By Jacob Sonenshine

Vertiv Holdings stock has soared since Barron's recommended buying it a year ago, and the rally isn't over.

Shares of the $49 billion company are up 67% since we published our recommendation in late August, 2024. Sales and earnings have continued to grow rapidly because the company benefits from spending on artificial intelligence.

Vertiv makes power and cooling equipment for companies in communications and manufacturing, but the majority of its revenue comes from Big Tech companies. They are spending more each year on their data centers, which enable them to create and make use of AI software.

The momentum continued in Vertiv's second-quarter results, disclosed at the end of July. Sales grew to $2.57 billion, beating the consensus call among analysts was of $2.35 billion. While profit margins dipped because of tariff-related costs, adjusted earnings per share grew 42% from a year earlier to 95 cents. Analysts had expected 83 cents.

More importantly, management raised its forecast for full-year sales by $150 million to $10 billion, suggesting growth of 24%. While some of the increase emanates from a weaker dollar, $40 million of the jump is from stronger-than-expected demand.

The forecast still looks cautious, which could set Vertiv up to exceed expectations in the remaining quarters this year. The guidance implies revenue in the third quarter will be similar to the figure for the second quarter, which would be somewhat unusual. Sales in 2024 grew 14% on a quarterly basis throughout the year.

The revenue guidance is a "modest quarter over quarter increase," J.P. Morgan analyst Stephen Tusa wrote. That "suggests it remains conservative."

It would be no surprise for Vertiv to beat expectations in the coming quarters. The company has surpassed analysts' estimates for the top and bottom line in all of the past six quarters. It has beaten EPS forecasts for the past 10 quarters.

Another positive is that margins should stabilize soon. This year's pop in tariff-related product costs shouldn't be repeated next year. Management forecast adjusted operating margins of 20% for the third quarter, compared with 18.5% in the second, as the company makes its supply chain more efficient.

All that is why analysts expect earnings to grow about 23% annually in 2026 and 2027, according to FactSet. "We regard VRT as a leading AI infrastructure player...positioned well for growth," Oppenheimer analyst Noah Kaye wrote after the earnings report.

The stock should rise if profit growth meets those expectations. While the shares trade at 30 times the EPS expected for the coming 12 months, compared with just over 22 times for the S&P 500, that is because Vertiv has so much more potential for growth.

The multiple is below its peak for this year of 42 times. It could move back toward that level if Vertiv proves analysts right and tariffs don't do any more damage to margins.

If the valuation goes that high, the stock likely would rise above its record high of $153, hit early this year, from $134 now. The 14% gain is on the small side for a relatively volatile stock that tends to make moves. Profits are growing rapidly.

Sometimes the best move to make is no move. Keep holding on to this one.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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August 28, 2025 16:36 ET (20:36 GMT)

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