Business Overview
Vertiv provides power management, thermal cooling, and infrastructure systems used in data centers and AI compute environments. The company benefits from rising server density and AI infrastructure spending, positioning it as a “picks-and-shovels” provider rather than a semiconductor risk play. Data centers can’t thrive without these services.
Revenue Quality and Growth
Revenue has scaled meaningfully with a CAGR (compound annual growth rate) of $18.7%. This strong multi-year uptrend is what you want to see in a any growth stock.
Year | Revenues ($ millions) | % Change |
2025 | 10,230 | 27.7% |
2024 | 8,012 | 16.7% |
2023 | 6,863 | 20.6% |
2022 | 5,692 | 13.9% |
2021 | 4,998 | 14.4% |
2020 | 4,371 | -1.4% |
2019 | 4,431 | 3.4% |
2018 | 4,286 | 10.5% |
2017 | 3,879 | -1.6% |
2016 | 3,944 | 0.0% |
Gross margin and operating leverage
Computed from Net Sales – Cost of Sales:
Gross margin
2025: 36.3%
2024: 36.6%
2023: 35.0%
Operating margin (Operating profit / Net sales)
2025: 17.9%
2024: 17.1%
2023: 12.7%
Gross margin is healthy and stable, while operating margin is expanding meaningfully—that usually signals scale benefits + improved mix/pricing + execution.
Net Margin
Net income ratio = Net Income / Sales
$VRT started in 2016. After a few years of no profit and losses, they’ve gained solid traction and have consistently returned a profit to shareholders.
Year | Net Income | Net Income Ratio |
2025 | 1,333 | 13.0% |
2024 | 496 | 6.2% |
2023 | 460 | 6.7% |
2022 | 77 | 1.3% |
2021 | 120 | 2.4% |
2020 | (327) | -7.5% |
2019 | (141) | -3.2% |
2018 | 5 | 0.1% |
2017 | (0) | 0.0% |
2016 | (0) | 0.0% |
Debt to Free Cash Flow
Vertiv is in a solid leverage position. They are able to pay off there debt with existing cash flows in 1.8 years. Anything under three is outstanding, especially for a company in this position as a market leader and relatively new business, incorporated in 2016.
Year | Long-Term Debt | Free Cash Flow | Debt to FCF |
2025 | 3,383 | 1,894 | 1.8 |
2024 | 3,079 | 1,135 | 2.7 |
2023 | 3,062 | 766 | 4.0 |
Economic Value Added
The average return on capital over the past 5 years is 11.65%. The weighed average cost of capital over the same period is 7.7%. This is a spread of 3.95%. In other words, when comparing the cost to hold the capital (debt and equity) versus the return on that capital, $VRT is increasing in economic value at an average of 3.95%.
This isn’t the most impressive stat. However, this is a 5 year average. In 2025, the ROC was 22.84% with a WACC of 8.51%, a 14.33% increase in economic value. This shows the value creation of $VRT increasing and proving the quality of the business.
Dividend Policy
Dividends paid:
2025: $66.6M
2024: $42.2M
2023: $9.5M
Dividends as % of FCF
2025: ~3.5%
2024: ~3.7%
2023: ~1.2%
The dividend is small today but as of right now, they are committed to growing their dividend. With a very low payout ratio of 3.5%, there is plenty of cash flow available to grow their dividend. Don’t look for rapid growth as this company should have many opportunities to reinvest cash flow back into the business. If anything, I’d prefer they don’t pay a dividend this early in their business development.
Valuation
Intrinsic Value Range: $214 - $261
Estimated 5 year CAGR: 25%
Discount Rate: WACC of 7.7%
Terminal Value: 25x FCF
Vertiv Holdings, Co. is within their fair value range despite the recent sharp rise. According to my estimates, this appears to be a good time to get in on the AI push without taking on too much risks. As I mentioned earlier, this stock is similar to the picks and the shovels in the gold rush. Regardless of which company wins the biggest with AI, everyone needs power and cooling infrastructure.
Disclaimer: This analysis is based on my interpretations of the business results. This is not investment advice. I am not your investment advisor. Seek professional, personal investment advice.