【GE Vernova (GEV) Q2 FY2026】What remains after the AI special demand? Can GEV become the 'power infrastructure standard of the 2030s'?
I am outputting my first analysis of GE Vernova's (GEV) Q2 FY2026 earnings.
This output has exceeded 25,000 characters.
I spent many days crafting it, using every spare moment.
Let me say this first.
This is not just an output that follows the earnings numbers.
Because it exceeds 25,000 characters, it will involve a fair amount of intellectual fatigue for the reader.
I think only those who seriously want to think about GE Vernova five years from now should read on.
These earnings were strong.
Revenue was $11.104B, up 22% year-over-year.
Orders were $24.216B, up 88% organically.
Adjusted EBITDA was $1.250B, with a margin of 11.3%.
FCF was $5.107B.
The backlog expanded to $176.284B.
Furthermore, they raised their full-year 2026 revenue guidance to $45.5B–$46.5B and FCF to $11.5B–$12.5B. The Adjusted EBITDA margin guidance was maintained at 12–14%.
Even so, the stock price closed at $985.03 on the day of the earnings announcement, down 8.69% from the previous day.
Although it was in a high price range, it was a clear sharp drop for a post-earnings announcement.
This time, I will consider this stock price reaction and the earnings content separately.
What I want to confirm with these earnings is not simply 'were they good earnings?'
GE Vernova is a company I have included in my Future40 for the second half of 2026.
What I am looking at in Future40 is not companies that will still be growing in five years, but whether it will be difficult to bypass those companies in five years.
In other words, whether an 'irreversible moat' has been formed.
For that reason, I have set four questions when looking at a company.
1. Do they hold the bottleneck?
2. Can they capture profit from that bottleneck?
3. Can they maintain the captured profit without leaking it to competitors?
4. As the business expands, does it extend to that defensive structure?
I think these GE Vernova earnings provided quite a lot of material to verify these four points.
Is the power demand surging due to AI just giving GEV a temporary special demand?
Or will they use this demand to expand their installed base and Services, and extend their dominant domain to power generation, transmission, transformation, and grid stabilization?
What will remain for GE Vernova after the AI special demand?
Through these earnings, I want to think about whether GEV can become the 'power infrastructure standard of the 2030s'.
■ 4-quarter earnings figures
Q3 2025 → Q4 2025 → Q1 2026 → Q2 2026
*Because some business segments were changed from January 1, 2026, the 2025 actual figures for Power, Electrification, and Wind use the figures restated to the 2026 standard in the Q2 2026 earnings materials. Regarding segment YoY, for Q3 and Q4 2025, the company-disclosed organic YoY at the time of each quarterly announcement is used, and for Q1 and Q2 2026, the company-disclosed organic YoY based on the restated comparison is used. For this reason, the YoY for Q3 and Q4 2025 is not a simple reverse calculation from the restated actual figures. YoY for items unaffected by business restructuring, such as total company revenue, Equipment/Services revenue, and RPO, is calculated on a GAAP actual basis.
・Revenue: $9.969B → $10.956B → $9.339B → $11.104B
YoY: +11.8% → +3.8% → +16.3% → +21.9%
QoQ: +9.4% → +9.9% → -14.8% → +18.9%
Entering 2026, the YoY growth rate re-accelerated.
Q2 was +12% even organically. Growth in Power and Electrification outweighed the revenue decline in Wind.
・Equipment revenue: $5.880B → $5.963B → $5.254B → $6.459B
YoY: +11.2% → +1.9% → +25.2% → +32.0%
QoQ: +20.1% → +1.4% → -11.9% → +22.9%
Revenue composition ratio: 59.0% → 54.4% → 56.3% → 58.2%
Q2 was the highest in four quarters, and +32% compared to the same period last year.
Driven by Gas Power and Electrification equipment, Equipment rose again to about 60% of total company revenue.
・Services revenue: $4.089B → $4.993B → $4.084B → $4.645B
YoY: +12.9% → +6.1% → +6.5% → +10.1%
QoQ: -3.0% → +22.1% → -18.2% → +13.7%
Revenue composition ratio: 41.0% → 45.6% → 43.7% → 41.8%
Services also accelerated to double-digit YoY growth in Q2.
Since current Equipment expansion increases the future installed base, I view Equipment and Services as a continuous revenue structure in the medium to long term.
・Power revenue: $4.863B → $5.776B → $4.971B → $5.477B
YoY (organic): +14% → +5% → +10% → +14%
QoQ: +1.6% → +18.8% → -13.9% → +10.2%
Revenue composition ratio: 48.8% → 52.7% → 53.2% → 49.3%
Still the largest business, accounting for about half of total company revenue.
Q2 grew mainly in Gas Power equipment, and services were also contributed to by Gas Power and Nuclear Power.
・Power Segment EBITDA: $651M → $982M → $811M → $1.031B
QoQ: -17.1% → +50.8% → -17.4% → +27.1%
EBITDA margin: 13.4% → 17.0% → 16.3% → 18.8%
YoY margin improvement (organic): +120bps → +160bps → +500bps → +320bps
Q2 EBITDA was +31.3% YoY, and the margin rose to 18.8%.
Volume and favorable price drove the profit margin improvement, and it is near the upper end of the full-year 17–19% guidance.
・Electrification revenue: $2.565B → $2.921B → $2.959B → $3.637B
YoY (organic): +32% → +32% → +29% → +29%
QoQ: +18.6% → +13.9% → +1.3% → +22.9%
Revenue composition ratio: 25.7% → 26.7% → 31.7% → 32.8%
The total company composition ratio rose from about 26% to about 33% in four quarters.
Q2 GAAP revenue growth rate is +68% including Prolec GE consolidation, but it is very strong at +29% even organically.
・Electrification Segment EBITDA: $387M → $494M → $528M → $671M
QoQ: +23.2% → +27.6% → +6.9% → +27.1%
EBITDA margin: 15.1% → 16.9% → 17.8% → 18.4%
YoY margin improvement (organic): +550bps → +320bps → +590bps → +700bps
Margin improved for four consecutive quarters.
Q2 EBITDA was +113.7% from $314M in the same period last year. Rapid growth and margin expansion are happening simultaneously.
・Wind revenue: $2.647B → $2.368B → $1.432B → $2.026B
YoY (organic): -9% → -25% → -25% → -11%
QoQ: +17.9% → -10.5% → -39.5% → +41.5%
Revenue composition ratio: 26.6% → 21.6% → 15.3% → 18.2%
It recovered significantly from Q1, but revenue decline continues compared to the same period last year.
The total company composition ratio fell from 26.6% in Q3 2025 to 18.2%, and a mix shift toward Power/Electrification is progressing.
・Wind Segment EBITDA: -$61M → -$225M → -$382M → -$275M
QoQ: Loss reduction → Loss expansion → Loss expansion → Loss reduction
EBITDA margin: -2.3% → -9.5% → -26.7% → -13.6%
Q2 improved by $107M from Q1, but large losses continue.
H1 2026 EBITDA is -$657M, and significant improvement in the second half will be required to achieve the full-year target of approximately -$400M.
・Orders: $14.608B → $22.192B → $18.279B → $24.216B
YoY (organic): +55% → +65% → +71% → +88%
QoQ: +18.1% → +51.9% → -17.6% → +32.5%
Organic order growth accelerated in all four quarters, and in Q2, they received orders approximately 2.2 times their revenue.
The future business scale is expanding more than revenue growth.
・Equipment orders: $10.039B → $16.175B → $12.753B → $18.941B
YoY (organic): +98% → +91% → +106% → +130%
QoQ: +28.6% → +61.1% → -21.2% → +48.5%
Equipment orders are at a pace of nearly doubling or more in all four quarters.
Centered on Gas Power and Electrification, future equipment sales are being reserved at a speed faster than current revenue.
・Services orders: $4.569B → $6.017B → $5.526B → $5.275B
YoY (organic): +5% → +22% → +25% → +15%
QoQ: +0.3% → +31.7% → -8.2% → -4.5%
Not as much growth as Equipment, but Services also had positive growth in all four quarters.
The expansion of the installed base of new equipment will further enlarge the base for future service orders.
・Backlog: $135.269B → $150.238B → $163.276B → $176.284B
YoY: +14.9% → +26.2% → +32.3% → +37.0%
QoQ: +5.1% → +11.1% → +8.7% → +8.0%
The backlog increased for four consecutive quarters, and about $41B accumulated in this period alone.
Furthermore, the YoY growth rate is also accelerating from about 15% to 37%.
・Equipment backlog: $54.092B → $64.245B → $75.924B → $87.821B
YoY: +28.6% → +49.2% → +66.9% → +76.7%
QoQ: +8.8% → +18.8% → +18.2% → +15.7%
Backlog composition ratio: 40.0% → 42.8% → 46.5% → 49.8%
This is particularly strong.
Equipment backlog accelerated from YoY +29% to nearly +77% in about a year, and expanded to account for almost half of the total backlog.
・Services backlog: $81.177B → $85.993B → $87.352B → $88.463B
YoY: +7.3% → +13.2% → +12.0% → +12.1%
QoQ: +2.8% → +5.9% → +1.6% → +1.3%
Backlog composition ratio: 60.0% → 57.2% → 53.5% → 50.2%
Services backlog is also increasing steadily.
However, what is driving current backlog growth is clearly Equipment, and the composition ratio is also rapidly shifting toward the Equipment side.
・Adjusted EBITDA: $807M → $1.158B → $896M → $1.250B
YoY: +232.1% → +7.3% → +96.1% → +62.3% QoQ: +4.8% → +43.5% → -22.6% → +39.5%
・Adjusted EBITDA margin: 8.1% → 10.6% → 9.6% → 11.3%
YoY improvement: +540bps → +40bps → +390bps → +280bps
Q2 organic basis: +340bps
Q2 was the highest for both Adjusted EBITDA and margin in four quarters. Since Q3 2025, profit amounts have maintained significant positive growth compared to the same period last year, and against revenue YoY +22%, Q2 Adjusted EBITDA is +62%. Operating leverage is clearly appearing.
・GAAP diluted EPS: $1.64 → $13.39 → $17.44 → $2.47
QoQ: Large increase → +716.5% → +30.2% → -85.8%
Q2 YoY: +32.8%
Because Q4 and Q1 include large one-time factors such as tax effects and Prolec GE revaluation gains, I do not use the quarterly trend of EPS for comparing fundamental earning power.
Q2 increased by about 33% from $1.86 in the same period last year to $2.47.
・Operating CF: $980M → $2.480B → $5.188B → $5.492B
YoY: -13.0% → +169.0% → +346.9% → +1,396.5%
QoQ: +167.0% → +153.1% → +109.2% → +5.9%
Operating CF margin: 9.8% → 22.6% → 55.6% → 49.5%
Entering 2026, CF expanded at an abnormal speed.
However, Gas Power slot reservations and Electrification advance payments are large, so it cannot be simply extrapolated as steady earning power. Quarterly CF for 2024 and 2025 can also be checked in company materials.
・FCF: $732M → $1.809B → $4.791B → $5.107B
YoY: -24.4% → +216.3% → +391.4% → +2,532.5%
QoQ: +277.3% → +147.1% → +164.8% → +6.6%
FCF margin: 7.3% → 16.5% → 51.3% → 46.0%
H1 2026 FCF is $9.897B.
The divergence from the full-year guidance of $11.5B–$12.5B is extremely large, and I will look in detail later at the H1 bias due to advance payments.
・Equipment and software investment: $247M → $671M → $397M → $386M
QoQ: +43.6% → +171.7% → -40.8% → -2.8%
Revenue ratio: 2.5% → 6.1% → 4.3% → 3.5%
They are continuing to invest in capacity expansion for Gas Power and Electrification.
GEV plans a cumulative $6B in CapEx from 2025 to 2028, and is currently in a growth investment phase to resolve supply constraints.
・Cash: $7.945B → $8.848B → $10.172B → $13.1B
QoQ: +11.4% → +15.0% → +28.8%
While proceeding with the Prolec GE acquisition, share buybacks, dividends, and capital investment, cash at the end of Q2 increased to $13.1B.
They are maintaining this cash level while buying back 2.5M shares for $2.3B in Q2 alone.
■ Conclusion looking only at the numbers
GE Vernova's revenue growth rate re-accelerated entering 2026, and the profit margins of Power and Electrification are also rising simultaneously.
What is even more important is that the growth rates of orders and Equipment backlog are significantly exceeding the revenue growth rate. Equipment backlog YoY accelerated from +28.6% in Q3 2025 to +76.7% in Q2 2026, and it has grown to account for about half of the total backlog.
On the other hand, the abnormal strength of H1 2026 FCF, the deficit in Wind, and the margin improvement required in the second half need to be verified separately.
I will dig into what follows as the real point of these earnings.
■ With such strong earnings, why was the stock price -8.69%?
Revenue grew, orders surged, and the backlog increased.
Furthermore, they significantly raised their FCF guidance.
Yet the stock price was -8.69%.
In external market data, it is said that against an EPS of $2.47, the analyst forecast was about $3.04, and against revenue of $11.1B, the forecast was about $10.73B. In other words, while revenue exceeded expectations, EPS fell below market expectations.
However, looking only at EPS, one might slightly misunderstand these earnings.
Q2 GAAP pre-tax profit was $925M, taxes were $276M, and the effective tax rate was about 29.8%.
Furthermore, after the Prolec GE acquisition, the impact of intangible asset amortization associated with acquisition accounting has become significant.
On the other hand, Q2 Adjusted EBITDA was $1.250B.
Up 62% from $770M in the same period last year.
Adjusted organic EBITDA margin also improved by +340bps compared to the same period last year.
In other words, this time, there is a considerable difference between how GAAP EPS appears and the earning power of the business itself.
Therefore, I do not think 'the earnings were bad' just by looking at the stock price reaction of -8.69%.
However, conversely, I do not think 'the market is wrong' either.
GEV is a stock that already incorporates very high expectations.
To maintain a high valuation, having strong revenue and backlog is not enough.
The market is buying ahead, looking at whether the backlog will truly be converted into high-margin profit, and whether they can reach a total company Adjusted EBITDA margin of 20% or more in 2028. GEV itself, in its December 2025 Investor Update, set a medium-term goal of margin expansion from about 8.5% in 2025 to 20% or more in 2028, and a backlog of about $200B at the end of 2028.
However, regarding the backlog, the company's progress is exceeding the initial plan. As of December 2025, they aimed for about $200B at the end of 2028, but this time the company indicated a view that they are on track to reach $200B in 2027. It has already accumulated to $176.3B as of Q2, and at least regarding orders and backlog, they are digesting their medium-term plan ahead of schedule.
Thinking about it that way, it is not strange that the stock price would adjust significantly when profits fall below expectations.
What is important is not that the stock price fell, but whether there was any change in the structure that supports the corporate value five years from now.
I want to look at that.
■ 116GW is not just an 'order backlog'
I think the most important number in Power this time was 116GW.
GE Vernova's Power is a power generation business that handles gas turbines, nuclear power, hydropower, etc., and one of its centers is Gas Power.
Gas Power equipment refers to new equipment such as large gas turbines and aeroderivatives installed in power plants.
In Q2, GE Vernova concluded new Gas Power equipment contracts for 20GW.
18GW was a Slot Reservation Agreement.
2GW was a formal order.
A Slot Reservation Agreement, or so-called SRA, is a contract where the customer secures gas turbine manufacturing slots in advance.
It is a stage before a formal order, but it is not just an inquiry.
Customers secure GEV's limited manufacturing slots and then convert them to formal orders according to the progress of the project.
This time in Q2, 10GW was converted from existing SRAs to formal orders, and 3GW was shipped.
As a result,
Formal backlog: 44GW → 53GW.
SRA: 56GW → 63GW.
In total, Gas Power equipment under contract is
100GW → 116GW
increased to.
Furthermore, the company expects at least 125GW at the end of 2026.
What is important here is not the number 116GW itself.
It is that this number is a leading indicator of the installed base subject to Services for many decades to come.
The installed base means the foundation of GEV-made equipment that has already been installed in customers' power plants and is actually operating.
Gas turbines are not just sold and forgotten.
If they operate, periodic inspections, parts replacement, performance improvements, upgrades, and large-scale outages that occur every few years will occur.
An outage is a large-scale inspection and maintenance performed by stopping power generation equipment for a certain period.
As the operating hours of the equipment accumulate, such Services demand also accumulates.
As of Q2, 130 units of the HA fleet have been commissioned, and 195 more units have been contracted.
HA is the main series of GE Vernova's large, high-efficiency gas turbines.
Fleet refers to that group of operating and contracted equipment.
Commissioned means the state where installation and test runs have been completed and commercial operation has begun.
In other words, 130 units are already operating as actual power generation equipment, and behind them exist future maintenance, parts, and upgrade demand.
Cumulative commercial operating hours have exceeded 4 million hours.
As equipment sales increase, the base for long-term Services revenue accumulates behind them.
GEV, in its December 2025 Investor Update, showed a vision to double the baseload operating Gas Turbine installed base from about 200GW to about 400GW, and to grow HA Services annual revenue from about $1B in 2025 to about $4B in 2035.
Services revenue is continuous revenue such as maintenance, parts, repairs, and upgrades that occur after equipment sales.
In other words, current Gas Power orders are not just increasing Equipment revenue for the next few years.
They are simultaneously accumulating Services revenue for the 2030s.
I think this is the most important part of the Power business's moat.
■ Does capacity expansion to 30GW dilute the moat?
On the other hand, there are also doubts.
If they have pricing power because they are scarce, won't they destroy their own scarcity if they increase supply capacity too much?
GE Vernova is trying to raise Gas Turbine output to
Q3 2026: 20GW annual rate
2028: 24GW
2030: 30GW
This becomes a very important counter-hypothesis in Future40.
However, for now, I do not consider the capacity expansion to 30GW as 'moat dilution'.
There are two reasons.
One is that demand is still ahead.GEV, as of December 2025, had already set a premise to further expand the Gas Power equipment backlog until 2028, and showed a long-term model where the installed base and Services backlog would increase even after 2028.
From there, contract volume has increased even further in H1 2026.
The other is that the expanded capacity also leads to future service capacity.If they sell new turbines, the installed base increases.
If the installed base increases, future service demand also increases.
In other words, GEV's capacity expansion is
an 'investment to increase current equipment sales' and at the same time an 'investment to create a Services annuity for 10 years from now'.This is different from a simple equipment manufacturer.
GE Vernova's installed base already supports about 25% of the electricity generated in the world.
This does not mean that GEV itself generates 25% of the world's electricity. It means that GEV's gas turbines, steam/nuclear/hydro equipment, wind turbines, etc., are heavily incorporated into the power generation equipment owned by power companies around the world, and the amount of electricity generated by customers using them is equivalent to about one-fourth of the world's total.
And what is important for GEV is that this huge installed base is the base for Services revenue.Turning current Equipment orders into revenue is not just increasing equipment sales a few years from now.
Every time new equipment operates around the world, the installed base expands, and long-term Services demand such as inspections, parts replacement, repairs, upgrades, and large-scale outages is added behind it.
In other words, the capacity expansion of Gas Power currently underway is not just an investment to increase Equipment revenue until 2030.
They are creating the base for Services revenue for the 2030s right now.
■ However, I do not call 'price +20%' pricing power as it is
Another important thing in Power is pricing.
This time too, in Gas Power, higher volume and price contributed to growth and margin improvement.
Q2 Power Segment EBITDA margin was 18.8%.
It improved by 240bps from 16.4% in the same period last year.
This is very good.
However, I want to be a little careful here.
When GEV looks at gas turbine contract prices, they use $/kW, which is an indicator of 'how much the contract was per 1kW of power generation capacity the customer secures'.
The fact that this $/kW is rising is positive for GEV.
However,
Just because $/kW went up by 20% does not mean that GEV was simply able to raise the price of the same gas turbine by 20%.
This is because what customers buy from GEV is not the same every time.
For example, gas turbines include not only large Heavy Duty Gas Turbines but also relatively small and highly mobile aeroderivatives.
Furthermore, when building a power plant as a combined-cycle, that is, a high-efficiency combined-cycle power plant that generates electricity not only with gas turbines but also with steam turbines using their waste heat, there are cases where GEV supplies only gas turbines, and cases where they supply a wide range of peripheral equipment such as steam turbines.
Naturally, if the scope GEV is responsible for expands, the contract amount per 1kW will also increase.
In other words, the rise in $/kW may include both a 'pure price increase' where they sold the same thing for more, and a 'change in product mix' where they sold more equipment or products with higher added value.
Therefore, I do not yet say 'GEV has 20% pricing power' just by looking at the rise in $/kW.
The second question of Future40 is not just 'were they able to raise prices?'
How much profit will remain for GEV as a result of contracts taken under high conditions?
I want to confirm up to this point.
In that respect, current numbers are moving in a good direction.
Power margin has
13.4% → 17.0% → 16.3% → 18.8%
risen to.
From now on, the backlog accumulated under high conditions in the past will be recorded as actual revenue.
If equipment margin also improves further at that time, it can be confirmed that the price increase at the time of order is turning into actual profit.
Only then can it be judged that GEV is properly capturing profit by utilizing the supply constraints of power equipment.
This will be an important fixed-point observation from next time onwards.
■ I think the real star this time is Electrification
The 20GW Gas Power contract is flashy.
However, this time, I am placing more importance on Electrification.
First, I want to briefly organize what kind of business Electrification is doing.
Even if electricity is made at a power plant, that electricity cannot be used as is in homes, factories, or data centers.
Transmit the generated electricity.
Change the voltage.
Convert between AC and DC.
Stabilize the grid.
Deliver it safely to where it is needed.
And control the entire power grid.
GEV's Electrification is responsible for transformers, substation equipment, HVDC, switchgear, grid automation, power conversion, etc., necessary for that.
Simply put, if Power is a business of 'making electricity', it is easy to understand if you think of Electrification as a business of 'delivering the made electricity to where it is needed and making it usable'.
And now, the problem with the construction of AI factories is not just power generation capacity.
Even if you can make a large amount of electricity, it is meaningless if you cannot deliver it to the data center.
There are not enough transformers.
There is not enough substation equipment.
There is not enough transmission capacity.
Grid connection takes time.
Equipment to stably process large amounts of electricity is also needed.
The increase in power demand due to AI is creating the problem of 'making the power grid itself bigger and stronger' at the same time as the problem that 'more power plants are needed'.
Electrification is there.
Looking at the numbers this time, this demand is already starting to appear quite strongly in GEV's performance.
Q2 Electrification had
Orders: $6.347B
organic +66%
Revenue: $3.637B
organic +29%
Segment EBITDA: $671M
Segment EBITDA margin: 18.4%
Book-to-bill: about 1.7 times.
Equipment backlog was
$40.6B.
Increased by $16.6B, +69% from the same period last year.
A book-to-bill of 1.7 times means, if simplified, that for every 1 of current revenue, about 1.7 in new orders is coming in.
In other words, work is accumulating for the future at a speed faster than it is being digested as revenue.
And what is important is that not only is revenue increasing.
Segment EBITDA margin is
Q3 FY2025: 15.1%
Q4 FY2025: 16.9%
Q1 FY2026: 17.8%
Q2 FY2026: 18.4%
and is rising.
The company's full-year 2026 guidance is 18–20%.
In other words, Electrification is not growing revenue by taking a large amount of work at low prices.
While rapidly expanding the revenue scale, they are also improving profit margins at the same time.
I think this is very important.
Why is this happening?
In the background, there is strong demand for Grid equipment, data centers, transmission grid reinforcement, grid connection, and the full consolidation of Prolec GE.
Especially through Prolec, GEV has incorporated into itself the manufacturing capacity of Transformers, for which there is currently a strong supply constraint globally.
In other words, it is not just that demand is increasing.
GEV itself is also increasing its supply capacity to capture that demand.
I think what follows from here is very important for looking at GEV's corporate value.
If only Gas Power grows, GEV will grow as a very excellent power generation equipment manufacturer.
However, when Electrification also becomes large, the meaning of the company changes.
GEV sells Gas Turbines.
Connects the electricity made there to the Grid.
Sends it with HVDC and substation equipment.
Changes the voltage with Prolec's Transformers.
Inserts grid stabilization equipment.
Approaches the consumer side with Power Conversion.
Controls that power grid with Grid Automation.
In other words, there is a possibility that it will change from a 'company that sells part of power generation equipment' to a 'company that holds multiple bottlenecks from power generation to delivering electricity in one company'.
Here, I want to think about GEV's current high PER.
If it were GEV before AI, it would have been natural to evaluate it as an excellent power infrastructure company with a huge installed base and Services.
Power demand from AI factories was added to that, and the scarcity value of assets GEV had, such as Gas Power, Transformers, and Grid equipment, rose all at once.
As a result, not only the growth rate, but the evaluation the market gives GEV itself has risen.
The question is whether this high evaluation can be maintained even after the peak of AI equipment investment.
I think one of the businesses that holds the answer is Electrification.
If it is just selling a large amount of power generation equipment triggered by AI factories, the equipment investment cycle will peak out someday.
However, if GEV can expand its contact points with customers to power generation, transmission, transformation, grid stabilization, Power Conversion, and Grid Automation in the meantime, the story is different.
GEV's corporate value will not be determined only by 'how many Gas Turbines can they sell'.
As the world's power demand increases,
GEV for power generation.
GEV for transmission.
GEV for transformation.
GEV for grid stabilization.
GEV for power supply to data centers.
It will approach a structure of.
If that happens, GEV will no longer be a company evaluated by a simple Equipment cycle.
It will become a company that can capture profit in multiple layers every time power infrastructure investment occurs, while accumulating Services from a huge installed base.
I think this is the possibility that Electrification will change GEV five years from now into a different company than it is now.
And whether they can maintain the currently risen PER also ultimately depends on this.
A high PER is not allowed because profit temporarily increased due to AI.
Can GEV itself change into a company that is difficult to remove from the power infrastructure of the 2030s, utilizing the huge power equipment investment that started due to AI?
Gas Power holds the entrance to that.
Electrification has the potential to expand its domain of control to the entire power system.
That is why this time, I feel the GE Vernova of five years from now in the numbers of Electrification's orders +66%, Equipment backlog $40.6B, and margin 18.4%, rather than Gas Power's 20GW.
■ Prolec GE did not buy transformers, it bought 'time'
GE Vernova acquired the remaining 50% of Prolec GE in February 2026 and made it a wholly-owned subsidiary.
I highly value this acquisition.
The reason is not because the transformer market is growing.
It is because one of the severe constraints in the current transmission grid is the supply capacity of Power Transmission equipment, including transformers.
Transmission equipment cannot be ready immediately even if you build a factory after demand is confirmed.
Factory.
Personnel.
Certification.
Relationship with customers.
Product design.
Supply chain.
It takes time to build these from scratch.
Therefore, by buying Prolec, GEV did not buy transformers, it bought several years of time.
As of Q2, about $5B of Electrification's Equipment backlog of $40.6B is from Prolec GE.
Moreover, GEV plans a total of $6B in CapEx from 2025 to 2028, and will invest about $1B in Prolec in 2026–2028 alone.
They are not just using the purchased assets as they are.
They are trying to further increase supply capacity using GEV's capital, Lean, production network, and customer base.
According to the company's forecast as of December 2025, Prolec GE standalone's Adjusted EBITDA margin was expected to be about 26% in 2026 and about 27% in 2028.
Note that this 26% is a company forecast on a standalone basis before the acquisition, and the consolidated EBITDA of Prolec GE disclosed by GEV after the acquisition has different definitions such as purchase price accounting and integration costs. Therefore, I want to confirm how far the actual margin after the acquisition converges to the earning power of the standalone era.
Therefore, I think it is closer to view this M&A as an acquisition to incorporate high-margin and scarce supply capacity into their own platform, rather than adding a low-profit business for scale purposes.
■ Data center orders exceeded $5B in H1 alone
Another major factor this time was data centers.
GE Vernova's data center-related orders exceeded $5B in the first half of 2026 alone.
This is more than double the total for the full year of 2025.
Here, I do not want to take the view that 'power stocks are rising simply due to AI demand.'
The important thing is which part of the AI factory power stack GEV captures.
To build an AI factory, there are multiple layers:
Generating power.
Transmitting power.
Transforming voltage.
Stabilizing the grid.
Connecting to the data center.
Converting to the required voltage.
Preventing instantaneous power interruptions.
And controlling the entire system.
GEV already possesses:
Gas Turbine
Nuclear
HVDC
Substation
Transformer
Switchgear
Synchronous Condenser
Power Conversion & Storage
Grid Automation & Software
In its 10-Q, GE Vernova itself defines the company as an integrated power company that handles everything from generation, transmission, control, and conversion to storage.
In other words, the core point in looking at GEV is not whether individual products are strong, but how much of the entire power system a single company can control.
■ Can it advance from a 'product manufacturer' to a 'power system designer'?
This leads to the third question of Future40.
Simply holding the bottleneck is not enough.
If a customer buys a GEV gas turbine, but the transformer beyond it is from another company, the HVDC is from another company, and the power conversion is from another company, there is a limit to the profit GEV can capture.
However,
Capturing the generation side with Gas Power.
Capturing grid connection with Electrification.
Capturing transformers with Prolec.
Capturing substations and HVDC with Grid Systems Integration.
Approaching the demand side with Power Conversion & Storage.
Entering operations with Grid Automation & Software.
If this flow is completed, GEV's competitive unit will change from 'product' to 'system'.
Once that happens, the nature of the moat will also change.
A standalone product can be replaced by a competitor.
However, if multiple products are integrated from the design stage and enter the same customer, the same project, and the same operation, the customer touchpoints and profit capture range will expand.
The company itself also cites grid software and electrical data center solutions as growth factors from 2028 onwards.
At this point, the revenue, margin, and cross-sell rates of integrated projects are not fully disclosed.
Therefore, it cannot yet be called a completed moat.
However, the third question of Future40, 'a structure that does not leak profit,' is clearly moving from triangle to circle.
That is what I thought this time.
■ You should not treat $12B in FCF as steady-state FCF
Looking only at the numbers this time, FCF might be the most impressive.
Q1 $4.791B
Q2 $5.107B
In the first half alone,
$9.897B.
It significantly exceeded the full-year 2025 FCF of $3.7B in just half a year.
However, it is completely wrong to simply double this and evaluate it as a '$20B annual FCF company'.
The company's full-year 2026 FCF guidance is,
$11.5B to $12.5B.
In other words, if you calculate backward from the company's plan, the second-half FCF is,
only about $1.6B to $2.6B.
The reason is clear.
In the first half, large working capital inflows occurred, such as slot reservations and equipment order prepayments for Power, and down payments and milestone collections for Electrification.
The company itself also cites higher positive benefits from working capital in addition to stronger Adjusted EBITDA as a factor for the Q2 FCF increase.
Therefore, I view this FCF in two ways.
As a measure of profit consistency, it is low quality.
However, as evidence of a moat, it is high quality.
Usually, customers do not prepay huge amounts of cash for products delivered years in advance.
Especially if there are easy alternatives.
Even so, customers prepay GEV to secure manufacturing slots.
This is closer to a state of 'I must secure it now or I won't get it when I need it' rather than 'I want to buy GEV's products'.You should not extrapolate it as FCF as is.
But as an indicator of economic scarcity, it is quite strong.
■ The 2026 12-14% margin guidance is actually quite execution-heavy
While the company raised its revenue and FCF guidance, it kept the Adjusted EBITDA margin at 12-14%.
The first-half margin was 10.5%.
Therefore, to achieve 12-14% for the year, the second-half margin needs to clearly rise.
Although it varies slightly depending on the second-half distribution of sales, roughly speaking, an Adjusted EBITDA margin of about 13-16% in the second half will be required.
In other words, this guidance is not 'a number that can be easily achieved because the first half was strong'.
It is a plan where profit improvement is heavily skewed toward the latter half.
Furthermore, the company aims for an Adjusted EBITDA margin of 20% or more for the entire company by 2028.
In the December 2025 Investor Update,
Revenue CAGR: LDD from 2025 to 2028
Adjusted EBITDA margin: approx. 8.5% in 2025 -> 20% or more in 2028
Cumulative FCF from 2025 to 2028: at least $22B
End of 2028 backlog: approx. $200B
This showed a medium-term vision.
To justify GEV's current valuation, increasing orders is not enough.
I want to focus more on whether the backlog can be converted into 20% margin profit than on the order amount.
■ Wind is still clearly weak
The talk about Power and Electrification is too strong so far, but Wind is completely different.
First, GE Vernova's Wind business is broadly divided into two.
Onshore Wind and Offshore Wind.
In Onshore, in addition to selling wind turbine units, it has an installed base of approximately 59,000 units worldwide, and also provides services such as maintenance, parts replacement, and upgrades.
Offshore, on the other hand, is a business that installs huge wind turbines at sea.
The problem is here.
GEV is currently in a phase of completing loss-making projects ordered in the past, rather than actively seeking new Offshore Wind orders.
For projects contracted before inflation and supply chain disruptions became full-scale, such as Dogger Bank and Vineyard Wind, the subsequent rise in material, logistics, and construction costs could not be sufficiently passed on to prices, worsening profitability.
In other words, the current Wind business contains both the relatively stable Onshore and Services, and the Offshore business that is processing past low-profit contracts.
Once you understand this structure, the numbers this time are also easy to see.
Q2 was,
Orders: approx. $1.2B, organic -40%
Sales: $2.026B, organic -11%
Segment EBITDA: -$275M
Margin: -13.6%
Even though sales are $2B, it is losing $275M in EBITDA.
It is completely different from Power's 18.8% margin and Electrification's 18.4%.
Moreover, in the first half,
Q1: -$382M
Q2: -$275M
Total,
-$657M.
In contrast, the company's full-year 2026 guidance is about -$400M.
Therefore, by simple calculation, to achieve the full-year target, the second half requires,
about +$257M in Segment EBITDA.
A business that had a $657M loss in the first half must be brought to a profit of about $257M in the second half.
Comparing half-year to half-year, this means a profit improvement of about $914M is required.
That is a fairly large change.
So, why does the company think it can improve that much?
The point is not that the entire Wind business will suddenly become a high-profit business.
It is important that the Offshore projects with large losses are nearing completion, and the burden of those losses will gradually decrease from the second half.
Installation of all turbines has been completed for Dogger Bank A and Vineyard Wind 1, and the remaining existing projects are also proceeding sequentially.
In other words, the profit improvement in Wind is different in nature from growth stories like Power or Electrification, where 'demand increases -> sales increase -> margin increases'.
Rather, I think it should be viewed as a normalization story: 'digesting past loss-making projects -> Offshore losses decrease -> the original profitability of Onshore and Services emerges'.
This is quite important.
The more the overall GEV margin rises, the more the reduction in Wind's losses will leverage the company-wide profit.
Conversely, no matter how well Power and Electrification are doing, if additional Offshore losses occur, it will drag down the company-wide margin improvement.Therefore, I do not evaluate the current Wind business as a 'moat' in Future40.
The first thing I want to confirm is whether the past Offshore projects can be completed without additional losses.After that, can Wind be returned to a business that generates stable profits, centered on the Onshore installed base and Services?Only after confirming this can Wind be evaluated positively for GEV's corporate value.
At this point, I think Power and Electrification are driving up corporate value, and we are at the stage of seeing how much Wind will eat into those profits.
■ Capital allocation is also changing from a 'defensive' phase to an 'offensive' phase
The cash balance at the end of Q2 was $13.1B.
In the first half of 2026, it repurchased 4.3M shares at an average of $854 and returned about $3.9B to shareholders, including dividends.
On the other hand,
2025-2028 CapEx: $6B.
R&D for the same period: $5B.
Gas Turbine production increase.
Capacity expansion investment in Prolec.
Robotech Automation acquisition.
Investment in AI, robotics, and automation.
are all proceeding simultaneously.
In other words, it is not hoarding cash to increase profit margins.
At a time when supply constraints are strong, it is reinvesting capital into scarce manufacturing capacity while also increasing margins.
I think this is quite important.
Truly good capital allocation is not just about generating massive FCF.
It is about being able to reinvest that FCF into places where high returns can be obtained.
GEV currently has,
Gas Power capacity.
Transformer.
Grid equipment.
Automation.
SMR.
Grid Software.
Data Center electrical solutions.
and a large number of reinvestment candidates.
In that sense, the current power equipment shortage is not just giving GEV profits.
It is also starting to provide the capital to build the next moat.
■ Re-evaluating GE Vernova with the four questions of Future40
Based on the numbers and points discussed so far, I return to the four questions of Future40.
1. Does it hold the bottleneck?
I think YES.
Large Gas Turbines.
Transformers.
HVDC.
Substations.
Grid equipment.
Long-term services capability.
All of these are areas where it is difficult to increase supply in the short term due to power infrastructure investment.
The equipment backlog increased to $87.8B in Q2.
Gas Power has 116GW under contract, and the Electrification equipment backlog is $40.6B.
At least at this point, the scarcity of the bottleneck has not diminished.
2. Can it capture profit from that bottleneck?
YES.
However, continuous verification is required.
Power margin is 18.8%.
Electrification is 18.4%.
The company-wide Adjusted EBITDA margin also improved from 8.1% in Q3 2025 to 11.3% in Q2 2026.
Demand is starting to be converted not only into sales but also into profit margins.
On the other hand, the increase in Gas Power order unit prices also includes mix factors.
Therefore, I want to track how the high-price backlog is actually transferred to equipment margins.
3. Can it maintain the captured profit without leaking it to competitors?
This is not yet a complete YES.
First, it is important to note that GEV is not the only one holding the bottleneck in power equipment.
In Gas Power, there are strong competitors like Siemens Energy and Mitsubishi Power.
In fact, Siemens Energy is also currently winning strong orders in Gas Services, with Q2 FY2026 Gas Services orders at €8.9B, up 32% year-on-year. Profit margins have also reached 15.9%. Furthermore, in Grid Technologies, orders were €7.0B, up 42%, with a 17.1% margin, which is also very strong in power grids.
*Since Siemens Energy has a September fiscal year-end, its Q2 FY2026 is the January-March 2026 quarter, which is a different period from GEV's Q2 FY2026 (April-June quarter).
Mitsubishi Power also deploys large JAC gas turbines globally and has a delivery track record of over 1,700 gas turbines and long-term service contracts. In other words, the gas turbine itself is not a monopoly market for GEV alone.
Therefore, what we should look at in Future40 is not just 'does GEV have a bottleneck,' but 'how much profit can it keep within itself compared to competitors who have the same bottleneck'.
GEV has,
Generation.
Transmission.
Transformation.
Grid stabilization.
Power Conversion.
Grid Automation.
Software.
Services.
This is strong.
On the other hand, Siemens Energy also has a very strong combination of Gas Services and Grid Technologies.
Honestly, I think this is a competitor worth putting to the same Future40 questions as GEV.
The reason GEV looks superior at this point is not just the gas turbine.
Huge installed base.
Services.
Electrification.
Prolec.
And business purity in power infrastructure.
It lies in the fact that it is starting to connect these multiple assets within one company.
However, how much of these can be won in a single project and how much customer spending can be captured by the company is not yet sufficiently quantified.
Therefore, at this point,
Transitioning from triangle to circle.
And including competitor comparison, I think this is actually the Future40 question I want to pay most attention to in this earnings report.
4. As the business expands, does its defensive structure expand as well?I have become quite inclined toward YES.
Increase one gas turbine.
Long-term services demand is created behind it.
Increase transformers, substations, and HVDC.
Customer touchpoints for maintenance, expansion, and Grid Automation increase behind it.
Increase Prolec's manufacturing capacity.
Customer touchpoints with data center customers increase.
In other words, as sales increase,
installed base,
Services,
manufacturing capacity,
customer touchpoints,
integrated proposals,
all have the potential to increase simultaneously.
Through this earnings report, the reason I have GEV in Future40 has become clearer than before.
What I am looking at is not the gas turbine demand itself, nor the power demand from AI itself.
It is that multiple bottlenecks of the huge system called power are starting to be connected within one company.GEV is not yet a 'company with a completed irreversible moat'.
However, the assets to build that irreversible moat are quite well-aligned.
■ Investment judgment
With this Q2 FY2026, the GE Vernova Future40 story has not been damaged.
I think it has actually become stronger.
Orders $24.2B.
Backlog $176.3B.
Gas Power 116GW.
Electrification equipment backlog $40.6B.
Data center orders exceeded $5B in the first half alone.
Power margin 18.8%.
Electrification margin 18.4%.
As far as these numbers show, the supply-demand tightness of power infrastructure is not just a theme, but is starting to be converted into GEV's orders, profits, cash, and installed base.
However, I want to organize this once here.
GEV is not a company born from AI.
Even before AI, it was a power infrastructure company with a huge installed base and services business supporting the world's power.
With the rapid power demand from AI factories added to that, the existing supply constraints of generation, transmission, transformation, and grid stabilization have suddenly become apparent.
In other words, AI did not create GEV's moat.
AI has rapidly increased the economic value of GEV's already existing moat.
I think this is quite important.
Because even without assuming that AI investment will continue at the current speed forever, GEV already has a foundation of corporate value called a huge installed base and services.
On the other hand, the current stock price is a different matter.
Due to the rapid increase in power demand including AI factories, GEV's growth rate has been upgraded, and the valuation given by the market has also been significantly upgraded.
Therefore, what should be asked in the current investment judgment is not whether GEV is a good company.
Will the growth rate and profit margin upgraded by AI factories last long enough to justify the current high valuation?
And one more thing.
Even in the 2030s, after the peak of AI investment, can it convert the equipment currently being accumulated into installed base and services revenue, and maintain that corporate value?
I want to see that.
In that sense, I do not underestimate the fact that the stock price fell -8.69%.
GEV currently has success quite far into the future priced in.
2028 company-wide Adjusted EBITDA margin 20% or more.
30GW Gas Turbine supply capacity.
Further margin expansion in Electrification.
Wind normalization.
Integrated proposals for data centers.
Investment recovery for Prolec.
Only by actually turning these into numbers can the current high valuation be maintained.
Therefore, I do not view this decline as 'the market sold it by mistake despite strong earnings'.
I view it as a decline that demanded the next proof from a company carrying high expectations.
And as far as I have confirmed this time, the company's story toward that proof has not collapsed.
Rather, it was an earnings report where what to look at next became quite clear.
What is needed for GE Vernova to truly remain in Future40 is not just for the AI factory capital investment boom to continue.
It is to use the current AI power demand to expand the installed base and convert it into 2030s services revenue and dominance over power infrastructure.
If it can do that, the current growth will not end as a temporary AI special demand.
The equipment demand accelerated by AI will turn into an irreversible moat that remains even after the peak of AI investment is passed.
I am viewing this earnings report as a progress report toward that.
In this Q2 FY2026, GE Vernova's Future40 story has not been damaged.
I believe it has actually become stronger.
Orders $24.2B.
Backlog $176.3B.
Gas Power 116GW.
Electrification Equipment backlog $40.6B.
Data center orders exceeded $5B in the first half alone.
Power margin 18.8%.
Electrification margin 18.4%.
Looking at these figures, the supply-demand tightness in power infrastructure is not just a theme, but is beginning to translate into GEV's orders, profits, cash, and installed base.
However, I would like to organize my thoughts here.
GEV is not a company born from AI.
Even before AI, it was a power infrastructure company with a massive installed base and Services business supporting global power.
With the addition of rapid power demand from AI factories, existing supply constraints in power generation, transmission, transformation, and grid stabilization have suddenly become apparent.
In other words, AI did not create GEV's moat.
AI has rapidly increased the economic value of GEV's already existing moat.
I consider this to be quite important.
This is because even without assuming that AI investment will continue at its current pace forever, GEV already possesses a foundation of corporate value in its massive installed base and Services.
On the other hand, the current stock price is a different matter.
Due to the rapid surge in power demand including AI factories, GEV's growth rate has been revised upward, and the valuation given by the market has also been significantly revised upward.
Therefore, what we should ask in our current investment judgment is not whether GEV is a good company.
Will the growth rate and profit margin boosted by AI factories last long enough to justify the current high valuation?
And one more thing.
Even in the 2030s, after the peak of AI investment, can it convert the equipment currently being accumulated into installed base and Services revenue, and maintain that corporate value?
That is what I want to see.
In that sense, I do not disregard the fact that the stock price fell by -8.69%.
Current GEV has success quite far into the future priced in.
2028 company-wide Adjusted EBITDA margin of 20% or more.
30GW Gas Turbine supply capacity.
Further margin expansion in Electrification.
Wind normalization.
Integrated proposals for data centers.
Return on investment for Prolec.
Only by actually turning these into numbers can the current high valuation be maintained.
Therefore, I do not view this decline as 'the market sold it wrongly despite strong earnings'.
I view it as a decline that demanded the next proof from a company carrying high expectations.
And as far as I have confirmed this time, the company's story itself toward that proof has not collapsed.
Rather, it was an earnings report where what to look at next became quite clear.
What is needed for GE Vernova to truly remain in the Future40 is not just for the AI factory capital expenditure boom to continue.
It is to use the current AI power demand to expand the installed base and convert it into 2030s Services revenue and dominance in power infrastructure.
If it can achieve that, the current growth will not end as a temporary AI special demand.
The equipment demand accelerated by AI will turn into an irreversible moat that remains even after the peak of AI investment passes.
I view this earnings report as a progress report toward that goal.
■ Next Checkpoints
・Progress from 116GW of Gas Power contracted volume → 125GW or more by year-end
・Volume of conversion from SRA to formal orders
・Reaching 20GW annual production capacity and progress on 24GW/30GW production increase plans
・Whether the rise in Gas Power order unit prices is being transferred to equipment margins
・Progress toward the full-year Power EBITDA margin target of 17-19%
・Growth rate of Electrification Equipment backlog of $40.6B
・Maintenance of Electrification EBITDA margin of 18-20%
・Expansion of data center orders and Power/Electrification cross-selling
・Prolec's sales growth, margin, and return on invested capital
・Consistency with the company's plan for H2 FCF of $1.6-$2.6B
・H2 profit margins toward achieving a company-wide Adjusted EBITDA margin of 12-14%
・Whether Wind can turn from -$657M in H1 to a profit in H2
・Progress toward a 2028 company-wide Adjusted EBITDA margin of 20% or more
(Disclaimer)This writing is published for the purpose of organizing and recording the author's personal decision-making, and involves hesitation, reconsideration, revision, and hypothesis updating. Furthermore, the information provided by this writing does not guarantee accuracy, etc. Therefore, as it may not necessarily be appropriate for readers, please recognize that investing in stocks involves significant risk, and make investment decisions based on your own judgment and responsibility. Note that this does not recommend investment in any financial products or individual stocks, nor does it recommend any investment methods.
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