Generac NYSE: GNRC said third-quarter net sales rose 16% year over year to a record $1.29 billion, driven by accelerating data center demand in its commercial and industrial business and a return to growth in residential generator sales.
Adjusted EBITDA increased 33% to $256 million, or 19.8% of sales, compared with $193 million, or 17.3% of sales, in the prior-year quarter. GAAP net income rose to $109 million, or $1.83 per diluted share, from $66 million, or $1.12 per share, a year earlier. Adjusted net income was $151 million, or $2.54 per share, compared with $108 million, or $1.83 per share.
President and Chief Executive Officer Aaron Jagdfeld said the quarter reflected “continued momentum” in commercial and industrial markets, as well as improving residential demand. The company generated $132 million of free cash flow during the quarter, up from $96 million a year earlier.
Amazon agreement expands data center backlog
The company highlighted a long-term supply agreement with Amazon for data center backup-power generators. Generac expects initial deliveries under the agreement to total $2.4 billion across 2027 and 2028.
The agreement includes up to approximately 1.7 million common warrant shares, with future vesting linked to $8 billion of backup-generator purchases over the deal’s seven-year term. Jagdfeld said the arrangement creates strategic alignment between the companies and provides an incentive for Amazon to continue using Generac beyond the initially anticipated deliveries.
Generac said its data center-related backlog increased to about $4.5 billion, nearly tripling from 90 days earlier. The backlog includes demand from hyperscale customers as well as new and existing non-hyperscale customers across multiple continents.
Jagdfeld said Generac now expects 2027 revenue from products sold into the data center market to “well exceed” $2 billion. He also said the company sees a path to doubling its commercial and industrial reporting segment in 2027, supported by data center demand, rental equipment customers, industrial distributors and international markets.
- Third-quarter data center revenue exceeded $100 million.
- Full-year 2026 data center revenue is now expected to approach $500 million, compared with prior expectations of about $450 million.
- More than half of the company’s $4.5 billion data center backlog is expected to be delivered in 2027, according to management.
Capacity expansion and supply chain plans
Generac began initial production at its new large-megawatt generator facility in Sussex, Wisconsin, at the end of the third quarter. The company expects production rates to ramp significantly during the fourth quarter, supporting sequential sales growth.
Management said it is working to triple global production capacity for large-megawatt generators, targeting roughly $4 billion in annual data center-related capacity by the second half of 2027. The planned expansion includes additional production lines, staffing increases, international facility expansions and a packaging facility in Belvidere, Illinois, expected to begin operations in early 2027.
Jagdfeld characterized the expansion as relatively capital-light, saying the company can increase output largely through added lines, labor and shifts within its existing manufacturing footprint. He said the company is also evaluating what an additional expansion beyond the planned capacity could require.
On supply chain readiness, Jagdfeld said Generac is dual- and triple-sourcing major components where possible, though high-horsepower diesel engines remain an exception because of limited global supply. He said the company’s hyperscale customers have also conducted due diligence on Generac’s supply chain and its capacity.
Commercial and industrial sales rise 28%
Commercial and industrial segment sales increased approximately 28% to $553 million. Segment adjusted EBITDA rose to $69.3 million, or 12.5% of sales, from $43.8 million, or 10.1% of sales, in the prior-year quarter.
Beyond data centers, Generac said mobile-product sales to rental equipment customers grew year over year. The Allmand mobile-products business, acquired in January, exceeded Generac’s prior sales and profitability expectations, according to Jagdfeld.
Domestic industrial distributor shipments rose sequentially but declined from the prior-year quarter, which included a stronger comparison related to backlog drawdown. Generac said lead times lengthened as it completed the final phase of moving production to its Beaver Dam, Wisconsin, facility. The company expects lead times to normalize in the first quarter of 2027.
International commercial and industrial sales, excluding data center shipments, also increased, led by growth in Europe, Latin America and the Middle East. Telecom shipments declined as certain customers reduced site-deployment backlogs.
Residential sales return to growth
Residential segment sales increased 9% to $744 million, led by mid-teens growth in home standby generator sales and strong portable-generator demand. Lower residential energy-storage shipments partially offset those gains following the completion of a Department of Energy program in Puerto Rico at the end of 2025.
Residential adjusted EBITDA rose to $200.8 million, or 27% of sales, from $160.2 million, or 23.4% of sales. Generac cited favorable price-cost dynamics, higher shipment volumes, operating leverage and lower energy technology investment.
Jagdfeld said more normalized outage activity, particularly in the Midwest and Northeast, supported stronger demand. Home standby activations returned to growth in September for the first time since the second quarter of 2025, while the company’s dealer network expanded to nearly 9,900 dealers.
Portable generator sales benefited from stronger outage activity and additional retail shelf space. Jagdfeld said Generac believes it has regained the No. 1 U.S. market-share position in portable generators. Meanwhile, Ecobee sales increased, and its connected-home count reached approximately 5.5 million homes.
2026 outlook maintained; EBITDA margin outlook raised
Generac maintained its forecast for full-year net sales growth in the mid- to high-teens percentage range, including an approximate 2% favorable impact from foreign currency, acquisitions and divestitures. The company continues to expect commercial and industrial sales growth in the low-30% range and residential sales growth in the high single digits.
Chief Financial Officer York Ragen said the company raised its full-year adjusted EBITDA margin outlook to 20.5% to 21%, from a prior range of 20% to 21%, following third-quarter outperformance. Generac expects fourth-quarter gross margin of 37% to 38%, reflecting sales mix from projected data center growth and inflationary pressures.
The company also raised its free-cash-flow expectation to approximately $450 million for 2026 despite elevated capital expenditures for capacity expansion. At quarter-end, Generac had approximately $1.33 billion in debt and a gross debt leverage ratio of 1.4 times adjusted EBITDA.
About Generac (NYSE:GNRC)
Generac Holdings Inc is a technology and energy solutions company that designs and manufactures power generation equipment and other energy-related products. Its offerings include standby and portable generators, commercial and industrial power systems, energy storage solutions, and products that help customers manage and monitor energy use.
The company serves residential, commercial, industrial, and utility customers. Its products are used for backup power, prime power, and distributed energy applications across homes, businesses, data centers, healthcare facilities, construction sites, and other critical operations.
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