widner
VP of Global Sales at INNIO

Thanks, David.

Olaf Berlien
CEO at INNIO

Thanks, David. Thanks, Andrew.

Operator

Thank you. We are now taking one more question. This one comes from Ben Kallo from Baird. Please go ahead.

Ben Kallo
Ben Kallo
Analyst at Baird

Hey, good day, guys. Congrats on the results. Maybe just taking a step back, could you talk to just some of the new state rules around data centers? How your Jenbacher solution plays into that. If you are seeing more orders because you outline your water usage, taking away from turbines or others if you are displacing anyone out in the field. Then just maybe if you could just highlight different states where you are seeing strength in the marketplace. Thank you guys very much.

Olaf Berlien
CEO at INNIO

Yeah. Thank you very much. As I said at the beginning of my speech, that we do not have any cancellation or delay in any project. So we are not affected from any issues, what you explained. Most of our customer base is in Texas, and all the projects are up to running and have approval. In this case, I do not have any customer. I am looking now to Martin in his eyes. Did you have any discussion with one of the customer which are affected from the issue? I think before you answer, the second part was really that I put this chart in to make it really clear. We are clearly need more or less no water, or I have to say very limited minimum of 0.1 liter because it is a circulate system like in a car. So that means we have no water usage.

Olaf Berlien
CEO at INNIO

I think that is one of the biggest advantage in comparison to a turbine, which needs up to 200 liters. In this case, we are a preferred solution for that. But back to Martin, any customers you have seen are discussing with problems with permission?

Martin Widner
VP of Global Sales at INNIO

No. Of course, we all have seen or you all have seen the announcement regarding Texas permitting, et cetera. So far our projects are not canceled at all, not postponed at all. There was a one-week postponement of one project and now it gets resolved again. So every building continues. Everything is fine there. The other data centers and the other engines are commissioned. Our main projects, Ben, as you said, are still in Texas, in Virginia, in Ohio, in New York, New Jersey. So I would say many, many states in the U.S. The

Martin Widner
VP of Global Sales at INNIO

Concern about water usage, to be honest, I like because it favors our technology. I would say we have more requests for our, or more asked for our technology than even before. With that, we are not affected so far at all by these new regulations.

Ben Kallo
Ben Kallo
Analyst at Baird

Thank you, guys.

Martin Widner
VP of Global Sales at INNIO

Did it answer the question?

Ben Kallo
Ben Kallo
Analyst at Baird

Yeah, it did. Thank you very much. Very good.

Operator

Thank you. We are now taking the next question. This one is from Andy Kaplowitz from Citigroup. Please go ahead.

Andy Kaplowitz
Andy Kaplowitz
Analyst at Citigroup

Hey. Good morning, everyone.

Dennis Schulze
CFO at INNIO

Good morning.

Andy Kaplowitz
Andy Kaplowitz
Analyst at Citigroup

So the services revenue has very consistently grown at over 20% this year, and that's really without help from your recent data center equipment orders. How should we think about service going into next year? Can service sustain this type of growth, just given the high utilization of your installed base and under continued high volume of transaction work?

Dennis Schulze
CFO at INNIO

Hey, thanks, Andy. Dennis speaking. As mentioned beforehand, the service business is a very steady, stable, and steadily evolving business. We are adding to the installed base on a consistent basis, but we are adding a lot of a young fleet. The development that we are seeing for the next couple of years actually is unchanged. It should be, on average, high single-digit growth. This year has been a particular good year, exceeding our expectations in going for the next couple of years. I see high single-digit growth, before it really kicks up in the early 2030s. This view is unchanged.

Andy Kaplowitz
Andy Kaplowitz
Analyst at Citigroup

Appreciate that, Dennis.

Dennis Schulze
CFO at INNIO

Thanks, Andy. Welcome, Andy.

Operator

Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone or click the Raise Hand button on your device screen. We will now take one more question. This question is from Moses Sutton at BNP Paribas. Please go ahead.

Moses Sutton
Moses Sutton
Analyst at BNP Paribas

Thanks for taking my question. Congrats on this quarter. Service intensity, if I could return to that in slide 24. It is helpful that you show over $50,000 per megawatt year estimated for the 19 GW of backlog and slots. Is this equivalent to year one service pricing and essentially that type of number, when we look at it through a given project, it is subject to its annual inflation as the service contract progresses? I know that there are minor and major overhauls in there as well. How do we think about that over $50,000 if it is an average over the lifetime pre-inflation adjustment? Anything that helps frame that. Thank you.

Olaf Berlien
CEO at INNIO

Thanks, Moses. I think maybe Dennis and Carl could answer it.

Dennis Schulze
CFO at INNIO

I will give it a kick and then, Carl, you jump in if there is something missing. First of all, yeah, service intensity is going to increase, and what you saw is completely correct. It is north of $50K per megawatt per year for what we are seeing in the 19 GW backlog and reserves. Going forward, it is going to increase. It is again, a blend. As you remember, I mentioned numbers of north of 70 to certain data center projects and other projects might be smaller, but overall, the data center intensity is obviously driving this number up. This is an average over the signed contract life cycle or the expected contract life cycle of the engines delivered.

Dennis Schulze
CFO at INNIO

This is the average for the 10 or 15 years ahead, and this is growing into it as the right sight of the page is showing. Out of the box, the first year is then going to be slower before it is really kicking in, and on average, we are getting to this number. The good years that are following with year five and then year 10 and in between are adding more than the 50, whilst at the beginning, as always, it is starting slower. Carl?

Carl Richers
Head of Global Services at INNIO

Yeah. I think that is exactly it. Then you asked, I think, about pricing as well, and indexation. The pricing shown here or the value of $50,000 on average per year, that is today's value. So that is not inflated.

Dennis Schulze
CFO at INNIO

Yeah. So you should see if there is inflation out there, we are indexing our contract, and we are going to see indexed up pricing going forward. Moses, did this answer your question?

Moses Sutton
Moses Sutton
Analyst at BNP Paribas

Yeah. Very helpful. Thank you.

Dennis Schulze
CFO at INNIO

Very good. Thank you. See you later.

Operator

Thank you. We have one more question, but I will hand back to Olaf for closing remarks.

Olaf Berlien
CEO at INNIO

Yeah. Thanks for dialing in, and I am looking forward to see and to meet you. If you have any additional questions, please get in contact with Tim or with Dennis and me, of course. And yeah, hope to see you soon. Thank you.

Dennis Schulze
CFO at INNIO

Thank you.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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