GE Vernova Inc ($GEV) Q1 2026 Earnings Call

Thank you, Michael. Good morning and welcome to GE Vernova's Q1 2026 earnings call. We've had a solid start to 2026. As global electrification accelerates, the structural drivers underpinning demand for our solutions continue to strengthen. The growth is just starting, and there is no company better positioned to serve and transform the global electricity system than GE Vernova. Since our spin, we launched with $116 billion backlog. We've grown this backlog to $163 billion with an 80% increase in our equipment backlog at considerably better margins. In the last 90 days, we've added $13 billion to our total backlog and now expect to reach $200 billion in backlog in 2027 versus our previous expectation of 2028. In Power, we delivered strong results and further margin expansion in Q1. Even with the continuing investments in capacity expansion and SMR in gas power, we continue to see significant demand and favorable pricing trends for both equipment and services. This demand is global and spans a diverse set of customers. We saw continued strength in new gas turbine agreements in Q1, signing 21 gigawatts in countries like the US, Vietnam, Mexico, Brazil, and Canada to grow our total gigawatts under contract from 83 to 100 gigawatts sequentially. Backlog grew from 40 to 44 gigawatts, and slot reservation agreements increased from 43 to 56 gigawatts. Approximately 80% of our total gigawatts under contract are with traditional customers, with the remaining 20% explicitly supporting data centers. Our momentum has continued into April. Quarter to date, we have booked more power equipment orders in terms of value than we did in all of Q1 2026. On pricing, we expect our orders in the first half of 2026 to be priced 10 to 20 points higher than our Q4 2025 orders on a dollar-per-kilowatt basis. We now expect to book 10 to 15 gigawatts of contracts in Q2 and to end 2026 with at least 110 gigawatts under contract. On production capacity, we now have installed over 280 new machines in our gas power factories and remain on track to reach 20 gigawatts of annualized output by Q3. Delivering on our growing backlog in the second half of this decade will lead to a larger and even more profitable service book that will benefit us in the 2030s and beyond. On the nuclear front, let's start with our operational progress in Canada on Unit 1 of the SMR project at OPG's Darlington site. With the recent regulatory approvals received by our customer, installation will soon begin on the 2 million pound basemat, a pedestal that will serve as the reactor's foundation. This is a critical milestone and serves as a great illustration of the progress we're making on the first SMR in construction in North America. We also continue to make progress on our commercial pipeline in North America as well as Europe. We are inspired and appreciative of the US and Japanese government's announcement of up to $40 billion for GE Vernova Hitachi to build SMRs in the US. This represents the best of government leadership to reindustrialize an industry that matters to the world's future, and we continue to work hard to advance next steps with both governments. In parallel, we continue to work with TVA and the Nuclear Regulatory Commission, and we expect the NRC to issue the license to construct for Clinch River in Tennessee as soon as the second half of 2026. In Electrification, we achieved significant growth and margin expansion in Q1 as customers work to keep pace with increasing electricity demand, grid stability needs, and national security interests. This is a large and growing market where we continue to see strong demand for our portfolio of solutions. We'll approach $14.5 billion in revenue this year. We project an annual addressable market by the end of the decade of approximately $300 billion based on what we offer today. Point being, there remains substantial opportunity for us to grow. The first two months of running the Prolec business since closing the acquisition have only reinforced the substantial opportunity ahead. I will talk more about Electrification in two pages. In Wind, the team is executing with discipline and is focused on the factors within our control. After successfully completing installation of the remaining wind turbines at Dogger Bank A and Vineyard Wind in Q1, we now have moved to the remaining commissioning activities for both projects. We are off to a very strong start on the installation of Dogger Bank B and continue to expect Dogger Bank B and C to take us through the better part of 2027 to complete. In Onshore, we continue to drive a more profitable service business with double-digit margin expansion versus the prior year for the second quarter in a row. While the US market for new onshore equipment remains soft, we are monitoring the outcome of 232 wind and solar tariffs, which could lead to more orders clarity in the second half of the year. As our total company backlog builds, we remain focused on driving even stronger execution. In Q1, we held a CEO Kaizen week with almost 2,000 team members doing roughly 200 Kaizens with a focus on improving safety, quality, delivery, and cost. Coming out of the Kaizen week, we see the opportunity for over $100 million in EBITDA improvement in future years driven from the lower costs and better quality performance. For example, we held our first series of Kaizens at Prolec post-acquisition. In one Kaizen, we focused on improving our sub-assembly process for transformer tanks, decreasing our rework hours by nearly 70% and delivering a nearly 40% output improvement. In another, we used lean manufacturing methods to reduce cycle times in the winding process for transformer production. These advances are helping us meet the growing demand for transformers as we accelerate the ramp and capacity to grow this business. We're also deploying AI to enable our employees, improve how we run our businesses, and accelerate innovation. We entered the year with 13 AI-based process transformations we were focused on executing, and the team is now working to double the transformations to 26 across GEV. If I spend a minute to try to make this real for you all with two examples: in our gas power business, where we have the largest install base of gas turbines, steam turbines, and generators of any OEM in the world, one of our real challenges is to project the demand and timing of needed investments in our customer fleets and ensure we have the right parts and resources available when a customer needs us. We utilize our decades worth of data and are building AI tools to automate our ability to match install-based demand with our planning to deliver a better performance for customers as well as a higher scope per outage for GEV. This is a very real customer example, but we also see substantial opportunity with sourcing as we leverage AI to drive parts rationalization and more intelligent bidding while further automating manual processes like invoice matching. We expect to save tens of millions of dollars every year going forward with these new tools while freeing up tens of thousands of hours of manual work. I give these two examples to reinforce for you that when you think about AI and GE Vernova, do not just think about AI as a demand driver for our equipment and solutions. We are running this company with a very determined focus on meeting the demand for growing electricity for AI while simultaneously incorporating the technology into how we work to transform our company. GE Vernova is operating from a position of financial strength and executing our capital allocation strategy with discipline. In Q1, we invested approximately $700 million in R&D and capex combined, with R&D growing by roughly 25% including work to commercialize new technologies. We also further simplified the organization with business dispositions that generated approximately $900 million in pre-tax cash. We also returned approximately $1.4 billion to shareholders including the dividend and $1.3 billion in share repurchases. Turning to the first quarter financial results, we are executing well in the growing long-cycle electric power industry. We booked $18 billion of orders in Q1, up 71% year-over-year. We also grew revenue by 7% year-over-year with growth in both equipment and services while increasing our adjusted EBITDA margin by 390 basis points. We generated $4.8 billion in free cash flow in the first quarter, meaningfully above our full-year 2025 free cash flow of $3.7 billion. This robust performance was driven by strong orders and slot reservations of Power and Electrification as demand continues to accelerate. Regarding recent conflicts in the Middle East, the safety and well-being of our employees and partners in the region remains our top priority, and we continue operations in the region where it is safe to do so. We are monitoring the situation closely and have seen minimal impact to our business and financial performance to date. Given the strength of our first quarter performance and confidence in our full-year trajectory, we are raising our revenue, adjusted EBITDA, and free cash flow guidance for the full year of 2026, reflecting higher revenue growth in Electrification as well as further margin expansion at Power and Electrification. On the next slide, I want to spend some time on Electrification. This segment is the biggest beneficiary of how we are operating GE Vernova today as one focused and integrated company. Electrification's growth trajectory has been significant since year-end 2022. Its backlog has grown from $9 billion to $42 billion, and we expect substantially more growth moving forward. This is being driven not just by traditional customers but also data centers, which accounted for approximately $2.4 billion in orders in Q1, more than the full year of 2025. Just to repeat that, our Q1 Electrification orders to the data centers were more than full-year 2025 results. Additionally, Electrification's backlog in North America is now nearly as large as its backlog in Europe following a strong Q1 and the addition of Prolec. This growth is underpinned by our integrated, diverse product offerings and productivity-driven capacity expansions to fulfill rising demand for grid infrastructure. Let me expand on these business units for those less familiar with our Electrification segment. Grid Systems Integration, the largest part of Electrification's backlog, delivers integrated solutions for large-scale electrification. This business sells HVDC systems and substations, including key data center solutions, all areas which have driven significant backlog and revenue growth as well as margin accretion. Today, our HVDC backlog represents approximately $10 billion to be delivered over the coming years and is located primarily in Europe, but we are seeing increasing momentum in other regions, including Asia, where we booked another large HVDC order this quarter. We expect to continue growing this portion of our backlog as we benefit from accelerating demand and investment in new products to expand our offerings for data centers. Power Transmission produces high and medium voltage transformers as well as switchgear and capacitors to modernize the grid and expand global electrification. We continue to drive productivity to increase volumes into this attractive market with healthy margins. With our acquisition of Prolec, this business now has increased offerings, scale, and strategic flexibility in transformers, a product category seeing robust demand and a backlog that is approaching the size of GSI. This includes $5 billion of backlog from Prolec, up $1 billion since we announced the transaction at Q3 2025 earnings. This 25% growth in the Prolec backlog since announcing the acquisition well illustrates the customer enthusiasm for this acquisition and the opportunity ahead. Power Conversion and Storage helps customers to improve grid resiliency and industrial power stability through advanced electrical solutions including rotating machines, power electronics, and battery systems. Within PCS, synchronous condensers are a critical product needed for markets experiencing increased intermittency, representing a $5 billion plus annual market opportunity. Overall, we see industry demand for grid resiliency products as growing low double digits through the end of the decade. Finally, we've combined our businesses that provide asset intelligence, monitoring, and grid software into Grid Automation and Software. Real synergies exist between our Grid OS software and grid beats that can help improve how the grid thinks, learns, and acts to enable utilities to move from reactive operations to predictive, autonomous grid management. We are also making investments in technologies that will define the next chapter of this segment's growth. For example, our historical business with the data centers has been the substation electrical equipment outside the data center, which remain the majority of our Q1 orders for this customer type. However, we also closed our first energy management system, or EMS, order in complement with substation equipment for a data center customer in Q1. EMS incorporates solutions from Power Conversion and Grid Automation Software to seamlessly integrate GEV assets with load requirements in the data center. This first order is part of a larger project that also includes our gas power equipment and substation electrical equipment. In dollars, EMS is a small part of this large order, but illustrates well the unique opportunity we have as GEV to provide integrated solutions that span power generation, electrical equipment, and automation and software solutions. With that, I will turn the call over to Ken for more details on our Q1 performance as well as our financial outlook.

Thanks, Ken. We've had a solid start to 26, but it is just that, a start. We see significant opportunity to continue to improve how we serve our customers and expand our margins. I shared just a few examples of this earlier in the discussion with lean and AI. With over 10 billion in cash and our updated 26 guide and a team just starting to get their feet under them with the significant opportunity ahead of us, we continue to make investments for the short, medium, and long term. We talked earlier about nuclear SMR and our electrification EMS solutions for data centers as two examples with tangible Q1 progress. But there are many more. As the opportunity for us to serve this growing market expands, our humility and hunger to meet this moment only becomes a larger and more important part of who we are. This is just the beginning and look forward to our Q&A discussion. With that, I'll hand it over to Michael.

Sure, Mark. I think if I work backwards from the question on lead times, I mean, we're directionally at about three years lead time today. We're sitting in the spring of 26 and we do still have capacity in both 29 and 30. If I compare where we were in our January earnings call in the fourth quarter, we talked to you then about having about 10 gigawatts of capacity remaining in 2029. What's happened in the first quarter is we sold a lot of 2030 slots because the reality is we had a lot of customers that looking at planning with EPC schedules and other dynamics needed the 30 slot more than 29. So what's changed is we still have about 10 gigawatts remaining cumulatively in 29 and 30 together whereas in the course of where we were in January earnings we had 10 gigawatts in total for 29. So we need to keep seeing where this market takes us. At the end of the day in many of the cases with these projects the gas turbines are really not the gating item when you're talking about a three-year cycle from when a project starts. The EPC buildout, the permitting, the fuel availability, but we'll keep working with our customers. And we're also going to learn a lot more on the first part of your question. 280 new machines installed in our gas factories over the last directionally 15 months. We'll have added about 1,800 production workers in the US between 25 and 26 with the largest portion of them being in our gas power factories. And I do expect that we'll drive more productivity as we start to execute with those new machines and those new production workers that we'll start to see in the third quarter of this year. So quantifying that productivity opportunity, we need time. But as we continue to learn how much more we can get out of the investments we've already made, we'll also learn more about where this market takes us as we sell out of 29 and 30 and the timing of really when the incremental gas turbines are really needed.

Thanks, Julian. I would say at the start, we don't really internally talk a lot about taking share, per se, when we're thinking about where we are with the PT business. This is really about continuing to do good business. And what is very clearly playing out is where we're doing really good business is where we're attaching that electrical equipment to the power generation solutions and that integrated solution. And that's why in the prepared remarks we talked a little bit about a project where we are getting the power generation, the electrical substation and the EMS solution. We're clearly gaining momentum with integration of our products and in that regard I expect a lot more to follow. On capacity we are investing in our existing factories. Clearly, we've got our $5.3 billion dollars we just spent to add three more factories in the US in Shreveport, North Carolina and Wisconsin through Prolec in addition to factory capacity in Mexico and Brazil. That allows us to serve this market more effectively where I would tell you a few months into the acquisition we continue to see more operational opportunity to get more out of those factories just applying lean and that's why I included on my prepared remarks a few of those examples that will bear fruit for us. On the tariffs I'm going to hand it to Ken to give a little bit of incremental context.

Nicole. We'd I'd say through the first four months of this year now on new bidding activity, which is probably a forward-looking indicator, we continue to be in that 10 to 20 point growth in price on new bidding and winning activity today relative to where we were in the backlog in the fourth quarter of last year. You're going to start to see that cutting through in orders in the second quarter. And that's why we had included that context on the 10 to 20 point improvement in dollars per kilowatt through the first half of 2026 inclusive of Q1 and Q2 which is really telling you that the dollar per kilowatt growth is going to be very healthy in the second quarter of this year. And from pipeline perspective, we continue to be very actively iterating with a very diverse set of customers to meet this moment. And you know, I think it's important to contextualize that the 100 gigawatts we have on contract today is with almost 90 distinct customers in 24 different countries. So I give that context to just say there's a need for incremental electrons for many different applications in many different countries which has us continuing to work hard to figure out how in a very capital efficient way we meet this moment and serve this market which is exactly what we intend to do.

You bet. I mean I think Philippe Peron the business leader and his management team are doing an excellent job really systematically building a string of pearls here of incremental products from power generation through right through to the data center. That's where the EMS solution is an example that we were able to cut in orders in the first quarter. We've already secured a second order with that product already in April and expect more there which is taking our entitlement per gigawatt up. But we're not stopping there. I mean, we're making progress with a stability block solution that complements what we're doing that is a MVUPS solution, a combination of medium voltage electrical equipment with storage and software that we're gaining real traction on within customers. We've talked to you in the past about the solid-state transformer investment that remains on track. Will deliver the first product to a hyperscaler in the fall of this year in which they'll then have 6 months of testing of that product before it can play into a potential order really in the first half of 27. But operationally we're making progress there and the SST would be the first example inside the data center of scope for us. But when you take that step back and it's why we've invested real money into the EMS solution, when you are doing the power generation, the substation equipment and you're providing a lot of the software solutions to help the hyperscaler manage the load requirements they want with our equipment. It's giving you the enablement to then attach more Lego blocks or that string of pearls I'm referencing to give them a more integrated solution. It doesn't come at once. EMS good wins here early in the year. The stability block with MVUPS is something we could see incremental orders on. I would say second half of this year if things go our way. SST would be next year. There's more stuff we're working on because when you see that 25% R&D growth in the company, the largest proportion of that R&D is in electrification because we see real opportunities to organically invest in this business and serve this customer need and we're very determined to do that. So there's a lot more to come in this business, but I continue to have more conviction with humility that we've got a very unique shot to deliver integrated solutions over time that few companies in the world could do.

In those conversations, thank you David. The conversations have generally centered on securing long-term commitments at today's pricing through generally a 5-year period of time during the first half of the next decade that would give us volume clarity in that period of time to continue to sustain our investments to meet this moment. We have not closed one of those transactions to date. Admittedly, we've been having these conversations for a period of time. And what continues to happen is incremental orders, let's call it by the drink. And that was the reference to a lot of 2030 contracts that were signed in the course of the first quarter, including with the hyperscalers. It's about 20% of our 100 gigawatts are direct to the data centers. And the conversations continue on call it 30 to 35 framework agreements but we haven't closed one to date and are continuing to iterate both strategically on the gas turbine content but also the attached potential with the electrical equipment and some of the other solutions we're talking about and in some fashion that expanded scope including electrification was some of the discussions even further is elongating the iteration that's happening but is a productive iteration we're going to keep working hard on.

We feel better and better, Joe, about our ability to meet this moment for the long term. We continue to invest in our suppliers and our partners that are making very good progress. I spend a substantial amount of time within that supply chain and we do continue to expect to take on orders for 31 and beyond. We referenced earlier we have about 10 gigawatts remaining of 29 and 30 capacity. And generally speaking don't find our heavy duty gas turbines to be the gating item on a directionally three-year cycle time right now and we'll continue to invest to meet this moment sustaining the demand. Now in our case the dynamic will be different than our competitors because our install base is so much larger and when you have an exponentially larger install base than the other OEMs, we have to continue to partner with our supply chain to support a growing fleet. I mean we have 231 HA units on order right now. Over a hundred of those haven't been commissioned yet. And that number is going to grow substantially through the rest of the year. That very large install base relative to anyone else, whether we talk HA or total gas turbines, is a luxury because it provides a financial floor of demand. We already have contracted in our service book that gives us a little bit more optionality to play to win and to serve this market, which is exactly what we're going to do.

You bet, Alexander. And I think it's an important point to close on in the sense that when I am iterating with our Asian customers right now and you think about LNG opportunities in a place like Vietnam or Japan. I was with one of our largest Japanese customers last week. You're talking about gas turbine deliveries in 2030 and beyond right now and commissioning projects for 2032 and 2033. For those customers, the LNG dynamic in the moment with the crisis in the Middle East, they're not really changing their underwriting assumptions for LNG economics in 2032 today. So we aren't seeing a change in buying behavior I would say in LNG-oriented markets like that in Asia at least to date by any means. Now we have talked in the past about the fact that we have commissioned our first LNG to power project in Vietnam 1.6 gigawatt. We have an incremental three projects on contract that are more in SRA category right now that'll evolve into orders over time. Alexander, I have seen and we've been iterating with our customers on some of what you could be citing in the press on one of the customers evaluating gas relative to a shift to renewables. And I would just tell you there are more projects that our customers are talking about than what we have on contract today. So our 4.8 gigawatts that we've cited in the past are all continuing to progress. Frankly, there's more than those three projects that are being negotiated with the government in Vietnam that is more relevant to your question. But we'll continue to work with our customers in Vietnam and throughout the world on the dynamics that they're facing to get projects done and are highly confident that we can do that.

Everybody, we appreciate you giving us the time this morning. Similar to our capital markets day in New York City in December at the end of last year, we talk a lot about giving being an important part of the culture we're building the company. In December, we had done the STEM toy drive that led to 80,000 some odd toys ultimately contributing. We've got a team at the New York Stock Exchange this morning announcing a $4.5 million commitment to the engineering of change program that's going to touch 6,000 students over the next four years in some important markets for us in the US and the UK. And just wanted to reinforce that and share that announcement that will be made today through our foundation. It's just an important part of who we are and the company and culture we're building. For our customers, we continue to appreciate their trust in us. For our employees, I personally thank each and every one of them for their work every day. And I'm proud of the team that we're building. We need our partners and are appreciative of them. And for all of you, our investors, thank you for your continued commitment to Vernova and continued interest in the company. We are appreciative and proud of our start but it's just that a start. This is just the beginning and we've got substantial opportunity ahead. So thanks everyone.