Generac CEO Says Data Center Buyers Without Guarantees Won't Get Built For, As Backlog Hits $4.5 Billion
Aaron Jagdfeld says demand lets Generac be pickier and is weighing capacity above $4 billion, with a backlog near $4.5 billion.
Generac will not build for data center customers that refuse to back a project with a parent guarantee or adequate deposits, CEO Aaron Jagdfeld said on the company's third-quarter earnings call, as a backlog of about $4.5 billion for data center products gives the maker of backup generators room to choose.
Guarantees or no deal
Answering a Guggenheim analyst, Jagdfeld described a hypothetical customer that is unwilling to provide a corporate guarantee for a special-purpose vehicle, the project entity it would use to buy. Without comfort on the parent company, he said, "we're not going to do it."
CFO York Ragen added that "appropriate customer deposits" could stand in for a guarantee, and Jagdfeld said payment timelines that de-risk a project are also required. Generac has plenty of interested customers, he said, and is "getting to that point in the cycle" where it can be more selective.
A Wells Fargo analyst raised financing worries at so-called neoclouds. Jagdfeld said Generac is asking non-hyperscale accounts for strong commitments to justify further investment, and that repeat customers are now bidding second and third phases.
Room beyond $4 billion
Generac, which makes home and commercial backup generators, is aiming for data center capacity of close to $4 billion a year by the second half of 2027, up from a little over $1.25 billion at the end of this year. Jagdfeld said $4 billion roughly maxes out the current footprint, and the company is asking what going to $6 billion would take: a greenfield site, an existing site or an acquisition.
The capacity target is also meant to leave space for a diversified customer base. Jagdfeld said the backlog roll-forward from $1.6 billion to $4.5 billion implies almost $600 million of non-hyperscale and other hyperscale orders in the last 90 days, after about $100 million shipped in the quarter.
A 45-to-50-week clock
Generac is quoting lead times of 45 to 50 weeks on large data center generators, Jagdfeld said, so orders not received by the first quarter of 2027 will be hard to fill that year. More than half the backlog is for 2027.
Jagdfeld said the company will watch the next 90 to 120 days as the Sussex, Wisconsin, plant ramps and the Belvidere, Illinois, packaging site comes online, before deciding on more capacity. A deal with a third hyperscaler, he added, would not affect 2027.
Third-quarter net sales rose 16% to a record $1.29 billion, and the company now expects 2027 data center revenue to well exceed $2 billion.
Generac's next earnings report, covering the fourth quarter and full year, is due in mid-February.
Sources
- Generac says data center backlog hit $4.5 billion (GNRC:NYSE) | Seeking Alpha — seekingalpha.com
- Generac Holdings (GNRC) Q3 Earnings Surpass Estimates — Yahoo Finance
- Generac to Report Q3 Earnings: Should Investors Hold or Fold? — Yahoo Finance
- Is Generac Holdings (GNRC) Below Fair Value Going Into Earnings? — Yahoo Finance
- Amazon Backup Power Deal Could Be A Turning Point For Generac Stock — Yahoo Finance
