GE Vernova Aktie

Good morning, everyone. My name is Sunaina Ocalan, and I'm going to be covering power and energy transition at Bernstein. It is my pleasure here today to kick off this conference with Scott Strazik, CEO of GE Vernova. Scott, thank you for being here. I think you want to make some comments before we get into Q&A.

You bet. Sunaina, thank you, and everyone, thank you for being here, both in the room and virtually. At the start, I would just reinforce that inside GE Vernova, we're working really hard right now to meet our potential and this incredible opportunity we have to electrify the world. And for us, this really starts with our installed base. We're generating 25% of the world's electricity every day. It's about 50% of this country, the U.S.'s electricity every day. Over 7,000 gas turbines, over 59,000 wind turbines, over 60 nuclear plants and the associated electrical equipment attached to that.

We've got an $87 billion services backlog that will generate by 2027, about $20 billion of services revenue across our services businesses. And then when you compare that to what's happening in our equipment businesses today, we've got a $76 billion equipment backlog. That's grown 80% since we spun from General Electric in April of '24. And as we execute on that $76 billion of equipment backlog, that drives that much larger installed base that's driving that much larger and more profitable services business for us into the next decade.

So if I give a little bit of context on the equipment growth that we're seeing, I think it really starts with gas. We've got 100 gigawatts on contract to execute on primarily through the end of the decade into '30 and starting to trickle into '31 right now. And if I just contextualize that 100 gigawatts, our entire installed base is 720 gigawatts today. And of that 720 gigawatts, only about 200 gigawatts of it is full firm baseload power, i.e., running pretty much every day, 365 days a year. Most of the 100 gigawatts that we have on contract is baseload. And we project that 200 gigawatts of baseload power to double to at least 400 gigawatts by the middle of the next decade. So just reinforcing the strength of the services business that we see coming over time.

Now we're also really excited about our nuclear business. Today, that's a small less than $1 billion revenue business today, supporting the installed base, but we're making great progress, commissioning and -- or installing at this point, the first SMR project in Ontario, outside of Toronto, making good progress on contracts in the U.S., in Sweden, doing an engineering study right now in Poland and see the nuclear business at many multiples of the approximately $1 billion, a little less than $1 billion of revenue that we'll have this year in 2026.

And then if we spend a minute or 2 on our electrification business before we go into the Q&A. This is our fastest-growing business. This is a business that in the end of '22 had a $9 billion backlog. At the end of the first quarter, that backlog had grown to $42 billion. And it's the business, I think our investors are learning the most about right now. So just to give a little bit of context on the 4 businesses we have inside electrification.

The largest is our power transmission business. This is the business that we think transformers, switchgears that we spent almost $3 billion to acquire the 50% of Prolec that we didn't already own, great early returns with Prolec. If I just give a few nuggets there. We closed the deal in February of this year. Since then, we've already secured year-to-date $500 million of incremental orders serving the North America market from our factories outside the U.S. This is something we could not have done before closing the acquisition because the JV had exclusivity to sell into North America from just our North America factories. So that's using our India, our Turkey factory capacity to serve our customers even more efficiently than we could have done prior to the acquisition.

Second largest business, grid system integration, GSI. This is a business that's gone through multiple elements of real growth spurts. It started with HVDC growth in Europe, really connecting renewables to the grid. It's now providing integrated solutions, technical solutions to the data centers in the U.S. We had more orders in electrification in the first quarter of 2026 than we had in all of 2025, and we're going to have a very strong second quarter in this business.

Third business in electrification, power conversion. This is a business that is launching a lot of new and exciting products right now. Last year alone, we took $2.5 billion of synchronous condenser orders in Saudi Arabia. This is technology rotating equipment that really provides a lot of stability for the grid as renewables penetration rates grow. It's also the part of the company that's investing in MVUPS solutions, medium voltage uninterruptible power supply for the data centers, what we call a stability block that's enabling the data centers to operate in different ways that we're really excited about.

And then we have our smallest business, really grid software and grid automation. This is really what's driving towards a more autonomous grid in different ways. And all 4 businesses represent real opportunities for us to continue to grow. And when you put all that together, as we wrap, I would just reinforce that inside Vernova, we're leading from a position of strength. That $116 billion backlog when we spun has grown to $163 billion. We have $10 billion of cash on hand. That's allowing us to invest $11 billion in R&D and CapEx over a 4-year period of time to grow these businesses organically while simultaneously returning a lot of capital to our shareholders.

We're about 5 quarters into a stock buyback program in which we've repurchased about 10 million shares, $4.6 billion in the last 5 to 6 quarters. And we see real value from here and real opportunity with a strong balance sheet to keep returning substantial capital to our shareholders. So those are just a few table-setting thoughts I wanted to begin the discussion with and then happy to do the Q&A.

Thanks, Scott. I have a lot of questions of my own, but just a quick reminder to the audience. You can submit questions through the link pigeonhole.at and the passcode is 2026SDC. You can also vote for the questions right there, so I can see them on the iPad.

Okay. Great. Scott, I'll start with macro. This is a great time to be in power. You talked about your backlog, your backlog proves this. What -- how do you think this power cycle is different from previous power cycles? Are we in sort of a 3- to 5-year data center CapEx wave? Or are we in more of an electrification super cycle?

Well, I mean, when you think about our backlog, it's really 20%, 25% data center in nature today. So there's a lot of other variables driving the growth. We really analogized this period of time being most similar to 1945 after World War II. It really comes back to the economic growth and the national security dynamics that are being driven by the need for incremental electrons, only coupled further by the fact that decarbonization matters, too, only coupled further by the fact that this isn't just about the U.S. or Western Europe.

We're seeing substantial growth in parts of Asia and parts of the Middle East, whether it be Taiwan, whether it be Saudi. So you have these dynamics where the incremental electrons key for economics that don't get built from an economic perspective, national security, decarbonization, and it's very global. So the opportunity is significant and is going to go for a very long time.

That's awesome. I'll alternate between my questions and the audience questions. And I think just to follow up on that. Can you discuss consumer pushback and prospective legislation? How real a threat to new data centers are the current protests?

Well, I mean, you're seeing more and more states that are certainly pushing back, and we do have customers that are struggling to get projects across the line. But what I would tell you is this is fairly typical in the power industry generally. There's an immense amount of development that happens, understanding there's going to be a realization rate on that because development is hard.

So what I would just articulate to you is this -- sometimes I'll read headlines on leases being canceled, projects getting pushed back because of community disputes. And that is really quite normal in the context of our customers having the ability to meet their needs. So when they sit down with us and project the next number of years of growth, they'll often show us many, many more projects than they're securing equipment for. Because they know there's a number of projects that, for one reason or another, either they'll choose not to develop or externalities beyond their own control will make it difficult to make happen.

So I do think it's real. It's very clear the community dynamic. But at the same time, with pretty much every customer we're working with, we look at the scatter plot of all the potential projects versus the realization rate they're planning and the equipment they're planning to -- or have already secured from us. And we don't see any risk in the fulfillment of our backlog from those dynamics.

Makes sense. If you think of strategy as intentional allocation of capital, how does your macro view that you articulated change your capital allocation across your businesses over probably the next 3 to 5 years as well as the next decade?

Well, in the next 3 to 5 years, I think it does go back to our ability to invest organically in this business. It's the $11 billion of CapEx and R&D to start. I mean, we're growing our CapEx and R&D by 30% or thereabouts this year because the customers are pulling us in that direction. So it really starts with the organic opportunity while simultaneously seeing real opportunities to continue to create yield for our customers -- our investors, excuse me, primarily through the buyback program that we have.

Now, we have more capital and will generate substantially more free cash flow than the $11 billion in R&D and CapEx will consume or a continual buyback program we'll utilize. So simultaneously, we want to continue to look for opportunities to invest in things like M&A. But what I would tell you is with the amount of growth that our management teams are experiencing right now, what I'm asking myself when it comes to M&A is if we put that capital to work, does it make it easier for my teams to be able to fulfill on that backlog? Or as the CEO, am I creating an incremental ball for them to juggle?

And if we have M&A opportunities that we have conviction makes it easier for us to meet this moment, we're in. But we're really not in a phase right now where we're trying to add adjacencies or new or incremental or different products that are more balls for our teams to juggle. Because, first and foremost, we're focused on meeting this moment. But if we can identify, call it, vertical supply chain integration opportunities in our big businesses, whether that be gas power for the long-term growth and the servicing of that book to better fulfill on our SMR product, to continue to strengthen our ability to serve in the electrification space, we would like to make those investments when the economics make sense. But it's got to make it easier for our management teams to meet the moment and not one more thing for them to do when few in our industry have experienced as much core growth as we're experiencing right now.

Yes, that makes sense. We'll talk more about M&A as well as Prolec. But I want to talk about electrification. You mentioned it is your fastest-growing segment. Let's stick with macro for just a second. What is your vision overall for electrification going forward? How big do you essentially think it can grow? What are the current barriers to getting there?

Well, our financial outlook that we've shared really guides this business to be about $20 billion of revenue at 22% EBITDA margins by '28. And we would say, as we have with most of our financial outlooks that, that represents a floor. We've also said that our backlog from the end of last year into '27 will double from $30 billion to $60 billion. And that path to $60 billion, we're already at $42 billion at the end of the first quarter. And I say that to just say, if the backlog is growing to $60 billion by next year, and we're at $20 billion of revenue in '28, the growth is going to continue way beyond '28.

Now just with what we sell today before new product introductions, we see our serviceable addressable market today in this business of about $300 billion. So that is a much more extreme case of opportunity for us in this business. $20 billion of revenue in '28, $300 billion addressable market. I can't give that same proportional market share in gas power, in wind power in North America primary markets, where our share of the global market is just substantially larger. So by default, this is a business that we see an incredible amount of opportunity for us to serve and meet this moment.

What I would also tell you is a dynamic is really changing in the world, which is as the power applications are becoming more sophisticated, more complicated, more intense, -- there's more of a need for integration between the power generation side of the equation and the electrical solutions to bring it together. It's a more common analogy for people to talk about power to the rack for a data center. That's one example, but there's many other industrial applications that also need integrated solutions.

Where we benefit is we're one of the few companies that can provide the power generation equipment, the electrical equipment and the software to allow the end application to work the way it's supposed to. And we're very much leaning into that opportunity right now and frankly, co-creating with our customers right now on what that can look like in electrification. So the electrification business is by far the biggest beneficiary of how we're running Vernova today as more of one integrated business working backwards from the customers. And the opportunities are substantial. So the financial numbers over the next 2 to 3 years are a good start, but they're just that, a start.

I'll follow up with 2 questions -- 2 quick questions on that. Are you allowed to talk about new products in electrification and which has probably more -- closer revenue contribution versus which needs more deployment on capital?

Yes. Well, I think I mentioned in my prepared remarks, our medium voltage uninterruptible power source stability block, we're calling it with the end customers. This is a good example of the power to rack solutions. At the end of the day, we've historically provided the power generation. We've done a lot of the electrical equipment, the substations outside of the data center. We talked about in our first quarter earnings call our energy management system solution, really primarily software solutions to integrate these things together.

But as the hyperscalers are working with us on how they want to run the data center, they need more of a buffer that allows them to drive very extreme frequency volatility. And this stability block we're developing is a great enabler of that. So that's another example of what I would call a string of pearls that we're developing here for an integrated solution that gives us real opportunity to continue to grow this business and is one of many things we're investing in right now in our electrification business.

And this may be more for power as well as electrification, but are you seeing any EPC and labor bottlenecks? Obviously, we're hearing a lot about labor shortages. Is this still the longest pole in the tent?

Yes. The EPC construction build-out specific to the U.S. is definitely the gating item for a lot of projects to get done. So when you think about our ability to invest in more gas turbine supply, as an example, the biggest driver is not really whether conceptually we could build more capacity. But what you don't want to do is build more capacity if there aren't going to be pedestals ready for your gas turbines.

That's a fairly inefficient use of capital, simply to invest in factory output that then can't be put to use because construction companies won't commit to our end customers to have the pedestal ready for our gas turbine. So over time, that will continue to moderate. But it's been an interesting dynamic for us in the sense that coming into this year, we were talking a lot about our '29 capacity that we had remaining. Well, we came out of the first quarter with still some '29 slots, yet we sold a lot of our 2030 slots. Why was that? It was primarily because the customers couldn't get a construction commitment that made sense for them to have a heavy-duty gas turbine in '29 because there isn't an EPC ready to make that schedule commitment.

Now that will solve itself over time. But without question, the EPC dynamic is, frankly, one of the largest variables for us to continue to manage our investment plans so that we can continue to meet this moment. And what I say all the time to our customers, to the government is there won't be a pedestal in this country that's ready for a gas turbine that won't have a gas turbine on it. But there's also not a need to build them ahead of when that moment is there in trying to be as capital efficient as we can be.

There's a couple of questions on supply constraints as well as orbital data centers. So I'll just stick with those for right now. So how do you think about orbital data centers and their impact on the length of the cycle as well as your -- how does this affect your capacity expansion plans?

I wouldn't say it's affecting today our capacity plans, thinking about data centers and space. But I would tell you that in the near term, that's certainly yet another opportunity for us to sell our equipment. The reality is the fuel that's needed for rockets to go into space requires a lot of electrical infrastructure. The launch pads require a lot of electrical infrastructure. This is another element of demand driver for us right now that we're working really hard to serve, both on the electrical side and on the smaller power generation side in different ways, and we'll keep doing that.

But I wouldn't say that the data center and space dynamic for whatever date you want to call is really driving capacity investment decisions. What is driving our continual scrutiny of our capacity is where our customers take us. And where our customers take us is not just our gas turbine equipment, but the system of systems I was just referencing that are all variables to have the gas turbines built when they're really needed.

Okay. I want to pivot to nuclear, Scott. How do you think about the role of the BWRX-300 SMR relative to other reliable low-carbon baseload sources?

It's clearly starting to move. We're in construction, as I said a few minutes ago, on our first project in Canada. We could see up to 10 units that we have on contract in the U.S. before the year is over. We're talking about up to 5 units in Sweden as an example. And when you start to add these things together, in addition to incremental units at Darlington, the first site because it's really being built for 4 units, even though we're constructing the first one, you can pretty quickly get closer to 20 units on contract versus the one we're building.

When you've got 6 gigawatts of SMR on contract, that gives us a whole another level of empowerment to go back to the supply chain and invest in that supply chain for the growth into the next decade, which is a big reason why the U.S. government is using part of the U.S. government Japan trade deal to fund, in our case, up to $40 billion of SMRs, which would be about 10 SMRs because the industry needs to be reindustrialized. And I think this is an example of great government policy to reinvest in an industry that hasn't been invested in, in at least 15 years.

As we execute on those things and with that size backlog, you then have an opportunity to start to cut down the cost curve. Because ultimately, what I say every day is style points don't build infrastructure, economics do. And these first set of projects are expensive, but they're expensive because the supply chain doesn't exist. Now if we can build a book like I just referenced, we can partner with the long lead suppliers in a way that part costs, even though these are really big parts, come down substantially. In the next decade, nuclear can start to become a material part of the equation.

Will it become -- will it take until then? Definitely. Will it really replace gas? No. But over time, will more customers carbon dollar cost average in some zero carbon baseload power that probably will still be at a pricing premium relative to unabated gas, yes, in a healthy mix. And there certainly are a set of customers that are willing to pay that premium for zero carbon baseload power. So we're excited about nuclear.

We're working hard on it every day. We see it becoming an important part of the income statement, let's say, in the next decade. But what you're really looking for this decade is that we build a contracted book that gives us the best chance to then drive economics with our supply chain so that it's a competitive economic solution for the world in the next decade. And that's really the game we're playing and one that we have a lot of confidence that we can serve and meet this moment.

That's awesome. If we can just talk about wind for a second. How do we think about wind profitability over the next few years? I think the offshore exposure is coming to an end next year. If you can talk about sort of key variables we should be monitoring?

We've been talking for a while in wind on needing to control what we can control. And that starts with our onshore wind services business. The industry in wind, I would tell you, has underperformed on quality including ourselves, okay? And we've put substantial economics over the last few years in infusing medicine into the existing installed base to improve the availability and performance of our existing installed base.

We've now had 2 quarters in a row in which our contribution margin with our services book has expanded more than, let's say, double digits. And I would expect our services profitability in onshore in '26 to improve year-over-year by about $400 million, real money. The challenge in onshore this year is that we have an even smaller new unit equipment shipment book, primarily because the U.S. market is so small.

Now the pipeline is very significant, but it's very hard to convert the wind pipeline to orders while there's a lot of economic uncertainty on things like tariffs. So there's currently a 2-3-2 evaluation by the U.S. government that will apply to the wind and solar industry. And until there's clarity in that regard, it's hard to project orders inflection point in wind. So what we're focused on doing is controlling what we can control. Our onshore wind services business will be much more profitable in 2026. We will execute through wrapping up our offshore wind in the [indiscernible] backlog in 2027. We still have another 5 or 6 quarters to go there.

And then on the other side, as we're doing that, you look for an orders inflection point in onshore that could drive towards a much more profitable business. Even with today's really small baseline volume that we've projected through 2028 that continues to shrink this business in the next few years, it's a mid-single-digit EBITDA margin business. So very dilutive to Vernova's margins.

But at the same time, what I would tell you is in 2022, we shipped 4,000 wind turbines out of our factories. That number is going to be 1,500 this year. We have a lot of volume leverage with limited capital that has to be put into the business if the orders come. But I don't think you can project or expect those orders until there's clarity on tariffs in the U.S.

Yes. Clarity on policy is what drives stable capital allocation, right? That makes sense. We're getting a couple of questions in on sort of more maybe longer term, so I'll go there. What inputs in the supply chain has the company -- is the company most worried about? Raw materials, rare earths, specialized chips like wideband gap semis? How do you manage the risk? How do you manage the inventory? How are you managing the supply contracts?

So I would say if I go back to the summer of last year, summer of '25, there was a very urgent focus on rare earths generally with the biggest dynamic being associated with our gas turbines. The team continues to make reasonable progress in this regard, securing supply wherever they can find it. It's one of those dynamics where you're inefficient with your inventory because it's a very small part of the total cost of goods sold.

So whenever you can buy it, you do, even at a premium to basically not let it get in the way of your gas turbine output. And we now project ahead the next few years and really have the inventory that we need for that rare earths dynamic, while simultaneously, we're investing in supply alternatives. So I feel better today on things like the rare earths than I would have said in August of '25, okay?

On things that are critical like castings and forgings, our suppliers continue to perform very well. This is a case where in the summer of '24, we went to our suppliers early in the cycle and said, we're going to need a lot more output. We don't have a lot of time to debate it. What does it take to get going? In many cases, what that took was us providing a CapEx for them to build new and then for us to yield that CapEx return over time with volume. And today, I would tell you that the suppliers are performing ahead of our expectations.

And what I mean by that is they're basically on contract schedule, even though our build schedule had what you would expect a bit of a schedule contingency between when we would be ready for the output versus when it showed up. And you can see a little bit of that candidly already in our inventory where we've been receiving a lot of the large castings and forgings on contract but ahead of our schedule. So this is another example that I continue to feel better on where we are.

Now, a big one is we're continuing to work with our suppliers of machines to continue to equip our factories with the automation and the machining they need to meet this moment. And gas power, as an example, we've installed 305 machines over the last little bit more than 5 quarters to meet this moment within our existing factories. We've got another 100 to install by the end of the year. And automation is a really big piece of the equation and doing it in more efficient ways. So that's a constraint, I would say, that is real.

So if I spend a minute, it's a little bit of a side comment, but I think it's an important one on the constraints. I mean, we announced last week a very small acquisition of a robotics company in Montreal, Robotech. 35 engineers, single million dollar acquisition. But why do we do that? Well, today, it's a supplier that's been working with us in our factories on our automation in machining and at another level, but also a lot of other of their customers. They'll now wind down their final contracts with others and focus 100% on Vernova's factory automation.

We like Montreal. We like McGill University. We think it's a platform that we can invest in a lot of young talent to have automation COE that can allow us to continue to transform how we operate in our factories. That's a critical component and gating item towards us making this moment. So in some ways, not to make light of some of the supply chain dynamics, but very authentically, a big part of this is about talent. And you're going to acquire talent to meet this moment in different ways. That's a very small humble way that we're doing it in Robotech in Montreal.

It's also a huge reason why we chose Cambridge for our corporate headquarters because the reality is if we're going to create ourselves -- recreate ourselves for this moment, we're going to need a whole another level of talent to do it with things other than more CapEx. So I just give the data point, we've got 79 kids from MIT that are starting on payroll at GE Vernova between June and July. Those are the resources that, frankly, I think are going to be the most important for us to continue to build a business and a company that meets its potential more than one supply chain element. So it's a little bit more adjacent to your question, but what really is on my mind for what we have to continue to invest into if we're going to serve the world with its expectations.

And if I can just follow up on that, maybe between -- amongst AI, robotics and automation, how are you thinking of these 3 impacting sort of the near term as well as the longer term?

Through '26, AI has a net to modest negative financial impact based on the investments we're making relative to the return it's yielding. In AI, that will flip in 2027. We're at a point where 2 years ago, we had very little of internal capabilities. Today, we have over 50 people in what we call an AI foundry that we're growing to 80 by summer to fall that are working on real process transformations that will drive real growth leverage for us, i.e., they're engineering applications where we would not be able to meet this growth without AI with a reasonably stable engineering workforce.

We're also seeing incredible opportunities matching our installed base needs with parts and resource enablement in a much more productive way than we ever have with decades of data with our installed base that we're optimizing in a much better way than we historically have. So AI, I would say, is a breakeven to modest negative in our financials this year that starts to turn in '27.

The investments we're making in automation probably are on a 1-year further lag. And what I mean by that is we have what we call 8 lighthouse areas of focus in our factories that we're investing deeply in right now, which is a combination of R&D and CapEx to execute on one function in one line. But the reason we've chosen these 8 applications is because as we get conviction that it works, we have many other factories that we can apply that equivalent automation to.

So what's really happening in '26 through at least the first half of '27 is proof of concept. And then as we get that validation, we have in our financial plans, the CapEx over the next 18 months to cut that in to all of the other use cases in our global factories that starts to drive real financial productivity in '28.

So these are not things that are long-term pie in the sky. I mean, we're -- whether it be what we started the year at, which was 13 AI process transformations, we're now focused on '26. And this is not about giving our employees access to AI. These are company-wide priorities where we spend a lot of time convincing ourselves that if at a corporate level, we invest the money, we will yield a return in the businesses in short order. Same idea with automation. And in both cases, it's early.

So I'm just as excited when I think about Vernova into the next decade with the incremental margin expansion, we're going to drive from investments in these things, but it's not going to take until the next decade. We'll start to see it in AI next year and automation in '28 as I am in the growth.

And I think that's what's probably still not fully appreciated with the cycle that we're in because we don't just have a more accelerated growth opportunity, we also have technology today that's going to allow us to serve that growth in ways that the profitability of this company should be very high or the expectations of the profitability should be very high because it certainly is with me every day on how I'm running GE Vernova.

So automation helps you with margin expansion now while still growing your capacity and expanding capacity. That makes sense. If we could just talk about equipment versus services for just a little bit. You've grown your equipment backlog by 80% since spin? What does this mean for services?

In the next decade, it represents substantial growth for us. And I would just say not every dollar of equipment growth is created equal in services aftermarket. And it's why we talk a lot about baseload power. If I just give an honest analogy for me, I spent 3 years going back to 2008 to 2011 and what at the time was GE Corporate, spending a lot of time analogizing how an aircraft engine and a gas turbine were similar on the razor blade model, let's say, of the 2 businesses.

But then in 2011, I spent the next few years at Aviation as the aerospace engine CFO. When I came to power in '13, it immediately became apparent to me that it's not -- was not so analogous because an aircraft engine needs to be in the air, certainly a narrow-body engine. 20 hours every day for an airline to make money. Yet remember the stat I said earlier, only 200 gigawatts of our 720 gigawatts are running baseload. The other 500 gigawatts are very often running seasonally baseload in the summer, in the South, in the Northeast, in the winter. But then in the spring and the fall when electricity demand is lower because of weather patterns would not be running.

So your annuity stream is less if you're not running all the time. The reality is so much of our growth right now is coming with applications where the business case from the customers are 20 years of baseload power that the services annuity stream that we're creating is substantially greater. At the same time, going back to the integrated solutions with electrification, what that's driving is another level of ecosystem of value creation that creates that much more of a long-term retentive nature.

Because as you're providing integrated solutions with power gen and electrical equipment, it's that much more of a moat that you're creating versus others for them ever to touch our equipment in the aftermarket. So we're going to have a great services business in the next decade. It's already a very good profitable business, but it's going to be a lot larger, a lot more profitable, and we're very excited about it.

And if we can maybe move to regional differences, how are you evaluating the current order environment across regions, especially with interest rates, policy support or power market economics?

The U.S. is a growing part of our backlog very clearly based on everything we're seeing in the U.S. But it's not the only market that we see real opportunities. I mean, we have had a very good first -- almost 5 months of the year in many other markets, whether it be if I take Vietnam as an example. We commissioned the first LNG to power project in Vietnam in January of this year, 1.6 gigawatts. Over the first 5 months of the year, we've signed contracts for 4 more LNG to power projects at 1.6 gigawatts a piece.

Now those are projects that have equipment that ship late this decade that gets commissioned early next decade. If you think about Vietnam, the entire grid is 90 gigawatts today. And we're talking about adding 7.2 gigawatts of baseload gas power. So a substantial amount of growth. When you really think about the policy environment, and it's a good example, I was recently with one of our largest Japanese customers.

They're talking about substantial growth in the business for shipments in '30 and '31. Those are plants that get commissioned in '33. Current LNG prices aren't changing their business case for 2033 when the plant is going to be commissioned. So we continue to see very strong demand in places like Asia. We see strong demand in places like Middle East, and we're working hard to meet this moment in all of these markets.

You talked a little bit about Prolec as well as M&A as well as cash flow priorities. If I can just follow up on that. You completed the acquisition of Prolec in Feb. What are the learnings so far over the last 3 months? What's on your radar for more economic inorganic growth, including Robotech from last week?

I would just say the learnings with Prolec, both operationally and commercially, the opportunity to drive real value for our customers is even more than we thought the day we closed the deal. So I've personally spent time in every factory that we've acquired with Prolec. And we already have raised our own internal expectations for how much output we're going to be able to yield from the existing factories that we've acquired.

Now in some cases, there's a little bit more modest CapEx required to invest into what the real logjams are. But we see real opportunity to continue to gain more output from the existing factories. Now, we also are driving a lot of customer synergy. The reality is there were many cases where customers were buying their switchgears from us, but then there are transformers not from Prolec. But if it's a new build, you need both, the transformers and the switchgears. And we're homogenizing that sales motion in a way that we see real growth opportunities.

What I would tell you as that then relates to other M&A is Prolec was right in the middle of our strike zone. It was complicated for our customers. They didn't fully understand the JV. I've been talking a lot about more integrated deals. Well, with a 50-50 JV, that was clunky with the customers when we couldn't fully integrate those transformers to solutions they wanted without interacting with another partner.

We want to put M&A into areas that continue to drive a more seamless customer experience, but within our core products. Prolec was right in the middle of our core with transformers. We don't really have the attention span right now for things very far afield from our core. But I don't think we need it. Because the reality is our core markets are excellent right now, and we want to meet those moments.

So where we can find those opportunities? And it can be in electrification, it can be in the supply chain of gas for the long-term growth there. It can be in the long lead items of SMR that give us that much more control over our supply chain, we'll do it where the economics make sense. But we also have so much organic opportunity in front of us even with a very strong balance sheet today that I don't sit here feeling a need to rush in that regard. So we're going to continue to take our time, focus and where we have the right opportunities within our core, we'll execute on it.

That's awesome. We're coming up on time. So I like this question. What is the biggest misconception about the business? What do people get wrong most often? What do you want to adjust with current market consensus about the business?

Well, I think it comes back a little bit to your question at the beginning on is this 3- to 5-year data center cycle? Or is it a longer opportunity. Now clearly, we are working very hard to serve the hyperscalers today and have come a long way to get under the tent with them on what their needs are. I mean, you think about it, really started with them on educating them on gas and how we decarbonize gas over time.

Now it's really how their data centers work or their AI factories really and how we can help them technically with that. But it's still a sliver of a much bigger, broader opportunity that we have in front of us that we're investing into. So I intentionally started with that $87 billion services backlog that will generate $20 billion of revenue next year or thereabouts because I think we index very heavily on admittedly, the sexy 80% equipment backlog growth in a little bit over 2 years.

But these 2 are very linked for what I think is a financial floor on this company with so much larger an installed base that's that much more profitable that the financial optionality we have into the next decade because of the strength of that services business in that next decade gives us a very unique opportunity to do special things. So we are zeroed in on the hyperscaler market opportunity, and we will meet the moment.

But we're also going to meet broader moments of opportunity, whether it be with defense and military. We haven't spent a lot of time talking about that. But the reality is drones become a bigger and bigger factor in military operations. Drones need docking stations to be recharged. That's an interesting opportunity for us. As we think about golden domes and opportunities in that regard, that needs a substantial amount of electrical equipment and power generation to make work. So there's a multifaceted set of markets we will serve, and we will serve with humility, but with determined commitment that create a very unique opportunity for us to create value, and that's exactly what we're going to do for a very long time.

Scott, thank you very much. We could have kept this going for a while. Thank you again. Thanks to the audience as well.

Thanks.

Good day, ladies and gentlemen, and welcome to GE Vernova's First Quarter 2026 Earnings Conference Call. [Operator Instructions] My name is Liz, and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the program over to your host for today's conference, Michael Lapides, Vice President of Investor Relations. Please proceed.

Thank you. Welcome to GE Vernova's First Quarter 2026 Earnings Call. I'm joined today by our CEO, Scott Strazik; and CFO, Ken Parks. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's Form 10-Q, press release and presentation slides, all of which are available on our website.

Please note that unless otherwise specified, our year-over-year commentary or variances on orders, revenue, adjusted and segment EBITDA and margin discussed during our prepared remarks are on an organic basis, which includes the removal of the impact of our Prolec GE acquisition. In addition, we realigned the reporting of certain business units to reflect how we are managing the company. Notably, in Power, we integrated the Steam business, primarily into our nuclear business.

In Electrification, we realigned the segment into 4 distinct business units to provide investors with greater visibility. This included revising our former Grid Solutions and Electrification Software business units into 3 separate business units: Power Transmission, Grid Systems Integration, and Grid Automation and Software. A portion of our Electrification software was also moved to Gas Power. Finally, in Wind, we simplified our reporting by integrating LM Wind into Onshore Wind. These changes are reflected in our first quarter '26, 10-Q and throughout our slide deck.

We have posted a financial supplement on our IR website, reflecting our realigned 2025 segment results. And please note, there were no changes to our 2025 total company results. We will make forward-looking statements about our performance. These statements are based on how we see things today. While we may elect to update these forward-looking statements at some point in the future, we do not undertake any obligation to do so. As described in our SEC filings, actual results may differ materially due to risks and uncertainties.

With that, I'll hand the call over to Scott.

Thank you, Michael. Good morning, and welcome to GE Vernova's Q1 '26 Earnings Call. We've had a solid start to '26. 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 a $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 '27 versus our previous expectation of '28.

In Power, we delivered strong results and further margin expansion in 1Q, 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 U.S., 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 '26. On pricing, we expect our orders in the first half of '26 to be priced 10 to 20 points higher than our 4Q '25 orders on a dollar per kW basis. We now expect to book 10 to 15 gigawatts of contracts in Q2 and to end '26 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 3Q.

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 base mat, and 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 U.S. and Japanese government's announcement of up to $40 billion for GE Vernova Hitachi to build SMRs in the U.S. 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 '26.

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, 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 2 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 '27 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 U.S. 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 subassembly process for transformer tanks, decreasing our rework hours by nearly 70% and delivering a nearly 40% output improvement.

In another, we use 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 in 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 are focused on executing, and the team is now working to double the transformations to 26 across GEV. I'll 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 installed base of gas turbines, steam turbines and generators of any OEM in the world, one of our real challenges is to project 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 installed base demand with our planning to deliver better performance for customers as well as a higher scope per outage for GEV. This is a very real customer example.

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 in 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 pretax cash. We also returned approximately $1.4 billion to shareholders, including the dividend and $1.3 billion in share repurchases.

Turning to 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 '25 free cash flow of $3.7 billion. This robust performance was driven by strong orders and slot reservations at 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 '26, 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 '22, 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 '25. Just to repeat that, our Q1 electrification orders to the data centers were more than full year '25 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 3Q '25 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 to provide asset intelligence, monitoring, and grid software into grid automation and software. Real synergies exist between our GridOS software and GridBeats 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 and 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, Scott. Turning to Slide 6. We delivered a strong start to 2026 with robust orders, growing backlog and revenues, margin expansion, and significant free cash flow generation. In the first quarter, we booked orders of $18.3 billion, a 71% increase year-over-year and a book-to-bill ratio of approximately 2. Equipment orders more than doubled, while services orders increased 25%. All 3 segments delivered significant orders growth.

As Scott mentioned, our backlog expanded to $163 billion, a significant year-over-year and sequential increase. Equipment backlog increased to $76 billion, up approximately $12 billion sequentially and 67% year-over-year, driven by both Electrification, which now incorporates Prolec backlog and Power. Equipment backlog margin remains healthy, reflecting favorable price and our continued focus on disciplined underwriting.

Our services backlog grew $9 billion or 12% year-over-year to $87 billion, led by Power. Revenue increased 7%. Equipment revenue rose 10% year-over-year as 39% growth at Electrification and 25% growth at Power more than offset anticipated lower Wind revenues. Services revenue increased 4% year-over-year, led by Power and Onshore Wind. Price remained positive. Adjusted EBITDA grew 87% year-over-year to $896 million, led by Electrification and Power. Adjusted EBITDA margin expanded 390 basis points with higher price, more profitable volume and further productivity more than offsetting inflation, including the impact of tariffs, which started in the second quarter of 2025.

We remain on track to achieve our $600 million G&A reduction target by 2028. We're executing on our road map to drive simplification and reduction of data platforms through numerous Kaizens. For example, in 1Q '26, we launched a comprehensive company-wide data lake that enables us to retire 15 legacy data platforms, which we expect will reduce costs by approximately $15 million annually and significantly upgrade our technology to position us well for AI-enabled solutions.

The strong adjusted EBITDA and working capital management drove $4.8 billion of free cash flow in the first quarter. Working capital was a $5.3 billion cash benefit, driven primarily by higher down payments on increased orders and slot reservations at Power as well as higher orders at Electrification. Year-over-year, free cash flow increased $3.8 billion, driven by higher positive benefits from working capital and stronger adjusted EBITDA, partially offset by higher taxes and CapEx investments supporting capacity expansion.

As Scott mentioned, we completed the acquisition of the remaining 50% ownership stake of Prolec for $5.3 billion. We also made further progress in simplifying our portfolio. We completed the sale of our manufacturing software business for approximately $600 million of pretax proceeds. We also sold an additional ownership stake in our China XD Grid business and our interest in a merchant transmission facility, which together resulted in approximately $300 million of pretax proceeds. Collectively, we recognized $4.5 billion of gains from M&A transactions, primarily resulting from the acquisition of Prolec, which were excluded from adjusted EBITDA.

In addition, we issued $2.6 billion of debt in 1Q and remained below 1x gross debt to adjusted EBITDA. Importantly, we are committed to maintaining a strong investment-grade balance sheet. We ended 1Q with a healthy cash balance of approximately $10.2 billion after returning $1.4 billion of cash to shareholders through share repurchases and dividends in the quarter. We're encouraged by our strong financial performance to start off the year. Our growing backlog with healthy margin provides an excellent foundation for continued improvement in our financial performance moving forward.

Turning to Power on Slide 7. The segment delivered another strong quarter with robust demand, continued revenue growth and significant EBITDA margin expansion. Power orders grew 59%, led by Gas Power equipment more than doubling year-over-year on higher pricing and HA units ordered. Power Services orders increased 29%, driven by nuclear power given orders for upgrades as well as continued growth at Gas Power. Revenue increased 10%. Equipment revenue increased from higher volume and price, driven by both heavy-duty gas turbine and aeroderivative growth at Gas Power.

We shipped a total of 25 gas turbines in the quarter, a 32% increase year-over-year. Services revenue also increased due to growth at nuclear power. EBITDA margins expanded 500 basis points to 16.3%, mainly driven by favorable price and higher volume more than offsetting inflation as well as additional expenses to support capacity investments at gas and R&D at nuclear.

Looking to the second quarter of 2026 at Power, as Scott mentioned, we expect continued strong growth in gas equipment orders. We also anticipate 15% to 17% revenue growth, driven by both higher equipment and services and EBITDA margin of approximately 17% to 18% as volume, price and productivity should more than offset inflation as well as additional expenses to support capacity and R&D investments. Year-over-year EBITDA margin expansion should be less than 1Q 2026, largely given the timing of planned outages relative to last year.

Turning to Electrification on Slide 8. We had another quarter of significant orders and revenue growth and EBITDA margin expansion. Orders remained strong at roughly 2.5x revenue and increased 86% year-over-year to approximately $7.1 billion due to growing grid equipment demand, partially to support data center development. We saw significant growth in substations, HVDC, switchgear, and transformers. Equipment orders growth was particularly strong in North America and Asia, both roughly tripling year-over-year.

Electrification equipment orders continued outpacing revenue, which combined with Prolec further increased our equipment backlog to $39 billion, up 75% or roughly $17 billion compared to the first quarter of 2025. Revenue increased 61% on a U.S. GAAP basis, inclusive of Prolec, and 29% organically with growth across all regions. We saw increased volume at Power Transmission, primarily from switchgear and transformers.

Prolec also delivered solid performance with nearly $500 million of revenue at just over 20% EBITDA margin since the acquisition that was completed in early February. Grid Systems Integration revenue increased due to higher substation and HVDC equipment volumes. Electrification segment EBITDA more than doubled in the quarter with margin expansion of 590 basis points to 17.8%. Margin expansion was led by strong volume, productivity, and favorable pricing.

Looking to the second quarter of 2026, we anticipate continued solid equipment orders with healthy margins. Second quarter electrification revenues should be between $3.3 billion and $3.5 billion, a significant year-over-year increase. We also expect strong year-over-year EBITDA margin expansion from higher volume, productivity and favorable price with a margin rate modestly above 1Q 2026 levels.

Turning to Slide 9 on Wind. We continue to focus on what we can control. In the first quarter, the team delivered stronger performance in Onshore Wind services and successfully completed installation of both the Dogger Bank A and Vineyard Wind offshore projects. Wind orders increased 85%, mainly due to improved onshore equipment orders, primarily in North America off of a low year-over-year comparison. However, for now, it's still difficult to call an inflection point in U.S. orders as customers still face permitting delays and tariff uncertainty.

Wind revenue decreased 25% in the quarter, given lower onshore equipment deliveries as a result of soft orders in the first half of 2025, partially offset by higher onshore services and offshore revenues. Wind EBITDA losses were $382 million in the quarter, in line with our expectations. The anticipated year-over-year increase in losses was primarily a result of lower equipment deliveries and the impact of tariffs at Onshore Wind as well as higher contract losses at Offshore Wind, partially offset by improved onshore services.

For 2Q 2026, we anticipate Wind revenue to decline at a mid-teens rate year-over-year due to lower onshore equipment deliveries. We expect EBITDA losses to be between $200 million and $300 million. The year-over-year increase in losses is primarily the result of the lower onshore equipment volume, partially offset by higher services profitability. We continue to expect significant improvement in Wind revenue in the second half of the year, given only 30% of our expected onshore turbine shipments are in the first half as almost 70% of our 2025 equipment orders came later in the year. Also, the volume we're shipping in the first half has fewer contractual protections for tariffs since we signed these orders before their implementation. As a result, we expect EBITDA losses in the first half to be partially offset by profitability in the second half.

Moving now to Slide 10 to discuss GE Vernova guidance. For the second quarter of 2026, based on our expectations for the segments as outlined, we expect continued year-over-year revenue growth and adjusted EBITDA margin expansion. We also expect to deliver positive free cash flow in 2Q '26, given our ongoing focus on aligning the timing of inflows and outflows, along with the impact of down payments, which correlate with the timing of orders.

For the full year, we're raising our guidance based on the strong 1Q results and the continued momentum we see in our business. For revenue, we now expect to be in the range of $44.5 billion to $45.5 billion, up $500 million compared to our previous expectation due to additional growth at Electrification. We're raising adjusted EBITDA margin by 1 point at both ends of the range to 12% to 14%, driven by Power and Electrification.

Given the accelerating strength in orders and down payments in addition to the higher adjusted EBITDA, we're increasing our 2026 free cash flow guidance to between $6.5 billion and $7.5 billion, up from $5 billion to $5.5 billion. We're generating significant margin expansion and cash flow this year while still investing in the business. Our 2026 guidance includes an approximately 30% year-over-year combined increase in R&D and CapEx to support innovation and growth.

By segment for 2026, we continue to expect 16% to 18% of organic revenue growth in Power, driven by Gas Power. We now anticipate Power EBITDA margins to be between 17% to 19%, up from our previous range of 16% to 18% as we continue to see the benefits of our productivity efforts. In Electrification, we're raising our revenue expectations from $13.5 billion to $14 billion to $14 billion to $14.5 billion as the team continues to deliver its growing more profitable backlog. We continue to expect Prolec to contribute approximately $3 billion of revenue this year. Given higher top line expectations, we're increasing electrification EBITDA margin to 18% to 20%, up from 17% to 19%.

In Wind, we continue to anticipate organic revenue to be down low double digits due to decreased onshore equipment revenues given the softness in orders. We still expect EBIT losses to be approximately $400 million in 2026 as improvement in Onshore Wind services and Offshore Wind offset the lower onshore equipment volume. We continue to expect 2026 GE Vernova adjusted EBITDA to be more second half weighted than 2025 with the highest revenue and EBITDA in 4Q '26.

We expect higher second half Gas Power revenue as we ship more gas turbines in the second half of the year and as we increase annual production capacity to approximately 20 gigawatts starting in midyear '26. We also anticipate typical Gas Services seasonality with the highest outage volume in the fourth quarter. We continue to expect Electrification EBITDA to increase sequentially through the year, even while we invest in our ongoing capacity expansions and new potential products. As mentioned earlier, in Wind, we expect higher second half onshore turbine shipments given our recent orders profile and better services profitability.

At corporate, costs are typically uneven across quarters due to compensation timing and portfolio activity at our Financial Services business. We continue to expect full year 2026 corporate costs to be between $450 million and $500 million as we continue investing in AI, robotics, and automation to drive productivity over the medium and long term. Overall, the combination of rising demand, combined with the consistently stronger execution, investments into our business, and the completed acquisition of Prolec sets us up nicely going forward.

With that, I'll turn it back to Scott.

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.

Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask just one question, so we can get to as many people as possible. Please return to the queue if you have follow-ups with that. Operator, please open the line.

[Operator Instructions] Our first question comes from Mark Strouse with JPMorgan.

Scott, I wanted to start maybe with your latest thoughts on Gas Power capacity. So you're talking more and more about AI, about automation. Just curious how we should think about that compared to the 24 gigs that you're targeting over the next several years. Is AI and automation, should we think about that kind of measured in maybe in hundreds of megawatts? Is that potentially in gigawatts? And then kind of just your latest thoughts on the lead times that you're thinking about might be needed before you would consider adding further physical capacity?

Sure, Mark. I think if I work backwards from the question on lead times, I mean, we're directionally at about 3 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 3-year cycle from when a project starts the EPC build-out, 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 U.S. 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.

Our next question comes from Julian Mitchell with Barclays.

My question really is on the electrification segment where you provided some additional welcome color this morning. But I guess a couple of follow-ups. I think one would be in the power transmission part of it that you call out on Slide 5, it does seem like you're very well placed and are taking a lot of market share. We met with a number of your competitors there at Data Center World yesterday. So maybe help us understand kind of why you think you're so well placed to continue to take more share in that power transmission kind of sleeve of the segment? Also wondered across the segment, if you could flesh out the capacity expansion plans in any detail? And lastly, on Prolec, any issues or major tariff mitigation needed in light of the Section 232 changes?

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 we just spent to add 3 more factories in the U.S. 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 in 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.

Yes. No, great question. The reality is that the tariff landscape has continued to move both with the changes in the country tariffs as well as the 232s. Our total number of tariffs last year, we said was about a net of $250 million impact on the company. We guided to $250 million to $350 million net impact on the company in 2026. The structure of those tariffs have moved around, but the absolute number is about exactly where we thought it would be.

To your specific question on Prolec, certainly with how the 232s have been defined, there's a little bit more impact on the Prolec numbers, whereas we've seen lesser impact on some of the other businesses. But I would just tell you that where we sit today, that outlook for $250 million to $350 million is fully built in our outlook. We'll continue to work on -- we'll continue to work mitigating plans through alternate sourcing through also finding contractual provisions where we have the ability to work with our customers to pass a piece of this along. But we are managing through the landscape just like we did last year.

Our next question comes from Nicole DeBlase with Deutsche Bank.

I'd like to go back to Gas Power. So just thinking about -- could we get a little bit more color on what you're hearing through customer conversations, pipeline growth, if the demand outlook remains as robust as ever? And then just an update on the pricing environment as well. It was really helpful, the pricing data point of 10 to 20 percentage points that you provided about the early part of 2026. I guess what are the expectations for pricing to continue to move higher beyond that?

Nicole, I'd say for the first 4 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 a pipeline perspective, we continue to be very actively iterating with a very diverse set of customers to meet this moment. And 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.

Maybe I'll just add just one data point because I know -- I think I did this last quarter to kind of help you kind of size the pricing on the power orders because we do disclose to you Power orders, we don't specifically disclose to you Gas Power orders. But because it is important to see what's happening in the pricing trends, what we show you the power orders, we also give you gigawatts. Well, the gigawatts obviously relate to Gas Power orders. So it's important as you're doing the math based upon the information we provide you in the earnings release to know how much there is to back out of those Power orders that are not Gas Power.

And last quarter, it was about $0.5 billion related to hydro and nuclear. This quarter, I'll give you the number, and it's a couple of hundred million dollars to back out there. I want to give you that because I know it's an important metric to track. And so if you take those pieces of data that we just provided to you, you'll see exactly what Scott just outlined to you, which is we see our orders -- we see the pricing in our orders actually look relatively consistent to what we had in the fourth quarter, maybe up just a little bit. But what we're seeing is we have the opportunity as these SRAs continue to convert that are in 10 to 20 full points above what we have in the orders book already to see incremental pricing start to flow through our backlog.

Our next question comes from Andy Kaplowitz with Citigroup.

Scott, just focusing on your comments that electrification focus orders on data centers in Q1 were larger than all of '25. I know you said in the past that I think you've got a $200 million to $300 million per gigawatt of entitlement in electrification for data centers. I think you're probably already higher than that now, but maybe you can talk about your progress on entitlement and what you see going forward.

You bet. I mean, I think Philippe Piron, 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 right through to the data center. That's where the EMS solution is an example that we were able to cut in, 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 MV UPS solution, a combination of medium voltage electrical equipment with storage and software that we're gaining real traction on with end customers.

We've talked to you in the past about the solid-state transformer investment. That remains on track. We'll 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 MV UPS 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, and 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.

Our next question comes from David Arcaro with Morgan Stanley.

I was wondering if you could comment on what your progress has been in the customer appetite for framework agreements around turbine orders, especially as you're getting booked further and further out. And curious if there's any pricing trade-offs that might come in those conversations.

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 attach potential with the electrical equipment and some of the other solutions we're talking about. And in some fashion, that expanded scope, including Electrification with 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.

Our next question comes from Joe Ritchie with Goldman Sachs.

So look, obviously, a big uptick in SRAs. One of your biggest competitors has talked about not taking orders beyond 2030, because they want to make sure that the supply chain can deliver on anything beyond 2030. I'm just wondering what your approach is going to be? Are you planning on limiting any type of order intake? Just any thoughts around that would be helpful.

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 3-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 installed base is so much larger. And when you have an exponentially larger installed 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 100 of those haven't been commissioned yet. And that number is going to grow substantially through the rest of the year. That very large installed 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.

And I think that the other thing that's really important, I think, as you think about Vernova, we talk about lean a lot, and we do that not just for the words, but because it is a part of our culture. And so we told you last time, we said that we were going to reach our 20 -- approximately 20 gigawatts of capacity in the middle of this year. And then that would step up to another -- step up to 24 in 2028, a couple of gigawatts from lean, a couple of gigawatts from some incremental capacity.

I think it's just important to think to your question about what do we do past 2030. Lean is not something that we do in only events. It's something that we do continually, and we'll continue to add capacity at a very attractive value play by continuing to grow our lean initiatives. So there's the opportunity there as well, Joe.

Operator, we have time for one last question, please.

This question comes from Alexander Virgo with Evercore ISI.

I wondered if you could just clarify your comments around April in terms of the Power Turbine or the turbines that you've already signed in April. And if you could just touch on the Vietnam order for us, Scott. I think you also referred in your comments about questions -- some questions over availability of fuel. I think there's been a little bit of debate over what is -- what the complexion of that Vietnam order actually looks like with one of the slugs of the 4.8 gigawatts, I think, being questioned over whether or not they change it to renewables. So I appreciate any color you can give us on that.

You bet, Alexander. I think it's an important point to close on in the sense that when I 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 gigawatts. We have an incremental three projects on contract that are more in SRA category right now that will 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 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.

And a quick one, just to answer your first question, the clarification on April orders was that we said that in April, we have booked power equipment orders a value equivalent to what we booked in the full first quarter.

Before we wrap up, let me turn it back to Scott for closing comments.

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 4 years in some important markets for us in the U.S. and the U.K. And I 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're 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.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

[Audio Gap] analyst, and this morning with us, we have Scott Strazik, CEO of GE Vernova. Scott, thanks so much for coming to London. And we'll go off to Q&A.

Sounds good Andrew, I appreciate it. Thanks for having me, everyone. Thanks for giving us a little bit of time this morning.

Okay. Andrew, if I start with a few thoughts just framing the company. I mean, for those that are maybe a little less familiar with it, we spun out from General Electric in April of '24. So almost 2 years ago today, generate about 25% of the world's electricity every day with our equipment through our customers. So that creates a real obligation and opportunity for us in a period of time when the world needs a lot more electricity. It also creates a huge installed base that generates a big services business for us.

So when you look at GE Vernova last year, about 45% of our revenue was services revenue, supporting that big installed base, $85 billion services backlog today. So a big foundational part of the business. If I just give a quick overview of the businesses before we jump into the Q&A, our largest business is our power business. That's about 2/3 services, 1/3 equipment today, although the equipment is going to grow exponentially over the next few years as we add more capacity. A lot of it's gas power. We also have a very exciting small modular reactor products that we're gaining momentum on. We can talk about nuclear today. Our second largest business is electrification. That will be about $14 billion of revenue this year. When you think about electrification, that is things like the equipment for high-voltage direct current, long-duration transmission lines, grid resilient solutions. We added $2.5 billion of business last year in the Kingdom of Saudi Arabia to support their shift towards a lot more solar in their grid, transformers, switch gears, grid automation and grid software is the smallest business, but an exciting one for us.

So electrification is our second business line, and then the third business for us is wind. And that's the smallest business by far. It will do about $8 billion of revenue this year. So almost half of electrification, 1/3 of power, where most of that business is U.S. centric in a time when the wind industry in the U.S. is very soft. So those are our 3 business lines: power, electrification, wind and we kind of come into 2026 and with intent to lead the industry forward in a position of financial strength. We've got a net cash position. We talked recently about generating at least $24 billion of free cash flow between 2025 and 2028. And that's $24 billion of free cash flow after investing at least $11 billion in R&D and CapEx over that period of time to position this business to grow. And we do all of that coming into the year with a $150 billion backlog, about $85 billion in services, as I mentioned, about $65 billion in equipment with a clear pathway to get to at least a $200 billion backlog in the next few years. So a lot to be excited about.

And Andrew, thanks for doing this with me and for everybody joining both in the room and online. Happy to kind of take it into Q&A from there.

Yes. So maybe first question, you added $8 billion of equipment margin dollars in backlog in '25. So how should investors think about the margin progression especially power compared to the margins you reported in the P&L in '25?

Yes. I mean I think that margin growth that we showed in our 4Q earnings call in January, and for context for everyone, we show at the end of every year, the change in margin in our equipment backlog because we think it's one of the most important proactive indicators of where the profitability of the business is going from here. And if you look at that page from our January earnings call, in '24, we accreted equipment margin by 5 points.

In '25, we increased our equipment margin by 6 points. And last year, that 6 points was $8 billion of margin that Andrew is referencing. That will come through to the P&L over really starting 2 to 3 years from now, so call it '27, '28 and some of it will trickle through into '29 and '30. But that visibility that we have today is why at a company level, in 2025, we generated 8.5% EBITDA margins but talked about getting to 20% EBITDA margins by 2028. So 8.5% in '25, 20% in '28 and the reason we're able to articulate that with such confidence is because of the change in margin already in our equipment backlog and enough of that cutting in, in '27 and '28 to drive that shift from 8.5% to 20% at the company level.

And just to follow up on that. You also commented that you would at least add another $8 billion of equipment margin dollars in backlog in '26. So what's driving that?

That will be primarily gas power. So what we see very clearly is what we call slot reservation agreements. So these are cases where customers have often put down 20% to 25% of the gas turbine contract in deposit and have secured the slot, but they haven't necessarily yet secured their EPC contracts. They may not have clarity with the fuel. So we are not yet putting in an order although we've got a substantial amount of cash down. What we can already see is with our slot reservation agreements, which we ended the year with 43 gigawatts of slot reservation agreements, and 40 gigawatts already on order.

The slot reservation agreements are, on average, 10 to 20 points higher in price than what's already in backlog. And that's driving the incremental at least $8 billion of equipment margin that will add in backlog in 2026.

And that slight reservation agreement be come back 12 months, like what's the time line? 9 to 12 months usually?

I would say 6 to 18 months today. And the reason I would say it's maybe extending a little bit is because as people now are starting to secure slot reservation agreements into even 31, by default, it's going to take a little bit longer before they convert to order because they're still working through their EPC, fuel and other dynamics like that.

Look, obviously, I think everybody is focused on backlog and orders, but also there is an execution story here as well. So how should we think about the impact that automation, AI, robotics, et cetera, is going to have on margins?

It's a substantial opportunity. It's not one at any material basis that we're embedding into our financial outlook. What I can tell you is we cut in over 200 new machines, installed over 200 new machines into our gas power factories last year, mostly in Greenville, South Carolina. We're going to embed an incremental 200 machines this year in 2026. That's driving a lot of new ways of making gas turbines. It's taking a lot of the dull and dirty work that historically maybe was done with craft labor, and it's automating it. That's in the factories.

But there's a lot of transformation that's happening in our engineering workforce. We're going to grow our revenue in our gas power business much faster than we're going to add engineers. That's because of the investments we're making in AI. I talked earlier about the fact that 1 out of every 4 electrons in the world is coming with our equipment. Well, that gives us an incredible opportunity to use AI to respond more quickly to issues out in the installed base that allows us to serve our customers and grow our services business faster.

If I give one real example we're working through that I'm really excited about right now with AI, if you look at the historical way that we would manage our sites, our, let's say, gas plants, but it's just as applicable with our other generation technologies. There's often humans in the control rooms looking at screens, evaluating how plants are running. When there's trips or there's vibration with gas turbines, they'll often call a remote diagnostic center that's sitting in Greenville, South Carolina and 2 people get in a phone. People in the control room and the people in our remote diagnostic center.

The reality is we'll get to a point very quickly, that is all driven by AI and that drives a real opportunity for margin uplift for our customers and ourselves because we much more quickly will problem solve with our customers to keep our fleets running and we'll get paid for it to enable that service.

And in terms of -- so as I said, it's not part of your formal framework. But when do you think the starts moving the needle? And is it AI? Is it automation? Is it robotics, which one could be the most impactful?

I think the automation will drive continual outperformance on volume because I don't think our teams are fully quantifying how much quicker it's going to improve our output of the factories. And I think the AI is going to contribute towards the margin expansion. I would expect by the time we sit down and do another Capital Markets Day, Andrew, and talk about whether it be 2028 or certainly 2030, that both of these things are contributing towards the financial outlook of the company, continuing to improve.

So automation could give you a sort of wiggle room on capacity without adding capacity?

That's exactly right. I think it will give us more volume quicker if we do our job, and then I think at the same token, we'll get more margin expansion from the AI. And I have -- I run the company with an expectation that in '25 through, let's say, '27, that financial lift is fairly negligible because as we start to get benefit, being consumed with our investment continuing to double every year by '28 the net lift will start to be material.

Maybe we can talk about a shift to electrification. So what gives you confidence that you'll double the electrification backlog by '28? And what products and markets will drive this?

Yes. And for context for everyone, I mean this is a business in our December Capital Markets Day, we talked about having a $30 billion backlog that's going to double over the next few years by '28. And that's meaningful considering when we spun less than 2 years ago, that backlog was single-digit billions of dollars. So we've already nearly tripled to quadruple that backlog. Now how do we have so much confidence it's going to double again? Well, within our backlog today, a big piece of it are HVDC long-duration transmission projects. That's almost $10 billion of our backlog, 10 projects.

But if you take a step back and look at how much more long-duration projects are required in the world, it's $100 billion to $150 billion of opportunity. Now there's 3 real players in this market in which if we're getting 1/3 of that, that in its own right could be $30 billion plus of opportunity for us to add to our backlog. I talked earlier about the fact that last year, we did a $2.5 billion transaction in Saudi for what's called synchronous condensers. This is rotating equipment that provides grid resilience as systems become more dependent on variable power generation sources, the grid needs more inertia or more pull. We see that as a $5 billion plus market opportunity every year going forward. We're working on very interesting deals right now in Iberia.

Think about last year's brownouts in Australia and India, in the U.S. These are deals, I think, will get done in 2026 that will grow the backlog. We're also candidly adding capacity in a number of our factories. And as we leverage our existing factory footprint and lean into that, that's going to allow us to grow our backlog even further. And that's really very attributable to our core power transformer and switchgear business. So we sit here and see an addressable market today that directionally is going to double over the course of the rest of the decade.

I mean there's a substantial amount of modernization of the existing grid required, while physically expanding it to connect renewables to where the power source is needed that gives us a very high degree of confidence that our electrification business will double its backlog over the next 3 years by '28. And that, that doubling of the backlog is why we have so much conviction that this business is going to continue substantially growing into the 2030s off of that backlog growth, you're going to continue to see in the business.

Excellent. And for electrification, how much opportunity do you have today for grid equipment at data centers? And how will that change? And how does using on-site versus front of the meter generation impact this?

So today, if you try to quantify at every gigawatt size data center for us and electrical equipment, our scope entitlement is about $300 million, $200 million to $300 million for every gigawatt. And today, that's really the substation equipment outside of the data center, transformers, switch gears, and that's what we do, okay? So last year, we did north of $2 billion of direct electrification equipment supporting data centers, and it's within that scope.

All that said, we're making a number of investments today to try to expand that opportunity for every gigawatt. We've talked in different settings about emerging technologies that could be inside or outside the data center. Inside the data center, it could be solid-state transformers that provide a role. We've got a product that we're developing in partnership with an R&D sharing with one of the hyperscalers that we're building today, that will deliver to them in the fall that could create opportunity. We also are getting under the tent with the hyperscalers in a very intimate way on really how they want to run the operating parameters of the data centers.

And that's important because we're providing a lot of the gas power generation to follow the load in what's becoming very clear to us over that experience is there's going to be a lot of what we call stability blocks, that are likely going to be required outside the data center that can include medium voltage transformers attached to storage in different ways with controls and software that with stability blocks. We can provide an ability for them to run their data centers in a fairly aggressive way up and down following the load and we're working on a product in that regard. So today, $200 million to $300 million for every gigawatt is our entitlement. Could that double or more than double over the next few years as these products are developed? I'm running the company with the expectation we'll get there. But I think we'll get there and starting to see the orders uplift in '27 and then revenue cut in, in '28 and beyond with some of these new products.

So you just closed the Prolec acquisition last month. You've given us cost synergies. How should we think about revenue opportunities with Prolec embedded into JV?

They're substantial. One of the reasons why we completed the acquisition of the 50% of Prolec that we did not own. So this was a historical JV that we were not controlling or running, but had a 50% minority interest because we weren't really running it. The JV had exclusive rights in North America to sell transformers into North America. By closing the deal, immediately, we can start to serve the North America market, not just with our product sites, but also with our transformer sites and other as other locations. That gives revenue uplift for us as early as 2027 because all of a sudden, we can use some of our capacity in existing factories and sell into North America that we were prohibited from doing prior to closing the deal.

We weren't able to start that commercial activity until we closed the deal last month. So it doesn't help our '26 financials. But it will give us orders lift in '26 that will convert to revenue in '27 and '28. Probably more in '28 than '27 because we only have so many slots available even in those factories. In the same token, historically, we have not done any low-voltage distribution transformers globally inside Vernova. Prolec has that technology. One of the things we're working on, but it's early, is how would we cut in some of the low-voltage distribution technology into our global factories because that was just a North America JV and expand our product reach in other global markets. I'm confident we'll do that. That has an even longer tail to it, whereas the selling into North America we will start to see benefit in '27 from a growth perspective and more in '28, I would view the expansion of the Prolec product lines globally to be more something that's '28, '29 into '30, the things that we've got confidence will ultimately be growth synergies of the deal.

So maybe shifting to power, how has the mix of orders and slot reservation agreements and gas power from data centers changed over the last year? And what do you expect going forward?

Yes. I mean in our existing backlog today from data centers, it's 10% to 15% of our backlog, okay? So when we talked earlier about 40 gigawatts on backlog, 15% direct to the data centers. So not that substantial of our existing backlog. That said, when we talk about slot reservation agreements, the contracts that will convert to orders over the course of the next 6 to 18 months, it's about 1/3 of our slot reservation agreements are with the data centers. So it's giving you an illustration of where the demand is going.

So would I expect in orders in 2026 for it to be closer to 1/3? Yes. Do based on all of our discussions with the hyperscalers on their needs expected to stay at that proportion for a reasonable number of years? Yes, based on all discussions. So about 10% to 15% of our existing backlog growing to approximately 1/3 of our gas power backlog over the next few years with the clear indication that that's happening because of the contracts we have with them where they've given us this 20% to 25%, but haven't necessarily chosen the site that they're going to allocate the equipment to. And until they've chosen the site and we're working with the EPC on building a plant, we don't record it in our backlog because we want our backlog to have as little, let's say, timing volatility as possible.

Got you. And then we literally were talking about this morning, but many data centers have announced plans to use smaller turbines like reciprocating engines and other applications I said we were talking to my colleague [ Umer ] about it. And are these taking share away from JV? And how do you view these competitive offerings? Are they competitive?

Well, I think today is a great market for all forms of power generation. And if you just first start with our Vernova book, I mean, we did over 60 unit of orders last year where there were derivative applications ourselves. And those are generally 30 to 60 megawatt applications where we're taking aircraft engines, attaching them to generators and selling faster power solutions with an ability to ramp up and down, which is a good business for us. And I would expect that aeroderivative business line in fix in orders to grow relative to the 60-some-odd units that we booked in '25.

We also have older, mature technology, what we call B&E heavy-duty gas turbines that are more in the megawatt range of, let's say, 60 to 100 megawatts that we announced in December, we're adding 2 gigawatts of capacity factory in France that's historically been making those that we're selling into the data center opportunities right now that also is good business for us. So we're playing on those 2 spectrums. Now are there other even smaller applications? Because what I'm talking about, in our case is smaller heavy-duty gas turbines at 60 to 100 megawatts or aero applications of 30 to 60. And is there a market for 10-megawatt applications, reciprocating engines and other things? And today, the most definitely is. And I think that's a good business today.

Do we actually see those as our comps and deals that we're bidding today? No. Do we see them in many projects where customers may be taking those technologies because they can get access to those -- that power solution faster and then with an intent to put them as the backup power, once the heavy-duty gas turbines show up in 3 to 5 years, they show up physically and directionally 3 years, but they can't be commissioned for 5 years. And yes, we do see them around the perimeter of a number of our deals. So in some ways, those smaller applications are enabling the projects to move faster. And then what we often think will happen is those applications will shift and replace what historically with data centers were diesel gen sets. So it's a good business right now for those applications. I don't know if they're really competition per se.

But in the market today, where our customers are taking any and all forms of power generation they can find, that's a good market. But what I talk to the team about all the time is economics ultimately dictate long-cycle equipment projects, and our customers are underwriting 20 years of running this equipment at baseload at very high usage rates. And if you're underwriting 20 year business cases, even in the U.S. with inexpensive gas, a few points of efficiency can drive real economic arbitrage. And that's why I love our heavy-duty gas turbine business, and that's why the market loves our heavy-duty gas turbine business because we've got a very efficient heavy-duty gas turbine.

So one of the highlights of '25 was very strong momentum for gas orders. Any insight how the first few months of '26 started off? And geographically, where have you been stronger recently? And will this change?

Yes. I would say just to give context, last year, the quarterly profile of new gas contracts, and this includes orders and the slot reservation agreements together. First quarter, we did 8 gigawatts. And Second quarter, we did 9 gigawatts. Third quarter, we did 12 gigawatts. Fourth quarter, we did 24 gigawatts. So it was just a continual ramp-up. Now the first quarter of 2026, will likely land somewhere between 3Q and 4Q. So somewhere between 12 and 24 gigawatts in the teens directionally.

So not as strong as the fourth quarter number but still substantially growing our contracted gigawatts in totality because we ended the year coming into '26 with 83 gigawatts on contract. If we do somewhere in the teens of new gigawatts on contract in the first quarter, we're still only shipping about 4 gigawatts. So we're going to add another directionally, let's say, 10-plus gigawatts to the contracted backlog in the first quarter. So the demand remains very strong. Andrew, if I just give an anecdote though, although it's very still U.S.-centric with that first quarter activity. I was in Vietnam, I guess it was last week, it all blends together at this point. And we commissioned in January, 1.6 gigawatt LNG-to-power project in Vietnam in January.

Last week, we signed contracts for 3 more, 1.6 gigawatt and LNG to power projects in Vietnam. And for context, that's a country that today only has 90 gigawatts. And we're talking about ourselves, adding 6 to 7 gigawatts of power. Now when I talk about gigawatts in that vein, it's what we call combined cycles, so it includes the steam turbine. When we normally talk about gas gigawatts and kind of Wall Street terms, we try to match it with McCoy, which is without the same turbine. So it's more like a gigawatt each of gas in those examples. But that's 3 more projects in Vietnam alone that we're working on. We were working very hard last week in Asia on continued opportunities to serve Taiwan. Taiwan needs a lot more gas power generation to support the TSMC chip build-out. That's another really encouraging market.

Last year, we signed commitments with Saudi Arabia for $14 billion of new activity, where about 1/3 of that was new gas commitments. So more than 50% of our gas commitments today are in the U.S. But I give those illustrations to just say, there's a lot of other markets for different reasons, whether it be economic growth in Vietnam, whether it be supporting manufacturing build-out in Taiwan. Whether it be shifting the Kingdom of Saudi Arabia from what today is a country that still gets 45% of its electricity from heavy fuel oil, to a healthier mix of gas and solar that we've got a lot of opportunities to serve this global market for a very long time.

And how should we think about your -- because that's we're getting questions there. How should we think about your share, the scope that the OEM has for a combined cycle gas turbine today versus what the EPC provider gets?

It's directionally 1/3 of the scope of a combined cycle plan is Vernova scope. So when you think about people talking about in the U.S. ,$2,500 to $3,000 a kilowatt and cost to build a plant today, and that's all-in cost. That's the EPC cost, that's the owner cost. Directionally, our scope is 1/3 of that. And that's what you'll see continue to grow in our orders over the course of 2026, where our orders, dollar value relative to the gigawatts is going to continue to grow. Because we're continuing to benefit from the increased price, the 10 to 20 points of incremental price in our slot reservation agreements, but it's directionally 1/3.

And we're moving from 2,500, it sounds like to 3,000?

I think that's the appropriate band.

And how should investors think about future gas capacity additions by Vernova, and we talked about it earlier, and what your customers that need power do given you're sold out through '28 and expect to be sold out through 2030 by year-end '26?

Yes. I think it's a great time to maximize what you already have with the installed base. So we've talked openly about the fact that our upgrades business the rest of the decade is going to grow by at least 50%, and that's likely going to be a conservative estimate relative to where the market keeps going. Because if you can't get a new heavy-duty gas turbine until '29, which is our reality today. And even if you're getting that heavy-duty gas turbine to be shipped in '29, you're not commissioning it until '31, you've got to look inward to what you've already got. And the reality is we can do a lot to help the existing installed base create more output that can close some of that gap between now and then.

Now on the dynamic of capacity additions, we're working hard to get to what we've already articulated our goals are, which is in the third quarter of this year, we will start to demonstrate a healthy uptick in output of our factory in Greenville, South Carolina. That continues to go very well. That will demonstrate that we're at an annualized run rate of 20 gigawatts a year. We're going to be below 5 in Q1 and Q2. We will be at 5 or a little bit larger than that by 3Q and 4Q of this year, and will sustain at that level. We talked about in December that we're making some incremental investments within our existing factories by '28 to be up to 24 gigawatts of simple cycle output and that continues to go very well. And that includes an incremental 2 gigawatts in Greenville, South Carolina, which is really leveraging the incremental machines that we're installing right now and 2 gigawatts in France, which didn't really even include a CapEx investment, it's really more shifts and more labor making older industrial gas turbines that are proven to be fairly popular right now. Beyond that, we've got to see where the market goes.

First things first. Let's get to that level. Let's demonstrate in the third quarter of this year that we're on that run rate of 20 gigawatts a year. Let's get all 400 machines installed that we're ultimately will be more than 400, but we'll be at about 400 by the end of this year in Gas Power. And let's see really what incremental productivity we can drive once all these investments are made. Because the last thing we want to do is continue to put capital to work before we know the maximum output of what we've got. And I think that will take us into next year to really define entitlement with the substantial CapEx investments we've made in '25, really '24, '25 and '26, and we'll revisit it at that time.

Maybe pivot to wind. Offshore has been a challenge for the last few years. Where are you now in the process for your 2 projects?

Yes. We announced last week our customer did that in Vineyard Wind, our one project in North America. We installed the last wind turbine last week. So 62 wind turbines, it has been difficult and humbling, but all 62 are installed. Now we still have some commissioning work to do. We still have what we call punch list items to kind of close out. So we're not done. But the installation milestone is substantial because that's where the more heavy cost structure exists for the more expensive vessels to move the towers, the nacelles, the blades out and install and that work is done.

So we've shifted on Vineyard to service work with both commissioning and punch list, and that's going to take us a number of months to complete that work. But it was a big milestone to get through the installation on all 62. We also have completed installation on all 95 of Dogger Bank A wind turbines in the U.K. and the North Sea are off to a very strong start on installation of Dogger Bank B. All that said, Dogger Bank B and C will take us through the better part of '27 to complete that project.

So it's moving in the right direction. We're continuing to make progress. And as we say every day in wind, we're very focused on controlling what we can control, and that includes getting these 2 offshore wind projects complete. It also includes driving a more profitable onshore wind services business, which we will demonstrate a substantial uptick in the profitability of our services business in wind -- onshore wind in 2026, which is needed. Because the reality is our onshore wind equipment volume is soft because the North America market remains very soft, and we need these other drivers to moderate a financial performance that is weaker than the other parts of GE Vernova.

And maybe in the remaining minutes, just shift to capital allocation. As I said, we were discussing where you were 2 years ago and where you are right now. Maybe just you're going to be very cash generative. Maybe you can talk about it across organic, inorganic shareholder return. And as I said, very strong free cash flow and nice balance sheet.

Yes. I mean we're sitting here today in a net cash position, as I said earlier, will generate at least $24 billion of cash, cumulatively, $25 million to $28 million. We've talked about returning at least 1/3 of our free cash flow to our shareholders in both buyback and dividend for context last year, we repurchased over 8 million shares. That's a lot. When you think about we spun out from General Electric with 275 million shares, and we repurchased 8 million shares last year. It's material.

I mean we returned $3.6 billion of free cash flow to our shareholders when our total free cash flow last year was about that. Now why were we able to do that? We are also able to do that because we're not just spending time thinking about what we're going to buy. We've also been simplifying our business and monetizing assets that are noncore to the point that since we spun in April of '24, we've generated over $2.5 billion of cash by simply simplifying the book. And I go there because I think that's a very important part of the culture of the company we're driving. We don't need hobbies. We're here to basically invest in businesses at scale that can be accretive. And that $2.5 billion of cash to a large extent, we gave back to our shareholders at very attractive returns considering that 8 million shares that we acquired was at an average price of $408, okay, relative to where the stock sits today.

We're going to continue to be very opportunistic with our share buyback program as the market creates opportunities for us. We'll continue to look at the dividend. So let's assume at minimum of that $24 billion, at least 1/3 of it is going back to the shareholders, but we've got another $16 billion to put to work. And we are very focused on continuing to make investments in our core businesses. What I'm saying all the time is my job is to not create new balls for our teams to juggle on the air, but to make their jobs easier.

And if we can find parts of the vertical supply chain that we can acquire, and then make it easier for our teams to fulfill on the substantial backlog growth they're experiencing. That's money we want to put to work. And it's money we want to put to work primarily in our electrification business. Maybe gas, but gas would be pretty small transactions more likely than not.

Maybe SMR as we build up a backlog for small modular reactors where we can make it easier for our teams to fulfill. But most of that capital allocation today is going to be in our core businesses. It's going to be vertical integrations to a large extent that allow our large core businesses to be even more durable and ready to meet this ramp as we drive to a $200 billion-plus backlog between now and 2028.

Scott, we're almost out of time. That's perfect. Thanks so much.

Andrew, thank you.

Good day, ladies and gentlemen, and welcome to GE Vernova's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] My name is Liz, and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the program over to your host for today's conference, Michael Lapides, Vice President of Investor Relations. Please proceed.

Welcome to GE Vernova's Fourth Quarter 2025 Earnings Call. I'm joined today by our CEO, Scott Strazik; and CFO, Ken Parks.

Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's press release and presentation slides, both of which are available on our website.

Please note that our year-over-year commentary or variances on orders, revenue, adjusted and segment EBITDA and margin discussed during our prepared remarks are on an organic basis, unless otherwise specified. In addition, our 2026 guidance and our by 2028 outlook being presented today include the Prolec GE acquisition.

We will make forward-looking statements about our performance. These statements are based on how we see things today. While we may elect to update these forward-looking statements at some point in the future, we do not undertake any obligation to do so. As described in our SEC filings, actual results may differ materially due to risks and uncertainties.

With that, I'll hand it over to Scott.

Thanks, Michael. Good morning, everyone, and welcome to our fourth quarter earnings call. We have been busy since our December 9 Investor Update, and I thought I'd start with progress since the event. First, on the positive. We continue to see very strong new gas contracts with an incremental 6 gigawatts signed in the last 3 weeks of December, for a total of 24 gigawatts of new contracts in 4Q '25 alone. We also ended the year with strong orders in both Electrification and Wind. Electrification had its largest order quarter in its history and Wind had its largest order quarter of '25.

On the negative, we have been impacted by the U.S. government halting of all offshore wind activity on December 22, which led to us booking an incremental accrual in 4Q for costs associated with the delay on the Vineyard Wind project. Ken will talk more about this in his section.

I'm pleased that our Prolec GE acquisition has received rapid approval from all required jurisdictions. This will allow us to close the acquisition on Monday, February 2. Taking all this into consideration, we are raising our full year '26 financial guidance, which now includes GE Vernova's full ownership and operation of Prolec for 11 months in '26.

Taken in totality, the last 3 weeks of December since our last update were a reasonable proxy for our '25 performance in total: strong growth in our largest, most profitable businesses with momentum continuing; challenges and wins that we are continuing to combat with accretive capital allocation with the approvals required to close our first sizable acquisition as a stand-alone public company. '25 sets us up for substantially more profitable growth moving forward.

In '25, we increased our total backlog by over 25% or $31 billion to $150 billion with robust profitable order growth in Power and Electrification, further underscoring our momentum as we kick off '26. In Power, we continue to see accelerating demand and favorable pricing trends for both equipment and services as customers invest in new units and existing assets. In 4Q, gas power equipment backlog and slot reservations increased from 62 to 83 gigawatts sequentially, primarily due to strong U.S. demand, but also with agreements in the Middle East, Vietnam and Taiwan, with backlog increasing from 33 to 40 gigawatts and SRAs increasing from 29 to 43 gigawatts. We expect to reach approximately 100 gigawatts under contract in '26. Under the assumption, we'll ship high teens in gigawatts this year with new contracts north of 30 gigawatts.

In 4Q, we grew our power services backlog to $70 billion, up $5 billion sequentially and $9 billion year-over-year. This increase was mainly driven by strength in gas with customers investing in fleets and signing new long-term service agreements at favorable pricing, which drove strong, high-margin services backlog growth.

In Electrification, customers are working to keep pace with growing electricity demand, grid stability needs and national security interests. In 4Q, we grew the segment's total backlog to $35 billion, up $4 billion sequentially and $11 billion year-over-year, representing Electrification's largest growth quarter on a dollar basis in '25. Importantly, we are seeing demand across the segment for grid and data center equipment, both with traditional customers globally and hyperscalers, primarily in the U.S. Of note, over $2 billion of Electrification's orders were signed directly for data centers in '25, more than triple the 24 total. We also signed large deals for providing grid resilience and reliability solutions in Saudi Arabia and Australia, an HVDC contract in Germany and a large grid equipment contract in Iraq in the year.

In Wind, we received approximately $3 billion of orders in 4Q, the largest of the year for the segment. In onshore, we continue to receive [indiscernible] for repowering and new units as customers utilize safe harbor and initiate physical work for approximately 10 gigawatts of repowering opportunities in the U.S. The team is focused on what we can control.

Taken together, our pathway to substantially more profitable growth is right in front of us. I'll talk about this more on Page 5 with the growth of margin in our equipment backlog, including $8 billion of incremental margin added to our equipment backlog in '25.

I'm also pleased with the returns that our '25 investments are yielding. On the CapEx side, we remain on track to see a substantial step-up in gas turbine output in 3Q '26. We installed over 200 new machines in our factories while adding nearly 1,000 new production workers in '25. We plan on adding an incremental 200 machines and over 500 production workers in '26.

Electrification is on track with its growth, delivering more than 25% revenue growth in '25 with a clear pathway to deliver $13.5 billion to $14 billion in revenue, representing 20% organic growth plus approximately $3 billion from Prolec GE in '26.

Our investments in automation and robotics are advancing at scale, and AI is starting to gain momentum in our engineering organizations and back-office functions. Our Advanced Research Center is progressing future businesses for us. This includes direct air capture, where we already have a facility up and running, real momentum in our solid-state transformer program and a good technical progress on our fuel cell program in Malta, New York.

We are making all of these investments from a position of financial strength, ending the year with almost $9 billion in cash. In '25, we were able to return $3.6 billion to our shareholders while repurchasing more than 8 million of our shares. We continue to see substantial opportunity to create value including through incremental investments with strong returns.

A few more comments on our financial performance on Page 4. We booked $59 billion of orders, up 34% year-over-year. We also grew our revenue by 9% year-over-year to $38 billion with growth in both equipment and services while increasing our adjusted EBITDA margin by 210 basis points year-over-year. We generated $3.7 billion in free cash flow, more than double our prior year, while investing more than $2 billion in R&D and CapEx.

We are increasing our '26 guidance and by '28 outlook, which now includes Prolec GE. Ken will speak to this more in a moment. And as announced, we are doubling our dividend in '26 versus '25 and have increased our stock buyback authorization to $10 billion from the previously approved $6 billion program.

One of the primary drivers of our conviction on our path forward is the significant growth and margin expansion in our equipment backlog again in '25, which I will touch on in the next page. On Page 5, we show the growth of margin in our equipment backlog consistent with our practice from last January. We started '25 with the expectation to increase our margin dollars and equipment backlog above our run rate in the prior 2 years. We achieved that expectation, adding $8 billion in equipment backlog margin dollars in '25, more than the prior 2 years combined.

We ended '25 with $64 billion in equipment backlog, an increase of approximately 50% year-over-year, with an incremental 6 points in equipment margin expansion. This included 11 points of growth in Power, mainly driven by our gas power business. We expect significant growth again in Power and Electrification's backlog in '26 at better margins as we convert higher-priced gas slot reservation agreements into orders and benefit from strong demand and pricing for grid equipment. These businesses' longer equipment cycles mean that we will not begin delivering on the majority of the higher-margin orders placed in '24 and '25 until '27 and beyond.

In Wind, we expect relatively stable margins this year and for backlog to decrease as we execute on the remaining unprofitable offshore wind backlog, and project a smaller onshore wind backlog given the recent softness in U.S. orders. As we noted in December, we see incremental opportunity for the teams to expand margins that are not projected in our backlog today. This includes our operating teams delivering our backlog with variable cost productivity versus known cost today, accelerating capacity additions, leveraging lean to sell incremental slots and a recovery in U.S. onshore wind orders.

In summary, good progress in '25, and we are excited about what's ahead. With continued strong demand and pricing in gas, the strong demand environment across multiple products in Electrification and my expectation for the team to drive variable cost productivity not embedded in our backlog margins today, we expect to add at least as much equipment margin dollars in backlog in '26 as in '25, setting us up for even more profitable growth over the long-term. Said differently, in totality, the equipment margin and backlog from '23 to '26, those 4 years will add at least $22 billion in equipment margin, driving future profitable growth.

With that, I will turn the call over to Ken for more details on our full year and fourth quarter performance as well as our financial outlook.

Thanks, Scott. Turning to Slide 6. We finished 2025 strong with robust orders, growing backlog and revenues, margin expansion and significant free cash flow generation. In the fourth quarter, we booked orders of $22.2 billion, a 65% increase year-over-year and a book-to-bill ratio of approximately 2x. Equipment orders increased 91% while service orders increased 22%. All 3 segments delivered significant orders growth across equipment and services.

As Scott mentioned, our backlog expanded to $150 billion, a year-over-year and sequential increase, with equipment backlog increasing to $64 billion, up approximately $21 billion and 50% year-over-year, while our services backlog grew $10 billion or 13% year-over-year to $86 billion led by Power.

Revenue increased 2% with services growth in all 3 segments. Equipment revenue was flat year-over-year as 41% growth at Electrification and 8% growth at Power was offset by anticipated lower Wind revenues. Price was positive in all segments.

Adjusted EBITDA grew 6% year-over-year to $1.2 billion, led by Electrification and Power. Adjusted EBITDA margin expanded 30 basis points with higher price and productivity more than offsetting higher contract losses at offshore wind as well as inflation and investments in growth and innovation.

The strong adjusted EBITDA and working capital management drove positive free cash flow of $1.8 billion in the fourth quarter. Working capital was a $2.3 billion cash benefit, driven primarily by down payments on higher orders and slot reservations at Power as well as higher orders at Electrification. Year-over-year, free cash flow increased more than $1 billion, driven by higher positive benefits from working capital and stronger adjusted EBITDA, partially offset by higher CapEx investments supporting capacity expansion.

We ended 4Q with a healthy cash balance of nearly $9 billion, up approximately $1 billion compared to the third quarter. During the fourth quarter, we returned $1.1 billion of cash to shareholders through share repurchases and dividends. Also, both S&P and Fitch upgraded our investment grade credit ratings and maintain positive outlooks on these upgraded ratings.

In early February, we expect to issue roughly $2.6 billion of debt as we complete the previously announced acquisition of the remaining 50% ownership stake of Prolec GE. We'll remain below 1x gross debt to adjusted EBITDA after this debt issuance.

We're encouraged by our strong financial performance in 2025. During the year, we secured $59 billion of orders led by Power equipment orders more than doubling and Electrification equipment orders growing more than 20%. Service orders increased 12% with growth in each segment. We delivered approximately $38 billion in revenue with 26% growth in Electrification and 10% growth in Power. We increased adjusted EBITDA by 46% and expanded margins 210 basis points driven by price, volume and productivity, more than offsetting the impact of growth and innovation investments and the impact of tariffs.

Finally, we generated $3.7 billion of free cash flow, a year-over-year increase of $2 billion.

As discussed in prior quarters, we continue to utilize lean to improve our billings and collection processes and drive better cash management and linearity. In 2025, we reduced days sales outstanding by 2 days compared to year-end 2024, resulting in over $200 million of additional free cash flow in 2025. Our growing backlog and healthy margin provides an excellent foundation for continued improvement in our financial performance moving forward.

Turning to Slide 7. Power delivered another strong year, led by gas power. Power orders in 2025 grew more than 50% given robust demand for gas equipment and growth in services, which combined, increased backlog by more than $20 billion. Power grew revenue 10% for the year and expanded EBITDA margins by 100 basis points to 14.7%, driven by higher price and productivity, primarily at gas power and steam power.

In the fourth quarter, Power orders grew 77% led by gas power equipment tripling year-over-year on higher volume and pricing. We booked 41 heavy-duty gas turbines, our largest orders quarter of the year and an increase of more than 70% year-over-year, including 15 HA units. We also secured orders for 18 aeroderivative units, that's 8 more than the fourth quarter of 2024. Power services orders increased 15% as customers continue to invest in their existing fleets.

Revenue increased 5%. Services revenue increased due to higher gas transactional services and nuclear. Equipment revenue increased driven by nuclear as we progress in building our first SMR at the Darlington site with OPG, as well as aeroderivative growth at gas power. This growth was partially offset by fewer heavy-duty gas turbine shipments, primarily due to the improved linearity of deliveries through 2025 compared to 2024.

EBITDA margins expanded 160 basis points to 16.9%, mainly driven by price and productivity more than offsetting additional expenses to support capacity investments at gas and R&D at nuclear along with inflation.

Looking to the first quarter of 2026 at Power, we expect continued year-over-year growth in gas equipment orders. We also anticipate high single-digit revenue growth driven by both higher equipment and services. We expect EBITDA margin of approximately 14% to 15% as volume, price and productivity should more than offset additional expenses to support capacity and R&D investments as well as inflation. Given the typical seasonality of services outage, Power revenue and EBITDA margin should be lower sequentially in the first quarter.

Turning to Slide 8. The Wind team delivered similar EBITDA losses in 2025 despite the impact of tariffs, driven by improved pricing and higher turbine deliveries at onshore wind, offset by offshore due to the absence of contract cancellation settlement gain recorded in the third quarter of 2024, net of lower year-over-year contract losses. In the fourth quarter, Wind orders increased 53% year-over-year, mainly due to improved onshore equipment orders, primarily outside of North America. However, it's still difficult to call an inflection point in U.S. orders as customers still face permitting delays and tariff uncertainty. At offshore, we remain focused on executing our challenged backlog.

Wind revenue decreased 25% in the quarter given lower onshore equipment deliveries as a result of softening orders over the last year. Wind EBITDA losses were $225 million in the quarter, below the fourth quarter of 2024 levels due to higher offshore contract losses, including the impact of the recently issued U.S. order to halt construction of all offshore projects and lower onshore equipment volume, partially offset by improved onshore services.

For the year, Wind losses came in at approximately $600 million, higher than our expectations of approximately $400 million outlined during our December investor event, driven by the U.S. government's December 22 stop work order for offshore wind projects. Until that point, the team was on the path to achieve these expectations as they worked to complete the Vineyard Wind project in early January. The order created a potential delay of at least 90 days and we accrued in 4Q the estimated incremental contract losses for the extension of installation work. As a reminder, the project has 62 turbines in total, and we've made significant progress with only 10 turbines needing blades and 1 turbine left to be installed at the time of the stop work order. At any time the order is in place, we are unable to execute the project. This and the resulting incremental costs are excused under a declaration of force majeure prompted by the government action.

We understand that Vineyard Wind received an injunction of the stop work order yesterday. If given permission to resume work soon, we would work to complete installation of the remaining turbines by the end of March. At the end of March, we'll lose access to the vessel required to complete installation of the remaining turbines. If we're unable to complete the installation of the remaining 11 turbines, 2026 Wind revenue could be negatively impacted by approximately $250 million due to our inability to bill the customer for those turbines. Because of our contract loss accruals and protection from incremental costs resulting from the stop work order, we do not anticipate significant additional negative EBITDA impacts for the Vineyard Wind project beyond the amounts already recorded.

For first quarter 2026, we anticipate Wind revenue to decline at high teens rate year-over-year due to lower onshore equipment deliveries. We expect EBITDA losses to be between $300 million and $400 million, down year-over-year primarily as a result of lower onshore equipment volume as well as the approximately $70 million impact of tariffs that started in 2Q of last year.

Looking at 2026, we expect significant improvement in Wind revenue in the second half of the year given only 30% of our expected onshore turbine shipments are in the first half as almost 70% of our 2025 equipment orders came later in the year. Also, the volume we're shipping in the first half has fewer contractual protections for tariffs since we signed these orders before their implementation. As a result, we expect EBITDA losses in the first half to be partially offset by profitability in the second half.

Now turning to electrification on Slide 9. Strong demand and price resulted in 21% orders growth and 26% revenue growth in 2025. Electrification equipment orders continued outpacing revenue, further increasing the equipment backlog to $31 billion, up more than $10 billion compared to the fourth quarter of 2024. EBITDA margins expanded 560 basis points to 14.9% driven by volume, favorable price and productivity.

In the fourth quarter, orders remained strong at roughly 2.5x revenue and increased 50% year-over-year to approximately $7.4 billion due to growing grid equipment demand, particularly for synchronous condensers, substations partially to support data center growth and switchgear. We saw strong equipment orders growth in the Middle East, which increased over $1 billion and in North America, which more than doubled year-over-year.

Revenue increased 32% with growth across all regions. We saw strong volume and higher price driven by switchgear and HVDC equipment. EBITDA increased 63% in the quarter with margin expansion of 320 basis points to 17.1%. Margin expansion was led by more profitable volume, productivity and favorable pricing.

Looking to the first quarter of 2026, we anticipate continued solid equipment orders with healthy margins. First quarter Electrification revenues should be similar to the fourth quarter of 2025 as we include Prolec GE, resulting in a significant year-over-year increase. We expect continued strong EBITDA margin expansion to 16% to 17% from volume, price and productivity.

Moving to Slide 10 to discuss GE Vernova guidance. For the first quarter of 2026, based on our expectations for the segments, as already outlined, we expect continued year-over-year revenue growth and adjusted EBITDA margin expansion. We also expect to deliver positive free cash flow in the first quarter of 2026 given our ongoing focus on aligning the timing of inflows and outflows along with the impact of down payments, which correlate with the timing of orders.

For the full year, we're increasing our 2026 guidance provided in December to now include the Prolec GE acquisition. We now expect full year 2026 revenue to be in the range of $44 billion to $45 billion, up from $41 billion to $42 billion, with growth in both services and equipment. We continue to expect adjusted EBITDA margins of 11% to 13% as we deliver our growing backlog with favorable pricing plus improved operational execution. We're also increasing our free cash flow guidance to between $5 billion and $5.5 billion, up from $4.5 billion to $5 billion.

By segment, we continue to expect 16% to 18% of organic revenue growth in Power, driven by gas power. We anticipate Power EBITDA margins to be between 16% and 18% as positive price, increased volume leverage and productivity more than offset inflationary impacts and the additional expenses for AI, automation and increased production.

In Electrification, we now anticipate revenue to be between $13.5 billion and $14 billion, which represents 20% organic growth, plus approximately $3 billion of revenue from Prolec GE. We continue to expect EBITDA margin to expand to 17% to 19% as we deliver our more profitable backlog.

In Wind, organic revenue is expected to be down low double digits due to decreased onshore equipment revenues given the softness in orders, but we expect EBITDA losses to be approximately $400 million in 2026, which is consistent with our expectations discussed in December as improvement in onshore wind services and offshore wind offset the lower onshore equipment volume. We expect 2026 GEV adjusted EBITDA to be more second half weighted than 2025, with the highest revenue and EBITDA in the fourth quarter of '26. We expect higher second half gas power revenue as we ship more gas turbines in the second half of the year as we increase annual production capacity to approximately 20 gigawatts starting in midyear '26.

We also anticipate typical gas services seasonality, with the highest outage volume in the fourth quarter. We continue to expect Electrification EBITDA to increase sequentially through the year following the completion of the Prolec GE acquisition. And as mentioned earlier in Wind, we expect higher second half onshore turbine shipments given our recent orders profile and better services profitability. At Corporate, costs are typically uneven across quarters due to compensation timing and portfolio activity at our financial services business. We expect full year 2026 corporate costs to be between $450 million and $500 million as we continue investing in AI, robotics and automation to drive productivity over the medium and long-term.

Turning to Slide 11. We're also increasing our by 2028 outlook to include Prolec GE. We now project at least $56 billion of total revenue by 2028, up from $52 billion, implying a low teens growth CAGR through 2028. And we still expect to achieve adjusted EBITDA margins of 20%.

We're increasing our cumulative GE Vernova free cash flow generation from '25 to '28 by approximately $2 billion to at least $24 billion, which incorporates nearly $1 billion of incremental CapEx from Prolec GE to support increased transformer production. This brings our expected cumulative CapEx and R&D investments through this period to approximately $11 billion.

At Electrification, by incorporating Prolec GE into our by '28 outlook, we now expect approximately $4 billion of incremental revenue on top of high teens organic growth and we maintain expectations for 22% EBITDA margins. We're not including any synergies from the Prolec acquisition into our updated outlook, but we see real opportunities in both revenues as well as costs.

Overall, the combination of rising demand, combined with the consistently stronger execution, investments into our business and the acquisition of Prolec GE sets us up nicely going forward.

With that, I'll turn it back to Scott.

Thanks, Ken. And to wrap, a few themes. We are executing well in the early stages of our multiyear growth trajectory. This is evidenced in the $150 billion backlog we entered '26 with versus roughly $100 billion in backlog that we entered '22 with after the announcement of our spin from GE in November of '21. Just think about that for a moment. Just over 4 years ago, we announced our separation from GE. And today, our backlog is 50% larger than it was upon the time of the spin announcement.

The steepness of our growth trajectory is probably best evidenced in our Electrification segment, which I often say has been the largest beneficiary of GEV working as one, purpose-built, focused company, now better linking the commercial muscle and customer relationships of our Power and Wind businesses with the Electrification solutions we provide. Electrification generated about $5 billion in revenue in '22, and we now expect that number to be $13.5 billion to $14 billion in '26, and we are just getting started.

But this isn't about growth for growth's sake. In the last 3 years alone, we've more than doubled our GEV equipment backlog, adding over $14 billion in future margin dollars in this backlog, while adding $13 billion in high-margin services backlog over the same period.

On the operations front, we are improving but culturally hunting every day for waste and opportunities to serve our customers in a more efficient manner. Take our transformer product line inside Electrification. Our labor hours were up 39% in 4Q, with output increasing more than 50% year-over-year as we drive significant productivity at these sites. And we now see real opportunity to apply a similar playbook to the 5 large factories we are acquiring with Prolec GE.

In onshore wind, our critical, customer-facing events are down over 50% in '25 versus '24, and the business is well positioned to deliver a much more profitable services business in '26. But we also are running a business with the humility to acknowledge we continue to have real opportunity to improve on our execution in areas like offshore wind as we complete our only 2 projects.

We are doing all of this while investing across the near, mid and long-term horizons. Our customers and investors will see substantial value creation from our increased gas turbine output starting in 3Q '26. These incremental returns are right in front of us, less than 180 days from now.

Other investments we are making are just starting to take shape, but I have high confidence that our automation and AI investment returns will grow in '27, becoming a bigger part of our margin expansion in '28. These investment returns are not included in our '28 financial outlook today.

And as we invest in these time horizons, we also are investing in businesses for the next decade. We expect SMR to contribute meaningfully to the top line of our power business in the next decade. We're making real products in construction of our first plant in Ontario today while continuing to invest in the engineering to drive down the cost of the product for the long-term. Nuclear was a drag on Power's '25 margins, and we expect '26 to be directionally similar. But our customers and investors will see this value in the next decade.

Similar theme with our solid-state transformer product line. We've completed production of our first unit. And just 2 weeks ago, I visited our new testing facility in Upstate New York that we'll be using to test and validate the performance of this first unit before delivering the completed solution to our hyperscaler customer in the autumn of this year.

And we can do all of this while returning substantial capital to our shareholders as evidenced in our $3.6 billion return of capital in '25 and our announced increase in our dividend and share buyback program. So we enter '26 pumped up about the company we are creating, the opportunities to serve our customers and deliver returns for our owners, not only in '26 but through cycles and for the long-term.

With that, I'll hand it to Michael for the Q&A part of the call.

Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask 1 question so we can get to as many people as possible. Please return to the queue if you have follow-ups. Operator, please open the line.

[Operator Instructions] Our first question comes from Joe Ritchie with Goldman Sachs.

So let's just -- I'm just going to focus my one question on gas power equipment orders. Clearly, incredible momentum in 2025. I think your original expectation was for backlog and for SRAs to be roughly around 60 gigawatts and you ended at 83 gigawatts. Now you have an expectation of 100 gigawatts by the end of 2026. Scott, maybe just talk about just the nature of your discussions. Have they changed at all? Types of customers? And then also, you did mention that you expected the margin in your backlog to be better as well. So it sounds like the pricing discussions have also been positive.

Yes, Joe. I mean, on the end of that, I'd say, yes, pricing does continue to strengthen. When we look at where we're trending with our slot reservation agreements today versus our existing backlog, there's another 10 to 20 points of pricing strength in the SRAs today. We are pleased -- you're right, we were talking in the middle of last year at 60 gigawatts and landed at 83 gigawatts, because the intensity of the discussions really late summer fall right through the holidays have continued to be very intense.

When you think about this year getting to 100 gigawatts by the end of the year, what I would tell you is it's likely going to be a larger proportion of orders. Today, with the 83 gigawatts, it's 40 gigawatts of orders, 43 gigawatts of SRAs, that probably shifts towards more of a 60-40 split with 60% on order over the course of 2026.

And then really the question that we'll have to evaluate and share with you as we go is how many customers are ready to commit to slots today for really '31 to '35. And our 100-gigawatt assumption that we talked about today doesn't really assume a lot of those, let's call it, framework agreements get closed in 2026, but there are active discussions right now, and active discussions we're going to keep working that could take that 60-40 split of 60 gigawatts of orders directionally and 40 gigawatts of SRAs, to see the SRA number grow even higher over the course of this year. But it's January and we want to see how those discussions progress.

The next question comes from Julian Mitchell with Barclays.

Just wanted to circle back to the gas power equipment market because I suppose we get a lot of questions from investors around smaller turbine makers looking to grab share, looking to take advantage of the fact that you're trying to be measured on capacity increases and there are very long lead times. And obviously, there was an announcement of someone looking to repurpose ancient narrow-body engines for power gen supply.

So I just wondered, I suppose, 2 things. One was how serious do you think the threat of market share gains from that plethora of smaller players is? And do you think that they could have some negative effects on pricing in the equipment market as their capacity and share gain efforts ramp up in the years ahead?

Thanks, Julian. I would just reinforce the comment I made before, which is we do see our slot reservation agreements 10 to 20 points higher in price than where we are in the backlog. So we're continuing to gain price as we continue to play this game in gas. Frankly, a lot of the smaller applications are simply enabling more projects to get started, because what it's enabling is earlier power that truthfully we can't provide, but then on the back end, as the heavy-duty gas turbines are available, those smaller applications will become the reliability solution on the back of the -- on the heavy-duty gas turbines.

So what we talk about every day is this is about economics. And when you're underwriting 20-year business cases, efficiency matters a lot when you're running these units at base load. So now with humility, we don't really view those smaller units to be competition, but that doesn't mean that's not a good business in the near-term. I think those smaller applications could do very good business in the next few years. But we also have just as much conviction in the competitiveness and the value proposition our heavy-duty gas turbines are providing and will continue to provide, and we expect to continue to have the attractive share in the market that we have had and we'll continue to have.

And Julian, I know you know this, but we obviously play in a piece of that as well, right? So we have aeroderivative units, and I think last year we booked orders for about 63 of those, which was up significantly year-over-year. Because of us playing in that market, it informs those comments that Scott just made, which is we know how the customers are thinking about utilizing that equipment in the midterm.

The next question comes from Nigel Coe with Wolfe Research.

So my one question is on the backlog margins, specifically for Power. So 11 points of improvement year-over-year is really impressive. Maybe just can you talk about the 17 points of improvement since year-end '22? The starting point would have been about a breakeven. I just want to confirm that. And then based on where you're pricing turbines today, would you expect backlog margins to continue improving in 2026?

That's fair that, directionally, the starting point is approximately breakeven, and most definitely, we expect the margins in equipment backlog in Power to continue to grow at a very healthy clip in '26. And that's why we articulated on the call that we expect to add at least as much equipment margin in backlog in '26, i.e., at least $8 billion, this year as we did last year.

And we get excited about that not only on the equipment side of it, but if you think about the pricing on the service contract that comes along with a new heavy-duty gas turbine, as the pricing is accelerating on the equipment itself, as we sign those new contracts for service orders, we'll see incremental pricing there. So your point is exactly right, we're seeing accretion in margins on the equipment. That also leads to a long life of pricing improvement on the service side of the portfolio.

Because when you think about it, everybody, we added about $12 billion of equipment backlog in Power. We added $9 billion of services backlog in Power over the course of the year. Both are experiencing real margin accretion.

The next question comes from Mark Strouse with JPMorgan.

Scott, maybe switching gears to the Electrification segment. Just kind of stepping back, kind of leading up to the spin. Just kind of the opportunity that you've been talking about, kind of investing in that business to expand it from what it's been over the last decade or so. Obviously, you're clearly making progress with the orders. You talked about kind of record orders in 4Q. To the extent that it's possible, can you just kind of update how much of that do you think is really driven by just kind of the overall market strength versus what GE is doing specifically to gain market share?

Well, I mean, Mark, with humility, I would argue that we're able to provide a very unique solution to the end customers today with the linkage of the power generation and the electrical equipment together in a way that it is difficult for many other providers to do. So this isn't simply about drafting on a larger market. I would say that was maybe more of a theme in '23 as the European market started to move post the Ukraine crisis, that supply and demand created an opportunity for us and we took advantage of it. That was a '23 theme.

'25 theme is we're providing a differentiated solution. And our ability to link power generation solutions with electrical equipment is positioning us to continue to grow this business on an outsized basis.

So I look at the business and I say $14 billion of revenue in 2026, directionally, we think our addressable market today with the products we sell, directionally $150 billion. So I mean, we're at like 10% of our directional market and there's a lot we can do. Now yes, to earn that, we've got to get better with our operations. And that's why we talked about the fact that from '24 to '28, we're doubling our output with transformers and switch gears. And most of that is coming from more shifts, more investments in how we operate that helps. And at the same time, we talked about things like solid-state transformers in December. I mentioned it in my prepared remarks, 2 weeks ago, I saw our first product that's completed, we'll be testing it over the course of the summer before we deliver it to the hyperscaler customer, that could be a substantial order for us with a new product line in 2027 for deliveries later in the decade.

So I continue to grow my optimism and, frankly, my expectations with how material this is as a part of GE Vernova. And we're going to keep leaning into this business.

And then it's a great opportunity to think about the Prolec acquisition, right? Because you talked about what are we able to do not only just from a market, but from a GEV perspective, bringing things together. This was one of the primary reasons that we were so excited about the Prolec acquisition, because there were terms and conditions around the arrangement which allowed us to keep things within certain markets. Now that it's totally going to be consolidated by GEV and fully owned by GEV, we're able to optimize where we can have transformers go around the world. So that's a really good thing.

But one of the other opportunities as well is Prolec is a provider of distribution transformers, which are a key part of what's going into data centers. So this opportunity of bringing GEV together and how it's benefiting the Electrification business though it runs right exactly to what Scott says, but it gave me the opportunity to remind everybody what the importance of this Prolec acquisition is.

The next question comes from Alexander Virgo with Evercore ISI.

Can we start on Electrification, please? And just integrating Prolec, I'm surprised there hasn't been a little bit more of an accretion on the original margin guidance. So I wondered if you just talk a little bit about costs to integrate an investment that you might need to do to make sure that you get the benefit of what you just talked about and think about how that margin profile might look as we look at the 2028 guidance.

I mean, Alexander, I'd just start by saying no change from the expectations from Prolec from what we talked about when we closed the deal in October. The reality is we could have a little bit of a debate as to whether we wanted to change the margin guide by basis points to be exact to where we had framed things up in October. What I would just interpret is this gives us even more opportunity to outperform over the course of '26. I wouldn't overthink that there's been any change in the financial contribution from Prolec in 11 months of, call it, the '26 or, at all, the '28 expectations. Frankly, if anything, we've had a very productive 3 months of integration meetings and are very excited for this to be part of the company on Monday.

The next question comes from David Arcaro with Morgan Stanley.

I was wondering if you could touch on the nuclear space. We've seen a lot of momentum on the policy side, deal side and the SMR space. Wondering if you could talk to your project opportunities. Have things accelerated? Could there be opportunities for more SMR deals to come?

David, the opportunity is great. The discussions are progressing. What I would say with nuclear, maybe a little bit different than gas and grid because we're really restarting an industry here in the western world, is they're progressing, they're sequential. There's a lot of terms and conditions that are being discussed. We're working very closely with the U.S. administration that is very determined to restart a nuclear industry in the U.S., and we're very motivated to serve them on that path.

We're also having productive conversations in Sweden, in Poland today that we're very optimistic about going forward. But it may take a little while before they translate to announcements.

So we're into a new year. We're working hard with a number of both governments and customer archetypes, including the hyperscalers on what this can mean for them in, let's call it, the first half of the next decade. So opportunity pipeline growing, but the timing to close is going to be a little bit different than the intensity of the closed velocity right now with gas and grid.

The next question comes from Nicole DeBlase with Deutsche Bank.

Scott, I wanted to get your thoughts on something a bit higher level. A few weeks ago, we had this announcement from Trump kind of pushing for an emergency power auction. I'm really curious about your reaction to that, both with respect to the potential impact on gas power demand in the market in the U.S. as well as GEV.

There's clearly a need to continue to evolve the market mechanisms to encourage what's needed in this country, which is substantially more new build of firm, fixed power generation capacity. Whether that happens through the auction mechanism a few weeks ago announced by the administration allowing hyperscalers to bid into a separate auction for separate PPAs, that's one pathway to do it. Do we probably need in a number of markets a capacity auction mechanism that provides more years of revenue guarantee for more build to happen today? Definitely.

The market's already moving, right? We moved into '25 with 46 gigawatts on contract. We ended the year with 83 gigawatts. We'll end this year with at least 100 gigawatts. So the market is moving regardless, but we are very motivated by continuing to iterate with the administration on how to enable even faster growth and simultaneously thinking our way through on how we'll fulfill if that happens. So motivated by the announcement a few weeks ago.

But I'd also emphasize it's early. I think changing policy in how these markets have worked isn't going to happen overnight. But clearly, you can see in our orders book that the market continues to move our way regardless.

The next question comes from Amit Mehrotra with UBS.

Just one clarifying question. Can you just update us on what you're sold out through -- I think last time it was 2028 on both heavy-duty and aeroderivatives. I mean these backlog members are eye-popping, so I assume we're going out quite further.

And then just one clarification on Electrification. I know you talked about it earlier, but it just seems like the organic growth expectations have maybe come down for '26 when you include Prolec in there relative to the 20% you had last year. Maybe I did my math wrong, but if you could just clarify that point, that would be helpful.

Let me do the last part first and then I'll hand it back to Scott. No, the organic growth expectations haven't come down. When we give you the organic growth number we're giving it to you without Prolec. So just to make that easy, we're saying the organic growth for Electrification and then just add the $3 billion on top of it. So there's been no change in the expectations for Electrification negatively.

And they've demonstrated ability to outperform the last few years with their ramp. Let's see how they do this year. But yes, no change, Amit, from December 9.

The gas capacity, the reality is the 83 gigawatts that we now have on capacity is certainly very heavily playing into '29, but there are slots in '30 and beyond that are also secured. So we do continue to have capacity available today at 83 gigawatts on contracts for 2029. That said, by the time we get to 100 gigawatts, which we're now projecting by the end of the year, that 100 gigawatts directionally will have both '29 and '30 largely sold out based on where we see it today. But sitting here today on January 28, there are still slots available for 2029.

Operator, we have time for 1 more question, please.

This question comes from the line of Andrew Kaplowitz with Citigroup.

Scott, can you give us more color on your assessment of how your teams are doing on that variable cost, productivity that you talked about and what that might mean for the next couple of years? Obviously, you've reiterated this 22% EBITDA margin targets for '28 in Power and Electrification, still early days on lean. What are you seeing on the ground as you begin to ramp up capacity more significantly? And can you remind us how your contracts are structured for rising commodity costs?

Well, the commodity cost, to a large extent, I would say from when we take orders, Andrew, to a large extent, we lock in with the suppliers the price. So it's generally matched. The only exception of that is with our long-term service contracts, and those have material escalators attach with them. So on our $150 billion backlog, we feel very good about our protection for material inflation.

Now on our variable productivity journey and where we are, it's a very good and timely question. We'll have our February operating reviews with our business teams next week, and that is the main event or one of our main events. If I assess where we are right now, I would say with the backlog that's grown by 50% in the last 4 years, the team has been making very good progress in our ability to fulfill on that. And that's when we talk about seeing the gas ramp up in the third quarter of '28 -- third quarter '26, excuse me, we'll hit that. Doubling transformers and switch gears '24 to '28, we'll hit that.

Now can we be even more effective with our sourcing leverage here now that we're at this level of scale? And do I have a high degree of expectations that the sourcing productivity will contribute even more to our margin expansion, when we show you that chart that we showed you today on backlog in March 12 months from now? The answer is yes. But there's a maturation process here between investments in the factories for output and fulfillment, feeling very good, somewhat countered with how strategically forward thinking our teams are with sourcing savings that I think we've got a few miles still to go together. That is good news in the sense that it's opportunity, an opportunity for us to get better and something I look forward to updating everyone on as we go through that journey together in 2026.

Before we wrap up, let me turn it back to Scott for closing comments.

Michael, thank you, everybody. I would just again with our customers. We are humbled with their confidence in us to drive that $150 billion backlog to the 75,000 employees we have today that I'm proud to represent every day, as is Ken, in these meetings. For everybody on the call, we appreciate your continued interest in GE Vernova. And I hope you can hear in our voices both the combination of humility and hunger that we have as we go into a new year that there's a lot of work to do. We're ready to do that work. And we look forward to interacting with all of you throughout 2026. Thanks, everyone.

Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Please welcome to the stage Vice President of Investor Relations, Michael Lapides.

Hello, everyone. Welcome to GE Vernova's Investor Update event. Great for our team to be back in front of all of you again. Good to see so many people here. Good to see or know that there are so many watching online.

Before we start, a reminder, our materials and our non-GAAP reconciliations are posted on our website. Also, unless otherwise noted, our outlooks being presented today exclude the impact of the recently announced acquisition of Prolec GE and all year-over-year commentary or variances on orders, revenue, adjusted EBITDA and margins are all on an organic basis.

Note that some statements we make today are forward-looking and are based on our best view of how we see our businesses today. And as disclosed in our SEC filings and on our website, those elements can change, and we are not obligated to update them.

Today, you'll hear from Scott and Ken, our CEO and CFO, as they provide outlooks on our multiyear forecast and the key longer-term drivers beyond '28. Then we'll do a Q&A session. For those of you who are here on site here in New York, we invite you to join Scott, Ken and the rest of our leadership team for cocktails afterwards.

At GE Vernova, we begin every meeting with a safety moment. I'll keep this one a little bit brief, keep it a little easy. [Operator Instructions]. With that like to hand it over to Scott, our CEO.

[Presentation]

Please welcome to the stage, Chief Executive Officer, Scott Strazik.

Everyone, thank you for being here today, both in the room and online. We have our entire leadership team with us here today. We also have a lot of the finance leadership team with us here today. And we really value these interactions, but we learn from our interactions with our investors. We also think it's really important right now in a very dynamic environment and in an industry in which we're leading to keep you close to our views on the business and the industry and our financial outlook.

So we look forward to the discussion, and we appreciate you giving us the time today. I am going to grab the clicker, which I did not come up with. Thank you, Kristen. And as we go to the first page, there's really 3 themes. Our opportunity to grow this business, electrifying the world is accelerating. It's accelerating because of AI, but there's a lot of other dynamics at play.

The reindustrialization of the U.S. economy, industrial growth in many other parts of the world, the electrification of buildings and ultimately, over time, the electrification of transportation are all driving accelerated growth today. Now we haven't seen demand at this level and this scale in decades. And because of that, the second real theme is this is going to take time.

Infrastructure at this scale is not easy and is going to take time for permits to play out, for construction companies to build things, for fuel to be available, whether it would be gas for power plants, our long lead equipment. This is a larger market for a longer period of time.

Theme three, GE Vernova as a platform of solutions is well equipped to serve this market and the varied applications that are at play today. If we just think about that for a second, the high-voltage fluctuations of AI factories on one end of the spectrum, the need to reinforce and provide more resilience to grids in the world that have gotten too high a renewables penetration rate without the right reinforcements.

Our traditional customers adding more capacity today as reserve margins come down or have a need to modernize the grid. In all cases, Vernova is well positioned to serve because we have the largest installed base, over 50% of the electrons every day in this country, 1/3 of the electrons in the world if you exclude China.

Think about power generation for a second. We are a company that can provide the bridge power today, heavy-duty gas turbines at the end of the decade. We're having very strategic conversations right now on SMR and carbon capture into the next decade with wind as an option for customers where that makes sense.

Similar thing with electrification, strong in high voltage, growing in medium voltage. Prolec will give us more of the low voltage with great complements with grid reliability, grid resilience solutions and a great grid software business. So again, accelerating market, larger for longer with GE Vernova very well positioned to lead going forward.

I wanted to have one page just to contextualize the expanding profit pool we're playing in because we spend a lot of time talking about electric power. But practically speaking, the world spends over $1.5 trillion a year on energy in totality, but only 20% of that energy is coming from electric power today.

Over time, the world, #1, needs more energy to prosper. And based on almost all projections, the proportion of that energy that's going to come from electric power is only going to grow and likely grow substantially. We see the early signs of that happening. You see that with utilities having larger CapEx budgets today than traditional oil and gas companies. You see that with hyperscalers contracting direct with us to provide the solutions for their applications.

You see it with governments that are leaning in more strategically to the electric power system for new capacity, for resilience and for incremental electrons to protect the national security. This is an expanding profit pool in which GE Vernova is well positioned to grow and grow with expanded margins.

One page on the fourth quarter, but a page I'm going to spend a little bit of time on because this was a critical or is a critical quarter for us, really reaffirming the growth acceleration that we're seeing in the business. We start on the left-hand side with Gas Power. Quarter-to-date, we have secured 18 gigawatts of new gas contracts. So to contextualize that, first quarter, we did 8 gigawatts.

Second quarter was 9. Third quarter, 12. We've done 18 quarter-to-date. And by the end of the quarter, we'll land somewhere in the low 20s. When you add that all up, sitting here today, we'll end the year with approximately 80 gigawatts of new contracts on order with about half in backlog and about half in slot reservation agreements.

From a fulfillment perspective, we are on track to get to a run rate of 20 gigawatts annualized by the third quarter of 2026. And as we continue to partner with our customers linked with the 80 gigawatts that will be on contract by the end of the year, we are working very hard today to get incremental production out of our 2 existing gas facilities. Path to do that, 2 gigawatts out of Bel Fort, France. These are with older industrial gas turbines, primarily 7E gas turbines that are 90 megawatts a piece. These are higher heat rates, so less efficient, but very reliable.

We've made more than 1,000 of these gas turbines, very good bridge power solution with no P&E attached, leveraging existing, no CapEx attached, existing capacity we have in France that we're getting a very positive response from customers on. And then 2 gigawatts from Greenville, South Carolina, where we are investing a lot of money.

We've talked about the fact we have 200 new machines that are getting installed in Greenville, South Carolina this year. By the end of next year, it will be an incremental 200 machines that will be installed in Greenville. And as we get to the end of the year with our lean muscle and also with the new labor contract we have with our production workers today in which our production workers are gaining very healthy raises. What we're gaining is an ability to schedule normal shifts on Saturday and Sunday. We have more confidence that we can get more output out of ultimately those 400 collective machines approximately that are being installed largely in Greenville, South Carolina over the course of this year and next year.

So you put all that together, and we're going to end the year with about 80 gigawatts on contract, on track with production with an ability to grow in a very capital-efficient way. And our commercial teams will have approximately 10 gigawatts of supply still available for 2029 deliveries going into next year, in which we sit here today and would expect to be largely sold out of deliveries in 2030 by the end of '26. That's gas. But it's by no means the only encouraging dynamic that we're leading through right now.

Small modular reactors. We've been very pleased, very appreciative, frankly, inspired with the work with the U.S. government right now on recreating a nuclear industry in the U.S. We signed an MOU for up to $100 billion of SMR industrialization in the U.S. earlier in the quarter when the government and ourselves were in Japan. We've got a lot of work still to do.

We're working our way through site selections right now, terms and conditions, but are gaining exponential confidence that in 2026, we can translate what today are MOUs into agreements that are going to accelerate the reindustrialization of nuclear in the U.S. We're very excited about this and appreciative of the administration and working very hard to serve them every day in this regard.

We've had a great quarter in electrification. It will be our largest quarter by a reasonable margin of orders coming directly from the hyperscalers to us in our electrification business, but it's not just hyperscalers. We've signed our sixth HVDC contract with Tennant in Germany, exact same scope as the first 5, 2-gigawatt bipole solution allowing us to execute with exponential confidence and come down the variable cost curve.

It's not just HVDC. We've signed grid resilience reliability solution contracts in Australia, in Saudi, and we signed a very large contract in Iraq in the fourth quarter. So just strong global demand across our electrification businesses. And then wind, this will be our largest quarter from an orders perspective in the year. It will be larger orders in the fourth quarter of '25 than '24, but still soft on a relative basis for where we want to be. But just to kind of give an illustration of what's happening in wind today, we have over 30 gigawatts of installed base that's eligible for repowering between now and the end of the decade.

Our customers through start of physical work have made the investments to protect for at least 10 gigawatts of that 30 to be repowered with investments with us or others, but aren't yet putting in the orders because there continues to be too much tariff uncertainty to drive the economics. But it's an anecdotal view on the activity that's happening, although the orders in totality, although better in the fourth quarter are still soft relative to the potential of what it could be over time.

So very encouraged with our fourth quarter, a real affirmation of the growth that's coming. And then from here, our 2028 outlook. Left-hand side, you can see the numbers on the page. We project at least $52 billion of revenue by '28, 20% EBITDA margins with both power and electrification at 22%, wind at 6%, and we will generate cumulatively $22 billion of free cash flow, '25 to '28, and that's after investing $10 billion in that period of time in P&E and R&D.

Now very consistent with the financial outlooks we provided in both March and December of '24. We view this to be a very grounded financial case, still positioning our businesses with the opportunity to outperform and what I want to do next is walk through those key drivers and opportunities that we see. Starts with price. This is most pronounced in our Gas Power business, where our outlook is tied to the price in backlog today. Our slot reservation agreements, as an example, are at a higher price on average than our existing backlog.

As our slot reservation agreements convert to orders, that's a financial opportunity that will drive incremental margin. Lean. This is probably most pronounced in our electrification business. Our electrification business this year will grow mid-20% directionally, 25% this year. We've assumed in this financial framework that the electrification business grows high teens, 25% to 29%.

As we continue to have productive progress with lean and electrification, that would be an opportunity. Variable cost productivity. Consistent with prior outlooks, we do not include in our financial outlooks variable cost productivity that isn't being demonstrated today. We're managing our teams and setting the expectations with our teams and paying our teams to drive variable cost productivity, but we don't put it in our external financial outlook until it's proven. That's an opportunity for us.

Talked a little bit about wind. This outlook by 2028, in essence, has grounded the onshore wind North America market to approximately 4 gigawatts annually with us having representative share we've held to over time. 5 years ago, the U.S. onshore wind market was mid- to high teens. But this financial outlook assumes 4 gigawatts by 2028, a real opportunity.

And as Michael framed at the beginning of the discussion, none of these numbers include the Prolec GE joint venture that we expect to close by the summer of 2026. Grounded financial case with a real opportunity for our teams to outperform. A page on capital allocation. When you think about my role and a CEO's areas of focus, it certainly starts with culture and talent. It then it is about going to Gemba in the operations and being deep in the details and then getting capital allocation right.

And I'm very pleased with our capital allocation plays in 2025. It will always start with our organic investments. And over the last 2 years, we've invested about $4 billion in CapEx and R&D to support the backlog growth that you're seeing in this business today. In 2025, we've returned $3.6 billion to our shareholders. About 90% of that is through the stock buyback program. We've repurchased 8 million shares year-to-date, a bit over 8 million shares and have acquired approximately 2 million shares in the fourth quarter alone.

The Board last week approved an increase in the stock buyback program from $6 billion to $10 billion and also approved a doubling of the annualized dividend from $1 to $2. Now we aren't just spending money. Top right-hand corner, we've created $2.5 billion of capital by simplifying the organization with business dispositions with negligible financial impact. That's on deals that have closed and deals that have been announced and signed and will close by the beginning of next year.

And we're pleased with the M&A activity we've done so far. The Woodward acquisition in gas is going great. It's very illustrative of other deals we would like to do, small vertical integrations that give us more control over the supply chain in our core businesses. We're only going to do deals that make economic sense. But we're working hard on that and would like to get some more vertical integration deals done like a Woodward.

And we're really excited about Prolec and what that represents for us, and I'm going to talk more about that later in the discussion. So as I wrap this upfront section, just key themes. This is an accelerating opportunity to grow this business. Our growth prospects are strengthening even further. Very happy with our fourth quarter. It's an affirmation of where this company is going.

We've set a new financial outlook through '28, but very consistent with our March and December financial outlooks. We view this to be a grounded financial case, providing our teams a real opportunity to outperform. Good start to capital allocation, but just that, a start with a lot more to follow. With that, I'm going to have Ken come up and walk through the financials. Please.

Thank you, Scott. It's great to be back here in this same room again this year to talk about our improving financial outlook. As Scott outlined, our momentum is accelerating. We're seeing increasing market demand, and we're delivering even stronger execution utilizing lean.

As a result, we're further expanding our backlog with growing profitability. That gives us confidence in our ability to deliver an even stronger multiyear financial outlook compared to what we told you last year. We're doing all of this while we're executing on our capital allocation principles.

I showed you this chart last year. Our financial strategy remains unchanged. It begins with disciplined top line growth, solid underwriting and pricing on equipment sales and continued growth in services. This, combined with our lean culture and a relentless focus on cost out and productivity is driving healthy margin expansion and strong and growing free cash flow generation.

All of this enables us to maintain an investment-grade balance sheet, while funding and strategically allocating capital. Our strategy remains firmly in place and guides our decision-making every single day. We're continuing to deliver better results each year with top line growth, margin expansion, stronger free cash flow generation.

Right now, we're reaffirming our 2025 revenue and adjusted EBITDA margin guidance and we're increasing our free cash flow guidance for 2025 from what was $3 billion to $3.5 billion to $3.5 billion to $4 billion, and that's primarily due to higher down payments on rising orders and slot reservations.

We're also introducing our 2026 financial guidance, which builds on this strong performance in 2025. We expect revenue of between $41 billion and $42 billion, implying low double-digit increase year-over-year with growth in both services and equipment. Adjusted EBITDA margins expand to 11% to 13% as we deliver our growing backlog with favorable pricing plus improved operational execution.

Finally, free cash flow grows to $4.5 billion to $5 billion, largely driven by stronger adjusted EBITDA net of tax, positive working capital with higher progress collections and then partially offset by increased CapEx to support growth and innovation. The key levers of our EBITDA growth and margin expansion remain in our control.

Positive price more than offsets inflation, while we benefit from volume as we deliver our growing backlog at better margins. We also expect meaningful productivity benefits from continuing lean activities as well as significant progress in achieving our G&A cost-out reduction targets. These levers will drive solid margin expansion even as we continue to make important investments in R&D and expenses to support increased production.

Now taking a look at the segments. Power's growth and margin expansion is led by Gas Power. As we achieve 20 gigawatts of annualized gas turbine output by middle 2026, along with continued services strength and higher productivity, positive price, increased volume leverage and productivity will more than offset inflationary impacts and the additional expenses for AI, automation and increased production.

Electrification remains our fastest-growing segment in 2026 and will continue to expand margins as they deliver their more profitable backlog. We expect wind revenue to decline, but we expect EBITDA losses to be similar in '25 than they are in '26 as they are in '25.

In Onshore Wind, we expect lower profitability year-over-year at mid-single-digit margins due to decreased equipment revenues given the softness in orders. That will be partially offset by improved onshore services profitability. And then in offshore wind, we expect to deliver higher revenue in 2026 with slightly less EBITDA losses as we continue driving productivity in that portion of the business.

We've seen our equipment backlog almost double since the end of 2022 as rising electricity demand is driving a need for more of our equipment. As a result, we've grown a stronger equipment backlog with disciplined underwriting based on current costs.

And as Scott mentioned, limited variable cost productivity, where we have a path for it, prioritizing profitable growth. Pricing remains positive, driven by the value we're bringing to our customers as well as continued strong demand. We've also almost doubled the power equipment backlog since the end of 2022. So far this year through the third quarter, we booked approximately 20 gigawatts of gas turbine orders and expect our power equipment backlog to grow even further as we finish this year.

We're seeing a growing demand, particularly in North America and the Middle East for our heavy-duty gas units that will provide reliable and highly efficient baseload generation. We're also seeing growing demand for our aeroderivative and smaller gas units to serve as bridge power supporting data center needs.

Now in electrification, the equipment backlog there has grown by more than 4x since the end of 2022, and it's now at approximately $26 billion with significant orders in Europe to integrate renewables and transmit electricity efficiently. But we're also seeing rising orders in North America, the Middle East and Asia for products such as switchgear, transformers, synchronous condensers that will modernize the grid and support increasing electricity needs.

Overall, the stronger equipment backlog will deliver multiple years of growth along with margin expansion. As the demand increases for our equipment and services, we are increasing our capacity. As we do this, we're taking a disciplined approach to further embed lean across our manufacturing lines, optimizing factory floor layout as well as reducing cycle times.

We've also been adding and training additional skilled labor and increasing shifts in our factories, where we're expanding capacity. Compared to last year's outlook, we're also investing an incremental $1 billion in CapEx between '25 and '28 at attractive returns. Reducing our cost structure continues to be a key building block in our EBITDA margin expansion road map. We began executing our G&A cost-out initiatives in early 2024, and we're making solid progress there.

We're accelerating our transformation, and we're on track to achieve our $600 million cost reduction target as we implement more efficient organizational designs with process improvements. In 2026, we'll realize a substantial portion of the benefits from the approximately $250 million restructuring program that we launched earlier this year, and a portion of that will go to reduce G&A.

We expect to become even more efficient going forward as we increase the use of AI in how we do work. Now in addition, we're also working to drive more variable cost productivity, leveraging our scale, while implementing lean and deploying more robotics, automation technology and AI. Our sourcing team is making good progress, leveraging our scale to deliver productivity. For example, you see the team has already worked on about $1 billion of our direct spend by negotiating as 1 GE Vernova.

In doing so, we reduced the average cost of this spend by 13% with those savings to be realized in '26 and '27. These highlight one of the many ways that we have to continue to expand our margins further going forward. Let me touch upon where we are with our offshore wind progress. We're proud of the work the team is doing. We're driving productivity in the factory and out in the field as we incorporate our learnings from our first peak installation season, which was this last summer.

We expect to be materially complete with both the Vineyard Wind project and Dogger Bank A project by the end of this year and the remaining portion of the Dogger Bank project in '26 and '27. As we reduce the existing offshore backlog, we expect EBITDA losses to improve.

Now I'll focus on free cash flow for a minute. On the left, you can see that we have continued to improve our free cash flow linearity in 2025. On the right, as mentioned earlier, we're raising our cumulative free cash flow by 2028 from $14 billion to at least $22 billion, primarily from the result of $6 billion of higher adjusted EBITDA net of tax.

We're also expecting progress collections to continue to be a cash source given the robust demand environment we're operating in. And then to support growth and innovation, we're taking a piece of that, and we're investing in CapEx an additional $1 billion in that time period. We're generating higher free cash flow with better linearity. And all of this makes it much easier for us to be flexible with our deployment of capital.

We're executing well on that disciplined capital allocation strategy that we framed back last year in December of 2024, and we remain committed to maintaining our investment-grade balance sheet. With the increased free cash flow outlook, we now expect total cash sources to be at least $30 billion from the date of the spin.

So far this year, we've already returned over $3 billion of capital to shareholders through share repurchases and dividends. And we remain committed to returning at least 1/3 of our cash generation to shareholders over time. Given our strong cash position and strong growth trajectory, we've doubled our annual dividend to $2 a share and increased the buyback authorization to $10 billion.

We expect to grow the dividend over time as our earnings grow, and we expect to opportunistically continue repurchasing our shares. After considering the cash we need to run the business, we now expect at least $16 billion of capital to deploy even after investing organically in our business. This is $6 billion of incremental capital compared to what we showed you at last year's event.

We expect to use a portion of this available cash to fund the Prolec GE acquisition, which isn't included in this cash walk. We plan to fund that $5.3 billion acquisition with an equal mix of debt and cash on hand. And going forward, we'll continue to evaluate inorganic opportunities to gain scale, vertically integrate our supply chain and accelerate R&D.

At the same time, we'll also assess additional shareholder returns as well as organic investments. Our strong net cash balance sheet and free cash flow enable us to deliver on our capital allocation priorities. Based upon all this, we now expect to deliver an even stronger set of results by 2028, and that's built on encouraging sector fundamentals, but also on solid operational execution.

We're increasing our revenue outlook from high single-digit to low double-digit growth on incremental strength in both equipment and services, all while maintaining disciplined underwriting. We're also increasing our outlook for EBITDA margins by 600 basis points to 20%, driven by increased price and volume leverage, particularly in Power and Electrification, along with additional productivity from lean.

The higher EBITDA combined with higher down payments on rising orders and slot reservations in addition to better working capital velocity will drive at least $22 billion of cumulative free cash flow with 100% conversion over time. The attractive market, combined with solid execution through lean will result in significant profit and free cash flow growth for Vernova. We're excited to lead the industry, and we're excited to drive significant value creation for our shareholders.

Now with that, let me turn it back to Scott.

Thank you. Thank you for the partnership. Thank you for everything you're doing for GE Vernova every day. I appreciate it. I wanted to just frame this. The left-hand side is really everything we've talked about so far from a financial perspective, $52 billion of revenue by '28, 20% EBITDA margins, the $22 billion of free cash flow cumulatively, and we'll keep taking down our share count every year, fine.

We needed to provide a new financial outlook to continue to drive productive conversations with you. But that's a start. That's not why I get up in the morning and I have a kick in my step. That's not what our team's ambition is. Our ambition is much greater than our '28 financials. And I just wanted to start to spend a few minutes with you today in this third section on where this company is going into the 2030s.

You start with the backlog. We have $135 billion backlog today that will grow to at least $200 billion by '28. You can then extrapolate that out for how much more growth there is in this business into the 2030s. Our electrification backlog will go from $30 billion to $60 billion between now and 2028 that will drive its growth into the next decade.

Our Gas Services business will have its baseload power installed base go from 200 gigawatts to 400 gigawatts over the next 10 days that creates an incredible financial annuity stream for us for a very long time. And while those core elements of our business demonstrate substantial strength, we are investing in businesses that are negligible impact, if not negative, with the R&D dynamics this decade, we have a lot of conviction in the value they're going to create in the subsequent decade, whether that be SMRs, whether that be grid software, whether it be a number of exponential technologies we're going to talk about today.

So we're pleased with our start. We're focused on delivering this financial outlook between now and '28, but we're playing a much bigger game here. On the backlog, just to walk through a little bit more, $135 billion to $200 billion. As I said, that includes electrification backlog doubling by 2028. It also will have our gas equipment backlog doubling between now and 2028, but the gas services backlog in nominal dollars will grow by an even larger amount than the equipment backlog in this period of time.

This has our wind backlog shrinking between now and 2028 on the orders outlook that we framed up. And again, by '28, the assumption is 4 gigawatts a year annually in the U.S. That's an opportunity that if we see an orders inflection could take these projections higher. And we have not included anything in the $200 billion for our SMR book, but that represents a real opportunity from here.

This is an important page because our electrification business is growing substantially. And as we're framing it up here is how we're going to financially start to represent our electrification business to you in 2026 and beyond. So you take that $30 billion backlog right now. The largest piece of the backlog is our grid system integration business. This is our Europe HVDC projects we've secured. This is the complex solutions we're providing the data centers today. That's about $15 billion of the $30 billion backlog today in grid system integration.

The second largest business we have inside electrification is our power transmission business. That's transformers, switchgears, circuit breakers. Today, that represents about $8 billion of the $30 billion of backlog. But then when we close the Prolec acquisition by the middle of next year, the size of the power transmission backlog becomes approaching the level of grid system integration as our second largest business inside electrification.

Power conversion and storage, $5 billion backlog of the $30 billion. This is where we've been adding orders over the course of this year with grid reliability and grid resilience solutions in Australia, in Saudi Arabia, as an example, where we see substantial opportunity to continue to grow this business.

And then finally, our 2 smallest businesses, grid automation and grid software. Grid automation that does a lot of sensing and inspection on existing equipment, grid software to complement that. These 2 businesses together drive a lot of the grid intelligence that the world needs to optimize the existing grid system. These are our 4 go-forward business segments or sub-businesses within electrification and how we will financially report them. And I just have to tell you, again, with every 90 days, I have that much more confidence and conviction on what we're creating with our electrification business.

One page on Prolec. Left-hand side, same financials we shared on October 22. Right-hand side, just to reinforce, it's been 45 days, since we signed the deal approximately. I have even more confidence today in the ability for us to grow this business and the synergy with end customers, merging these businesses together. I spent time in our 4 largest factories that we're acquiring and have even more confidence today that as we apply our GE Vernova lean playbook to these factories, the operational productivity will be substantial.

And just as importantly, I just like the cultural fit and the people. And I'm really looking forward to having them inside Vernova by next summer and making these businesses everything they can be. An important page on the Power services installed base and revenue path forward. If you think about the Power segment today, about $12 billion of the $19 billion in revenue this year is in gas and steam services.

That number by 2035, that $12 billion will be at least $22 billion. So you just pause for a second. The entire business segment is $19 billion of revenue today, $12 billion in gas and steam services, the rest equipment revenue, hydro, nuclear, and we see a clear pathway to this revenue stream of $12 billion to be at least $22 billion 10 years from now.

Why? Because the baseload installed base is doubling. These are machines that run a lot and have very healthy services annuity streams attached to it. That's most clearly driven in our HA revenue. In our financials today, we have a little bit more than $1 billion of HA services revenue in today's business. By 2035, that will be $4 billion annually as we grow our HA product line.

We have very strong escalation protections in our long-term service contracts that every year drive price and are continuing to get very strong orders price index benefit in our services business that will drive revenue growth throughout this period of time. We continue to see very healthy upgrades into our gas installed base. We've talked in the past that we project that to grow at least 50% and likely will be higher late in the decade as customers work to get every amount of output and performance they can out of the existing installed base.

And we continue to see very strong demand for upgrades in steam and aeroderivatives and our controls business that all just contribute to an incredible asset that creates substantial value in a very smart economic way, where installed bases are already built, but also is an incredible asset for our owners.

Page on SMR. Picture on the left, this is our Darlington project in Ontario. We started construction in the spring. That is where we are right now. This plant is getting built. We are on schedule. We are on budget. We are making substantial progress. I talked earlier about how motivated and inspired we are with the U.S. administration's focus to build a nuclear industry in the U.S. and are highly confident we're going to make substantial progress with them in the months that follow.

But it's not just with the U.S. government. We're making substantial progress with the NRC today on getting approval to construct the first site in the U.S. TVA last week received a $400 million grant from the Department of Energy to advance their Clinch River project. And we have real commercial momentum in Europe, in Finland, in Sweden, in Poland.

The SMR solution is going to be a very compelling alternative in Europe. And I gain more and more confidence and conviction into the next decade, this is going to be a valuable part of our business. Now long-term investments we're making are more diversified than that. On the left-hand side, I spend a lot of time talking about our horizontal investments across the company. That's both AI and robotics. From an AI perspective, we're seeing real productivity gains. Part of how we're driving the growth in gas that's both on new units and in upgrades and doing it in an efficient way is with AI.

We're getting a lot of volume growth, very modest growth in our engineering resources because of the investments we're making here, and we're doing a lot more in '26 that's embedded in our financial guide. Robotics. We have 8 lighthouse projects that we're executing on in 2026, primarily in power transmission and gas and parts of our factories that are the most advanced with lean that as we execute on those projects in 2026, we project extrapolating across the analogous supply chain throughout the company, real opportunity for us to drive variable cost productivity.

Now we're also investing in new products that can create new businesses for us. Carbon capture is a good example. We have a running direct air capture facility in Niskayuna, New York today. We've been contracted to build a 1,500-ton direct-air capture facility outside of Calgary and Canada that will be built in 2026. And we have a high degree of confidence that with this carbon capture technology in the end, we can apply this to gas turbines and are having active discussions with another number of customers that can come into play in the 2030s.

Fuel cells. We have a dedicated facility in Malta, New York and are getting more and more confidence and conviction with our thermal spray technology relative to what most of the industry uses today, which is more ceramic processing, that we can manufacture fuel cells in a very cost-competitive way at a larger physical scale. And that this is another example of a business that we have or a product that we have today that we see a very clear right to win in.

Now we're 12 to 24 months away from commercializing this product, add another, make it 24 to 36 months away from industrializing, but it's something we're really ambitious about today. Solid-state transformers. We've talked in different settings about the fact that we're making investments and have co-investment programs right now with hyperscalers. This is an example with our solid-state transformer that we have an R&D sharing arrangement with one of the hyperscalers to develop in '26. And if we can meet spec through the R&D, a commitment from them to buy 1,000 solid-state transformers from us in '27 and beyond.

We have a lot of confidence and conviction in what this business can be. So you take these products, and this stuff is hard, but we have the technical expertise. And almost as importantly, we know how to build these products at scale and industrialize these products at scale in a world in which the economics are going to play a meaningful role, and we're really excited about all these investments.

Page on culture. Every day, I have so much gratitude and pride in the teams that I'm able to represent. And if I just spend a minute on this page, top left-hand corner, it's a little bit hard to see, but that's a picture in February when we were in Saudi with our female engineers, with members of the Royal family. These women are changing our company, while simultaneously changing their country. Hard to go back to the hotel room at the end of the day and not be pretty pumped up with what we're doing in Saudi today.

Bottom left-hand corner, our launch MIT event and our alliance this fall. We're working hard to make Vernova a very attractive platform for young kids to come in and start their career excited about what the world can look like with further electrification. We've got a number of research projects that we're working with them on today and are hiring a substantial number of these kids walking distance from our headquarters in Cambridge.

This is a priority for me. To become the company I want us to become, we need early career young talent that are swarming our offices, and we're gaining real traction on the MIT campus. Top right-hand corner, I went down to Family Day. At our Greenville, South Carolina factory in November, we had 6,500 people at a Family Day on a Saturday, our production workers, our salaried employees, bringing their kids, bringing their grandparents to show them what we're doing and what we're building.

When I went home on that Saturday night, I had that much more confidence and that much more conviction that, that factory in Greenville, South Carolina is as important as any factory in this country, when it comes to the U.S. competitiveness and the reindustrialization of this economy. And that team is going to perform. And then the last week, at the end of the summer, to give a little bit of context, my marketing team laid out a plan for the rest of the year. And I asked them to do one more thing this year that no other company had done before, but to do it in a very entrepreneurial way, i.e., not much of a budget.

They came up with what we executed on our giving campaign in the last week. On December 2, on National Giving Day, we launched a toy drive with Toys for Tots, asked our team to break or set a Guinness Book world record. And over the course of 24 hours with our team donated over 23,000 toys.

As I was watching our team interact that day because every hour, every 90 minutes, we were kind of providing an update on how far along we were on the journey towards breaking the record. I just could step back and see that the company we're building and the team chemistry that's coming together -- our chance to do something great is substantial.

The picture you see on the page was us taking over Rockefeller Center yesterday with an innovator's toy land with our scientists trying to inspire high school kids and many kids throughout New York to be excited about this industry. So I get this is a financial update. We've gone through all the numbers, why the pictures and the stories because this is a critical enabler towards us meeting our potential into the 2030s.

And if I compare where we are as an organization today relative to our first Investor Day in March of '24, our second in December '24, we're making a lot of progress in this regard, and it's a critical enabler for the company we're going to become. So to wrap, New financial outlook between now and 2028, grounded case providing an opportunity for our teams to outperform. But we're not playing for 2028.

We are running this company. I am running this company with a high level of confidence with humility on what we can become, and it is a much larger, much more profitable company in the 2030s. We are building a platform to serve this accelerating growth market of solutions that varies across the spectrum to high electro-intensive AI factories to very complex projects in parts of the world that need substantial infrastructure build for their grid to work.

Attached to all this is the culture. We need to stay humble. We need to stay hungry, serving leadership approach with our teams, with our customers, with our government with an eye towards reaching our potential. And as we do all these things, I love our chances for what's going to come in the 2030s and beyond.

So with that, I'm going to wrap this part of the presentation. I'm going to ask Ken and Michael to come up if they would, and we'll jump into some Q&A, please.

[Operator Instructions] So with that, let's go with Nicole right here in the middle. And oh, please introduce yourself, name and firm.

Yes, Nicole DeBlase from Deutsche Bank. Thanks for the new information about the service story into the 2030s. That was something that I was excited to hear today. Can we talk a little bit about if that also creates potential for further margin expansion? We have all this historical wisdom that the service business was always very margin accretive, but obviously, equipment margins are also expanding a lot, too. So I guess what does that mean for margins as we move into the 2030s?

Yes. Maybe I'll start. Scott, you can add. As we look at this, we've been talking since we first started talking with you in March of 2024 and getting ready for the spin about with everything that we're doing within the service business, we see the opportunity for power margins, so we called it the segment margins to expand by 50 to 100 basis points a year just based upon the productivity that we're seeing within the service portfolio because you roll back the clock at that point in time, and that was a little before what we've seen with the equipment takeoff where it was.

So use that as a baseline. The answer there to your question then from that is, yes, we continue to see that opportunity. In fact, with the page that Scott showed you with all the things on the right, today, we have 125 or so H-class turbines running. As we get more of those running, and we had a number on the page that shows how far we get on that, we'll get productivity on that service. That will bring incremental margins.

The bigger the installed base, the more these turbines run at baseload generation, the more they're going to throw off service streams. And then just layer on top of that the fact that through this period, as we price new units higher, then what's also happening is you get a carry-on impact in the service portfolio or the service contract that's going to follow that unit that you're going to see incremental pricing.

I'd just reinforce that the margin expansion we're seeing on the equipment side, we will also see in our services book, but there's more of a lag, right? Because you deliver equipment and gas between now and 2030, you don't get to your first major outage until 4 or 5 years after that. But the margin expansion that we see in our services book is analogous to what we're experiencing in equipment.

So by default, with that services growth, it will be an enabler of incremental margin expansion. It's also very tied to the investments we're making in things like AI and robotics, where we see real opportunities to drive productivity in the field in very material ways in the next decade that is another leg of the story.

Got it. Let's just come right here to Mark Strouse.

Great. Very helpful presentation. Sorry if I missed it, the incremental 4 gigs that you're talking about, is that all within heavy duty? Can you break that down a bit? And then can you talk about the opportunity that still exists to add additional shifts to kind of eke out incremental capacity?

And maybe kind of a bigger picture, can you talk about lean? I know you put it in baseball terms, it's probably never game over, but how to think about kind of what inning that you're in, Scott, under your tenure, where we...

So Mark, 2 gigawatts is coming from France, and those are older 7E technology, higher heat rate, less efficient, but very reliable, often gas turbines that have used historically in industrial applications. That in today's world are very attractive for bridge power more than anything. Some may run baseload indefinitely, but the heat rate is admittedly higher, okay?

The other 2 gigawatts is really of the directionally 400 machines we will have installed by the end of next year. It's getting a little bit more out of those machines, okay? Now there's a lag factor between installing them by the end of the next year and getting more output more because of the supply that we need that feeds those machines, which is why we don't see 24 gigawatts until 2028, even though most of the machines are installed by -- of the 400 are installed by the end of '26.

I don't know, if there's necessarily a lot more, let's call it, shift leverage per se. That was lower-hanging fruit when we signed our new production contract with our production workers in the beginning of the fourth quarter. But most definitely, we still see substantial opportunities in lean. So from a baseball analogy perspective, in gas, third inning of a 9-inning game.

But maybe just one thing to add to that because I think that covers all of the gas bases to your question. Think about the shift and the lean opportunity in our Electrification segment. That's a business that for many years wasn't that profitable, didn't have that much volume growth that's happening.

So as we've talked about the investments that we're making in Charleroi, PA to expand the capacity in that facility, a lot of that is being driven by adding shifts, relaying the floor out, that's lean stuff. So gas, we've gotten a lot of those along the way. We still -- I point that out because the business and where we see the backlog going on the electrification side, we have a lot of opportunity to leverage shifts and lean in that business as well.

Let's go to the other side of the room. Over there, Joe. I think that's Joe. I can't light. Yes, the lights are bright.

Yes, Michael, you got it right. So way to pack up in a short period of time. Joe Ritchie, Goldman Sachs. I want to go back to the first question that was asked around services. So can you just level set, Scott? So today, you've got $12 billion in your backlog.

What's the margin in that today or in your revenues -- I'm sorry, $12 billion in revenues today. What's the margin today? And then $22 billion by 2035, I mean, we'll be well into the 2030s. The pricing that you're getting on your contracts today, you'll start to see. What are we -- what's the kind of dream on 2035 margins?

Well, I think the way we always talk about it, Joe, is that almost all of our profit in our power business today is in that $12 billion because the rest, there's negligible margins still today, whether that be nuclear, hydro or the gas equipment that really we don't start to yield profitability in equipment in any material way until the third quarter of next year, which is the beginning of, call it, the higher-priced orders starting to fulfill.

So it's all the profitability in the business today. But going back to the discussion we had earlier, for all the variables you're talking about, we see there to be substantial margin opportunity that follows. But the 2035 in many regards is more the beginning of that in margin than the end because, again, you think about orders we're taking today.

We're shipping in '29 or '30. You'll like the equipment margins. We won't get to the first outage on the stuff that we're taking as equipment orders today until about 2035. So by no means are we saying that's like a plateau on the revenue growth or the profitability. But it was a logical time that, in essence, most of the stuff that we have on equipment order today will be starting to contribute to services revenue, which is why that 2035 milestone felt like a good representation of the art of the possible with a lot that will follow from there.

Let's stay on this side of the room and go with Andrew. So right up in the front row, please.

Andrew Obin, Bank of America. Just a question on electrification. How should we think about capacity additions in electrification?

One of your competitors had a slide, they sort of indicated the capacity gap right now. They still think there will be capacity gap much narrower by the end of the decade. But then if you look at the capacity additions in North America, like you literally have Chinese players putting in capacity in the U.S., you have Koreans coming in, you have Brazilians coming in.

How does that all play out? What does your crystal ball tell you where are we in terms of capacity for you and the industry by 2030?

Well, I would start by just framing that it is factual that of the $1 billion of incremental CapEx that we're providing in this year's outlook versus where we were a year ago, the largest proportion of that is in electrification.

Electrification. Yes.

It isn't necessarily North America. There are investments globally to position us to win effectively. Andrew, the way we continue to look at this is really by going to the customers, talking about the demand projections they have, in many cases, signing framework agreements with them that aren't yet orders, but that are a road map for us to invest and for them to draw upon as they need incremental supply.

And when we've done that with, as an example, the U.S., to your question, with our largest utility customers in the grid space, the capacity we're investing to relative to the demand they're projecting with these framework agreements, there's still a gap between our investment level and that demand.

Exactly how this plays out with grid, I often am very open that it's a much more open playing field to project supply with grid equipment than as an example, gas turbines. So I think we need to be especially thoughtful whenever we're evaluating incremental capacity. But at the same time, think about it this way, we're kind of telling you a backlog that has doubled twice already since we spun.

And we have a high degree of confidence it is going to double again between now and 2028. We see less than $1 billion of incremental CapEx to support that. It's the largest piece of the $1 billion of incremental CapEx, but that's a pretty attractive investment in return in securing that amount of growth.

We also got a nice benefit lying ahead with the acquisition of Prolec GE as we think about transformer capacity, right? Because we were constrained in some ways as to markets that we could sell into based upon, where the products were built. And with their capacity expansions over the last couple of years, along with what we're doing, we're getting the opportunity to expand capacity through the acquisition itself. So a lot of these -- a lot of opportunities to expand there.

Let's come to the front of the room. So literally right in front of me. So Stacy, come to Moses, please. And it will take a second.

Moses, BNP Paribas. Great presentation. I want to return again to the gas service slide, that $12 billion. Doing a little bit of back of the envelope, if we thought of that $12 billion on an inflation-adjusted basis, just the $12 billion, just the base that exists understood before price, that would take you maybe to $16 billion by 2035, just on the $12 billion.

Then you add -- you double the base. I know it's not all feeding in by 2035, but let's imagine the year that it is, whether that's 2038, 2040, whatever that looks like, that would sort of take the $16 billion to north of $30 billion in theory, depends on mix. And then there's price on top of that on that second half.

So are we looking -- someone mentioned dream the dream on this, but thinking scale, not margin, are we looking at a gas service business that really keeps marching all the way toward well into the 30s billion range, not even that $22 billion longer term?

Well, what we would say is we very clearly see considering on the gas equipment business, we are highly confident we'll be sold out of deliveries in '30 by the end of next year or largely sold out. And thinking about deliveries in '30 that we're already past the 2035 milestone we'll experience our first outage, it's clearly continuing to grow from there.

As long as you believe the installed base is going to continue to grow as this order book continues to grow, maybe not at the same percentage growth we've certainly experienced this year, we should expect a higher services revenue base in '26 and '27 and '28 because every year, you see us continue to add to the equipment backlog -- you got to add another 4 to 5 years before the services calories start to come through.

So I don't think we're ready to kind of quantify that number per se. I view our role here is to continue to give you incremental financial floors and incremental financial foundations to build upon. And 2035 is a more extended financial foundation than -- but it's a step forward to help you think about with everything we do, a foundation to build upon. And that includes power services in 2035.

Let's go over here to the far right in the front row, Logan over, and we'll go from there.

UBS, I wanted to just segue into that in terms of floors. So when we think about power margins of 22% in '28, that's a great number. It looks like it implies sort of $7 billion of EBITDA in power by 2028. But if I were to just play devil's advocate, the implied incremental margin is like between 30% and 35%.

And most of that bridge between now and '28 is pricing, which obviously comes with much higher incremental. So is the '22 by '28 a floor? Is that the right characteristic -- characterization? And why is the incremental implied so low relative to what it could be given all the price?

Well, I think as we framed up the 5 variables that can make it better, one of the things we're very clear on is we're not projecting any variable cost productivity beyond what's demonstrated today. Yet with this much volume growth that on the equipment side, we have not experienced in decades, it's not unfair of you or me of the teams to expect variable cost productivity that would change the incrementals on that volume.

But we've set up a financial algorithm that we're comfortable with on how we talk with you on what is in and what the opportunities are. I think we do a pretty good job being very overt on what we think can lead to it being better and variable cost productivity is a big dynamic there.

Now can there be some conservatism in our approach? Yes. But at the same time, we haven't experienced this much volume growth. And certainly, if we execute well from a safety and quality perspective, naturally, in the gas equipment side, we're going to experience variable cost productivity simply on the volume with a generally flat overhead base. That's all part of the opportunity to do better. Yes.

Got it. Let's come right here, Stacy.

Andy Kaplowitz, Citigroup. So Scott, the pacing of orders in Q3 and Q4 for turbines, as you said, just kind of exploded. Obviously, it seems time with the uptick we saw in hyperscaler CapEx. So maybe talk about how much of the uptick was driven by hyperscalers versus global demand.

How that pans out going forward? And obviously, if you book a year's worth of work in a quarter, you would kind of have to -- more consistently, you'd have to raise capacity even further. So maybe talk about what's going to happen from here.

So it's a healthy mix of traditional customers, utilities, IPPs. We have wins in the fourth quarter in Vietnam and Mexico. But it is true that the 18 gigawatts in the quarter have a larger proportion of hyperscaler orders than what's in our backlog, which is only 10%.

So we've talked about the fact that we project going forward that to be more like 1/3 on the gas side. And in the fourth quarter alone, it may even be a little bit larger than that, but not -- it's not the only order book. I mean we have mid-teens number of customers in that 18 gigawatts that really covers the spectrum.

Now I think what we're trying to get to in a fourth quarter like we're having has helped us is more productive adult conversations saying, listen, we got to stop living kind of transaction to transaction with you with us taking up price and you getting grumpy when there's nothing left. So can we please start having conversations on 31 to 35? What is a floor minimum that you need? And then let's contract for that.

Now we haven't gotten one of those constructs done yet. So when we talk about being at 80 gigawatts by the end of the year, that's still in the context of what I would call many transactional orders. But we're having healthy conversations in this vein with the hyperscalers saying, if you know you need this and you're ready to go to that period of time, what's the floor number for 31, 32.

And I would expect over the course of next year, with at least 2, we signed volume commitments in that duration of time of, call it, 31 to 35, which continues to let us plan and continues to let them plan and then they can syndicate where it goes and who builds and operates it in the end. And we're finally getting to the point where those conversations are converging.

And that's what gives me so much confidence in this just being a larger market for a longer period of time because no one is running away from that discussion. And I don't think they will get done by New Year's Eve, but I do think a few of those will get done next year that are contributions to our orders book, but only a sliver of it is the 30 deliveries that are left because they're also getting more and more confident in understanding really how much can get built every year based on the other variables I framed up beyond our equipment supply, but they don't want to keep living this way where every 90 days, we're having a level of tension in a very dynamic environment, and we're trying to address that. And I think we'll make progress there next year.

Got it. I think we have time for a few more questions. So let's come all the way up to the front row right in front of me with Marc.

Marc Bianchi with TD Cowen. I wanted to ask about sort of the bring your own capacity and bridge power that we're seeing evolve. There's companies with smaller-sized gensets that are having a lot of success signing up work there. One of the largest players just announced doubling of their -- more than doubling of their capacity to supply that market. You guys don't play in that size of a genset, but just curious how you view that and the competitive dynamic?

Well, I think we don't have a gas turbine or air derivative solution that's smaller than about 35 megawatts, okay? And then when you get to heavy duty, it's 60 to 90 is really as small as they go. But that's an example where we talked about the 7E applications, which are 90 megawatts, each one in simple cycle that we've got a very attractive response from the customers on even though the heat rate is higher.

When it comes to very small gensets, we don't really -- I can't give you one example of a deal as an example, we've lost to many small applications relative to what we're bidding. And I don't have any examples of active deals where it's us in that competition. There are projects where our heavy-duty gas turbines are attached, that there are smaller reciprocating engines and otherwise that are providing bridge power over a period of time.

But I don't really cry my beer over that because it's enabling the heavy duty to get done later, but enough power to bridge to that solution. And as we talked about with that power services page, yes, we're very happy with the equipment economics, and we'll share with you all at the January earnings call, our change in margin and backlog in 2025. But the blade is still more lucrative than the razor in our gas business over the long term, including on an NPV basis.

And we'll get that services annuity stream. And if some of these smaller applications enable a few more projects to go forward, and we're on the back end of that with the heavy duty, we're going to go home at night and feel okay about those transactions.

Got it. Right here, Logan, if you'll come up to Julian here in the front row, please.

Julian Mitchell at Barclays. Maybe my question would be around the gas supply and demand kind of balance. So you have the doubling of the installed base of gas capacity. Maybe help us understand the assumptions around kind of global electricity demand growth over that time and the role of gas, if that's moving within that.

And when you're looking at your ability to supply that, how are you sort of balancing the need not to lose market share with a sort of position of responsibility as the global #1 to keep pricing in good shape?

Well, our share as a proportion of a much larger market this year is not going to be a lot higher than it has historically been from a heavy-duty perspective. That's true at a global basis when you start talking about we can have an 80 gigawatt global market.

Now our share in the U.S., which is, from a legacy perspective, been fairly high, will be even higher than historical. But there's a lot of business in other parts of the world with 50Hertz applications that other OEMs are winning, and you can see that in the McCoy reporting. A little bit of the dynamic that I want to draw on, though, when you talk about the capacity tug of war between equipment and services is drawing on something that's pretty important because when you go back to the services revenue going from $12 billion to $22 billion, that takes a lot of heavy-duty supply chain output to service the outages.

So the point I'm just making is as we've built out the business case for the investments we're making in gas, we need a fair amount of these investments simply to support the baseload growth because our outage numbers are going to grow substantially in the middle of the next decade. And if this level of new unit demand sustains itself for a number of years, we will have a pinch point. And that pinch point, we will have to address at a later date.

Do we see that to be something we are going to be taking on in the next 18 months? No. Because we feel pretty good over the next 18 months from both our ability to meet the deals we want to win on the equipment side and the services growth we projected. But the truth of it is with that services growth and if we really do sustain an 80-gigawatt directional new unit market that would stay at that level through to, let's say, the middle of the next decade, we would need to invest further in our supply chain to manage the 2 dynamics together of a lot more outages and continued demand.

So said another way, just to repeat it, some of the new unit growth that we are -- have underwritten this decade and the early next decade, we've somewhat assumed gets consumed with services outages and output by the middle of the decade. If this size market sustains itself, we will have to make further investments to meet those 2 dynamics together. But that would be a discussion 18-plus months from now.

And if -- I think that point of depending on what we see with the new unit growth and that available capacity could start to shift a bit to support services. As we're looking at these investments, and you heard us say throughout the conversations, we're looking at favorable returns on all of this.

That dynamic, even though we're getting favorable turns on these capacity investments today would drive even better incrementals to the question that was asked earlier as services start to flow through. So we feel really good about the way the team is helping to look at the capacity and knowing kind of when that -- when we need it for because we are going to need it longer than that when the equipment shifts to services, and that will create incrementals that are much more positive.

Let's do one last one. We'll come right here in front of me. So to Andrew. Let's give Stacy a moment to bring you the mic, David sorry, David.

No, no, you're fine. Pop upside the head. I was wondering if you could touch on the pricing backdrop for the turbine market. You've had a major inflection upward in bookings. I was wondering, if you could touch on pricing level kind of incrementally versus previously in the year. And where are things going? What's the reaction from the customer base looking forward at pricing of turbines?

So just taking a step back again, and it gives a little bit of context over time. I mean, our first real pricing increase of substance was in May of '24, and it took us until November of '24 to realize that price, and that was significant.

We then went through a level of price increases in December of last year and have been incrementally raising price throughout this year. The price growth in the fourth quarter is substantially more than the price realized in the first 3 quarters, so price benefit continues to accelerate.

Now not all of that will be in our change in margin and backlog in the fourth quarter in the January earnings call that we'll show the fourth quarter backlog because a lot of it will still be in slot reservation agreements on New Year's Eve. And what we show each January is just the firm backlog, not the slot reservation agreements.

And I think likely what we will be framing up to you in January is, #1, a very healthy change in margin and backlog in '25, but we'll provide commentary directionally on where we project it to be in '26. And in the case of gas, because most of the orders next year are already slot reservation agreements by the end of the year, we see another year with substantial margin accretion and backlog based on what's already papered. And within the year, the fourth quarter is our strongest quarter of both new contract commitments, but also at higher pricing.

Before Scott bounce me on the head. Maybe I don't know, Scott, if you have any last closing comments you want to make. I know we're late. We've gone for 1.5 hours almost.

I would wrap where we started. We appreciate you giving us this investment of time. We learn from these interactions. We are appreciative and proud of our teams and our customers and their belief in us. We are confident in the financials we framed up today and view them to be very grounded with an ability to outperform, but we also wanted to spend a healthy amount of the time today talking about the company we're creating into the 2030s.

View this to be the first of many conversations in that regard. But in a long-cycle business with the investments we're making, there are a lot more conversations to come because when I look at this company and what we can create, the art of the possible is great. And if we get the culture right, I love our chances from here.

So thank you all for the time. Thank you to my team. We will all be here and available for the next hour or so. So thanks again, everyone.

Yes. That will conclude the webcast portion for those who are in the room.

Good day, ladies and gentlemen, and welcome to GE Vernova's conference call to discuss the acquisition of Prolec GE as well as GE Vernova's Third Quarter Financial Results and Outlook. [Operator Instructions] My name is Liz, and I will be your conference coordinator today.

[Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Michael Lapides, Vice President of Investor Relations. Please proceed.

Welcome to GE Vernova's conference call today, where we will start by discussing the planned acquisition of the remaining 50% of Prolec GE and then cover our third quarter 2025 earnings results. I'm joined today by our CEO, Scott Strazik and our CFO, Ken Parks.

Today's remarks include GAAP and non-GAAP measures; including stand-alone forecast of the Prolec GE joint venture. Reconciliations of GAAP to non-GAAP measures and related information are in our Form 10-Q press releases and presentation slides available on our website. Our Prolec GE comments reflect expectations for the transaction and the joint venture's business cost and revenue synergies from the transaction and capital allocation plans. Unless otherwise noted, year-over-year changes in orders, revenue, adjusted and segment EBITDA and margin or on an organic basis.

We will make forward-looking statements based on how we see things today. We may update these statements in the future, but undertake no obligation to do so. Actual results may differ materially due to risks and uncertainties described in our SEC filings.

With that, let me turn the call over to Scott.

Thank you, Michael. We are excited to update you on our announced acquisition of the remaining 50% of the Prolec GE joint venture from our partner, Xignux. We partnered with Xignux for 30 years to build a world-class transformer business. This is a business we know well and is an attractive acquisition for GE Vernova consolidating a leading grid equipment provider that produces transformers to serve North American utilities, industrials and data centers.

While Ken will go into the details. We're paying $5.275 billion planned to be funded 50% with cash and 50% with debt. We expect the transaction will close by mid-'26. This acquisition fully aligns with our strategic and financial objectives. Prolec will further strengthen our capabilities in the grid equipment market, primarily for transformers in North America, but also over time, beyond North America, accelerating the growth trajectory of our fastest-growing segment, electrification.

The acquisition is immediately accretive to EBITDA before synergies. We are confident in the cost synergies and expect to drive revenue synergies over the medium to long term after bringing Prolec fully into GE Vernova. This transaction is also consistent with the disciplined capital allocation strategy discussed at our December '24 investor update, where we highlighted our commitment to fund organic growth, return at least 1/3 of cash generated to shareholders and execute on targeted M&A like this transaction, which aligns with our core and adds to the electrification product solution we can deliver to customers.

Turning to Slide 5. We expect Prolec to generate $3 billion in revenue this year at strong EBITDA margins of 25%, making this a margin-accretive business to GE Vernova overall. Prolec is focused on producing transformers across most high, medium and low voltages with approximately 10,000 employees across 7 sites, including 5 in the U.S. and 1 in Mexico, which is USMCA compliant. Prolec's largest product offerings is power transformers, which many energy-intensive customers rely upon, including data centers.

While GE Vernova sells transforms internationally, this joint venture sells almost all of its volume to U.S. customers and is the exclusive way we've delivered transformers into North America. We value our relationship with Xignux, our partner in the Prolec GE Venture and the management team at Prolec and are excited to build on the 30-year foundation built to date.

Turning to the next slide. Customers should clearly benefit from our full ownership of Prolec GE. We anticipate being able to streamline the customer experience by fully integrating Prolec into GE Vernova's commercial activities and product development. This transaction removes existing contractual limitations and creates an opportunity to better serve customers in North America and across the world.

Prolec is investing in its factories to meet the increasing need for transformers. For example, in North Carolina, our recently announced expansion is already underway, and Prolec has also completed expansions in Louisiana and in Mexico. Not only are there further opportunities to expand capacity at Prolec's sites, we also expect to incorporate our lean culture into how we operate these facilities. Lean has helped GE Vernova expand capabilities in places like Charleroi, which makes circuit breakers outside of Pittsburgh, a facility where we are doubling output and adding jobs.

We expect to drive attractive outcomes over time at the Prolec facilities. Longer term, we see a real potential to increase volume and improve lead times from executing on disciplined capacity additions and leveraging our global footprint. We also expect to integrate parts of Prolec with GE Vernova's existing businesses. And not just with our growing Switchgear and Transformer businesses within Grid Solutions, but also Grid Automation, which will help customers in the monitoring and performance management of their assets. Prolec also expands our product offerings within distribution transformers to customers outside of North America.

We have talked recently about our expected higher R&D next year to develop and deliver more product to data centers and going beyond the transmission substations we provide today. Prolec will help deliver an even more robust range of product offerings. Today, GE Vernova's Electrification segment focuses primarily on transmission technologies and Prolec's North American factories could provide an opportunity to produce HVDC transformers locally.

Moving to Slide 7. We've discussed the attractiveness of the Electrification equipment market. In North America alone, we're seeing significant investment in Electrification, where we expect our combined serviceable addressable market to grow at approximately 10% compounded growth rate, doubling in size by 2030.

There are 3 primary drivers increasing demand for grid investment. First, electricity demand is increasing from expanded electrification needs, data center growth and rising digitization levels. There is also a need for increased grid stability and flexibility, especially as more distributed resources come online and as voltage or frequency support becomes even more critical. Reliability is paramount and maintaining reliability requires modernizing aging infrastructure. Finally, we see growing demand from the energy transition and increased national security interests.

Now I'll hand it over to Ken to walk through the financial details.

Thanks, Scott. On Slide 8, let me highlight for you the financials of Prolec GE and our expectations for the next few years before synergies or integration costs. The business has strong fundamentals and a sizable backlog. Prolec had an equipment backlog of approximately $4 billion at the end of the second quarter. In addition, they maintained frame agreements with their key customers, which are not in backlog, representing strong relationships that will continue to drive growth going forward.

We expect low double-digit revenue growth driven by volume and pricing with revenue increasing from $3 billion this year to over $4 billion in 2028. During the same time frame, Prolec should see robust EBITDA growth to over $1 billion in 2028 before incorporating anticipated cost and revenue synergies.

We include our 50% share of equity income in GE Vernova's adjusted EBITDA. Consolidating Prolec will add an incremental $800 million for GE Vernova in 2028. The business also generates positive and growing free cash flow. Additionally, the numbers provided today include the estimated impact of tariffs as currently outlined.

We plan to fund the acquisition of Prolec using an equal mix of debt and cash on hand for the just under $5.3 billion payment. We remain committed to maintaining an investment-grade balance sheet, even after issuing roughly $2.6 billion in debt resulting from the acquisition, we expect to remain below 1x on a debt to adjusted EBITDA basis. Again, this is an immediately accretive transaction to EBITDA before synergies.

On this next slide, I'll walk through some of the expected synergies, starting with cost. We expect to apply proven practices that have helped GE Vernova across all 3 segments improve margins. For Prolec, we plan to implement common design practices in terms of how we develop and manufacture transformers, helping drive down cost and become even more efficient.

We'll also leverage our sourcing practices and expand lean to drive process improvements that will lead to increased productivity. Many of you have heard us talk about the work we've done to improve output from our electrification facilities. We expect to take those learnings and best practices and incorporate them at the Prolec's sites. Opportunities clearly exist to optimize R&D, especially as we integrate Prolec's processes with the work our electrification team undertakes to design and deliver new technologies and product offerings. We also expect to realize G&A-related savings, both from process leveraging and the use of technology and systems.

On the right-hand side of the page, we highlight the opportunities to drive revenue-related synergies, which provides upside to our financial outlook. For example, full ownership of Prolec enables GE Vernova to leverage our combined global factory footprint to provide even more transformers into North America. We also see opportunities to harmonize our go-to-market strategy and expand our services offerings in North America.

There are further investments that can drive future growth such as opportunity to eventually market and sell Prolec's transformers, including low to medium transformers outside of North America. We also anticipate expanding and improving our grid automation offerings with products Prolec provides today.

In summary, we expect to realize $60 million to $120 million of annualized cost synergies by 2028. And as we integrate Prolec, we see real opportunities to drive additional revenue synergies ahead. We're working hard to execute a smooth integration, which includes retaining talent and ensuring continuity, while also evaluating systems integrations and the sharing of best practices across engineering and operations to increase productivity, reduce costs and leverage our scale, all to deliver value after the deal closes.

With that, let me turn it back to Scott.

Thanks, Ken. A few closing thoughts on the transaction. We are excited to acquire the remaining 50% of Prolec GE, which will help us gain scale and strategic flexibility in North America, our largest market, while providing customers with benefits as well. We will focus in the near term on streamlining the customer experience and on improving performance across safety, quality, delivery and cost by applying our lean playbook.

We expect to deliver on the cost synergies outlined today and to drive revenue synergies as well, and we are excited to grow our low to medium voltage technology offerings to serve select industries in global markets over time. This is an immediately accretive acquisition before synergies, and we are highly confident in our ability to deliver Prolec's financial outlook. We're already seeing attractive organic growth in our Electrification segment, and this transaction will add to our growth runway and to expanding margins ahead.

Now with that, let's shift to our 3Q results on Page 12. Put simply, 3Q was another productive quarter. We are running the company from a position of financial strength focused on long-term growth and returns, and 3Q is another affirmation of the potential ahead. Based upon our execution, combined with this era of increased electricity investment, our growth trajectory is accelerating.

Customers are relying more on our equipment and services, and we've grown our backlog $16 billion in '25 with $7 billion increase in our backlog in 3Q alone. We see continued strength in gas power demand and pricing, having signed 12 gigawatts of new contracts in 3Q after securing 9 gigawatts of new contracts in 2Q. Our gas turbine backlog grew this quarter from 29 to 33 gigawatts and our slot reservation agreements increased from 25 to 29 gigawatts, building our total gigawatt of backlog and slot reservation agreements to 62 gigawatts from 55 when we talked about -- that we talked about at 2Q earnings.

As expected, we are seeing significant strength in the U.S., but also signed contracts for our HA gas turbines, our largest and most efficient baseload units this quarter in Mexico, Kuwait, Poland and Malaysia. We now expect to approach 70 gigawatts of contractual gas power commitments by the end of '25 with significant momentum into '26. We are seeing customers invest in both new units and their existing assets, driving services growth with solid pricing. Year-to-date, our Power Services backlog has increased $4 billion with growth in gas and steam.

On electrification, the breadth of market strength and increasing margins continues to reinforce our conviction in investing in this business. We're seeing demand strength across the globe in the Middle East, North America and Europe. Equipment orders more than doubled year-over-year with healthy growth and positive orders price across multiple product lines in grid solutions and power conversion and storage, where we sell products that help stabilize the grid like inverters and synchronous condensers.

This quarter, we secured $1.6 billion of orders for synchronous condensers in Saudi Arabia with more to come. Hyperscalers increasingly are turning to us for their electrification needs with $400 million of orders in 3Q alone. So far this year, we've booked roughly $900 million in electrification orders with hyperscalers compared to $600 million in all of '24.

In wind, the onshore volume trajectory remains too difficult to call. In the U.S., onshore equipment orders remain soft, as we shared in September. Customers still face permitting delays and tariff uncertainty that will likely weigh on our '26 onshore revenue. We are closing deals with growing opportunities for services, repowering in the U.S. and new units in attractive international markets. If we shift towards our ability to fulfill on the strong growth across our businesses, we had a very productive last 100 days.

I had the ability to spend time in our 2 largest gas power facilities in both Greenville, South Carolina and in Budapest, and I'm very pleased with the progress. We've installed almost 200 new machines in our gas power factories this year and added approximately 800 production workers and remain on track to meet the runway of 20 gigawatts annualized production by 3Q '26. My visit Stafford in the U.K. this month reinforced my confidence in our grid business' ability to meet the ramp in HVDC.

I also visited critical suppliers in 3Q we are relying upon and the supply chain is keeping pace. Visiting our offshore marshalling harbor in the U.K. this month continue to give me conviction we'll be materially complete with Dogger Bank A and Vineyard this year. All that said, we are running the company to simply sell and fulfill on the business in front of us. We are investing in the long-term future. We signed our first technology collaboration funding agreement with a hyperscaler for scope inside the data center, as an example.

We also announced a strategic alliance with Samsung this month to advance our BWRX-300 nuclear SMR outside North America. Our investments in artificial intelligence are gaining real traction as we gain engineering productivity through AI to meet the unprecedented demand in gas turbine controls engineering requests associated with the surge in both new unit and upgrade order activity. We are using AI in our bidding activity today to ensure we get customer requirements right the first time and for design verification and validation.

Physical automation using machines, robots and mechanical systems to perform physical tasks that would otherwise require human labor is gaining traction across areas such as material handling, inspection, surface treatment and assembly. Our AI and physical automation investments are just starting, but will drive substantial value for our customers and owners in the back half of the decade.

We make all these investments while further strengthening our balance sheet, closing the quarter with approximately $8 billion of cash. This enables us to grow both our R&D and CapEx over 20% this year, while we have also repurchased over 6 million shares for roughly $2.2 billion year-to-date at an average price of $357. We are and will continue operating GE Vernova from a position of financial strength with substantial opportunity ahead of us.

Turning to the next slide on our third quarter results. We are building a larger, higher-margin backlog that positions us for future growth and margin expansion. We've grown our total equipment backlog to $54 billion in the third quarter, an increase of $11 billion so far this year. Within that, electrification equipment backlog has grown by over $6 billion, roughly the same amount it increased in each of the last 2 full years. This equipment backlog was $6 billion entering '23 and is now more than $26 billion. We are growing our equipment backlog with improved margins, and we'll highlight the change in equipment margin in our fourth quarter earnings call.

Our services backlog also grew $2 billion sequentially and $5 billion for the year, primarily in Power. Power and Electrification are delivering increasingly stronger results, while we're executing our win strategy. Electrification revenue increased over 30% and margins expanded to over 15%, while Power in its traditionally lightest quarter due to the seasonality of outages, expanded margins to north of 13%.

In Onshore Wind, we are encouraged with our services orders up 27% year-to-date with solid progress in repowering in the U.S. and the availability of our fleet improving, while down turbines and cost per job is reducing. In the third quarter, Vernova revenues grew 10% organically with double-digit growth in both equipment and services and EBITDA margins expanded 600 basis points, while delivering another quarter of strong positive free cash flow. Finally, we are reaffirming our '25 GE Vernova guidance for revenue, adjusted EBITDA margins and free cash flow.

With that, I'm going to hand it over to Ken to provide more details.

Thanks again, Scott. Turning to Slide 14. Third quarter results were strong with robust orders, backlog expansion, solid revenue growth, adjusted EBITDA margin expansion and another quarter of strong free cash flow generation. We booked orders of $14.6 billion, a 55% increase year-over-year and a book-to-bill ratio of approximately 1.5x. Equipment orders almost doubled with significant growth in both Power and Electrification. Services orders increased 5% and grew in all 3 segments.

As a result, our backlog expanded to $135 billion, a year-over-year and sequential increase led by both Power and Electrification. As Scott mentioned, equipment backlog grew to $54 billion, up approximately $12 billion year-over-year, and equipment backlog margin remains healthy, reflecting favorable price and our continued focus on disciplined underwriting.

Our services backlog grew more than $5 billion year-over-year to approximately $81 billion, led by Power. Revenue increased 10% with double-digit growth in both equipment and services. Higher equipment revenue was driven by 37% growth at Electrification and 22% growth at Power, more than offsetting anticipated lower wind revenues.

Services revenue growth was led by Power. Price was positive in all segments. Adjusted EBITDA more than tripled year-over-year to $811 million, with each segment delivering significant growth. Adjusted EBITDA margin expanded 600 basis points with higher price, more profitable volume and productivity more than offsetting investments in innovation and capacity. Margin also benefited from lower offshore wind contract losses, net of the contract settlement gain recorded in the prior year.

The strong adjusted EBITDA and working capital management drove positive free cash flow of approximately $730 million in the third quarter. Working capital was a nearly $300 million cash benefit, driven primarily by down payments on higher orders and slot reservations at Power as well as higher orders at Electrification.

Free cash flow was lower than prior year as stronger adjusted EBITDA was offset by lower positive benefits from working capital given actions we're taking to improve cash flow linearity, along with higher CapEx investments supporting capacity expansion. We're also simplifying our portfolio to generate cash and invest in our core businesses.

In the third quarter of 2025, we reached an agreement to sell our manufacturing software business for approximately $600 million. We expect to complete this transaction during the first half of 2026. We also sold an additional ownership stake in our China XD Grid business and generated approximately $100 million of pretax proceeds. The proceeds are classified outside of free cash flow and the gain was removed from adjusted EBITDA.

We ended the third quarter with a healthy cash balance of nearly $8 billion, giving us confidence to continue investing in our core businesses, such as the targeted M&A we've discussed already today and returning cash to shareholders through dividends and share repurchases, while maintaining an investment-grade balance sheet.

During the third quarter, we returned approximately $730 million of cash to our shareholders through share repurchases and dividends. Year-to-date, we've repurchased $2.2 billion of stock and expect to continue to repurchase shares opportunistically as we firmly believe there is incremental value embedded in our stock. We're encouraged by our strong financial performance year-to-date, delivering 12% organic revenue growth, 290 basis points of adjusted EBITDA margin expansion and nearly $2 billion of free cash flow generation. Our growing backlog with healthy margin provides an excellent foundation for continued improvement in our financial performance moving forward.

Now turning to Slide 15. Power delivered another strong quarter with robust demand, continued revenue growth and further EBITDA margin expansion. Power orders grew 50%, led by Gas Power equipment, more than doubling year-over-year on higher volume and pricing. We booked 20 heavy-duty gas turbines, including 13 HA units, a 40% year-over-year increase in both. Revenue increased 14%, led by Gas Power.

Power equipment revenue increased from higher heavy-duty gas unit deliveries, project commissioning and price. Power services revenue increased mainly from higher transactional volume and price. EBITDA margins expanded 120 basis points to 13.3%, mainly driven by continued strength at Gas Power. For the segment, higher price and productivity more than offset additional expenses to support capacity investments at gas and R&D at nuclear, along with inflation. The positive impact of volume was offset by mix. For the full year 2025, we continue to expect organic revenue growth at Power to be between 6% and 7%. We also still expect EBITDA margin to be in the range of 14% and 15%.

Turning to Slide 16. We're executing on our wind strategy and improving profitability. Onshore wind margin expanded in the quarter, and we remain focused on executing our challenged offshore wind backlog. Wind orders increased 4% year-over-year. Higher onshore services were partially offset by lower onshore equipment, which included higher repowering orders.

Wind revenue decreased 9% in the quarter due to the absence of a settlement from an offshore contract cancellation of approximately $500 million as well as charges for the impact of blade events, both recorded in the third quarter of 2024, partially offset by higher offshore deliveries and increased onshore services. Excluding the impact of the prior year offshore settlement, wind revenue grew low double digits.

Wind EBITDA losses improved by approximately $250 million year-over-year. At onshore, margin expanded from productivity, price and favorable mix, partially offset by the impact of tariffs. At offshore, EBITDA losses improved given lower contract losses net of the contract cancellation settlement gain recorded in the third quarter of last year. For the full year 2025, we now anticipate wind revenue to be down high single digits organically compared to our previous expectation of down mid-single digits due to the softness in onshore equipment orders continuing through the year. As a result, we expect wind EBITDA losses of approximately $400 million.

Turning to Electrification on Slide 17. We had another quarter of robust demand with significant revenue growth and EBITDA margin expansion. Orders remained strong at roughly 2x revenue and more than doubled year-over-year to approximately $5.1 billion, driven by the growing need for grid investment. We saw strong orders growth in the Middle East, primarily due to $1.6 billion of orders for synchronous condensers in Saudi Arabia as well as growth in both North America and Europe.

Electrification equipment orders continue outpacing revenue, further expanding the equipment backlog to approximately $26 billion, up almost $8 billion compared to the third quarter of 2024. Revenue increased 32% with growth across all regions. We saw strong volume and higher price at Grid Solutions with meaningful growth in HVDC and switchgear equipment as well as power conversion and storage. The segment is executing well on its capacity expansion plans, leveraging lean as we continue to increase output.

For example, the team at our Stafford, U.K. facility that manufactures HVDC systems executed a series of Kaizens during the third quarter that improved their standard work, further optimized site layout, reduced cycle times and as a result, increased production capacity for valve modules by approximately 40%. EBITDA doubled in the quarter with margin expansion of 550 basis points to 15.1%. Margin expansion was led by more profitable volume, productivity and favorable pricing, primarily at Grid Solutions.

For the full year, we now expect Electrification organic revenue growth to trend towards 25% compared to our previous expectation of approximately 20% as we're achieving better-than-anticipated output on our capacity expansion. Given the higher revenue growth, we now expect Electrification EBITDA margin to be in the range of 14% to 15%, raising the lower end of the prior guidance.

Moving to guidance on Slide 18. Based on the full year segment expectations, which I've already outlined, we're reaffirming our GE Vernova financial guidance. For revenue, we continue to trend towards the higher end of our $36 billion to $37 billion guidance range, and we expect adjusted EBITDA margin to be in the range of 8% to 9%. In addition, we anticipate our full year free cash flow guidance to be in the range of $3 billion to $3.5 billion.

Our 2025 guidance also includes the impact of tariffs as currently outlined, which we estimate to be trending towards the lower end of our $300 million to $400 million range, net of mitigating actions. They're expected to be relatively similar across the last 3 quarters of 2025. Corporate costs are typically uneven across quarters due to compensation timing and portfolio activity at our Financial Services business. We expect 2025 corporate costs to increase year-over-year, driven primarily by higher stock-based compensation and incentives based on performance.

In addition, we've increased our AI, robotics and automation investments to drive productivity over the medium and long term. For the fourth quarter, we expect growth in adjusted EBITDA, adjusted EBITDA margin expansion and positive free cash flow. 4Q revenue may be slightly lower year-over-year, primarily due to the improved linearity of gas turbine deliveries through 2025 compared to 2024 as well as continued softness in onshore wind, mostly offset by continued strong volume growth at Electrification. We're very encouraged by the rising demand combined with the consistently stronger execution across the business. Together, they're driving strong results again in 2025 and setting us up nicely for 2026.

With that, I'll turn it back to Scott.

Thanks, Ken. Turning to Slide 19. At our December investor update last year, we highlighted our strategic principles for capital allocation. These principles remain unchanged. We will use our free cash flow and balance sheet strength to fund organic investments to drive profitable growth, while also returning at least 1/3 of our cash generation to shareholders. After this, we still expect over $10 billion of incremental capital to deploy by '28.

Since our spin, we've announced and/or successfully divested assets or businesses to generate roughly $2.5 billion of cash we can opportunistically redeploy for future growth. Through the third quarter this year, we've returned $2.4 billion to shareholders in dividends and buybacks. For M&A, we generally pursue opportunities that can increase scale at attractive returns, further integrate our supply chain or accelerate R&D that will benefit us longer term.

Prolec fits nicely into this as it's a business we know well. It aligns with our core business and creates customer and valuation benefits. We are acting on the capital allocation principles we laid out for you last year. We're streamlining the company, generating significant cash, returning capital to shareholders, all while executing on M&A opportunities to strengthen our core business.

If we shift to the wrap-up page, you can hear in our voices our excitement about the Prolec GE acquisition. We're also pleased with delivering another productive quarter. But this is about our future potential, and the reality is our potential has grown faster than our performance since the spin. We are appreciative of the faith our customers have put in us, prideful of the work our employees do across the world every day, while remaining focused on getting better today and chasing our potential tomorrow.

We are still early in the journey to reach this potential, but with the right combination of humility and ambition, I like our chances. We look forward to seeing many of you at our investor event in New York on December 9, when we will discuss our '26 guidance and provide an update to our outlook by '28.

With that, I will hand it back to Michael for the Q&A portion of the call.

[Operator Instructions] Operator, please open the line.

[Operator Instructions] Our first question comes from Mark Strouse with JPMorgan.

Maybe starting with the acquisition. Can you just talk about on Slide 8, the visibility that you have into those 2028 targets? I appreciate it seems like you're trying to be conservative not baking in any revenue synergies. But just kind of given where the backlog is, can you talk about what gives you the confidence in putting that number out there for that year?

You bet, Mark. I'll start, Ken can add perspective. Part of why we put the '28 marker out there now is just to match with the fact that we've got by '28 financial guidance out for the rest of the business that we'll update in December. So we thought it was practical to match today, where we see the Prolec JV cutting in and we'll complement that on December 9.

Now you can see on the pages we've got $4 billion of explicit backlog today with Prolec. So by no means is in our backlog today, the '28 financials. But at the same time, we have a number of framework agreements that are in place with a number of the utilities, where they're able to draw upon their framework agreement at set cycle time commitments that through a lot of our interactions with the end customers as we evaluated this acquisition, gave us a lot of confidence in the growth of this business, both with our traditional customers like the utilities, but also frankly, with our new archetype of customers like the data centers. I mean that's a part of the customer base that a year ago in 2024 was about 10% of Prolec's business. This year, it will be closer to 20% of Prolec's business.

And as we project forward, as we integrate solutions for that customer set, we see that as a growing part of the business. So we like the trends. We're very confident in the numbers that we put on those pages, but we got to earn it every day by securing those orders in framework agreements and working new customer sets like the hyperscalers.

Yes. I mean I think I'd just add one small point as you think about the amount of growth that we have and are projecting on that page is that Prolec, which obviously, we've been a partner in for this last 30 years that we've talked about. Prolec over the last few years has been and continues to invest in capacity. So they've invested about $300 million in existing or active programs to expand capacity to support the growth that Scott outlined.

So these are factories we know well, everyone. We've spent a lot of time there. We see the potential just to reinforce another thing that we talked about in our prepared remarks, we're really excited about the medium- and low-voltage technology that comes with this acquisition that for our business, we have not sold internationally. Now over the medium-to-long term, we think that's a real growth opportunity for us is taking some of that medium and low-voltage technology and selling internationally, but none of that is embedded in the financial guide. All we've included from a synergy perspective is the cost synergies that Ken outlined with real opportunity to lean into this business over the long term. Thanks for the question, Mark.

The next question comes from Nigel Coe with Wolfe Research.

Prolec acquisition seems like a home run. So congratulations on that. Can you maybe just -- Scott, it seems that you're really excited about the potential in the low-voltage, medium voltage and perhaps some of the industrial verticals. Can you just maybe just lay out, where the mix is today and where you think that could be over time? And then just maybe talk about the -- where capacity is today for Prolec any investments that are required, that would be really helpful.

I'll start again, Ken, please complement. But there are a number of investments that Prolec has made that we have been funding through the joint venture that really cut in over '26 and '27 that are aligned with the financials that are on the pages going out to '28. So largely, that revenue that we project through '28 is our programs that are in the process of being funded or already funded, being we do see Prolec peak CapEx in 2026 to support that '28 revenue stream.

Now their business in totality, the biggest proportion of their business is with the higher voltage power generation piece, but they do, do low and medium voltage today. What I would say on where my excitement sits, Nigel, to be very explicit is probably not that we're going to lean and even more aggressively to residential low-voltage plays. It's really where we see integrated solutions with power gen and the electrical equipment specific to certain industries that are very electro-intensive or data centers that are coming to us and saying, co-create with us the power to rack solution.

And in that vein, we are motivated to invest further in lower voltage solutions more than I foresee us playing on the core residential space that I think we're going to continue to leave to others from here.

Yes. And I think, as Scott mentioned in his comments at the beginning of the call, the ability for us to take and really leverage a global consolidated GEV transformer footprint, right? So this low- to medium-voltage products due to the arrangements around the joint venture, are primarily staying out of Prolec's stay in the North America markets.

And while, again, revenue synergies not built into the case that you're seeing, we see the opportunity to take those products, not only into the areas that Scott just outlined and into data centers and other places like that, not only in North America, but also outside of the North America geography. So there's a lot of opportunities in bringing this business together, and we're excited about the opportunity to continue to work with the team there.

The next question comes from Moses Sutton with BNP Paribas.

Congrats on that update on Prolec. On gas turbines, we're starting to hear pricing for U.S. gas turbines are perhaps peaking and softening a bit. So really a 2-part question here. A, has CCGT build truly served to 2,500 KW in the U.S., it's the type of number out there with GE capturing 30% of that in the turbine sale typically? And B, is that number softening a bit in new negotiations? And if so, by how much?

So the directional number of 2,500, I think, is a practical illustration of where the market is today and our directional share, I agree with. So I would say yes to both A and B. What I would not say is that we're experiencing any softening. I can understand how you can look at the orders amount in the gigawatts and any orders booked in the quarter come to that conclusion, but it's more a mix.

In the third quarter, as an example, we had substantially more smaller gas turbines, more aero derivatives that are higher priced per megawatt than the baseload units. In totality, we continue to see price accelerating in gas. And as an illustration, when we look at the profitability and price in our slot reservation agreements that 29 gigawatts that's not yet in order relative to the 33 gigawatts that is on order, the slot reservation agreements are at higher price and more attractive orders -- more attractive margins, excuse me, that will translate to orders in directionally in the next 12 months. So we continue to see price accelerating.

But in any 190 days, we've got to kind of govern the mix dynamics, which is why I understand the question, but the explanation for it in the third quarter with still strong trends ahead.

The next question comes from Julian Mitchell with Barclays.

Congratulations on the Prolec's transaction. I just wanted to maybe stick with the Power equipment point. So maybe flesh out a little bit some of what you just discussed because, yes, if we look at the Power equipment, dollar orders year-to-date or in the third quarter and that increase versus the gigawatt orders in gas, there is a very large positive delta on that dollar growth versus the gigawatt growth.

So maybe shed some light on that sort of price versus mix tailwind there for the dollars versus the gigawatts. And maybe it pertains to it somewhat, but aero derivatives are getting a lot more attention now, strong demand growth, a lot of competition. Maybe help us understand your plans for capacity additions in aero derivatives vis-a-vis the demand outlook?

Yes. I would say let's work it backwards. Aero derivatives do continue to experience very strong demand. We do expect to continue to experience and deliver growth in that business line. That's both in orders and ultimately in revenue, as you project out to '26, '27 and beyond. As I said in the prepared remarks, I spent a lot of time in our large gas turbine factories over the summer. And our businesses -- our business is very well prepared for that growth. So we're encouraged with where we are there on derivatives.

On the orders gigawatt triangulation again, the big dynamic is aero versus heavy-duty mix, even within a heavy-duty mix, there's also the dynamic between simple cycle relative to combined cycle because remember, we always talk in just gas turbine terms in simple cycle, when we talk about orders, irrespective of whether the bottoming cycle is attached in any one quarter or not. And depending on the quarter, there can be more or less of the combined cycle that gets booked in that quarter, i.e., the steam turbines and generators that can sway the orders to gigawatt interconnection.

What I can tell you is that we continue to see stronger price and stronger margin trends in the third quarter in the business for gas turbines, both in orders and also in slot reservation agreements that will turn into orders in the subsequent 12 months. I look forward to getting to our next earnings call in January and showing you, as we've committed every year, the change in margin in backlog, equipment backlog across our businesses and we've framed up in the past that the $6 billion margin growth in equipment backlog the prior 2 years will be at least sequentially as large this year on an annualized basis.

We sit here today, probably even more confident that, that is a floor with an opportunity for it to be substantially higher than that.

And maybe I'll just give you just a couple of points because I know that if you look at the surface of the numbers that we provide you, I'm going to give you a couple of sequential numbers. You look at what happens to total orders in power and you'll see that, obviously, you referenced the growth, and you'll see the gigawatt growth. So the math at a power level is going to show a slight decline, right? So that's just the math. But as Scott mentioned, if you're looking at the quarter-to-quarter back out enough of non-gas power orders that have really no gigawatts related to it.

So if you're trying to model back to gigawatts and cost and revenue per gigawatt in the orders or order per gigawatt you'll get back to a number that you should see as relatively flat quarter-to-quarter sequentially. But as Scott mentioned, what's happening is we're still continuing to see good positive growth both on heavy-duty gas turbines in orders per gigawatt dollars, as well as on the Aero side. It's just that it's mixed this quarter a little bit more heavily to the heavy-duty gas turbines versus the orders, which tend to be slightly lower per gigawatt.

I know that's a lot of calculations there. But I know that each of you are following it closely. If you kind of take those 2 or 3 pieces, you'll kind of substantiate the numbers.

The next question comes from Amit Mehrotra with UBS.

I wanted to ask about margins. I know we'll get more on this on December 9. But maybe just from like a structural or conceptual perspective, Scott, when I look at the last cycle, I think power margins peaked maybe approaching 25%, if I remember correctly. I know we're all fixated on this 2028 number, but I assume the runway is kind of long and wide beyond '28 just given the service stream.

Is there any reason we can't exceed kind of the peak of the last cycle just structurally, given all the pricing that you've been talking about. Just talk to us about the structural opportunity relative to previous cycle?

Thanks, Amit. I would say the answer to that is no. We're not sitting here today trying to rationalize any reason we can't meet or exceed previous "peak margin" levels in this business. When you think about any prior cycles, the reality is that the revenue on the services side would have been substantially smaller than because our installed base is substantially smaller. And we have a much larger installed base today with a much larger, more profitable services business, while our equipment revenue is growing into becoming a very attractive economic driver for us as we start to get into the second half of '26 and beyond when really the new price paradigm orders start to come into revenue.

Now I think a lot of the December 9 update, is, yes, as we outlined, Ken and I will frame up our '26 commitments are updated by '28 guide. But we're also going to spend more time with you on why we're so excited and have so much confidence on the trajectory of this business beyond 2028. Now we're not going to put financial numbers out beyond '28 this year, but we are going to try to help you understand why we have so much confidence and conviction on how exciting this business is going to be through the next decade.

And these are some of the dynamics that we'll hit on more then, but I don't want any of you believing that we're running this business trying to rationalize anything other than a better performance than previous peak cycles. We just have to go earn that every day, and that's what we're intending to do.

The next question comes from Nicole DeBlase with Deutsche Bank.

So congrats on the Prolec deal. I just wanted to come back and had a couple of tie-ups on that. I guess first on the cost synergy realization, any help on the cadence of realizing those savings? Like what can be done faster, what takes more time? And then you talked a lot about capacity expansion that you guys have done in Prolec and that, that remains a focus. What have you seen from the industry as a whole? And what has that meant for pricing within the Prolec business?

I'll start out and cover the synergies I think we said by 2028, we haven't put a real timing around it. We'll come back to you a little bit in December 9 because we've still got a lot of work to do to hammer out kind of working through synergy road map. So we said $60 million to $120 million. The types of things that we're talking about are not large investments to drive synergies on the cost side. It's leveraging things on the G&A side of the equation. It's doing things as far as leveraging what we're doing in the design space, which obviously, both businesses know well.

So as soon as we can kind of start to get the teams to really be active in discussions on those synergies, I think they'll start to flow relatively soon. So I don't think you'll see a huge hockey stick I'm not sure I could commit to you today that it's going to be ratable, but you will begin to see synergies pretty soon after we complete the acquisition.

And just to complement that, Nicole, I mean, we like this team a lot. We are very drawn towards how they've been running the JV. I mean 25% EBITDA margins today. We're not acquiring a business where there's a huge swath of cost that comes out the next day. At the same time, frankly, the Prolec business is larger than our Transformer business. I mean we are larger with switch gears and circuit breakers. Prolec has the larger transformer piece of the equation. So some of the synergies, they are going to be reverse synergies based on what we learn from the JV and where we can leverage a lot of their best practices.

So we clearly see opportunities to drive more of our learnings on some of the factories with quality that we framed up that we think can accelerate fulfillment even more. And exactly, as Ken said, let's assume we get this deal closed in the first half of '26, we're going to use the rest of '26 to set ourselves up for success, and you should expect to start to see those synergies cut in, in '27 and beyond.

The next question comes from Joe Ritchie with Goldman Sachs.

Just a 2-part question on Prolec. Scott, maybe you can double-click a little bit on the commercial limitations that currently exists under your agreement. And then as you kind of think about getting after that $80 billion addressable opportunity by 2030, I just want to know like you're like how you're going to get after it, like the ability to really kind of accelerate the profitability of the business?

Thanks, Joe. So Prolec had exclusivity for transformers in the North America market. So as an example, if customers wanted fast shift short-cycle transformers that the Prolec factories were at capacity on, it wasn't easy for us to fulfill on those opportunities even if, as an example, we had capacity in some of our factories from outside the U.S. because we provided exclusivity to them to serve that market.

Now there were times, there were exceptions, we were able to work through that dynamic with Prolec when they were at capacity and that we did leverage our global factories. But I would say it was more the exception than the rule. This eliminates that dynamic. So all of a sudden, we're able to take their North America factories and the capacity, but also our global capacity and especially, where cycle time is at a premium leverage that global capacity to improve the profitability of our collective business.

There also are dynamics where although we were a 50% owner of the JV, we weren't in control. And that included on the front end commercially on pricing and commercial strategy and candidly, with the customer experience in totality. This streamlines that customer experience and a lot of where we've yielded real benefit with switch gears and circuit breakers. Now we can bundle together into one more integrated solution that with a more integrated solution, we have confidence we can do that in an even more attractive price and economic way for us and ultimately, an easier customer experience for our market.

There also are a number of customers, as an example, that are either larger Prolec Transformer customers or on the inverse larger GE Vernova circuit breaker and switchgear customers. Well, the reality is, unless it's fixing something that's in the field, both are needed every single time to provide that solution. And on a go forward basis, I have a very high degree of expectations that we will converge that scope in both cases, where either Prolec or GE was larger and get the other half, so to speak.

So these are all opportunities in, I would say, North America in the medium term, that will yield even more opportunity. What we've shared with you today is basically our core baseline JV financials as a 50% owner of this business on the as-is business to a large extent. So we haven't embedded these things into the numbers we've shared with you. And as we talked about earlier, we haven't embedded the opportunity to take some of this technology and ultimately export it internationally with medium and low voltage.

Now I do think that takes longer. The near-term benefits are going to be the North America commercial synergies that I started with. Medium to long term, as you get into later in the decade, we can capacitize some of our existing international factories with incremental technology and get an incremental boost. But I think that's Chapter 2 to Chapter 3. What we're really going to focus on over the next 12 months is to really take advantage of those North America commercial synergies that should give us an opportunity to outperform in '27 and '28, once we get there.

The next question comes from Andy Kaplowitz with Citigroup.

Scott, so you said you're expecting 70 gigawatts at the end of the year between slot reservations and backlog in Gas Power. I know you said in the past that you'd be comfortable expanding capacity when JV gets to 80 to 100 gigawatts. And when you get to that 20 gigawatt annual run rate in the second half of '26, but are there any situations where you'd actually begin to ramp capacity to get to higher than 20 gigawatts annually before you have that much backlog, especially given you're already getting pretty close by the end of this year?

Andy, at the moment, I would say no. I don't see that materializing. And just to be fair, and I don't want to pick on the words, but I wouldn't say that we've been saying we'll be comfortable to add capacity when we get to 80 to 100, we said we'll evaluate it at 80 to 100. Because at the end of the day, what keeps playing out here is we're booking more orders and more specifically, at this point, slot reservation agreements out longer. And we continue to like the economics of what we're booking and don't necessarily see us losing parts of the market that we care about.

So at the end of the day, as we continue to see growth, but that it's for fulfillment later at even more attractive economics, I'm not sure that necessarily justifies increasing capacity today because we're not the only long lead item. At the end of the day, the customers need to secure the EPC build-out. They need to secure the gas pipelines. We're pleased that we're going to end the year closer to 70 gigawatts with momentum into 2026 that does say to you that we do see that 70 gigawatts going higher over the course of 2026.

The good news for us is as we're flirting with that 80-plus gigawatt number as we're projecting out another year or thereabouts, that is the same time that we'll be on this 20 gigawatt run rate. And when we're there, simultaneously as we're pushing our commercial teams to continue to create value every day, rest assured, we're pushing our supply chain to continue to find productivity. And as we do that, and I think we will, because as I mentioned earlier, the 200 machines we've installed already year-to-date in these factories, I don't think our supply chain has fully quantify the productivity benefits of that can give us a modest, modest capacity lift.

We'll know a lot more about that -- about this time next year, as I would say it. But we'll keep scrutinizing the right investment return dynamics. But today, I view the likely outcome is our CapEx peak for the gas build-out is 2026. Same answer for Grid. We see the CapEx peaking in 2026, both with our organic business and with the Prolec JV and that, that positions us very, very well to serve this market. But we're committed to continuing to update you on where we are and where we're going, but we actually feel very good on where we are right now, both with the build-out, peak CapEx in '26, but within our ability to serve these markets for the long term.

The next question comes from Chris Dendrinos with RBC Capital Markets.

I wanted to follow-up again just on Prolec and looking at that low double-digit revenue CAGR through 2028. And I think in a previous question, you suggested that maybe there was some capacity constraints. So is that growth outlook capacity constrained? And then how does the growth outlook for Prolec compared to the growth opportunity for the rest of the Electrification portfolio?

We'll triangulate with the rest of the Electrification portfolio, Chris, on December 9 and the growth outlook that we project in Electrification. The reality is that business has continued to outperform our own growth expectations really for 18 months. I mean, that's why Ken framed up, again, raising the revenue expectations of the business for this year. We owe you an update on the revenue expectations of the business by '28 on December 9 and a macro view on what it can mean even beyond that.

But clearly, our core business has been growing at even higher than that the Prolec growth rate as you've seen over the previous 18 months. And there's a lot of momentum there. I mean you look at the third quarter with our organic book and -- I mean, our orders grew more than 100%. That is generally stuff that's going to cut in on average, 2 years from now, depending on products. Some of it's longer, some of it shorter, but directionally 2 years.

And when you think about another quarter where the orders are demonstrating that much growth, what it's kind of telling you is that the revenue growth rate of our core business and Electrification is likely going to be higher for longer. And at least in those numbers higher than what we're showing you at Prolec.

Now just to repeat again, on Prolec, like we've been managing with our core business, we're often trying to provide floors on day 1 and then to build off of them. What we're sharing with you today is really the JV strategy financials over the next 3 years without embedding us leaning into a lot of the things we talked about in this call, we'll have another conversation on what this can mean, when we're into the business and owning and controlling it versus sharing with you what we see every day as a 50% owner.

And I hope you can hear the excitement in both of our voices that we like our chances on what we can create here to try to converge those growth rates, but we need some time before we lean into that.

And Chris, I think the only point that I would add just because of your specific question around capacity constraints within the Prolec numbers, I'll repeat again what I said earlier. They've already launched, completed and/or have investments to expand capacity across their call it, most of the facilities, but specifically Mexico and the U.S., valued at $300 million, which is looking at the projections that they have and ensuring that they have the capacity to get there. A lot of words to say, no, we do not feel like we're capacity constrained. They are not capacity constrained to meet the numbers.

And as a team, just to reinforce, I mean, there is solid lean foundation within the Prolec JV today. I mean this is a JV that already is very well run with a team we like immensely. Now we see opportunities where we can help those factories. I also am highly confident that there are management practices at the JV that are going to help our core business and that we're going to -- all boats are going to rise as we learn from each other.

But having spent time myself in a number of these factories over the last 3 years as a 50% owner, they're well-run factories, but we also see opportunities to further invest in them and serve this market, and that's exactly what we're going to do.

The next question comes from Michael Blum with Wells Fargo.

I wanted to ask another question on the Gas Turbine business. Can you speak to why most of the backlog increase or slot reservations as opposed to orders? Is that just a function of timing? Are there other dynamics going on there? And then can you just level set us, is '26 to '28 basically sold out and you're more or less selling '29 and beyond at this point?

Sure. I mean I think we naturally start the funnel with slot reservation agreements because our customers want to secure their long lead equipment. Now we don't want to put things into backlog until the customers to secure their EPC contracts until we have transparency on their gas availability until the permitting process is progressing. So the orders classification to be candid is more our classification than the customers, right?

Because in many cases, they're providing us enough financial capital on day 1 that one could argue we could be booking these things as orders. But we've made the decision as the surge in activity started that we did expect within what we're calling slot reservation agreements still some level of movement on timing, because I think it can be hard to build gas plants and secure the things that I just framed up. So there's a level of conservatism on our end to check those boxes before we move them to backlog because we don't want to see much backlog volatility.

Now we have not. And frankly, to date, we haven't seen much slot reservation volatility either, but there's just been so much growth we've been wanting to be cautious for that. So I wouldn't be surprised, if you continue to see slot reservations growing faster than orders because candidly, it's easier to secure the equipment with us by giving a deposit. It's harder to then to secure that EPC schedule, the gas pipelines are progressed with the air permits and there's a lag factor there. But the benefit of the customer is cutting those checks is they know they've got the equipment, while in parallel, they work those other solutions.

And the -- and a point that we made a couple of times maybe in previous calls, I'll add to this because there's usually a follow-on question that says, our slot reservation is a little bit less sure than the orders piece of it. But the reality is, in both slot reservations and in the orders that are going into backlog as Scott mentioned, there's a measurable amount of cash funding upfront and down payments. And in both cases, they're nonrefundable. So the customers are making our commitment, both at the slot reservation point as well as at the order point.

Operator, we have time for one last question, please.

The next question comes from the line of David Arcaro with Morgan Stanley.

I was wondering if you could maybe just elaborate a little bit more on how you think about modular power, this behind the meter power that we're seeing, things like your aero derivatives, but also smaller-scale gas turbines, engines, even fuel cells?

How do you see those -- is that a longer-term competitive threat to the larger frame gas turbines? Do you see an opportunity to expand capacity and actually go after more volume in that side of the market? I would be curious to your strategic thoughts on that element -- of the market right now?

David, I think over time, when I talk to the team about all the time economics rule the day, not style points. And I would say that the economics of the larger gas turbines are just so much more economically efficient because they consume so much less fuel to produce so much more output that over the medium to long term, heavy-duty gas turbines are going to carry the day. These are customers that are underwriting business cases for 20-year -- 20-plus year economics.

Now that said, there's a very aggressive surge for near-term power that smaller applications that can provide bridges, even if those bridges are economically less efficient, will get moved in this environment. And then over the medium term, we'll shift towards backup power. We see that with some of our smaller applications, some of our aero derivatives for the next 5 years, we'll likely run closer to base load and then heavy-duty will follow over time, and they'll shift to being the backup power and what's really happening with aero derivatives and some of the other solutions that you're talking about, is they will replace what has been the diesel gen sets of the past that many of the hyperscalers and data centers we're using for backup power and some of these other solutions will become that reliability support.

Before we wrap up, let me turn it back over to Scott for closing comments.

Michael, I appreciate it, everybody. Thank you for giving us the time. I just want to again thank our customers for their continued faith in us. I continue to have a lot of pride with our employees and our partners that are working with us every day to position ourselves to meet this ramp. Another productive quarter for us, an important step forward on our value creation journey with the announcement of Prolec, both value creation with customers, but also with our investors.

We talked a lot about the prior 90 days, but I would just emphasize that this is about where this company is going for the future. The opportunity we have to serve this market and our very high confidence and conviction with the right balance of humility that we're the right company for this moment. So, thank you for giving us this time today, and we look forward to seeing you all on December 9.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Hello. I think we'll get started. Thanks, everybody, for being here. I'm Dave Arcaro. For those that don't know me, I cover GE Vernova for Morgan Stanley. I also cover the power and utility space and clean energy industries. And I'm very happy to be joined today by Scott Strazik. He's the CEO and President of GE Vernova. Scott, thank you so much for being with us.

Dave, thanks for having us. Morgan Stanley, thanks for hosting this event. It's always an event that we look forward to attending each year. And Dave, if I start with a few thoughts in the beginning and then go into the Q&A, I would...

Let me -- sorry just to interrupt. I got a disclosure to read. I'll hit that first. Jump right in, of course. Put my compliance hat on here. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that, I will hand it over for any opening comments.

Very good. Dave, thanks. At start, I'd just say 2025 is a year in which we're having a lot of fun inside GE Vernova. But the exciting dynamic is that we're just getting started. If you look at our 2025 dynamic and financials, we'll do $50 billion of orders this year. That's relative to $37 billion of revenue at very attractive margins as we strengthen and improve the profitability of this business from here. If I just talk a little bit about the big businesses and start with Gas Power. We talked in our July earnings call about the fact that we've got 55 gigawatts of new capacity equipment units or gigawatts on contract. That includes both orders and slot reservation agreements. Through the third quarter, we should approach 60 gigawatts. I would expect our contractual commitments in the third quarter to look very similar to the second quarter in which we signed 9 gigawatts of new incremental contracts.

And we're seeing demand really with the hyperscalers on both ends of our product spectrum, aeroderivatives, think about the Crusoe announcements that have been public, which is the first gigawatt of the Stargate project power to the other end of the spectrum with 7HA gas turbines with Homer City, a project in Pennsylvania that was announced in July that's 4.5 gigawatts of power with our 7HA.02 gas turbines. But I think the interesting dynamic is that our interactions with the hyperscalers right now is much more than power generation. So if I shift to our electrification business segment, year-to-date, we've done $600 million of orders direct with the hyperscalers with electrification equipment. We'll do at least $1 billion of orders this year direct to them. But what's most exciting isn't the $1 billion of orders this year, it's the co-creation that we're doing with them focused on solutions from power to the rack that we're going to be investing into from here as a real growth opportunity for GE Vernova going forward.

Now in electrification, this isn't just about hyperscaler demand. If you look at our year, we're going to have a great year in Saudi Arabia, in Algeria, in Korea. These are 3 big countries for GE Vernova with legacy power generation relationships that we're demonstrating the ability to pull forward the electrification scope and serve that market in different ways. Now if I spend a minute on wind, this remains our most challenging business segment of the 3. But if I start with the good, we continue to make real progress to improve the profitability of our onshore wind business from a services perspective on how we're executing in the field of the installed base.

We also had a very productive summer in offshore wind executing on our existing backlog, but we do continue to see softness in our end markets in onshore specifically. This is a dynamic where if you look at the last 90 days, the tax bill that was signed on July 4, works for the industry and for us. You look at the IRS guidance that was issued in August, and that is really right in the middle of the highway, supporting incremental wind growth. But the continued ambiguity both with permit availability and tariffs is continuing to demonstrate or drive softness in our end wind markets.

To the point sitting here today, looking at our third quarter orders, we would expect them to be somewhere in between our first and our second quarter performance, but likely down sequentially 3Q relative to 2Q. Now as we continue to see order softness in onshore wind, this is a business we've talked about as generally flat from here. But today, we could see our revenue in 2026 in onshore wind down 10% to 15% relative to 2025 if this order softness continues. And this is a business that's been high single-digit EBITDA margins, onshore wind specifically, that we were hoping would drive towards double-digit EBITDA margins with some revenue growth. But as we project down 10% to 15% lower revenue next year, that EBITDA margin could gravitate more towards mid-single digits from the high single digits of this year.

So we take all that together and then still feel very good about our 2025 financial framework that we rose our financial guidance in July, but this isn't really about our 2025 financials. We look forward to getting to the end of the year and providing updated higher by '28 financial guidance for the company. But this isn't really about 2028 either. This is about the sequential disciplined strategic steps we're taking every day and every week in this company to create a company that is a high-tech industrial infrastructure company, very well positioned to provide the electrification solutions that both companies and countries require to both thrive and simultaneously decarbonize. So Dave, I appreciate the ability to start with that, I'm happy to take it where you'd like.

Excellent. Yes. Thank you for setting the stage that way, very dynamic market environment we're talking about here. And I wonder if we could start at a bit of a high level, we think in terms of cycles. This is a unique interesting cycle where I want to ask you, how do you look at this cycle? Is this a period of sustained growth that may get out of the traditional kind of cyclical framework? Or how does it compare to previous periods in history in the industry that you might be able to reflect back on as you look over the next 5 to 10 years?

Yes. I mean I think if you take a step back and ask yourself whether the world needs more energy in the end for companies, communities to thrive, I think the given answer is the demand for energy is going to grow exponentially from here. But in the current energy system, the world is only getting 20% of its energy from electricity. But all projections going forward is not only is the world going to need more energy, but the proportion of that energy that's going to be coming from electrical power is going to grow. And because when you take a step back, still the majority of the energy in the world today comes from liquid molecules. It comes from coal with industrial applications. And those energy sources aren't necessarily the best suited energy applications for things like hyperscalers and the load dynamics and operating parameters with things like AI factories.

So we take a step back and say, although I'm not ready to call the next 30 years, we don't see a similar analogous time to where we are right now to 1945 with the demand cycle we see, and that was a 30-year cycle of substantial growth in both the growth of energy, but also the electric power. And what I think is even more compoundingly important in this cycle is not only is the energy going to grow, but the proportion of that energy is electrical power is very clearly going to increase. So maybe not a 30-year view today sitting here in September '25. But internally, we talk about a decade of action in which we're focused on investing and positioning the company to provide the solutions from an electrification perspective to allow companies and countries to both thrive and simultaneously decarbonize.

Excellent. Yes. That's helpful and really paints the picture of it doesn't look like there's an end in sight in terms of the growth outlook here. And it's also a pretty rapidly changing quarter-to-quarter, there's just so much more activity that's coming. And maybe looking at your 2028 guidance framework, you've mentioned that we're going to reassess the 2028 financial targets. It wasn't that long ago that you had set them. What's happening in the market that's causing you to now relook and to increase the targets that you're going to have?

In the context of the by 2028 financial guide, this has less to do with the market and more to do with the fact that we're executing better, period, end of sentence, exclamation point. And associated with that, the margin profile of our large big businesses in power and electrification are already trending towards the by '28 financial guide that we outlined at the time as a floor. And we outlined at the time that within that financial guide, there were things that could make it better, including variable cost productivity that we were not embedding in that guide. And when you look at our performance through the first 8 months of the year, and we're not that far from our third quarter earnings, our management teams and our business teams are performing better. That's going to drive the margin uplift that we'll outline in our next Analyst Day analogous to what we did last December.

Now -- it doesn't mean that the market isn't better. The market opportunity continues to become greater for us, but a lot of that goes beyond 2028, candidly, because we're very quickly getting in a dynamic where we're growing our backlog this year, $13 billion at least, we see a clear trajectory to continue to grow our backlog at very healthy levels, and that backlog growth goes long beyond '28. So part of what we want to accomplish in our next Analyst Day is really 3 things articulate very clearly how we're performing better that's driving the margin uplift. That's important, and that's the more material of the by '28 guide is margin. We're not going to surprise that differently on top line revenue.

But simultaneously, we need to outline the investments we're making in partnership with our customers in '26 that gives us so much conviction that 2028 is just a milestone that we happened to set in our Capital Markets Day in 2024. The best days for this company are long after 2028. And I want to provide the goalpost for our owners and investors to look at the company into 2026 and understand why the growth acceleration continues long after that. And those are some of the objectives that we have for the next Analyst Day we'll set up before the end of the year is both that by '28 guide, another level of detail on the market and how we plan to capture it, but also to reinforce very clearly that, that's just a step in a journey towards a company that we're really excited about building here far into the future decades.

Excellent. And looking post 2028 and you had suggested before a 10-year kind of outlook for activity. Could you talk about how you see your businesses evolving? Like if we go out 10 years, what do they look like? How does it change versus the dynamics that we're seeing today?

Sure. And let's start with our biggest business in power in which Gas Power is our largest business there. I mean, today, the services business is the biggest piece of that equation. So we have about 720 gigawatts of installed capacity in Gas Power in simple cycle terms, okay? Of that 720 gigawatts today, only about 30% of it runs baseload, okay? A lot of the other installed base is seasonal peaking. It runs all the time in the summer. It runs all the time in the winter in the Northeast. But during the fall and the spring, the utilization is much lower because the electricity demand is lower because of energy patterns.

And I frame that up to just say, over the next 10 years, if you want a 10-year guide, we're going to add at least 200 gigawatts of incremental installed base to that 720. But the difference is those 200 gigawatts we're adding in the next 10 years is primarily running baseload. And the impact that has on our financials when you project ahead that far is massive, because if today, only directionally 200 gigawatts of our existing fleet runs baseload.

And over the next decade, we're going to double that. There is a lot to be excited about in the installed base and the financial foundation that is our business, which is the installed base of our Gas Power business for the future. Now that's power. I mean we're going to add substantial capacity, and I start with that because I think we index too much sometimes on the equipment economics that are going to be very attractive for the next many years. But I'm just as excited about the services economics for the future decades to follow. Now at the same time in electrification, we continue to have opportunities to get better. And something I share with folks often is I feel like I'm reaching my third gear of optimism in relation to electrification. The first gear was when we announced the spin in late '21 into '22 and '23, and there were very clear opportunities to run that business better.

Cost out, organizational design, underwriting discipline, and we're bearing that fruit today, and you see it in our financials. I would say over the course of '24 and '25, that second gear of optimism very much focused on commercial arbitrage, pulling electrification forward where we had strong strategic relationships in the rest of the world. And you're seeing that. You're seeing in our North America orders growth with utilities. You're seeing it with the hyperscaler demand. You're seeing it in legacy countries that we've sold a lot of power generation equipment like Saudi, Algeria, Korea. But the third gear that's really just starting is we have a number of incredible organic investment opportunities of technology that we had historically invested in, in our electrification business, but because it was somewhat orphaned inside a larger GE company, we didn't give them the capital they needed to get the products to completion and to commercialize them.

And in today's world with substantial demand for electrification, we've got a customer base, including hyperscalers, pulling us forward with those products that gives me great confidence that there is another chapter of growth coming for electrification that organically, we're incredibly excited about. So that's electrification 10 years in the future. And then when it comes to wind, we've got to continue to make that business better. The reality is the wind industry, including my business, has historically been too manually run. It's not as automated. And that leads to some of the economic challenges that the industry has experienced.

Our volume is softer than I want it to be today. I can cry in my beer over that or I could use that time to position this company in this business, in this industry, frankly, to be more economically competitive by investing in how we make things, how we serve the installed base. And that's very much what we're focused on inside wind today. We're not playing victims. We're focused on leading a more competitive industry going forward. So those are a few thoughts across the businesses.

Excellent. And you mentioned -- maybe to dive into the services trajectory over time here, too. You mentioned in the power business, the baseload dynamic. I feel like the installed fleet that's not running baseload actually also seems to have an opportunity to run more in the future given the demand that we're seeing, that seems to point to this big services opportunity that can really emerge next decade. Could you talk about that and the financial impact that could bring to your overall portfolio?

You bet. I mean we've talked in the past about the fact that we project the upgrades into our existing gas installed base to double by the end of the decade. That's for exactly the reason Dave's inferring. The existing installed base that has not been running baseload, you have many owners that are now saying, I haven't invested in my fleet in a number of years, but I see an opportunity to run these assets differently and more, and I'm ready to make those technology investments. Sitting here today, that marker of doubling our upgrades by the end of the decade is probably -- won't take that long, it will probably be larger than that, okay? There is a lot of pent-up demand for our installed base in gas. But this isn't just about gas. We're seeing very healthy orders growth in our steam business. We see up to 5 gigawatts of incremental nuclear electrons we will add in the U.S. with our existing installed base by upgrading existing running nuclear plants that we're working through right now.

We've talked a lot about the fact that we're driving and have made substantial investments in our wind business with things like modern technology, different forms of cranes we're using today to enable us to service that installed base differently. We will have a more profitable and improved profitability in our onshore wind services business going forward. But we're also driving real improvements in our electrification business. So I would say, it's hard to not start with Gas Power when we talk services because that is our most economically attractive and largest installed base, but there's work and opportunity for us across the portfolio.

Excellent. The competitive landscape has gotten quite a bit of attention lately. I'm wondering if you could touch on how you see maybe market share in your different businesses going forward? How are you competitively positioned now? And maybe in there, if you could address gas turbine supply-demand outlook and the capacity situation there?

Yes. I think -- I mean, our legacy share in gas, if you look over a period of time, trends between 40% and 50%. That fluctuation is driven by global demand in certain markets in any 1 year. So for instance, we have a very limited presence in China. So in years in which China has a large proportion of the market, that leads to our global share being lower as an illustration. But I see no reason to expect us to have anything other than our historical share on a go-forward basis. If you double-click on that, we tend to be especially strong in 60 hertz markets. So think U.S., Saudi, Korea, Taiwan, Mexico, those are really good markets to have a very competitive product today, and we're benefiting from that.

But I don't really run that business trying to gain share. It's not really what we're focused on. It's how do we build an amount of supply that we think makes economic sense. That's the 20 gigawatts a year of simple cycle supply and then maximize the profitability with that available capacity. But when it comes to markets and share, the one I would really go to that I would argue is a bigger main event for our investors is electrification. Because if you take a step back in electrification, we believe our addressable market today with the products we have, it's somewhere between $125 billion and $150 billion.

Yet our revenue average [ '25, '26 ] directionally, we've got $10 billion business today. Yet our addressable market is between $125 billion and $150 billion. That's the more pointed question you should ask me, which is why isn't that exponentially larger? And the answer is it's going to be.

So in electrification, there's a lot more open field running because there are -- there is many more competitors and competitive dynamics, but it's also the part of GE Vernova that was under-invested in for too long, especially in a time that we were part of a bigger company that we weren't organized enough on the front end with end customers. So I do expect us to gain share in electrification over the medium term.

And in power, this is not that in any 1 year, it won't fluctuate to how I frame, but this is about maximizing our profitability than chasing share per se. And then in wind, we've historically been 50% of the U.S. market. We continue to expect over time, we will be. The market is just smaller than I want it to be right now, okay? And then situationally, we're focused on other markets where our products make sense.

Excellent. Maybe to drill into a couple of your businesses a little bit deeper. You've highlighted electrification in a big way here. I think we've seen varying growth trends maybe regionally. Could you dig into where are the most exciting areas of growth maybe regionally or product set also?

Yes. I mean Europe has remained our largest market in totality. But as I framed in our prepared remarks, I mean, let's take Saudi. I think that's an important case study for the art of the possible for GE Vernova. We hosted a future energy event in Saudi in February. And I've been going to the Kingdom for a dozen years and have good relationships with the end customers. In that future of energy event that admittedly was very focused on power generation, we had an authentic adult conversation on the need to pull forward incremental electrification scope and not just gas turbines. And that was in February. Where -- by March, we had a $2.5 billion commitment from them to take out incremental electrification equipment, in this case, primarily synchronous condensers to stabilize their grid in different ways with the 50% of their system that they're driving to build solar and storage into in which they need more rotating equipment with synchronous condensers.

$1.5 billion of that $2.5 billion commitment will be an order in the third quarter of 2025. So I give that, that illustration to just frame that we think the art of the possible of electrification is great. We think we have very strong interconnected relationships that we historically haven't been leveraging enough with a business that thankfully is running itself better and better every day. Philippe Piron, the business CEO, is doing an excellent job as is his management team. And with that, that gives our company the conviction to really advocate for electrification as we're interacting in the market, and we're seeing the benefits of that.

So I mean, there was a period of time after the spin that I visited a number of my most intimate customers and asked for their advice on both wind and grid. And generally speaking, the advice I got for wind was consistent with our plans. The advice we received on grid in those lunches and dinners is often, I'm not sure what to tell you because I'm not sure what you have. In that moment I heard that, it's painful. But then on the flight back, you say to yourself, wow, this is an incredible opportunity because it just was not effectively front of mind with our end customers and how we were playing it. And we continue to demonstrate an ability to fix that with customers that are quite willing to lean towards us in this regard.

So I give those anecdotal, that anecdotal perspective because this isn't about a market or a product. This is about building a business segment with the electrification solutions in totality that allow us to serve our strategic markets and strategic customers globally.

No, that's interesting. And may segue a little bit into a topic I did want to ask you about. Are there opportunities that you would highlight that might be smaller now that excite you over time? It feels like that might be -- there might be opportunities within electrification, for example. Are there investments that you could make, maybe it's new products that will take investment in the near term, but then in the 2030s, it looks like it could be a bigger and bigger opportunity.

Yes. I mean let's talk about software for a second. And as an example, we announced today that with our manufacturing software business, it's a Proficy is the name of the product, we're selling that business to TPG for $600 million. We have an opportunity for an incremental earn-out at a later date associated with the deal. Now that represents of our electrification software business, about 20% of the revenue for a business that's between $900 million and $1 billion in totality, all of electrification software. Why do we do that? We did that because when I would go on a customer visit, it was to go meet Procter & Gamble that leverages that solution in all their factories. And that Procter & Gamble is a great customer, but that's not our core business.

And we want to focus on our core businesses. So the beauty is that $600 million that conceptually, not directly, but indirectly, we can reinvest into our grid software business, which is the lion's share of our electrification software business. We're very excited about our grid software business. We see this as a critical part of our future. We announced over the course of the summer an acquisition of a company called Alteia, which is a visual intelligence, artificial intelligence company that allows us to really -- it's an acquisition of a company, but practically, it was an accelerated R&D. It was really more acquiring small technology that we wanted to cut in to our solution. But we believe grid software is going to play an incredibly important role in the future.

Now it will be tough for it to be big enough for you to model it this decade. We're nurturing this business. We're focusing it, but with the complexity that our customers are managing the grid everyday, by directional flow of electrons, distributed energy resources, think solar panels on houses, think increased renewables penetration rate with intermittent planning dynamics, wildfires, our customers are craving a more holistic solution for grid software because today, to a large extent, they have homegrown solutions that don't talk to each other very well.

So we're really excited about grid software and what we're going to do with that business, and we're continuing to focus our electrification software to lead there. That's an example. Hard to not spend a minute on nuclear in that vein. We're in construction on our first 300-megawatt small modular reactor today in Ontario, Canada. We also have an application into the NRC, the Nuclear Regulatory Commission to begin construction on our first project in the U.S. We've committed to the administration that if we receive that approval to construct by the end of next year, we will be in construction in 2027.

New nuclear is going to matter more in the next decade. Is it going to fit in, in any material way to your financial modeling or mine for this decade? No. But are those 2 examples of businesses that strategically we're investing in that we expect to create substantial value in the subsequent decade? You bet we do.

Yes, really adds to the longevity of the business profile into the 2030s for some of those opportunities. You bet. Maybe going to the -- something that excites us right now is in the gas equipment side of things. Could you just give us an update on what you're seeing in terms of demand? Are there regions that pop out as the most exciting demand opportunities on the gas equipment side of things?

Last year, Saudi was our largest individual market. This year, it will be in the U.S. It's almost certain it could be the U.S. again next year. But this isn't just about the U.S. I mean we have been observing the market in Mexico recently, not participating. I could see us reentering Mexico and serving that market in a material way in the near term. We have 10 gigawatts of plants that are in construction right now in Taiwan, primarily supporting the TSMC build-out. There's another 10 gigawatts that needs to be built, if not more. So Taiwan is very important for us.

When I think about the time that I spent this year in Southeast Asia, I do think there will be a number of hyperscaler data center investments and build-outs in Southeast Asia, often close to Singapore, leveraging Singapore law, but with the power generation plants in Malaysia or Indonesia, we're positioning ourselves very well to serve that market. We're making investments in Vietnam, as an example, as a location that as a platform will allow us to serve that market. So we're really -- if you take a step back, going into an environment that most people would say that the gigawatts of new capacity additions certainly could be north of 60 gigawatts this year. And I don't think that's a 1-year anomaly. So the U.S. matters, but a lot of these other markets create very compelling opportunities. And as the undisputed global leader in this industry, we expect to work very hard to serve all of the markets where the economics make sense.

Excellent. One kind of overarching piece of the business that gets a little bit underappreciated, I feel like from investors is the free cash flow outlook. And I was wondering if you could touch on capital allocation. You've got an improving and very strong free cash flow outlook over the next several years. You've already got a strong net cash balance as well. So how do you prioritize allocating that capital?

Yes. I mean even before that, I would just going back to the small announcement we made today with manufacturing software, $600 million sale. To be clear, since we've spun, we will have generated about $2.5 billion of capital through the simplification of our organization. That isn't because we need the capital. It's because we're driving a culture as a company in which we want to focus on our core businesses that we can scale and drive incremental value for our customers and our owners every day. And that is something culturally we are focused on every day.

Now that said, we are very encouraged with our free cash flow projections for the out years, and it does give us a lot of flexibility for where we are. It starts with organic investments. We see very compelling opportunities to grow into our business. Our CapEx, as an example, just based on things that has been previously announced on our growth trajectory will likely peak in 2026 for both gas and grid. But with previously announced capacity additions, next year is peak CapEx for those businesses. We'll talk about that more when we get to our Analyst Day at the end of the year.

But we see compelling R&D opportunities. I do expect our R&D to be up double digits again in '26 relative to '25 with electrification being the segment that benefits from that growth more than others. We are very focused on continuing to return substantial capital to our shareholders. We will continue to be very opportunistic with our stock buyback program from here, and we have been year-to-date and will continue to be. And then situationally, we're going to invest in our core from an M&A perspective. But it's going to be in our core.

Right now, we look at our businesses and the number of balls that our businesses are juggling every day. And the question I ask myself is how do I make those management job -- team's jobs easier. And where we have opportunities to do vertical integration within the core that allows them to control their destiny to a larger extent, we're going to do that. We were very happy with the Woodward acquisition we did supporting our gas business early in the year. We'd like to do other transactions like that.

But we'd also like to continue to invest M&A dollars into our core grid business. And where we can get deals done that make economic sense, we'll do that. But we're going to be thoughtful and patient also. So I often frame up that in the near term, we may be a little bit inefficient with our balance sheet, but that's a very strong balance sheet that we have that positions us with the luxury of playing offense when it makes sense.

Excellent. Yes, it's really a good problem to have. It gives you a lot of flexibility going forward.

It's a great opportunity.

Great. So I think we're about up on time. So I think, Scott, thank you very much for being with us. I think we're going to -- we're only holding it to the fireside chat questions today, unfortunately. So we can take this offline. So thank you very much. Appreciate everybody's time. Thank you. Thank you, Scott.

Thank you.

Good day, ladies and gentlemen, and welcome to GE Vernova's Second Quarter 2025 Earnings Conference Call. My name is Liz, and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the program over to your host for today's conference, Michael Lapides, Vice President of Investor Relations. Please proceed.

Welcome to GE Vernova's Second Quarter 2025 Earnings Call. I'm joined today by our CEO, Scott Strazik; and our CFO, Ken Parks. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's Form 10-Q, press release and the presentation slides, all of which are available on our website.

Please note that year-over-year commentary or variances on orders, revenue, adjusted and segment EBITDA margin discussed during our prepared remarks are on an organic basis unless otherwise specified. We will make forward-looking statements about our performance. These statements are based on how we see things today.

While we may elect to update these forward-looking statements at some point in the future, we do not undertake any obligation to do so. As described in our SEC filings, actual results may differ materially due to risks and uncertainties.

With that, I'll hand the call over to Scott.

Thanks, Michael, and good morning, everyone. We had a productive second quarter, positioning us well to continue to accelerate our growth and margin expansion. This era of accelerated electrification is driving unprecedented investments in reliable power grid infrastructure and decarbonization solutions. We see attractive end markets converging with better run businesses, giving us a substantial opportunity to create value from here.

At the start, I just want to share some market context as I see it today. Continued strength in gas power demand as we signed 9 gigawatts of new gas equipment contracts in 2Q, of which 7 went into slot reservation agreements and 2 went directly into orders. During the quarter, we also converted 3 gigawatts of SRAs from previous quarters into orders, while shipping 5 gigawatts of equipment. This resulted in backlog remaining at 29 gigawatts, while growing slot reservation agreements from 21 to 25 gigawatts, building our total backlog and slot reservation agreements to 55 gigawatts from the 50 we talked about at April earnings. We continue to see higher turbine prices and strong demand and still expect to have at least 60 gigawatts between backlog and reservation agreements by the end of the year at better margins with significant momentum into '26.

But the power demand isn't limited to gas new units. We also see solid services demand growth as customers look to invest in their existing fleets. Not only are we seeing strength in gas services. Steam services orders were up 30% in Q2, and in support of nuclear extensions and upgrades, and we booked significantly higher uprates in hydro, which increased 61%. We continue to work hard to ramp our production capacity at Gas Power and to meet this rising demand for services across our fleet. We also are pleased with the progress in our 300-megawatt small modular reactor which is part of our higher R&D for this year. We are starting to see the initial proof points of our investment. We are in construction in Ontario on the first project. The NRC has now formally accepted TVA's application, a constructed Clinch River site, which means the formal process has started, and I expect more customer announcements with our SMR technology in the second half of the year.

Continued progress in electrification. We grew our equipment backlog an incremental $2 billion in 2Q '25 led by Europe with North America and Asia backlogs both sequentially increasing almost 10%. Demand in the Middle East is accelerating as evidenced with our announcement on the Saudi grid stabilization equipment, synchronous condensers. We expect at least $1.5 billion of this agreement to become an order in the third quarter. Synchronous condensers provide voltage support and frequency regulation to help balance the grid when generation levels are volatile, especially in areas with significant renewable intermittency. This is a technology we have manufactured for years, and now the market is starting to catch up. Investments in the reliability and resiliency of the grid are clearly growing globally. Technologies like synchronous condensers have been a small market over the last decade, but we see this as a credible $5 billion market opportunity a year going forward and are investing in positioning our businesses to serve this opportunity.

Demand for data centers also remain strong in electrification. We've already received almost $500 million in orders in the first half '25 versus $600 million in full year '24. So this growth market continues to accelerate. We do see weaker European HVDC orders in '25 as we sit here today with some projects canceled are moving to the right as affordability challenges in EU becomes even more real. With the momentum we are seeing elsewhere in this segment is more than offsetting it, and we continue to see a clear pathway to grow our electrification equipment backlog at least as much in '25 as we did in '23 and '24.

On wind. Since the tax bill was signed on July 4, we've experienced an increase in customer engagement in the U.S. So the potential certainly exists for an inflection towards growth, although permitting and managing through the interconnect queue are also key. It is early, and we'll see how the rest of the year materializes. I'm also encouraged with some wins we've had recently in international markets. Romania, Australia, Japan, Spain, Germany, markets where we expect to see orders and second half '25. The markets continue to come our way while we continue to work hard every day to run our businesses better. Ken will walk through the detailed performance by business, but I was pleased to see Power deliver EBITDA margins north of 16%, with electrification approaching 15% in 2Q, but I would emphasize that as our teams continue to get their feet under them, we see real opportunity to continue to accrete margins higher from here.

On wind, we continue to ship more profitable onshore equipment, but that was more than offset in 2Q with our investments in our services quality programs in the field, in addition to the impact of tariffs, on our offshore wind business. Year-to-date, we've lost approximately $300 million in the wind segment but expect the business in the second half of '25 to be closer to breakeven. Our onshore fleet performance continues to improve. We've seen the availability of our fleet increased by 1 percentage point since last year, positively impacting our customers with long-term service contracts. We are starting to free up more capacity in 3Q onwards for transactional-related work in the onshore installed base. In offshore, we installed 34 units in 2Q and commissioned 33, our most productive quarter to date.

Another variable that is giving me real confidence in the future is that we are now getting to a point in many of our larger businesses, certainly in both gas and grid solutions, where we have a solid enough lean foundation to evaluate robotics and automation in a more strategic ways, both in the factories and out in the field. Standard work in our functions is also laying the foundation to even more aggressively invest in AI and drive real productivity improvements at pace. As I see it, robotics and automation are critical. We can only be invested into once the business is sufficiently eliminated the waste in their core processes. In a similar vein, a business must get to standard work before investing in AI. We are now ready for both. And these 2 themes are important parts of our strategy reviews that will take place in 3Q across the company.

Better market conditions and continued operational improvement in our businesses, are both important, as is our focus on leading the industry from a position of financial strength. We were pleased to deliver positive free cash flow again in Q2 and end the quarter with almost $8 billion of cash. So far this year, we've spent $1.6 billion on stock buybacks, repurchasing approximately 5 million shares. We are continuing to invest in our organic growth. Just last week, I was at our Charlotte Roy factory in Pennsylvania, where we announced an incremental 250 jobs over the next 2 years with up to $100 million investment that will support a doubling of volume out of that factory from '25 to '28. We are also pleased with our progress in our small strategic acquisitions. A great example of this is our acquisition of Woodward's gas turbine parts business, which includes a factory that allows us to redirect work and optimize the layout of our Greenville plant with limited CapEx spending and improved productivity in our gas power supply chain. Prior to our acquisition, this site experienced 50,000 labor hours in '24, but after approximately 100 days since close, we now see a clear path to 90,000 hours in the factory by '28, freeing up space in our Greenville factory to drive more productive growth. These are the kinds of transactions we are working hard to add to our pipeline, where we see clear opportunity to complement the growth in markets we serve with our lean discipline to do very attractive, lower risk and accretive deals in our core.

We were also excited to announce this week our acquisition of Altia scheduled for an August 1 close. With this acquisition, we are buying an existing partner that uses AI and visualization technologies to help our customers manage and orchestrate the grid. We will be able to immediately integrate this with our grid OS as another important step forward for our electrification software business. I share all of that to just outline in my words, what it means to lead from a position of financial strength, $1.6 billion stock buyback at very attractive valuation, smart vertical integration of supply chain opportunities in our core, where we can rapidly increase productivity to gain substantial operating leverage and strategic additions of complementary new technology to improve growth going forward. In all these cases, it is early, but I expect us to deliver substantially more from here.

Turning to the next slide on our second quarter results. We continue to build a stronger backlog supporting the long-term growth potential in our businesses. Our equipment backlog grew from $45 billion to $50 billion in 2Q, up almost $7 billion in first half '25. We are growing this backlog at improved margins and consistent with prior communications, look forward to showing you at fourth quarter earnings next January, the full change in margin in the equipment backlog. Our services backlog also grew approximately $1 billion in the second quarter. We now maintain a total backlog of $129 billion. In light of the strength of our power and electrification results in first half '25 and forecast for the remainder of the year, we've revised up our EBITDA margin expectations for both segments and increased our free cash flow expectations for the year in line with these expanded margins at modestly higher revenue levels. Ken will provide more details, but these updated estimates fully embed the cost of tariffs in '25, which we estimate to be trending towards the lower end of $300 million and $400 million at today's announced tariffs, so almost 1 point of negative EBITDA margin embedded in the guide. The teams are making real progress on a go-forward basis on how we are contracting for this, in addition to new sourcing strategies and more utilization of free trade zones for '25, it is likely the impact remains within this band.

The last thing I want to touch on and which Ken will also give more details to in the later slides, is our announced planned restructuring costs, which we expect to incur over the next 12 months of approximately $250 million to $275 million. It was very important to me that after our first year as a public company, we evaluated how our organization is performing and where we had opportunities to be more efficient and streamlined. More important than the savings this will yield is that this is an important step forward in the culture of the company I want GE Vernova over to be. Even with the growth ahead of us, it is critical culturally we continue looking in the mirror and finding opportunities to get better with a lower cost structure. This is the first of many ways I expect us to be a more productive while meeting the substantial growth ramp ahead in the early stages of this investment super cycle into the electric power system.

With that, I'm going to hand it over to Ken to provide details on our second quarter results and our updated guidance.

Thank you, Scott. Turning to Slide 5. We delivered strong results in 2Q 2025 with continued orders and revenue growth and adjusted EBITDA margin expansion. We also generated positive free cash flow again this quarter and returned approximately $450 million to shareholders through share repurchases and dividends while maintaining a healthy cash balance of nearly $8 billion. Demand remained robust in the second quarter as we booked $12.4 billion of orders, an increase of 4% year-over-year and approximately 1.4x revenue. Equipment orders grew 5%, driven by Power, which more than doubled year-over-year. Electrification equipment orders remained strong, but decreased year-over-year given the value of large equipment orders recorded in the second quarter of last year. Services orders increased 3% with growth in power and onshore wind. As a result of the strong orders, our backlog continued to expand both year-over-year and sequentially across equipment and services, now reaching $129 billion in total led by both power and electrification. Equipment margin and backlog remains healthy, reflecting higher price as well as our continued focus on disciplined underwriting. Revenue increased 12% with higher equipment and services revenues in all 3 segments. Equipment revenue grew 18%, with double-digit growth in electrification and Power, while total services revenue increased 6% and Price was positive in each segment. Adjusted EBITDA increased just over 25% to $770 million, led by strength in electrification and power. Adjusted EBITDA margin expansion of 80 basis points was driven by more profitable volume, price and productivity, which more than offset investments for innovation and future volume growth as well as tariff impacts primarily at offshore wind. We continue to generate positive free cash flow with approximately $200 million in the second quarter, reflecting stronger adjusted EBITDA and Working capital in the quarter was an approximately $600 million cash benefit driven by strong down payments from rising orders and slot reservation agreements at Power, which more than offset cash taxes along with CapEx investments supporting capacity expansion.

As we've discussed in prior quarters, we continue to utilize lean to improve our billings and collection processes to drive better cash management and linearity. In the second quarter, we reduced days sales outstanding by 2 days sequentially, resulting in an approximately $200 million of additional free cash flow in the quarter. As expected, free cash flow decreased year-over-year due to the absence of a $300 million arbitration refund that we received in the second quarter of 2024. We as well as a lower positive benefit from working capital and higher cash taxes on higher adjusted EBITDA. As a result of our improving free cash flow linearity through the year, we continued to return cash to our shareholders in the second quarter with a total of approximately $450 million of share repurchases and dividends. So far this year, we've repurchased $1.6 billion of stock, and we'll continue to execute our buyback authorization opportunistically as we firmly believe there is incremental value embedded in our stock. We ended second quarter 2025 with a healthy cash balance of approximately $8 billion and with no debt, which gives us confidence to invest in the business for growth and return cash to shareholders through dividends and share repurchases while maintaining a solid investment-grade balance sheet.

In the first half of this year, both S&P and Fitch affirmed our investment-grade credit rating and increased their ratings outlook to positive from stable. We're encouraged by our overall financial performance in the first half of 2025 and delivering double-digit organic growth, 120 basis points of adjusted EBITDA margin expansion and approximately $1.2 billion of free cash flow generation. Our growing backlog with healthy margin provides an excellent foundation for continuing improvement in our financial performance moving forward.

Turning to Power on Slide 6. The segment delivered another strong quarter with robust orders, continued revenue growth and further EBITDA margin expansion. Power orders grew 44% and led by gas power equipment nearly tripling year-over-year. We booked 20 heavy-duty gas turbines, including 7 HA units, which was 6 more heavy-duty units compared to the number booked in the second quarter of 2024. We also secured orders for 27 aeroderivative units compared to only 1 unit last year. We're seeing incremental demand for our aero derivative technology, particularly to support data centers. Power Services orders remained strong with mid-single-digit growth in the quarter, primarily driven by steam power given more life extension and upgrades for existing nuclear sites. As Scott mentioned, we also saw strong orders growth at hydro, driven by higher demand for upgrades. Revenue increased 9%, led by gas power. Power equipment revenue increased 23% as we delivered 7 more HA units than the second quarter of 2024. Power Services revenue increased mainly from higher transactional services volume as well as price. EBITDA margins expanded 40 basis points to 16.4% and driven by strength at gas and steam. Margin benefited from higher price, productivity and volume despite the mix headwind of higher equipment deliveries. This expansion more than offset additional expenses to support R&D at nuclear and expenses to support capacity investments at gas as well as inflation.

Looking to the third quarter of 2025 at Power, we expect continued year-over-year growth in gas equipment orders. We also anticipate mid-single-digit organic revenue growth on higher equipment deliveries as well as continued services growth. We expect EBITDA margin of approximately 11% to 13% as productivity, price and volume should more than offset additional expenses to support R&D and capacity investments as well as inflation. Given the typical seasonality of services outages, power revenue and EBITDA margin should be lower sequentially in the third quarter.

Turning to Slide 7. We are executing on our Win strategy. In onshore wind, we delivered double-digit revenue growth and we invested more to enhance fleet performance. In offshore wind, we remain focused on executing our existing challenged backlog. Wind orders decreased 5% year-over-year, driven by lower onshore wind equipment orders outside of North America. Sequentially, onshore orders improved primarily due to equipment growth in North America. Wind revenue increased 9% in the quarter on higher onshore wind equipment volume in North America partially offset by lower offshore wind revenue as we executed on our current production and delivery schedule. Wind EBITDA losses increased approximately $50 million versus the prior year. At onshore wind, the benefit of more profitable onshore equipment volume was essentially offset by increased services costs as we're deploying more crews and cranes to accelerate improvement in the installed fleet performance. At offshore, we incurred additional costs primarily due to the impact of tariffs. As Scott discussed, there's potential for an increase in onshore wind orders over the coming quarters as developers and utilities work to ensure projects meet tax credit requirements outlined in the recently passed U.S. legislation. We will need to see how this materializes. In the third quarter, we expect wind segment revenue to decrease by a mid-teens rate year-over-year. Absent the approximately $500 million benefit of the onetime settlement from an offshore contract termination in the third quarter of last year, we expect wind revenue to increase low single digits. EBITDA losses should improve substantially year-over-year and approach breakeven driven by further improvement in onshore wind as well as the absence of the offshore contract losses recorded in the third quarter of 2024, net of the previously mentioned onetime termination settlement gain.

Turning to electrification on Slide 8. We had another quarter of robust demand, significant revenue growth and EBITDA margin expansion. Orders remained strong at approximately $3.3 billion, roughly 1.5x revenue, driven by the growing need for grid equipment. While we saw strong orders growth for switchgear products in Europe and Asia, total orders decreased 31% year-over-year due to large equipment orders recorded in the second quarter of last year, where we recorded 2 orders that were both greater than $1 billion, an HVDC order for Europe and a great equipment order for Algeria. Importantly, equipment orders continue outpacing revenue, further expanding the equipment backlog to approximately $24 billion up more than $6 billion compared to the second quarter of 2024. Revenue increased 20%, driven by strong volume and higher price at Grid Solutions where we saw meaningful growth in HVDC, switch gear and transformer equipment volume. The team is executing well on its capacity expansion plans, and we continued to increase output in the second quarter. The segment delivered another quarter of significant EBITDA growth with margin expansion of 740 basis points to 14.6% on more profitable volume, increased productivity and favorable pricing, primarily at Grid Solutions.

In the third quarter of 2025, we anticipate significant equipment orders at healthy margins. Electrification revenue growth should be approximately 20% and driven by grid solutions as well as power conversion and storage. We expect significant year-over-year EBITDA margin expansion from higher volume, productivity and favorable price with a margin rate slightly above 2Q '25 levels.

I'll now turn to Slide 9 to discuss GE Vernova guidance. For the third quarter, based on our expectations for the segments, which I've already outlined, we expect continued year-over-year revenue growth and adjusted EBITDA margin expansion in the quarter, which includes our estimated impact of tariffs. We expect to generate positive free cash flow again for the sixth consecutive quarter in 3Q, given our increased adjusted EBITDA as well as our continuing focus on improving cash linearity. We continue to expect to deliver positive free cash flow in all 4 quarters this year. For the full year, we're raising our financial guidance based on the strong first half results and continued momentum we see in our businesses. For revenue, we're trending towards the higher end of our original $36 billion to $37 billion guidance range and we now expect adjusted EBITDA margin to be in the range of 8% to 9% due to the incremental strength at electrification and power. In addition, we're raising our full year free cash flow guidance by approximately $1 billion to be in the range of $3 billion to $3.5 billion due to higher down payments from increased orders and our updated adjusted EBITDA outlook. Our increased 2025 guidance also includes the impact of tariffs as currently outlined, which we now estimate trending towards the lower end of our previously stated range of approximately million to $400 million, net of mitigating actions. These costs are expected to be relatively similar in each of the last 3 quarters of 2025.

As Scott mentioned, we're actively navigating this ongoing dynamic environment and taking action, including the acceleration of our $600 million G&A cost reduction road map. In 2024, we reduced our adjusted G&A cost by approximately $170 million, and we expect to decrease our cost by a similar amount in 2025. To accelerate the achievement of our $600 million target, we've launched a restructuring program subject to local regulatory information and consultation requirements to be executed over the next 12 months and anticipate approximately $250 million of annualized G&A savings beginning in 2026. We estimate that we will incur approximately $250 million to $275 million in cost to execute the plan. By segment, we're increasing our organic revenue growth guidance at Power to be between 6% and 7% and compared to our previous guidance of mid-single digits. We're also raising our EBITDA margin guidance for Power to the range of 14% to 15% compared to our previous range of 13% to 14% and driven by strength at gas and steam. In wind, we expect revenue to be down mid-single digits with EBITDA losses trending towards the bottom of our $200 million to $400 million range, an improvement year-over-year driven by onshore margin expansion within the high single-digit range and lower losses at offshore. In electrification, we're increasing our organic revenue growth guidance from mid- to high teens to approximately 20% as we continue to deliver our growing backlog. Given higher top line expectations, we now expect electrification EBITDA margin to be in the range of 13% to 15% and compared to our previous expectation of 11% to 13% EBITDA margin. We expect adjusted EBITDA in the second half of 2025 to be more fourth quarter weighted similar to last year. We anticipate typical gas services seasonality with the highest outage volume of the year in the fourth quarter. As Scott mentioned, we expect wind to be approaching breakeven in the second half of the year, primarily due to the timing of onshore turbine deliveries already in backlog and improved services profitability. We also expect electrification to grow sequentially as is typical.

Finally, at corporate, we now anticipate higher costs this year, largely given higher-than-expected stock compensation based upon the midpoint evaluation of our incentive programs. As discussed, corporate costs can be uneven across quarters like 2024 as it includes the portfolio activity at our financial services business, but we expect corporate costs to sequentially improve as we move through the remainder of the year.

Overall, we delivered strong results in the first half of the year. We're very encouraged by the rising demand and consistently stronger execution we're seeing at power and electrification and as well as the improvements we're making at wind, enabled by our lean culture.

With that, I'll turn it back to Scott.

Thanks, Ken. Just to reinforce a few important themes at the close. Productive 2Q. We continue to position GE Vernova to serve the accelerating growth we see in the markets, real strength in power and electrification, but potential for an inflection point forward on wind that will monitor in the second half of the year. Margins are improving, but we are just getting started. Our team is seeing more opportunity every day and as lean starts to take hold and spread across the business. I like what I'm seeing in this regard. Good cash performance first half of the year and pleased with our capital allocation, whether it be the stock buyback year-to-date, our organic investments for growth or the small but strategic M&A we are doing, we are creating a unique special company that serves the world in a way like no other. We don't take that for granted. I certainly don't. And wake up each day hungry and ready to serve our customers, our investors and our partners. We are just getting started, but I like our chances.

With that, I hand it back to Michael for the Q&A portion of the call.

Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask 1 question so we can get to as many people as possible. Please return to the queue if you have follow-ups. Operator, please open the line.

[Operator Instructions] Our first question comes from Julian Mitchell with Barclays.

Maybe I just wanted to start with the electrification segment. So a couple of different things there. One was just on the demand outlook. Maybe give a bit more color on the regional differences. It seems like Europe is maybe losing steam at Asia picking up. And pricing, I think in Europe, you talked about maybe softening the last 6 to 12 months. And then on the margin front at electrification, the updated guide for this year puts you close to touching distance of the medium-term margin goal. So maybe any thoughts around that and how you keep the discipline on big projects there?

Thanks, Julian. I'll start. I mean I think to take it in reverse on the margin guide, I think it's fair. I mean, we're pleased with where we are with electrification performance for the first half of the year approaching 15% in the second quarter EBITDA margins. And we do expect modest incremental improvement sequentially in 3Q and 4Q. So to your point, I think this is an area that will go through our strategy reviews here in the summer into the fall and likely have an update for you at the end of the year on the by '28 margin expectations in electrification.

Now on the first part of your point, we do continue to see growth regionally, whether it be Europe, North America or Asia. But what I would tell you is the big projects, so call it the long transmission line, HVDC projects that are quite a bit more lumpy. There's a lot more scrutiny in those projects today. So the orders that we're seeing are more core transformers, switchgears, we're encouraged with our grid stabilization equipment solutions like synchronous condensers. We've announced the transaction with Saudi, but we see real opportunities in many markets that have high renewables penetration rates for those solutions. And we're still seeing price but at a decelerating rate. So this becomes a dynamic where we need to continue to drive variable cost productivity. You're seeing that in our margin performance through the first half, but we're going to have to keep driving that because we don't expect to continue to get price at the same level that we have experienced over the previous 18 months.

And maybe just always kind of keep in mind as you're thinking about this pricing dynamic that Scott outlined we gave you an update at the end of the year as we closed out 2024 as to what was going on with our margins and backlog in all of our businesses. But specifically about your question around electrification over the last 2 years, we've seen about 9 full points of electrification margin and backlog expansion. I raised that just because as we continue to see things kind of get to the levels where you're not seeing the rate of growth to continue to inflect up as quickly as maybe we saw a couple of years ago, what is really good to look at as you're thinking about the business as much of that backlog is yet to be delivered. So as we think about the future, there is already margin and backlog to be delivered as we move out into the '26, '27, '28 time frame.

Our next question comes from Mark Strouse with JPMorgan.

I wanted to pivot over to the gas power business. So a lot of investor focus on pricing that gets disclosed in some of these deals on the equipment side. Curious what you can talk about on the service side, what you're seeing in pricing for your existing installed base, but also what you're seeing on new deals that are being signed?

Thanks, Marc. I'll start. I think this is another good illustration to connect dots with what's happening in the market when you even look at the PJM pricing that was confirmed yesterday with the capacity market that's driving incremental demand for incremental services and frankly, justifies incremental pricing into our services book for upgrades that can create incremental capacity for things like those capacity markets. So you're right, we talk a lot more about equipment new build pricing, but we are also in a price-up environment in services that will materialize through our income statement in the years ahead. So it's early in that regard, but we've been on that journey for the better part of the last 12 to 18 months, and we'll continue to see that translate into the income statement in the subsequent, let's say, 12 to 24 months because it's shorter cycle conversion than our new units.

Our next question comes from Joe Ritchie with Goldman Sachs.

Nice strong quarter again. Just the I want to try to square something actually on your new equipment orders in Power saw that you guys booked roughly about a little over 5 gigawatts versus 7 last quarter. But then I'm trying to square the revenue -- the order dollars were up sequentially, roughly $700 million, and so how much -- I don't know if you can tell me how much of that is pricing versus the equipment that you booked in the other areas of your power business, whether it's Hydro team, nuclear, et cetera?

We did see continued growth. So to square up the numbers, we did actually book -- we said we contracted about 9 gigawatts of orders in the quarter, of which 2 went directly into even went into SRAs. Then we had some SRAs convert over into orders, delivered 5 gigawatts out of backlog keeping the backlog number flat and seeing the SRA number grow from 21 gigawatts to 25. So those are the numbers that we've quoted there.

As far as the pricing on that, much of what we're seeing is a pricing positive dynamic there. We are seeing incremental equipment, but both on the service side as well as on the equipment side. We're seeing positive pricing on the orders themselves.

And to triangulate orders and at just think to yourself in the second half of the year, the mix of combined cycle orders that will be booked will be substantially larger. So you're going to see an orders dollar connection to gigawatts that will be larger in the second half of the year. The first half of the year has been more simple cycle orders. So that's where you've got to think about the gigawatt dollar connections and the mix between whether it's a simple cycle or combined cycle deal and we'll have substantially more combined cycle orders in the second half of the year.

Our next question comes from Nicole DeBlase with Deutsche Bank.

Can we just talk a bit about capacity. So I guess, the Pennsylvania plant announcement for electrification, was that kind of already embedded in your thinking, like if we look at the 2028 revenue ramp? Or is this totally incremental. Anything you can give on what that means from a revenue perspective if it is incremental. And then any change to how you guys are thinking about capacity on the gas side relative to what you've already announced?

Let's take them in reverse. I think on gas, we're really in the exact same place we've been, which is first things first, let's get to a 20 gigawatt run rate, which we should get to in the second half of 2026. On top of that, we've talked about wanting to get to 4 to 5 years of backlog and that's backlog between slot reservations and explicit RPO. And we've talked about the fact that we'll get to at least 60 gigawatts by the end of the year. So that's directionally 3 years of backlog. So for us to really lean into the incremental capacity, I think we've got more work to do, both in proving out that we can deliver what we've already committed but then seeing that backlog growth more towards the 80 to 100 gigawatts versus where we think we'll be at the end of the year, which is 60.

Now on electrification, we do continue to gain conviction that we can ramp up in these businesses within our existing factories with incremental investments into more both machining, but also more labor. That's the 250 incremental jobs we announced in Pennsylvania. Some of that's simply more shifts. The reality is that's a plant that if you go back a few years ago, it was 1 shift 5 days a week we're very quickly 6 days a week, 3 shifts. And as we leverage Lean, we're finding capacity and finding opportunities to do things better. And that's in Pennsylvania, but that is extrapolated across a number of our electrification factories and will be all part of what we need to work through in our strategy cycle here. And come back to you at the end of the year with an updated view on revenue trajectory for electrification through 2028.

Our next question comes from Nigel Coe with Wolfe Research.

Scott, just wanted to put it back to services. Maybe a bit more color in terms of what you're seeing transactional an upgrade. And in particular, any updated view on the potential for upgrades in the fleet. But I know it's 1 question, but I'd really like you to address the Arrow opportunity because big quarter for orders. You got the Cruso deal hitting the tape, I think, yesterday. Where do you see the opportunity for arrows? And what is the ability to scale up this business in the sort of next 1 or 2 years?

Well, there's a need for incremental bridge power and the beauty of Aeroderivatives is they can be commissioned faster and that's needed in the environment today, and our customers are able to price at a premium for expedited power. So error derivatives are a very attractive solution right now. They may, in the end, lead to customers having strategy where they become back up over time because maybe the plant will get connected to the grid in 3 to 5 to 6 years once the system hurdles the interconnect queue at large. But in the near term, demand for aero derivatives is very strong, and that's in the U.S., but it's also in global markets. At the end of the day, the need for incremental electrons right now is driving continued strength and upgrades. We will continue to see strength in our services book. We grew our services backlog in the second quarter by approximately $1 billion. And a lot of that incremental backlog and services is new incremental orders that go into our CSA book. And when we get incremental demand into the CSA book, it goes directly into backlog and then the orders convert when the revenue converts. So that's why you're seeing that $1 billion of growth, and we expect that trend to continue. So we're I'd still say early in this process here. We said probably directionally late last year that we saw at least a 50% growth in upgrades by the end of the decade. And today, I'd say that's likely a floor on what we see. But let us get through our strategy processes here in the third quarter and come back and give you another update there on what entitlement really becomes with power services in the next few years, but it's very encouraging.

Our next question comes from Chris Dendrinos with RBC Capital Markets.

I wanted to focus a little bit on the robotics and automation opportunity that you highlighted. And I recognize it's probably early here, but can you maybe highlight where you see the greatest opportunity to leverage that technology across the business lines?

Yes. We are -- we have a number of -- we call them lighthouse projects right now that we're working in some of our factories in both Gas, Power and our power transmission set of businesses and grid. And the reason we're starting there is because there are factories that we've made the most progress on lean. And once you've really eliminated a lot of the manual waste in the processes you're most ready to apply that automation. But it's not going to be limited to there. We're doing very interesting work right now and wind to look at automation opportunities in the installed base. When you think about servicing wind turbines and very remote locations in the world, you could very easily make a declaration, and I could very well have already done this internally to say, we really shouldn't have humans out there servicing blades and wind farms at high altitudes robots can do that. Now that takes time to kind of get to that end outcome, but this is an important part of our future. I mean we see a growing backlog. We have a lot more certainty on the demand outlook. Our both supply chain and services teams are performing better leveraging lean, and this is the natural next extension. So I do think in a similar vein that we're talking about a lot of updates we owe you by the end of the year, this is an example of an incremental investment. I would project into 2026 on the strength of the backlog that we have that will yield return in the out years. So as you said, it's early. But with the strength of our visibility in the future right now, these are very attractive investment return equations and ones that we will be leaning into more in the financial year 2026 for returns that will come in the years that follow.

Our next question comes from Amit Mehrotra with UBS.

Wanted to maybe just ask about any implications to the power business from the recent tax bill if you're seeing any filing of EPC or permitting bottlenecks. Demand is obviously very strong. So I'm just trying to assess if there's an opportunity for SRAs to accelerate conversions to increase and if data centers are becoming a bigger piece of the growth relative to kind of that third of the book that you talked about last quarter?

Amit, it's early, right, since the bill was signed on July 4, but I would give a few elements of context. I mean, in our wind business and our inverter business for solar farms, with our grid equipment that supports wind and solar I would say, in all 3 of those categories, we've seen an acceleration of activity, not necessarily orders yet, but an acceleration of activity that we're going to need to monitor through the second half of this year and give you better transparency on as it materializes.

In relation to that, though, as that activity increases for wind and solar for call it, the near to medium term, there also is very clear market sentiment that on the back half of the decade into the next decade, there's going to be a need for more gas. So this theme of more gas longer. And this is a U.S.-centric comment related to the tax bill. I would say our pipeline of activity for gas demand is only growing, but it's growing at even more healthy levels for 29 deliveries, 30, 31 in periods of time where maybe prior to the bill being signed, some of our traditional customers may have been intending more wind or solar, but looking to the other side of the tax bill see more incremental gas making sense. And that is at least today what we see. There may very well be more incremental activity for wind and our equipment we serve or sell to serve solar, but then I think in the medium to long term, this is another bull case for gas. And those conversations are accelerating as we speak.

Operator, I think we have time for 1 last question, please.

This question comes from the line of Andrew Obin with Bank of America.

Yes, just a question, why gross margin declining, particularly service gross margins. And I'll take 1 more in. Why is nuclear revenue declining? I totally appreciate that we have bright outlook here, but just what's the dynamic here?

So the gross margins moved a little bit just in light of the mix of revenues between equipment and services overall. So I don't see that as anything other than setting us up for a very positive future as we continue to deliver the units that overtime will actually accrete to our service portfolio. So little bit of a mix issue, nothing there at all to be concerned about.

On the nuclear side, just the timing of, right now, we are heavily focused on fuel servicing until the new SMR book builds and we begin to deliver more of those units. So it's just the timing of fuel servicing, nothing significant.

Before we wrap up, let me turn it back to Scott for closing comments.

Michael, I appreciate it. And everybody giving us the time, it is appreciated. I mean, we've had a few questions on the context of our performance year-to-date relative to the outlook. And if I try to wrap this all together in a moment or 2 to try to help all of us think about the company going forward. We talked a little bit about electrification at the start, and we are definitely pleased with our progress in electrification to be at almost 15% EBITDA margins today with modest improvements in the second half of the year. So we'll get through our strategy process and electrification and come back to you on a new by 2028 financial outlook.

What I would tell you in that regard is we're also gaining real confidence and conviction on our ability to continue to expand our markets in electrification, we're having very productive conversations with the hyperscalers on incremental solutions we can provide them. And I do expect our R&D to continue to ramp up in electrification in 2026, and that's something we'll share with you as we get to the end of the year. similar themes in power. We're pleased to be approaching the 14% to 15% band with power also. And as we've been saying for a period of time, that's primarily the strength of services and core operations. I mean the better equipment backlog does not cut in power until the second half of '26 and really 2027. So where we are sitting in Power today, we also have an opportunity to go through the strategy processes this year and likely update that by '28 financial guide.

On wind, that's probably of our 3 business segments, the 1 that as we look out to 2028, we're still sitting at a very similar expectation as where we were in December '24. That's the business segment that we're probably still sitting at by 2028, 10% EBITDA expectations, but there's also a lot that we owe you over the second half of the year in wind. I mean, in onshore wind with where our orders have been in the first half of the year, we have directionally 45% of next year's revenue in backlog today. So these orders need to convert in the second half of the year to fill our revenue profile for 2026. That's important.

In addition to that, with offshore wind, although we had our most productive quarter operationally in 2Q, both installing and commissioning more than 30 wind turbines. Sitting here today, we've talked to you in the past about the fact that we'll have maybe a stub period with offshore to complete Dogger Bank in 2027 and the most practical outcome is we're likely completing Dogger Bank through the 4 quarters of 2027. And with the benefit of the summer and our execution through the rest of the year, we'll give you an update on that by the end of 2026. So I thought it was important just to reground on where we are in all 3 business segments at the wrap and some of the stuff that we're going to be working on here as we look to the future with the business. Practically speaking, I think some of the big questions for us as we go into the end of the year is the strength of the backlog growth we expect in these businesses in 2026 because very quickly, when we start talking about incremental backlog growth in 2026, that's telling us and you, the incremental growth we expect in this company in 2029 and '30 and beyond. And that's going to be an important piece of the equation because the 2028 marker is just that. It's a marker. We are running this business and intend to lead this company with much grander expectations than 2028. And it is early for us, and we're confident with where we're going.

So with that, at the wrap, I just want to thank all of you for giving us the time. As you always do, we look forward to both Ken, Michael and I, seeing you out in the field for our customers. We appreciate the continued commitment and faith in us for our partners and suppliers. We need you in this growth ramp and we're going to keep working with you. And for our teams, we're proud of our progress. We're appreciative of everything you're doing. But we also know we have a lot of opportunities to improve, and we are going to focus on that every day. So thanks for the time today, everyone.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.