Vertiv (VRT) stock has skyrocketed by more than 193% this year. This impressive growth highlights the company’s strong position in the data center infrastructure market and its ability to tap into surging demand driven by artificial intelligence (AI).
Vertiv designs and services cutting-edge systems that power, cool, and maintain the electronics essential for processing, storing, and transmitting data. Its offerings are crucial for data centers, communication networks, and industrial customers, placing the company at the forefront of the digital revolution.
As the AI boom reshapes industries, the need for reliable digital infrastructure is skyrocketing, positioning Vertiv as a key player. With such strong momentum, the key question is: Can this rally continue? Let’s delve into the factors that could keep VRT stock climbing.
AI Driving Demand
AI applications require unprecedented levels of computing power, which, in turn, necessitate advanced infrastructure capable of handling these workloads efficiently. The growing reliance on AI workloads has created opportunities for companies like Vertiv to provide hybrid cooling solutions, integrating air and liquid cooling systems to optimize performance.
Vertiv has made significant investments in R&D and production capacity to address the complexities of these cooling requirements. The company recently expanded its global liquid cooling portfolio by introducing two high-capacity coolant distribution units designed for AI applications. These systems allow for cost-effective liquid cooling deployments in data centers, enabling operators to manage high-density AI workloads alongside traditional air-cooled systems.
Strategic Partnership to Power Growth
Vertiv’s collaboration with Compass Datacenters, a significant player in building and operating data center campuses, will likely significantly boost its financials. These companies have developed a solution that allows data centers to transition seamlessly between air and liquid cooling, ensuring readiness for high-density computing demands.
The first units from this partnership will roll out in Q1 2025 under a multi-year, multi-billion-dollar supply arrangement.
Revised Growth Projections Signal Strength
During its 2024 investor event, Vertiv raised its organic revenue growth forecast. It now expects its organic sales to increase at a CAGR of 12%- 14% through 2029, up from its previous projection of 8%- 11%. Further, for 2025, the company expects organic sales growth of 16%- 18%, driven by robust order volumes and a growing backlog.
While liquid cooling is a key focus, Vertiv’s growth is well-rounded. Its entire product portfolio—including thermal systems, power management, IT solutions, and modular services—is experiencing strong momentum.
Investing in Capacity Expansion
To meet surging demand, Vertiv is aggressively expanding its manufacturing capacity. For example, since acquiring E&I Engineering in 2021, Vertiv has nearly doubled production capacity for switchgear, busbars, and integrated solutions by establishing new facilities and upgrading existing ones. Moreover, to support its growing thermal management activities, the company opened a new manufacturing plant in India, positioning itself closer to high-growth markets.
These investments ensure that Vertiv has the geographic presence, scalability, and resiliency to meet customer needs globally.
Financial Performance and Future Outlook
Vertiv has been performing well, with its organic sales and adjusted operating margins consistently growing at a healthy pace. Further, the company’s Q4 2024 guidance is robust, with 2025 sales expected to be even stronger. Key drivers of growth include the thriving hyperscale and colocation data center markets.
In addition, pipeline growth across all regions, particularly in AI-driven liquid cooling technologies, expansion of its product portfolio, and the launch of the Vertiv Operating System (VOS), designed to enhance operational efficiencies, will likely accelerate its growth.
Vertiv will also benefit from improved operating leverage and gains in manufacturing and procurement productivity, which will drive profitability and free cash flow expansion. The company also maintains a low net debt leverage, providing the financial flexibility to pursue further growth opportunities.
Analysts Are Bullish on Vertiv Stock
Wall Street analysts have strong confidence in Vertiv, giving the stock a “Strong Buy” rating. Their optimism is fueled by several key factors, including the company’s broad product portfolio, acceleration in organic sales growth rate and margin expansion, and solid backlog, which stood at $7.4 billion at the end of Q3.
The Bottom Line on VRT Stock
Vertiv stock has already gained substantially this year, but its growth story is far from over. Vertiv’s ability to innovate and new products positions it as a leader in the rapidly expanding data center infrastructure space. As the adoption of AI continues to grow, so will the demand for the cutting-edge solutions Vertiv provides.
With a clear growth roadmap, strong financials, and a market-leading product portfolio, Vertiv offers a compelling investment opportunity.
