GE Vernova’s Weak Spot Is Twisting in the Wind
The renewable unit’s drag on profit could worsen as AI-driven demand for gas turbines soars and hostility to alternatives intensifies.
The weak link.
Photographer: Scott Eisen/Getty Images
GE Vernova Inc. is hitting on two of three cylinders as demand for electric power surges with the advent of artificial intelligence and the need for large data centers that underpin the technology.
The sales gains and profit-margin improvements at the company’s electrification and gas-turbine units are powering earnings and a 90% increase in the shares this year, including a 14% spike on Wednesday after the company reported second-quarter earnings.
It’s no wonder that investors are bullish. The gas-power unit posted revenue growth of 8% for the first half of this year, and operating cash flow margins jumped by almost 3 percentage points to 14%. The unit that supplies power companies with transformers, switchgear and other equipment posted a 19% sales gain in the first six months of this year, and margins jumped to more than 13% from less than 6%. The outlook for both businesses is robust as Amazon.com Inc., Microsoft Corp., Meta Platforms Inc., Alphabet Inc.’s Google and other so-called hyperscalers scramble to secure power for their AI data centers.