Vertiv Holdings Co Aktie

Okay. Great. Thank you, everybody, for joining us. My name is Mark Delaney, and I have the pleasure of covering Vertiv for Goldman Sachs. I'm very pleased to have with me today, Gio Albertazzi, Vertiv's CEO; and Craig Chamberlin, Vertiv's CFO. Thanks for joining.

Thank you for having us.

Gio, maybe we could start with one on the top line environment. At your Investor Day in May, the company raised its organic revenue CAGR target to 20% to 22% for 2025 through 2030, and that's up from the previous 5-year forecast of 12% to 14% that had been given at the 2024 investor event. Maybe start with helping investors better understand what's driving that acceleration?

Well, certainly, a combination of things. First of all, with the market, it continues to be strong. If anything, it's been strengthening. And even in our July earnings call, we reiterated the message of strong market, if anything, strengthening, strengthening pipelines, more visibility, elements of sales cycle acceleration. So that going in the right direction. And then our position in the market continues to be strengthening. So stronger and stronger. Certainly, that was very true when we had our May investor conference, 1.5 years pretty much after our previous one. And again, we continue to strengthen our portfolio, our role in the industry as thought leaders and innovators, but innovators at scale, very important.

And also, the evolution of the portfolio is conducive to capturing more of that market. I'm sure we will have opportunities to go through elements of that, too, during the course of the conversation today. So all things pointing in the right direction in a market that is strong and if anything, is showing signs of further strengthening.

And one of the key things we've discussed previously is it's not just about the revenue CAGR, but also what you're seeing with the pipeline. The company has seen that pipeline expanding and you also talked about an expanding pipeline on the 2Q earnings call. Can you elaborate on what's driving that increase in the pipeline?

Well, there is a combination of factors. The underlying market is strengthening. We have seen that in many ways, in multiple declaration -- public declaration of hyperscalers, various type of players, the frontier labs that are gradually becoming hyperscalers themselves. The industry is becoming broader and more active across the board. What used to be predominantly an American type of market acceleration, we are seeing geographically way more widespread than it was in the past. And again, something we've been vocal about quite constantly in the last 3 to 6 months. That acceleration is happening globally pretty much everywhere in the world.

And again, the fact that we are expanding portfolio. And as we have explained several times, adding layers of value to a foundation of product component technologies, the UPSs, the chillers, the CDUs, the switchgear, you name them, the sidecars, adding to that system level layer, products, converged products like OneCore and SmartRun, all the way to strengthening and expanding our services portfolio, all elements that contribute to that expansion.

Very helpful. There's been a lot of discussion recently in the industry around the potential for volatility and what data center build-outs may look like in terms of maybe policy restrictions on where data centers can be built or capital needs of some of these projects and can they be financed. And as you observe some of these things, I'm curious if you're seeing that have any implications for the pipeline.

Well, again, we not only look at the pipeline, we talk a lot with our customers and the industry in general. And of course, the pipeline is also the result of that all. And we see no sign of weakening. If anything, we're seeing strength that the pipeline is getting stronger and stronger and our customers resolve and building plan continue to evolve in the right direction. It is clearly true that the environment has complexities as you were explaining, the industry has demonstrated over the years to be able to look at what we believe are pacing items and address them with solutions to continue the expansion. And the expansion will continue as the demand for compute capacity will continue to expand. And we have no doubt about the fact that demand for compute power, especially AI compute power, but not only will continue to expand. And that's what we say.

The other aspect is very important to look at those challenges as opportunities. So Vertiv is providing solutions to address some of the concerns, if you will, that are behind some postures in the general discourse. From closed-loop cooling to elements of increasing efficiency in the way we operate the powertrain. We were vocal in our earnings call in July talking about PurgeRite, so everything that is fluid management and a product called NearZero that basically not only of course -- the data center not only will recirculate water. So no consumption, no use of water during running the data center, but also minimize to NearZero the consumption of water during commissioning. So all elements of a portfolio that is more and more addressing the concerns. And again, an example of how the industry is moving towards addressing the challenges that are thrown at it.

Well, speaking of solutions, you announced the proposed acquisition just very recently, Utility Innovation Group. Craig, maybe you can take this one. But talk about what that brings in terms of the breadth of solutions that Vertiv will be offering and any financial commentary you can share?

Yes. I mean I think when we think of UIG and kind of the step functional change it will do for us, it's another one of these assets when we look at what we're doing inorganically of what do we need in the portfolio to continue moving us forward and put us in a position to capitalize on the growth where UIG comes into the fold and what we see it being able to help us look for is the opportunity to influence the way the powertrain will be constructed as you think of the way it goes into the actual data center. UIG has put us in a position where when they design and develop and architecture the way the behind-the-meter power will go, it's strictly in that conversation from the standpoint of influencing that.

So we thought it was a great spot to go in and act on that. It's an acquisition where, again, a spot where we think what is not in the portfolio that can help us continue to grow and continue to help us influence the way that the data center market moves. It's again, one of these ones where if we went back a year ago, it's something like PurgeRite, where we saw it come up and we were like, hey, it's an advantageous thing for us to get today, and we can grow it going forward, and it gives us in a different position and a different, I would say, light in the way that we think about the way the data center architecture is being constructed. So I think when you look at the way that we structured the deal, again, we like the way we structured the deal. If the earn-out happens, we'd be really happy to pay the earn-out. For us, it's a home run of an acquisition.

And on the topic of solutions, can you give a sense of how much of Vertiv's revenue comes from solutions currently and how that might evolve over the next, say, 3 to 5 years?

I don't think we ever define it in terms of solutions. I mean we always look at services and products, but products in and of themselves can be different ways in the way they're deployed. And when we say solutions, again, it's looking at the total architecture of the product basis. So you can either do a point product delivery, you can do what I say a construction around an architecture of either the thermal chain or the powertrain and you can even do all the way up to a SmartRun deployment or then you could go all the way to a OneCore deployment. And all those are levels of solutions. And so we don't really break it out into the terms of the way of, "Hey, we're defining or we're developing solutions." What we like to be able to have is a portfolio of solutions that can be delivered and I'd say, executed at a point product level, at a system level and at what we would say an architecture level. So for us, it is ensuring that we can deliver to the customer multiple layers of outcomes that will help them address what they're facing.

So it's whether that is, "Hey, we want this level of a UPS that does this. We want to be able to do that. We want a powertrain that does this. We want to be able to do that." We want to be able to think of it in terms of what our customers want and need and a portfolio that can address all of that. So when we think of internal development and external development, that's the forefront of the strategy is how do you ensure your portfolio is going to be able to address, one, what I call the intense development and design of a point product that can deliver efficiency and effectiveness all the way to a data center that can do all the things that need to be orchestrated together to create efficiency and effectiveness for your customers. So I wouldn't go in and say, "Hey, we're always going to go deliver a solution." It's the level at which that solution would come out.

That makes sense. Well, given the demand that the company has been seeing as well as some of the solutions that you're providing to customers that led to quite a bit of conversation around supply chain on the last earnings call. Maybe talk a little bit more around some of the supply chain congestion that Vertiv spoke about on the 2Q earnings call and what's leading to that?

Yes. I would say that we got very, very specific. That was not a generic situation. It was specifically referred to our converged infrastructure solution products are OneCore and SmartRun. So products that have intrinsically a high level of complexity. But that complexity is exactly the value proposition. We -- with products like SmartRun and especially OneCore, we are removing complexity from a construction site. We are industrializing something that is a field project. That creates a lot of value for the customer. That is phenomenal in terms of -- we call it tokenomics in terms of a product that is designed or, let's say, a data center that is optimized from an engineering standpoint as a product and then it is delivered in ways that minimize that time to token.

So certainly creating a lot of value for the customer, removing the complexity from the site. Clearly, that means that, that complexity is with Vertiv, and we are industrializing something that the industrial was not. So we're driving this data center product. And the way the execution of that works is 2 aspects. One is more multidimensional, require much more coordination across factories. And that's a muscle that we've been reinforcing a lot. Second is it can have some variability in terms of, okay, is revenue recognized this day or maybe 4 days later because some of the components are converging in the integration factory. So those dynamics are always there in the nature. But -- so I go back, it's not about supply chain. It's about coordination and maturity in this kind of in-sourcing and the complexity and returning to our customer extraordinary value for that. And we believe that is very potent and the return we see from the market is certainly corroborating that.

And we feel good about 2 things. One is the trajectory on which we are in terms of honing in on that, managing that additional level of complexity, i.e., industrial -- fully industrialized something that nobody has industrialized yet. On the other hand, forward-looking in the fact that the type of outlook that we have given fully incorporate elements of -- well, let's say, the wiggle room against possible hiccups. So we feel very good about the trajectory, but we are extraordinarily excited about the role of that offering in the market.

You spoke about building some of the muscle to deliver these full solutions that are bringing a lot of value to your customers. Are there other elements you need to do to also alleviate these kinds of challenges going forward like having more integration capability at Vertiv and investments like that?

Oh, yes. Well, I would say that clearly, in this type of converged product offering, and I talk products when we really mean what the world looks at an entire system, but we use products very deliberately. Clearly, integration is a capability. It's a fundamental capability. But we are not talking about the integration like we've done for 25, 30 years, the power modules that is a different scale. And that scales require capacity. And that capacity is being deployed. And that's a constant deployment of capacity to follow a demand that is certainly very, very encouraging.

That's helpful. Given everything you're seeing around demand and some of these timing challenges, can you speak a bit on lead times and to what extent Vertiv's lead times have changed?

Well, it's really specific to the individual technology type of products, market, but also size of deployment. So we do not feel we are -- we believe we're very competitive and meeting the market expectation in general with our lead times. And again, when we talk about large projects, be that delivered as a modular or like a lot of our business is about just products being shipped on a kind of a point product basis to our customers, we feel we are in a good place.

Okay. Maybe we can talk about some of those specific products and a lot of different opportunities that I think were underpinning the 20% to 22% 5-year forward CAGR you gave at the Investor Day. One of those was around 800 volt. And I think you guys on your -- the tech part of the Investor Day spoke a bit about that. But speak more on the opportunities you see, any challenges that are coming with 800 volt.

Well, I want to go back to a conversation at Investor Day and reiterated certainly in our earnings call in July, we do not see a univocal solution or the industry going in one direction. We firmly believed in May and if anything, we are even more convinced that the future is multi-architecture and different type of use cases, different type of customer groups will have different type of power infrastructures. So everything around 800-volt DC, be it happening at individual pod with a sidecar or all the way to the entire data hall, so a native end-to-end 800-volt DC is something we feel very, very good about.

In terms of our road maps and the -- how we are moving along those road maps, I would say that we are pretty nicely delivering on the time lines that we shared with you in May, and we reiterated in July with customers' validations ongoing, some of the products already in the offering cycle. And yes, we feel pretty good about that. And again, underlying all this is the fact that the complexity of the powertrain is increasing simply because that the performance required are increasing. And that's always a, let's say, favorable environment for us in terms of content, in terms of differentiating with our know-how and breadth of portfolio. And by the way, further expanded now with the recent announced acquisition that will, again, help us to start the orchestration, as Craig was saying, very early in the process, but also physically very early just behind the meter. So very exciting.

Lots of different types of 800-volt products and innovation happening. Maybe remind investors when Vertiv expects to begin shipping 800-volt products.

It really varies because we will see -- and it's less about Vertiv, it's more about what we see happening on the demand side. We'll start to see an acceleration in everything sidecar happening in 2027 from second half of 2027. When it comes to fully native end-to-end powertrain, 800-volt powertrain, that would probably be commercially back end of '27, volumes '28.

And I think Vertiv will deliver a whole range of products, right? There'll be some changes around what you bring with UPS and batteries, sidecars, maybe even a solid-state transformer. I mean, would investors expect all of those from Vertiv?

Yes, absolutely. The whole portfolio and being able to excel in every part of the portfolio is our mantra of what we have demonstrated over the years, also because we want to sit in front of a customer and not have an agenda. Our agenda is really to maximize their business opportunities, their business model. If we are one-trick pony, it's either 800 volt DC or a starvation for us, well, that agenda becomes predominant, and we want to be there for our customers instead.

Craig, maybe I can turn to you on the financials of 800 volt. What does it mean for revenue per megawatt?

We would articulate it a little bit like we did in the Investor Day. I mean, again, it does give us the opportunity to have more content. So we look at that. And we would say, "Hey, depending on how the architecture is constructed, there's opportunities there for us, definitely."

So again, whether you're going to the sidecar, whether you're going to go to a pod level, whether you're going to go into the actual data center, it will construct a little bit differently each way, Mark. But I think there's opportunities for us in each way that we would deploy that. And that's where I think you and I continue to think about what the customer wants is, "Hey, we want to be able to solution ourselves the right way for different levels of architectures and what I would say the customer deployment is going to be so that we can address all of those." And in each one of those aspects, and Scott walked them through pretty proficiently at the Investor Day, we see opportunities for growth in each one of those.

Maybe we could transition to the cooling side of the business. And Gio talk about where Vertiv is innovating on that part of the portfolio?

Multiple levels. Of course, the -- if we follow the heat flow, so we start from the chip. Strategic Thermal Labs is an acquisition. We -- small acquisition, we like a lot because it gives us an opportunity to be very early and very inside the silicon development. We see opportunity of orchestration at primary -- secondary fluid network level and orchestration with everything cooling. The liquid cooling technology continues to evolve. We continue to add capacity to this part of the business that is growing in a very convincing way for us. So clearly, design the evolution on the CDU and the liquid cooling part of the portfolio, certainly not stopping.

The other part, not to ignore the air cooling, but for -- in the interest of time, going outside of the building straight and talking about heat rejection, that's an area that is very dynamic, everything chiller, dry coolers, everything that high water temperature for efficiency reasons. There is -- there are a lot of moving parts. We feel good about our technology. We're very excited about the ThermoKey acquisition on the dry cooler side. And again, it's not going to be one technology or the other is a combination. But again, it's never -- it's always a combination of organic, inorganic also in this space.

We are super excited, and we see a lot of attention around what we call a trim cooler that is really physically a hybrid between a dry cooler, so no mechanical refrigeration, just free cooling and the chiller that really extends the range of when you can operate a data center on a free cooling basis. So an extremely efficient way from an energy standpoint and still have that reserve of cooling boost, if you will, for the days that are too hot to run on free cooling. So best of both worlds certainly at scale.

Mark, I think what you'll hear kind of as a continuation through the conversation here is back to what Gio was saying on the thermal side of the house is how do you ensure that you can sit at the table with the customer and have a portfolio that will address what they're asking. Whether that is the ambient temperature is going to be different in Minnesota than it is going to be in West Texas. All right. Well, how do we architect the right thermal chain for you depending on where you're going to deploy at or how you're going to deploy. And that comes back to the powertrain side as well.

And again, our thoughts about having the right portfolio influence a lot of the conversations that we're having when we say, "Hey, what do we need to go do organically and inorganically." Organically, something like the trim cooler, where we saw these conversations going on. On the powertrain side, it's the UIG situation where we saw these conversations going on around behind the meter and how do we make sure that we're there to address the -- not just the concerns of our customers, but the outputs that they want and the solutions that they want. And earlier, we were talking about the way that the environment is going and the questions that our customers are being asked about how to deploy data centers. Again, we want solutions there that would be able to help them deploy in a faster manner and to answer the questions that they're getting from certain jurisdictions or governments.

Maybe kind of thinking about the products and solutions more generally that Vertiv offers, maybe talk about where you're seeing the most momentum because I think your target from the Financial Analyst Day did suggest you're taking share. So anything in particular that's driving that share gain?

I mean I would say, one, it is our ability to have a portfolio of products that's very wide and very broad. We did talk about last fourth quarter of a ramp in orders around our infrastructure solutions business, and that would be what we'd say a deployment in SmartRuns and OneCores. And that we believe is a competitive advantage and that we like that competitive advantage. So definitely in the fourth quarter, we saw the ramp there.

Again, I would say the portfolio that we have and the structure that we have always is in that situation and the way that we're talking about it to give ourselves an advantage when we sit at the table to pull through more content. And that's, again, the conversation you have when you start with the UIG and you say, "How do you pull through more content and being able to drive the architecture the way that you want it." There's other opportunities in that in the thermal chain side of it that we were talking about and driving a thermal chain that acts altogether. And whether or not you need to ensure that you turn on the trim cooler at a certain time, well, that means you need to influence the way that, that architecture and structure is going and whether you have a layer on top of that, that has Next Predict or a solutions and controls basis that we would have that we could articulate and deploy with that.

So for us, it's this portfolio that all sings together. And it gives you the opportunity to not just structure a point solution, but a system-level solution. And then beyond a system-level solution, what I'm going to say is an opportunity to have a controls infrastructure that allows you to orchestrate that entire system. So it's layers when you think about it, and that gives you the opportunity to be more share of wallet and potentially more -- not potentially, but what we'd like to see is a gain in market share.

Very helpful. Some of the hyperscalers have taken steps to develop their own power and cooling products. What implications, if any, have there been to Vertiv?

I'd say that this is not new to the industry, and I've been very vocal about that. Probably the industry is receiving a level of scrutiny such that people see new things and behaviors that have been there for at least almost 2 decades or at least a good decade. So there's nothing new there. But the majority of the hyperscalers who, at least partially because no one is pure in that type of approach, need to rely on players that can support them with technology know-how and depth. So it's never saying hyperscaler operates their own IP and hence, the door is closed. No, door is never closed for 2 reasons. It's not all their own IP. And even when it's their own IP, there is a lot of opportunities to do things together because, again, the ability to operate at scale and make technology and domain know-how available and share that experience super important.

Maybe we could ask some financials -- financial-related questions. At the Investor Day, the company introduced a target for 27% plus adjusted operating margins by 2030. That was up from your prior 25% plus target. What are some of the biggest drivers of the margin expansion as you look forward?

Yes. I mean I think we pointed to a couple whenever we were talking about Investor Day, and it is ensuring that we can continue to scale and get leverage on our, I'd say, our volume for sure. And that's on basically what I'd say, a base cost basis as you get leverage on that and ensuring that you can go and deliver on that. So that's definitely one of them out there, Mark.

The other one would be what I call an efficient operational output. So we look at our manufacturing facilities and how do we ensure that we are driving the right level of productivity in our shops, and that's labor and overhead productivity and ensuring that we get the right level of productivity through a purchasing of materials perspective. You get volume and scale there, you should be able to leverage that up. And I'd say in the past, it's some spot where we probably haven't been as effective as we could have been. So it's the next step function for us to go drive more efficiency in the shops as we see this volume come through.

So those are 2 particular areas that we would think would add to that additional margin expansion. We'll continue to push through positive price/cost and ensuring that we can cover our inflation and drive that. I think that's something that we've been pretty adept at being able to do. And that continues on at probably a little bit lower of a scale, but much more driving it through the leverage perspective and the shop productivity perspective that I would say is going to drive more of that margin expansion in the second half. And that's the way we layered it in when we looked at the Investor Day.

Have you had more of those conversations around price/cost with customers when you talk about supply chain complexity, there's the tariff environment that's been ongoing, the competitive landscape. Any kind of additional work you need to do in order to maintain that price/cost positive outlook?

No. I mean I think it's what we've had historically put in place over the last couple, I'd say, year or so is really driving and ensuring that we understand what the outlook looks like from an inflation perspective and pricing that in accordingly, understanding that the tariff market changes can change on you pretty dynamically. And when it does change, how do you ensure that you have the right triggers in your contracts and the conversations that you have with your customers to put that into a pricing mechanism.

So it's an ongoing steady review and cycle behind it so that we don't ever think that we're comfortable. And when I say, don't ever think we're comfortable, how do you make sure you understand your input costs on a regular basis and that you have the mechanism to drive the right costing perspective and the right pricing perspective out of that. And that goes for inflation and it also goes for tariffs. On the back of tariffs, you also have other things you can do internally. And we say those are countermeasures. And those are everything from where you buy from to how you deploy to those things are in there as well. So that has a little bit of a double layer to it is ensuring that you have countermeasures that you can pull on, but also the way that you build it into your pricing mechanism.

As Vertiv's mix shifts more towards solutions, including prefabrication, doing more in terms of services, what does that mean for your incremental margins?

Yes. And I would say from an infra solutions business or SmartRun, OneCore, you look at the face of the P&L. On a product basis, the infra solutions basis is somewhat in line with that product margin. So it might have a little bit of mix in there, but nothing that we would say is material, but it's right in line with that because it is kind of a combination of everything that we do. Now it would be -- as you build up more product, it would be a little bit of a mix dilutive if you don't move it faster than -- if it moves faster than services because, again, our product margins are a little bit lower than what our services margins are.

So what we're looking at in terms of the outlook at Investor Day was growing services at similar paces that we're growing the product business, and that kind of what -- it would mute out any ability that would be there from a mix perspective. If products will move faster, you would have a feeling of the different mix there.

Gio, maybe we can close with a question for you on how you think about deploying capital. Obviously, you just announced the UIG deal pretty recently, but you have a lot of cash generation you expect and a good balance sheet. So any key priorities for capital that you would like to talk about?

Well, we have shown that we do the right moves when the right opportunity presents itself. We continue to believe that, that and very importantly, investing in ourselves in terms of R&D and capacity is extremely important. And I would say what you have seen so far is certainly indicative of what we like doing. I think we have ahead of us great opportunities for further growth organically with elements of inorganic that are very important, and we will continue to fuel that. We feel very good about the direction of travel.

Great. Well, we are out of time. I'd like to thank both Craig and Gio for joining us.

Thanks, Mark.

Thank you for having us.

Good morning. My name is Lucas Penner, and I will be your conference operator today. At this time, I would like to welcome everyone to Vertiv's Second Quarter 2026 Earnings Conference Call. [Operator Instructions]. Please note that this call is being recorded. I would now like to turn the program over to your host for today's conference call, Lynne Maxeiner, Vice President, Investor Relations.

Great. Thank you, Lucas. Good morning, and welcome to Vertiv's Second Quarter 2026 Earnings Conference Call. Joining me today are Vertiv's Executive Chairman, Dave Cote; Chief Executive Officer, Gio Albertazzi Chief Financial Officer, Craig Chamberlain.

We have one hour for the call today. During the Q&A portion of the call, please be mindful of others in the queue and limit yourself to one question and if you have a follow-up question, please rejoin the queue. Before we begin, I'd like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of burden. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

We refer you to the cautionary language included in today's earnings release, and you can learn more about these risks in our annual and quarterly reports and other filings made with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will also present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and in the investor slide deck found on our website at investors.vertiv.com.

With that, I'll turn the call over to Executive Chairman, Dave Cote.

I am incredibly pleased by our second quarter performance and outlook for the rest of the year and beyond. We have a great position in a good industry and continue to execute very well. Gio and his team stay at the forefront of technology with organic investments and acquisitions. The industry outlook is incredibly good because the digital age has decades to go. Our outlook is incredibly good and deservedly so as we provide the picks and shovels for the digital age. The seed planning Gio and his team have been doing continues to pay off and will do so even more in the future as the benefits from our technology investments unfold over time. And with all that goodness, we still have opportunity to further improve. As Gio likes to say, we are still far from our full potential. The future is so bright, we have to wear shades. I love it. With that, I now turn it over to Gio.

Well, thank you, Dave, and welcome, everyone. Let us go to Slide 3. A strong quarter, EPS, margin, profit and cash convincingly strong, continuing on a trajectory of strong sales growth even with some timing elements. Pleased with what we see in July and full confidence in H2 execution and backlog. As a result, we have raised our full year outlook. Net sales were up 24% versus Q2 '25 driven by continued strength in the Americas, which grew 29% and APAC also up 29%.

And Importantly, EMEA returned to positive net sales growth with a 2% year-on-year increase. On an organic basis, net sales grew 18% with additional 5% from acquisitions and 1% from favorable currency. Adjusted operating margin came in at 22.6%, exceeding our guidance and growing 410 basis points year-on-year. The strong margin performance translated into adjusted operating profit of $738 million, up 51% from a year ago.

Adjusted diluted EPS were $1.52 or 60%, up from second quarter '25 driven primarily by high volume and continued operational productivity. Adjusted free cash flow came in at 925 million, a very strong 134% year-on-year growth. driven by higher operating profit and working capital efficiency. Free cash flow conversion exceeded 150% in the quarter. We are raising our full year guidance across all key metrics. Net sales raised to $14 billion, a $250 million increase from previous guidance, up 37% year-on-year.

Adjusted diluted EPS now at $6.70, a 60% increase from '25. AOP now expected almost 60% up year-on-year, and adjusted free cash flow expected at $2.5 billion. and we achieved a net cash position at the end of Q2. Let's now move to Slide 4. And let's start with the market environment on the left. Our global pipeline momentum remains very strong, and we expect another year of robust orders growth.

Demand signals are clear and broad-based. Regionally, let's start with the Americas, where market continues to be strong. Pipeline is actually accelerating, corroborating the long-term growth trajectory of our business. EMEA's momentum is further strengthening. This reinforces our confidence in the acceleration for the second half of the year.

APAC showed broad-based strength, pipeline expansion and favorable market conditions. This supports continued growth across the region. Pricing continues to be favorable. We expect positive price cost in '26, including the current impact of tariffs and counter managers. Now to the right side of this slide. Q2 revenue showed strong growth year-on-year quarter-to-quarter. We are executing on further acceleration in Q3 and Q4 on strong backlog. Additional capacity is online globally. Examples are Johor in Malaysia, 5 large plants, expansions in the Americas, chiller capacity increases in EMEA MMO.

During Investor Day, you saw that this expansion is rapid and broad-based at speed, but always in a very disciplined fashion. We are delivering data center infrastructure solution at an increasing scale and level of complexity. That's exactly where we want to be. We experienced a minor timing shifts in Q2 revenue primarily driven by multiphase project execution and temporary supply chain dynamics, but the demand is there and the trajectory is strong. Keep in mind, there are increasingly large projects underway, think Smart Ron and think even bigger with one core. These come with significant intends a lot of coordination, a lot of rapid learning. I like the pace of our progress, and we get stronger every day.

On capital expenditures, we now expect to be at the high end of our range, 4% of '26 sales as we further expand the global capabilities and capacity going into '27. We continue to invest for the long term in a disciplined manner in future power architecture, advanced thermal systems, services and converged infrastructure. These are the building blocks that enable the next-generation AI data centers and factories, and we intend to continue to lead the industry.

Let's now go to Slide 5. I am sure many of you will recall, our CTO, Scott Armul, a power architecture presentation at our Investor Day in May. I want to reiterate and build on what we shared there. multiple port architectures will coexist in the future. Virtiv supports each one of them through complete orchestrated powertrain. On the left side of the slide, you see the different architectures. Our AC foundation with, as an example, Vertiv Trinegy and energy core battery storage system and the rest of the Vertiv powertrain, of course, this architecture is broadly deployed, growing and will continue to be used by many categories of customers.

The next architecture, serving a higher density has a medium voltage AC source that feeds low-voltage AC to deliver 800 volts at rack and pod level. Here, you see new Vertiv technologies like mid-voltage BaaS UPS and Vertiv volt DC site cars. This is under customer validation in 26 with deployment planned in '27. Then the 800-volt architecture at data hall Care vertical solutions will include MV DC UPS and solid state transformer to cover the multiple ways to address the end-to-end powertrain. We're active in development with planned '27 customer validation supporting '28 deployment. As stated, rather than transitioning to a single architecture, the market is expected to leverage both AC and DC solutions as power requirements continue to evolve for years to come.

Now the right side of the slide. This is an example of deploying multiple power architectures as sites evolve and expand. I'm thrilled to highlight our collaboration with NVIDIA and Visionbay.ai, Foxconn's business unit focused on AI supercomputing at their site in Kaohsiung, Taiwan. For the initial phase, of this site, Vision Bay AI awarded the power, thermal and services business to Vertiv for what is Taiwan is the first AI data center featuring an DGB 300.

On top of this, we are collaborating for the world's first AI data center, DP800 DC-DC architectures at the rack and pot level featuring NVIDIA Vera Rubin. This is an example of early customer validation of our road map and supports the broad power architecture evolution. This is real, this is happening. In a nutshell, as a number of viable power architectures expand and AC and DC coexist to deliver on the 800-volt DC Vertiv's content opportunity per megawatt expands and we are leading this transition.

Let us now go to Page 6, and let's continue on the topic of technology. I want to spend a moment talking about Vertiv's data center colon architectures and our unique fluid management services. When the two are coupled, combined, we ensure our customers to use nearly 0 wood. As they scale, many customers have been and are adopting closed-loop cooling architectures as they optimize power and water use.

A closed-loop cooling architecture is just that closed or filled with water recirculating. Typically, it does not require additional water after the fill at start-up. Vertiv Nan thermal chain technologies for both the primary and secondary cooling lube examples are Vertiv coolish to name a few, fully enable this approach. This architecture enables a data center to run on no water consumption. Now let's take the focus on water use a step further. Let's also address the initial system fill, and this is where PurgeRite's NearZero comes into the equation.

As part of our unique fluid management technology and services, our PurgeRite's NearZero utilizes a closed-loop recirculation system to capture, treat and reuse water during start-up. This reduces the water normally used in the process by up to 90% during the start-up of a data center. For our customers, this means a faster and more cost-effective deployment and commissioning of liquid cooling system and chill water circuits. This means a significantly less waste and less disruption on site. More broadly, this expands vertical differentiation thermal management services, and we are managing fluid performance from start throughout decades of operational life. PurgeRite NearZero 0 is scaling through our existing serving network, a capability we believe no one else can replicate at scale. And with that, over to you, Craig.

Thanks, Gio. Turning to Slide 7, let's walk through our second quarter financial results in more detail. On adjusted diluted EPS, we delivered $1.52. That's up $0.57 or 60% versus prior year and $0.12 above guidance. The year-over-year improvement was driven by $0.58 from higher adjusted after-tax adjusted operating profit, which was driven primarily from higher sales volume and increased profitability. Looking at net sales, we delivered $3.274 billion in the quarter. That's up $636 million or 24% versus prior year.

Organic sales growth was 18% and with 5% additional growth contribution from acquisitions and an additional 1% growth contribution from favorable foreign exchange. By regions, Americas grew 21% organically APAC grew 26% organically and EMEA was down 2% organically. Moving to adjusted operating profit. We delivered $738 million. That's up $249 million or 51% versus prior year and $28 million above the midpoint of our guidance. Adjusted operating margin of 22.6% expanded 410 basis points year-over-year and came in 140 basis points above guidance. The margin expansion was driven by strong operational execution, continued productivity gains and favorable price cost execution, partially offset by tariff impacts.

We're also continuing investing in capacity and engineering R&D to support future business growth. To round out the quarter, adjusted free cash flow on minimum was outstanding, with the quarter ending at $925 million, up $648 million or 234% from prior year. The improvement was driven by higher adjusted operating profit, strong working capital performance, including project milestone collections, which is inclusive of initial advanced payments and lower cash interest. These items were partially offset by higher cash taxes and higher spending on CapEx investments. At our quarter end, our net leverage is at negative or 0.1x, providing even more flexibility.

Just a quick note on our deferred revenue, you'll see an increase in the quarter, and that's driven by project advanced payments and ongoing milestone collections. We are very happy with our execution on project milestone development and what you're seeing in deferred revenue is a combination of payments at project initiation, order placement and ongoing project milestone execution. Flipping to Slide 8, let's look at segment performance. In Americas, net sales were $2.71 billion, up 29% with organic growth of 21%.

Organic sales growth remained strong in the quarter. As Gio mentioned earlier, some minor timing shifts in 2Q revenue, these shifts were reflected in the Americas revenue numbers and were primarily driven by multiphase project execution and temporary supply chain congestion. However, we expect the associated timing delay to resolve in the second half of 2026. Adjusted operating profit was $571 million, driving 360 basis points in adjusted operating margin percentage. The margin expansion was delivered by ongoing commercial excellence and strong operational execution.

Moving to APAC. The region had strong results with net sales of $720 million, up 29% with organic growth of 26%. We continue to see strong end market demand and the commercial execution across the team gives us confidence going forward. Adjusted operating margin percentage grew 270 basis points in the quarter due to strong operating leverage realized in the region. In EMEA, net sales were $484 million, up 2% with organic sales down 2%. We continue to see a strengthening market, which supports our position for the region to return to organic sales growth in the second half of 2026.

EMEA also saw strong growth in adjusted operating margin percent, up 380 basis points year-on-year. The team continues to drive improved operational execution, which came through in the strong margin performance. Turning to Slide 9. Let's walk through our third quarter 2026 guidance. For 3Q, we're projecting adjusted diluted EPS of $1.80 at the midpoint, that represents 45% growth versus prior year. The year-over-year improvement is driven by continued volume growth and ongoing margin expansion. On net sales, we expect $3.75 billion at the midpoint. That's up $1.074 billion or 40% versus prior year.

Organic sales growth is expected to be up approximately 35% with an additional 5% from acquisitions. By region, we expect Americas organic growth in the high 30s, APAC in the high 30s and EMEA in the mid-teens. Adjusted operating profit is expected to be $918 million at the midpoint. That's up $322 million or 54% versus prior year. Adjusted operating margin is expected to be 24.5% at the midpoint. That's up 220 basis points year-over-year and is driven by strong organic sales growth, continued operational leverage and ongoing productivity realization. Now let's turn to Slide 10 and for our updated full year 2026 guidance. We're raising our outlook across all key metrics. Starting with adjusted diluted EPS, we now expect $6.70 at the midpoint, that's up $2.50 or 60% versus 2025. The updated range is now at $6.65 to $6.75. This is an increase of $0.35 at the midpoint versus prior guidance. The year-over-year improvement is driven by continued volume growth and ongoing margin expansion.

For net sales, we now expect $14 billion at the midpoint, that's up $3.77 billion or 37% versus 2025. This represents an increase of $250 million versus our prior guidance. Organic sales growth is expected to be at 31% with 5% growth from acquisitions and 1% growth from favorable currency. By region, we expect Americas organic growth in the high 30s, APAC in the low 30s and EMEA is in low single digits. Moving to adjusted operating profit. We now expect $3.325 billion at the midpoint, that's up approximately $1.235 billion or 59% versus 2025. This is an increase of $125 million versus our prior guidance.

Adjusted operating margin is expected to be 23.8% at the midpoint expanding approximately 340 basis points from 2025 and up 50 basis points versus our prior guidance. The margin expansion is driven by continued operational leverage and positive price cost execution, which is offsetting some tariff headwinds. Finally, adjusted free cash flow is expected to be $2.5 billion at the midpoint. That's up $613 million or 32% versus 2025. The year-over-year improvement is driven by higher adjusted operating profit and lower cash interest which is partially offset by higher cash taxes and higher investments in capital expenditures. We're delivering strong results, raising our outlook and executing with discipline. Based on our performance and momentum, we're very confident in our ability to continue driving results throughout the balance of the year.

With that, I'll send it back to you, Gio.

Well, thank you. Thank you, Craig. And let's go to Slide 11 to wrap up. Strong Q2 performance. We are delivering and the team continues to raise the bar on what's possible. We raised our full year '26 guidance across all key metrics. The momentum is strong. it's broad-based and it's accelerating. We continue to invest with discipline. Now just for the 45% growth we expect in the second half but for the years beyond, capacity, innovation services.

On M&A, we closed the ThermoKey in June, strengthening our heat rejection capabilities. We closed the strategic Thermal Labs in April. We're adding the server-side liquid cooling and co-plate expertise for high-density thermal management. Together, these two acquisitions expand what we offer across the full thermal spectrum from heat rejection to directed chef cooling. Allow me two additional spotlight at the naval postgraduate school in partnership with NVIDIA, we delivered a fully engineered package rack, power and cooling system into an existing on-prem facility.

This includes liquid cooling integration, commissioning and deployment and deployment support. This is a repeatable at scale reference architecture for NVIDIA DGX GB300. We call this Vertiv SmartIT solution. [indiscernible] established an advanced locally operated AI environment for education research, engineering, modeling and simulation. This also shows how an existing facility can rapidly be transformed to support next-generation accelerated computing, easy for enterprise and sovereign customers to adopt. In EMEA, Germany, our collaboration with Data 4 is a great example of the momentum we are seeing in that region.

Vertiv delivers complete powertrain, including switchgear, UPS and battery systems, et cetera, and thermal chain like chilled water units, free cooling chillers and our industry-leading services, it all will enable data force new Frankfurt side. This is exactly the kind of optimized end-to-end system deployment with Vertiv Excels. To conclude, I'm more confident in our trajectory today than I've ever been. We're executing, we're investing ahead of the curve. And increasingly, our customers are asking us to help them architect their most complex infrastructures. That's the role we've earned, and it's the role we intend to further strengthen.

With that, let's go to the Q&A.

[Operator Instructions]. The first question comes from the line of Scott Davis from Melius Research. Scott, go ahead.

Yes. Thanks for the reminder, operator. I haven't figured out my phone yet. Anyway, sorry, guys, and good morning. Look, I just want to address a little bit of the issue that may be hurting your stock a little bit today with the timing shifts in 2Q revenues, the supply chain congestion comment. What -- can you give us a little bit more detail on that? And more explicitly, is this something -- I mean complexity is something that I would imagine is going to just do nothing but increase over the next 5 years and perhaps forever. Is this potentially going to be an ongoing issue, not just a one-off? And if so, how do you mitigate or kind of manage through it so that it really doesn't disrupt quarters the way that perhaps it can.

Well, thanks, Scott, for the question. And you're right, complexity is increasing. Some of the projects are not only bigger but multidimensional there could be a lot of supply chain interdependencies. And this supply chain is not necessarily an external supply chain. It can be very often and internal with Vertiv supply chain.

Now clearly, like everything and like we've done in so far, there is a learning curve. I'm pleased with the speed at which we are progressing in this learning curve. And this learning curve is leading execution on this complexity. So I'm pretty confident about our direction of travel. And again, these are the first very large projects with this level of complexity. And we are more and more equipped for this, not just from a technology standpoint, but from a logistics and operations in general. When it comes to the second part of your question, so what could be the -- is there an ongoing impact on the future?

Well, certainly, as I said, there is a learning curve that we are progressing on at speed. But there is also the fact that we are prudent anyway in our second half guidance. This is true in general also for the future. So if you think about our H2 guidance, we're not assuming all stars at line. So we have a wiggle-room for this progress on the learning curve, not to be perfect. Though, of course, speed and perfection is our goal.

Okay. Fair point. And then just a quick one. Would -- is there a price where you would start buying back stock a little bit more aggressively, just given the pullback we're seeing in the entire complex right now?

I mean I think we always look at it opportunistically, Scott, and this is the thing that we've talked about even at Investor Day, given today, it is a good time to look at it, but I think it's always something that we evaluate and take what we consider our capital deployment, and it's 1 of the areas we look at.

The next question comes from the line of Jeff Sprague with Vertical Research.

Gio, just on the comment that the pipeline is actually accelerating. I assume that's sort of all hyperscale, but could you give a little bit more context on sort of the nature of the acceleration? Is it -- is it scope diverted? Is it kind of additional customers? Is it existing customers looking to do more quickly. And it seems to support the comment you're making about robust orders for the year, but just love a little bit more color there if you could.

Let's start from the end. Good day, Jeff. Let's start from the end. Yes, of course, this is certainly supporting our comments about orders. When I talk about pipeline, I always like to talk about magnitude of pipeline, if you will, and speed of pipeline. When I talk about speed of pipeline, we talk about acceleration, it means that the sales cycle within the pipeline can be faster or slower.

So we noticed an acceleration to becoming faster sales cycle. But at the same time, just to be extremely clear, the strength is also in sheer size of the pipeline in terms of quarter-to-quarter, year-on-year growth. And this is broad-based. It's pretty much across the world. but also it's broad-based across the various customer categories. So certainly the whole range, hyperscalers, it is true for enterprise. It's certainly true for Colo, Neocloud, so pretty broad-based.

And just to add on to that, Jeff, I would also just say, again, as hyperscalers and colos, hyperscalers are sometimes deploying through colo. So to look at it that way, you might get a little bit of a mix there. So just to ensure going back to what Gio said, we're seeing it again, across regions, across products, and that's the way we really look at it, but that's the way we would view our pipelines and see it accelerating in all those spaces.

And just a quick one, if I could. Do you have a solid-state transformer solution at scale at this point? Where do you stand on that product evolution?

Just like one of the slides was describing the solid state is currently a matter of product development for us. It's in pro development phase.

Your next question comes from Amit Daryanani with Evercore. Amit, please go ahead.

I guess if you just go back to the supply chain issues and delays, can you just talk about how much revenues are actually pushed out due to these challenges you had in the quarter? I think you missed the Street numbers about $100 million, but I'm actually wondering if the supply issues were perhaps much larger than that from a dollar perspective. And maybe just on the same lines, can you just talk about was that a Vertiv-specific issue or something on the customer side that led to this impact. And then how do you see this flowing back into the model into the back half?

So first of all, is it customer or is it Vertiv? On the customer side, pretty much we see the same dynamics that we have seen historically. So no big differences. When it comes to the Vertiv side and the exact and the exact amount, well, we will not be too specific, but the majority of what we're seeing is really coming from those dynamics that I've described during while I was going through my opening remarks, but also the conversation with Scott.

That is pretty much the dynamics that we see. Is it on the supply chain. The supply chain is always a matter of working the sequence of things. It's nothing different than what we have experienced historically, and we are pleased with how we are strengthening our -- the resilience of our business in general.

And Amit, I would just add that just to clarify, we're talking about the large project deployments and the learning curve around that, which has confounding effects from both the external supply chain and our own internal supply chain. So there are some, I'd say, gray areas in there when we typically can recover from a late part and our smaller supply chains, but it becomes a larger supply chain, it becomes more confounding.

So again, not to define that specifically, but that's the areas where we're seeing it the most is in those large project deployments and we're learning and understanding what that takes to go forward and how to iron those out. And then also, again, as we talked about thinking of not always that being perfect in the second half as we look in the guidance.

The next question comes from the line of Deane Dray with RBC Capital Markets.

I'll keep it to one question. Really good performance on free cash flow conversion this quarter. But for Craig, I'd be interested in hearing was there any contribution from customers for deposits on orders. I know that's something you all have been looking at. And Dave Cote knows from his air and defense days, that that's pretty standard to require deposits on large orders. So any contribution there?

Yes, Deane. And again, I want to congratulate you. I know you're retiring in September. So congratulations, a great career, a fantastic career. But to your question, yes, if you look at the face of the balance sheet and you -- I mean, the face of the , you'll see that our deferred revenue did go up. And our deferred revenue is a read-through in terms of those advanced deposits on orders, but it's also ongoing deposits as we go through the milestones of delivering those larger projects.

So it's a combination of both. But that is driving the working capital and the great cash performance when you look at it across the entire balance sheet. So definitely an indicator of strong commercial performance on both sides.

The next question comes from Nigel Coe with Wolfe Research.

I just want to pick up on that topic. I think this is the first time maybe I'm wrong, but the first time I've heard progress collections kind of stage payments. Maybe just touch on that. I know your assortment is changing with OneCore and SmartRun. So just maybe just talk about that, what kind of percentage of revenues are we talking about now that actually have progress collections? And then just is not a second question, by the way. So it's more kind of an add-on to the first one. the balance sheet the balance sheet numbers moved quite a lot this quarter. I mean the ThermoKey acquisition seemed quite small, but did it come with quite a big balance sheet.

ThermoKey didn't come with a large balance sheet. So I'll answer that one first, and then we can go a little bit -- I'll double-click on it as we go further into your question, Nigel. But in terms of the actual progress collections, yes, there is a portion that we get upfront and there's a portion as we deliver milestones. And a lot of that is related to delivering products to the end project. And so that's how you would start phasing it in. And sometimes you get those a couple -- like a month before you deliver projects. Sometimes you get those at the end of design. So they are all faded in different ways. So we would get a portion upfront, we get a portion at the delivery milestones that we set forth, always, in our view, staying ahead of the curve in terms of a cash position in that project.

Some of it is going to be related to deliveries where you would see revenue incurred. Some of it might be delivered in terms of a design point, which would be a secondary milestone before revenue occurs. And again, they're all a little different in how we look through them, all the goal being staying ahead of the cash curve and being cash positive on that. On the other phases of the balance sheet, you mentioned lots of movement. We do have a significant ramp in the second half. So you would see some inventory come on. And as that inventory comes on, you'll see AP come on as well. And we did have a good quarter in terms of sales. So that's where our bar is going up as well. So all of this is a reflection of the volume you're seeing. ThermoKey add little impact to that.

The next question comes from Andrew Kaplowitz with Citigroup. Andrew, please go ahead.

So you updated us again regarding the evolution towards 800 BDC potentially in the start to impact Vertiv 2027. And I know you commented on an SST and product development to Jeff. But when you step back, how confident are you that versus content per megawatt could go up as 800 BDC technologies adopted. As I think you reiterated today? And would you surmise that Virtus 800 BDC offering could be toward the higher end of that $3.25 million to $3.75 million per megawatt range you gave us at the Analyst Day.

Yes, we're pretty convinced about that. And also when we look at all the elements of the powertrain in the various architectures. And when we think what happens inside the white space in the gray space, we see value there forward and an expansion of revenue per TAM per megawatt. So not differently from our conversations or what we shared at Investor Day 2 months ago, we continue to go through that math, and the math is corroborated by of course all the progress that we're doing on the product development, but also on the on the activities that we are conducting with customers.

So we should and we would need to go elements per elements in that chain. But again, think about the entire powertrain, all the elements vis-a-vis what we have today, and you'll see that with that density with that complexity our content is impacted favorably.

The next question comes from Andrew Obin with Bank of America.

Just maybe another question on this deferred revenue. So we've been getting lots of questions on this topic. It's a large number, but I guess what folks are trying to figure out and I know sort of some people have been asking a similar question. Has the structure of your deferred revenue sort of changed materially from what like I'm not asking, I know that it fluctuates quarter-to-quarter. I totally get that. But has the structure of what goes into deferred Avenue changed materially over the still if we look at deferred revenue over the past several quarters, it's apples-to-apples.

Apples-to-apples, Andrew. No. What you might be feeling a little bit differently is, as we talked about back in fourth quarter, we had a large order influx on the [ Infor ] Solution business, where I would say a lot of these milestones are set up in the project-based world as opposed to the point product-based world. So the project-based world might have more milestones before delivery of revenue. so you would get wanted input of order and then one along the way as a design and one that you potentially as you start to deliver products. So you have different levels of milestone of those projects. Versus a point product.

And we know that the project basis that we've talked about a lot, those larger ones, 1 quarter SmartRun, we had a large order intake in the fourth quarter of last year that we spoke to. And again, that would be some of the stuff that you might be seeing in the deferred revenue as it comes through throughout the year. And then again, it is tied to our regular down payments as well. But no structural change in the way that we would recognize deferred revenue.

The next question comes from Chris Snyder with Morgan Stanley. Chris, go ahead.

I wanted to follow up on the conversation around the production disruption and some of the supply chain impact. I guess you guys are obviously guiding to a pretty significant organic ramp here into the back half relative to what we saw in the first half. So I guess anything that you could provide around confidence that you're seeing in these disruption getting better? Like I would imagine that as the quarter went on, the monthly has got better, I think you said July was off to a start that presumably supports this ramp. So I guess, has it gotten better? Any just kind of color on that lintels more confidence in the back half.

Thank you. I wouldn't use the word disruption. I think we have to -- I want to be clear about -- we talk about complexity into the interdependencies. As I said, very, very often in these large projects, you will see multiple Vertiv factories feeding other factories besides, of course, external suppliers feeding those factors as well. So it's really a complexity. So there is an operational aspects to your question. That is -- we are getting stronger in the operational execution of that complexity. So the complexity doesn't go away. But the -- our ability to handle that complexity is certainly accelerate very, very strong. And that hence my questions. Sorry, hence my comments.

But again, I wouldn't talk in terms of the disruption.

I think on your second point of why do we feel comfortable about the second half. As Gio said, it's a learning curve when you have these large projects, and you do have congestion in your supply chain, which, again, some of that stuff is normal on point products, which is easier to INR as you have a learning product, a larger project, some of it takes a little bit more time to get smoothed out and understand we're seeing good signs of being able to ratchet up that learning curve.

And as we think about the second half, we've also assumed that congestion continues as we normally would, but on these projects, it might be a little bit further of congestion that we would have assumed than normal.

Exactly. So all in all, we believe that we have -- we are prudent in our second half and very, very well-supported platform.

The next question comes from Nicole DeBlase with Deutsche Blank.

Yes. I'm sorry to beat a dead horse, but I'm going to. I think with respect to the second half ramp, there's still a lot of questions about what specifically is embedded and what isn't. Maybe a way to frame it, I'll try this. Like how much of the second half ramp is based upon this improvement in learning curve and maybe unlocking some of the revenue that was pushed out of 2Q versus just the overall capacity ramp that you guys are doing at the same time, just so that we can try to get more comfortable with the step-up in revenues that are embedded in the second half? And how much visibility you have into that?

Yes. Thank you, Nicole. When we talk about unlocking revenue, let us be clear that the revenues that were, let's say, a little bit locked in some elements on the second quarter are being delivered deployed in the second half. And we feel extremely well about that. When it comes to some elements of congestion, possible elements of congestions as Craig mentioned, we are prudent in our guidance, though we believe that there will be. And we see -- we are seeing certainly a strong acceleration and improvement from an operational standpoint, we still remain prudent in our guidance.

There is capacity that is being released. And that is a big element, of course, of also the backlog conversion. So look at it as 3 levels. The operational acceleration in the complex projects, the capacity coming available as this has been coming available in the second quarter. But first, even more so in the second half, a very strong backlog coverage and over and above that, wrap it up with anyway in a guidance that it's not an all-star aligned type of guidance.

The next question comes from Amit Mahotra with UBS.

Thanks, operator. Gio, I'd just be curious to sort of compare and contrast some of the challenges you're having today to the challenges you had really kind of this time last year and you got back on track pretty quickly from an operational. But at that time, it wasn't a revenue issue, it was more of a margin issue and an operational issue, and I know at heart, you're an operational guy. So just maybe compare and contrast that?

And are there multiple points of I just want to maybe explain the complexity within the complexity. What I mean by that is that are there multiple points of challenges? Or is there a sort of one main challenge at sort of cascading across the supply chain that a little bit color there would be helpful.

Thank you, Amit. And I really appreciate you draw that parallel to exactly a year ago. It was a different nature that stage was Ireland and some executional challenges on the on the busbar switch gear that we have amply recouped as you were saying. But I think this highlights the fact that in a business that is moving at the speed that is growing at this speed. With a number, let's say, of technology with the technology speed -- sorry, the speed of technology evolution that we are experiencing and indeed driving there is a lot of complexity to manage -- and so in many respects, the parallel is similar.

You were talking about while that was a margin, this is a revenue anyway, it's operational execution that we are concentrating on right now. So it may be different in the type of product line, if you will. It's no different in terms of the type of focus and the type of and the type of, let's say, recipe that we applied. And again, it's a matter of really continue to mature operationally as the markets, the portfolio, the scope of what we do continues to evolve. So I feel very good about it.

Gio, are you failing -- are you -- it's not failing, but are you reducing the on-time delivery of the customer? Because one of the USPs has been Vertiv has been one of the few companies that can deliver on time in full are you disappointing customers with this development that opens up market share opportunities for other companies or no?

Well, look, our overall performance is, if anything, improving. So I would say that the answer is it's not something that changes our perception in the market, we believe.

The next question comes from Mark Delaney with Goldman Sachs.

Yes. One of the key topics at the Investor Day that we have discussed yet on the call this morning is around M&A. I think you talked about something in the order of $24 billion that could be deployed in light of some of the pullback in financial market valuations as well as all the opportunities you see on the technology front, including areas like 800 volt. I'm curious if you could give us your latest thoughts on the M&A opportunity and if the pipeline there is active and that might be something that could be executed upon relatively soon.

I mean I would say our outlook doesn't change in terms of the M&A world. We still look at it in the same way. We looked at it back during Investor Day. But it is active. And we do see an active market and we are participating in that active market looking at several targets. But again, it has to fit us, and it has to be the right, I'd say, value play for us in terms of a fit in our portfolio and what we believe we can grow and what we can return to investors in terms of what we're going to pay again, I've always talked about we invest in ourselves first, and that's capacity and that's R&D and that's development, and that's the thing we're always going to look at.

And then we'll look at the external spots where we believe we can get true value out of an acquisition and an add-on, whether it be regional reach or a product that we believe will get it to the market faster or a technology we don't currently have. So yes, we are active, and we continue to look at it in terms of that framework.

The next question comes from Noah Kaye with Oppenheimer.

Talking about some of these learning curve developments around what seems to be more of a focus on the infrastructure solution. The components of these, as we understand them, the building blocks, they're already part of the Vertiv portfolio largely. But I'm just curious, as you come up this learning curve, is -- to what extent are you increasing your vertical integration across those building blocks and supply chain, is that a process that you are undertaking now? Is it something that needs to happen on a go-forward basis to mitigate and manage some of those challenges in architecting the solutions.

Well, there is clearly always an analysis of make or buy vertical integration and anything we do, be it at a point product level and at, let's say, a large infrastructure solution level. When you talk about vertical integration for Infrastructure Solutions for us is really we are very vertically integrated in the sense that we are putting into our Infrastructure Solutions products that are Vertiv products.

So then clearly, we are in good control of the supply chain in that respect. And so we feel good in this moment. We do not think there are any major gaps in vertical integration from what we're doing, but that doesn't mean that we will not adjust over time, the mix of making whichever dimension that could be, depending on the type of business, depending on where we manufacture and auto manufacturing locations are the same in terms of access to a nearby let's say, supplier critical mass. So it's always [indiscernible]. But we do not perceive in this moment that there are any major gaps. But for example, if you think about an acquisition that we shared with you last quarter, Mark, that was a move to vertically integrate on our frame construction for our infrastructure solutions. So that, I think, testament to the dynamic approach that we have when it comes to make a buy.

The next question comes from Ananda Baruah with Loop Capital.

Yes, really appreciate it. I'd love to get your guys' view, this is an 800v, 450V question. For 800V, how broadly throughout the marketplace, are you expecting the next couple of years, the technology be adopted. And really, the genesis of the question is there's that as you guys may know, there's sort of been speculation in the last few months that one of the larger AI infrastructure companies could see a pushout that would use 800V as far as in 2029, how -- if there were a major customer pushout, how broad is the tech? Are you guys anticipating the tech to be throughout the industry?

And then we've heard really good things on 450V potential over the next 24 months. What's the right way to think about the impact that could have? And could that fill in any white space if there were like a meaningful sort of AI for search 800V customer pushout? Just any context would be helpful.

Well, thanks. A multidimensional, multilayer question, Anand here. So I would not comment on rumors in the market. As we shared with investors in May, but also earlier today, we believe that the adoption of 800-volt will be gradual, would be convincing we are certainly very invested in that part of the portfolio. Whether that happens at the speed that is currently in our road maps and that you saw or something lower than that, we will be flexible.

And certainly, we are extremely resilient with that because it means that other parts of the architectures that we provide to our customers will certainly be take the share of the market in terms of architecture. So whichever way, no matter the speed of acceleration, we think that we are in a good place because we have the architectures, we have the technologies, the road maps, as we shared but there is a 400-volt DC question and that 400 DC-volt question is an important one. We see that some players are thinking in terms of both of 800 and 400. The underlying technology is not dramatically different. And quite honestly, we are involved in both.

The next question comes from Luke Junk with Baird. Luke.

Thanks for sneaking me in here, you hoping just to get some texture around your ongoing increase in confidence around the EMEA market specifically, and we saw a step-up in margins sequentially this quarter, how do you think about the sustainability there or maybe even the potential for some further improvement in the back half of the year?

Yes. Well, thanks for the EMEA question. We are pretty bullish about EMEA, as you saw, certainly, we believe, a strong second half and back to growth to see EMEA forming better than we expected anyway in the second quarter. So very, very confident in the second half. I was vocal about the fact that we were very happy with orders in EMEA in the first quarter. I would say that we -- we like what we see in the second quarter. And there is a backlog formation that is certainly convincing. And we see that the improvement translates in top line and bottom line improvement has demonstrated. So the market continues to accelerate, and we certainly have a very important position in that market.

And Luke, I just hit on the fact that we do -- as we've talked about through -- even back as early as last year, we do see a second half increase in growth for EMEA in terms of where we expect the organic growth to go from a revenue perspective. In terms of the -- or I say the gain that you saw in margin was a favorable comp to. As Gio had mentioned, the Ireland portion did come through 2Q last year, which was in EMEA. So a little bit of a favorable comp in there, but we do still expect margins to be pretty good.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back to Gio Albertazzi for any closing remarks.

Well, thank you, and thank you very much, everyone. Thank you for the questions, and thank you for your time today. I am very pleased with what we delivered this quarter and how we're positioned for the second half. The team is executing at a high level, scaling capacity, deepening customer partnership and advancing our technology portfolio, all simultaneously. It's not easy. But it is -- but this invigorates us. Pipelines are strong. Our operational discipline is sharp and our customers trust us to deliver at scale. Just to be clear, I am very encouraged by our trajectory. I am pleased but certainly never satisfied. With that, thank you all, and I wish you all a great rest of the day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hi. Good morning, everyone. And a full house here today. And again, I know many more joining by the webcast. So again, good morning, and welcome to the second day of Vertiv's 2026 Investor Conference. We have an exciting day ahead. But before we begin, just a quick housekeeping pause.

I would like to point out that during the course of this event, we will make forward-looking statements regarding future events, including the future financial and operating performance of Vertiv. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

We refer you to the cautionary language included in today's presentation, and you can learn more about these risks in our annual and quarterly reports and other filings made with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

During our conference, we will also present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in the investor presentation found on our website at investors.vertiv.com.

All right. That may have been AI Lynne. But anyway, I am thrilled today. We're going to talk a lot about technology and innovation. So how we are shaping the industry with our technology and innovation. So it is my great pleasure to introduce our Chief Product and Technology Officer, Scott Armul.

[Presentation]

All right. On a scale never attempted to empower the world. We're attempting it. We're in the midst of it. We're driving this. We're shaping the industry. Thrilled with the turnout. I wasn't sure how the overnight session would go, got peppered with a multitude of incredibly good questions last night. Impressed and humbled with the technical knowledge, the awareness, the understanding of where the direction is going. I think indicative of the time we're in, the industry we're in and the trajectory we have going.

I have probably 4 hours' worth of technical content that we will try to cram into 1 hour here. So I will go fast. I will go deliberately fast, and I will try to leave room for ample questions at the end. But what you'll see today is a pretty significant and healthy dose of architecture evolution and changes that are happening because AI and because data centers need to evolve to achieve and meet the performance standards, the efficiency effects, the big picture dynamic changes that need to happen. So let's dive in.

I'll reanchor by saying and reminding Vertiv is the leading innovator with the most complete end-to-end portfolio. We talk about this in terms of power management, thermal management, IT systems, infrastructure solutions, and we wrap the whole thing with services. This will be the framework and the guidework for how we walk through some of the technology evolutions. We're talking converged infrastructure as well. So the vocabulary will change.

The way in which we're discussing some of the problems we are tackling is going to change and evolve. We will move briskly through this. But this isn't an easy kind of story that is moving to one converged answer. Maybe the seed I will plant as we're talking through the technology changes here. This will be multi-path. This will be multimodal. This won't be unidirectional in terms of the end solution we arrive at. So maybe disappointing for some folks that are looking for the answer.

I think it refers back to the complexity that we see in the industry today, the importance of the breadth of portfolio and the understanding of how solutions need to be paired together to solve what are incredibly almost inconceivable challenges that are space is undertaking today that we wouldn't have even been able to comprehend or think about 3 years ago.

We hit this yesterday, density, speed, scale, complexity and load profile. We are seeing AI and GPU-based racks at 140 kilowatts today, quickly approaching 300, moving to 600, and we have a megawatt rack in the time horizon and in our visibility. Incredible density problems, incredible scaling challenges that come with rack density and densification at this level.

The speed at which we are driving the industry, that's time to first token, that's deployment speed, that's truly performance as well is dramatically increasing. And we are doing this at a scale where 250-megawatt buildings and gigawatt campuses are now almost -- we're numb to it. It's almost normal. And we think about the scale of a data hall used to be a megawatt. We're talking about a rack that is a megawatt. We're talking about a building or an entire campus that used to be 250 megawatts. We're scaling to a gigawatt. We're doing that for cluster size. We're doing that for performance, and we're doing that for the scale at which AI needs to be deployed.

We're seeing dramatic change. With that scale comes greater complexity. The amount of piping, the amount of heat rejection on a site, the amount of interconnects over the course of what is potentially a small city becomes immensely complicated. We start talking about how these different subsystems, different products and different solutions stitch together. Those seams in that area of complexity is increasing dramatically.

That complexity favors a company like Vertiv that can think about solutions and problems end-to-end and can understand how some of those issues at the seams need to be scaled, need to be rectified, need to be understood and solved for in order to make the whole system and operate better and more efficiently.

We talk about the load profile, and I will hit this quite a bit. The AI load profile is dynamic and synchronous. Dynamic, meaning it ramps up and down. It is very somewhat volatile, and it is synchronous. We talk about the unit of compute. We are scaling GPUs to pods. We're building clusters that operate as single computers at 1-megawatt, 6-megawatt, 10-megawatt building level.

We're talking about buildings that operate now as single computers that has dramatic impact to how the upstream infrastructure, how the grid and how the downstream GPUs and silicon itself needs to operate and behave, dramatic implications. Solving for these challenges simply is what AI depends on. The evolution of AI depends on us solving these challenges robustly and vigorously.

We're also using different nomenclature. And we introduced this a little bit yesterday in terms of how we think about an AI factory, the reason for a data center, how we unlock performance and efficiency. We start talking in terms of tokens per second. It's the new unit of performance. How many tokens, how many units of AI compute can I generate in a second? The push towards the latest, the newest, the kind of frontier generation GPUs.

How many tokens can I generate in that watts or megawatts envelope is the new measure of efficiency? How many tokens I can generate per dollar of my total spend of my total infrastructure becomes the new way in which we're thinking about cost. And deployment speed is no longer my time for construction. It is my time to first token from conception, from power availability to idea of a site, how do I go from the go button to I have an optimized, turned up, ready-to-produce GPU producing tokens in that space as fast as possible.

Vertiv is uniquely positioned to influence and drive all 4 of those levers. We think about how. Tokens per second, latest generation GPUs that don't have to throttle because of electrical or thermal performance. We think about tokens per watt. How do I take the allocated or interconnected amount of power at a site and ensure that the maximum amount of power isn't dedicated to support equipment to cooling, to other ancillary gear and the vast majority of that or the maximum optimized amount of that power goes towards the actual GPUs themselves.

In terms of cost, how do I rightsize the equipment? How do I get the design right from end to end so that I don't have to oversize equipment. I don't have to deploy more than is necessary for capacity for redundancy. How do I ensure from a life cycle perspective, we have the end-to-end site operating with the maximum amount of TCO to enable that performance and that efficiency in the most effective way possible.

And we do that thinking differently about speed. This idea of prefabrication, this idea of manufactured converged infrastructure that brings what can be thousands of skilled trade or labor on site back to a factory-controlled environment to drive better quality, to ease commissioning, to deploy and test as systems before it ever gets to a site to dramatically compress what can be very chaotic and somewhat uncertain deployment schedules in a traditional construction environment. We make that a manufacturing environment through converged infrastructure.

We have levers to pull here that help all 4 of these things go faster. The key piece to unlocking and enabling these levers is the foundation of a broad product portfolio. Having all of the pieces being able to see this end-to-end and be understanding how all of those systems interconnect is a key piece to unlocking and understanding where some of these challenges actually lie.

Normally, this would be where I'd flash the kind of the broad Vertiv product portfolio slide. We'd kind of look at it in a static fashion. What I want to do is kind of in a digital fashion, in an animated fashion, take you through what a OneCore data center looks like and walk the powertrain, the thermal chain and give a sense of the visibility of the site. So let's dive in.

We're looking at, call this, a 12- to 50-megawatt data center. We have the powertrain, the thermal chain, the IT white space, and we wrap this with services. When we dive into power, talking about a battery energy storage system, the incoming MV switchgear to low-voltage switchgear at an MV power board or low-voltage power board. We go through the gray space into a large power converter UPS device with lithium-ion batteries into an auxiliary UPS that's typically supporting CDUs through a power distribution or an STS type of a switching cabinet from the gray space into the white space through our busbar into our tap-off boxes and down into what is a high-density top-of-rack distribution device.

That gets AC into the rack, DC power busbars from a rack power system and power shelf into the chip itself. From the chip, we're going through liquid cooling manifolds in the side of the rack up into the secondary fluid network through valves down into our row-based CDU. That CDU provides liquid cooling back to the chiller. That chiller loop feeds air handling units that are providing air to the cold aisle through the hot aisle back through that primary fluid loop out to buffer tanks and what is a cool loop chiller for Vertiv. That represents kind of the power infrastructure and the end-to-end story of the equipment on a site.

We talk about services and control, the control dashboard of the chiller to the CDU to an EPMS approach to all of the switchgear and the power management as well as things like optimization, Next Predict, predictive analytics for us to understand how all of that works. With the next lever of something like Next Response to dispatch services and look at this in a holistic fashion.

Truly end-to-end and where those systems abut is where you understand system design. It's where you understand how converged infrastructure can finally come together. It's where, as we talked about yesterday, the idea that point products have an asymptote or a ceiling in terms of how much we can optimize and how much efficiency we can drive out of a point solution, but there's a new horizon or a new frontier when we think of a data center, the white space or a holistic facility as the product or as the system itself, we can think about efficiency, performance, tokens per watt, all of those levers not as individual things to push on or exercise, but as an end-to-end process that can be optimized and solved for in a different fashion.

It unlocks a hidden amount of efficiency of performance of improvement that otherwise remains hidden. How does Vertiv do this? We're looking at evolving the powertrain for AI scale loads. They are different. They require different thought, different thinking, different approach. We're talking about transforming a data center into a truly grid-connected asset, not something that is just a grid consumer, but something that interacts with, participates with and ultimately supports both the grid and the load in a robust and dynamic fashion. We start talking about orchestrating and controlling power, cooling and the IT workloads as one system.

We get asked this question a lot, does it actually matter that you have all of the different pieces in the portfolio? The short answer is yes. Power affects GPU performance, thermal affects GPU performance, visibility to power ultimately is a leading indicator of the thermal need of that GPU in the white space. Small examples of how knowledge and telemetry and interconnectedness of these devices and these systems help us to unlock better predict, better-enabled performance that remains hidden to folks that are approaching this in a one-off discrete product type of a fashion.

And then we think of it -- we talk about SmartRun and we talk about OneCore. I think that's the embodiment. That's the easy way to think about converged infrastructure because it is the whole site. And it's a good example, but we take that approach and we apply it subsystem, system to site level. We're uniquely positioned to be engaged with customers to help solve some of the problems that are not yet visible to the broader industry.

So we will walk this somewhat discretely. I will dive into a power management story. There will be some discussion on architectures. There will be some discussion on evolution and ultimately where this is going. The spoiler here is there's no one discrete path. There will be multiple flavors. There will be multiple instances, but we are seeing things that maybe allow us somewhat agnostically to navigate where we think the technology is going and where it should go in a way in which somewhat altruistically, we can help the industry navigate and solve for the problems in a way that doesn't force us to push one angle of technology. And I think that's very important.

Traditional power architecture. And potentially -- sorry for the size, it's both oversimplified and maybe, perhaps, difficult to comprehend, but we go from utility to MV switchgear to LV switchgear to a traditional AC power UPS on the source side. That's gray space out to mechanical yard. On the load side, we're into the white space and kind of reference back to the video we just walked. Distribution into the white space, current GPUs today are deployed with AC power fed in, conversion at the rack level to 50-volt DC, and that's how we get to operation at GB200, GB300, choose your GPU type of performance today.

The major disruptors, influences, challenges are impacting the way in which we're thinking about that traditional AC power architecture today. First, grid interaction is becoming critical. We're hearing about in the news, restrictions on interconnect, long delays on interconnect timing, limited grid capacity in certain regions and a significant increase in what I will call grid compliance requirements, low-voltage ride-through, how we handle faults, how a data center needs to stay connected if and when there is an issue, upstream or downstream, the size of data centers and the criticality of data centers to the local grid is amplified and magnified tremendously.

That has significant implications for how the data centers need to design and behave and the performance that we need to enable for those assets to not just be effectively in an island mode, but can actually be active participants in the grid. We talked about the dynamic and synchronous loads. Those large-scale AI loads behave dynamically and synchronously.

And when you have 5, 10, 50 megawatts behaving in that fashion, there are dramatic implications for what is potentially influenced and reflected back upstream to the grid. There's dramatic implication for impact to all of the infrastructure, seeing that volatility or seeing that impact. And there's potentially dramatic effect on the ultimate performance of the GPU if that volatility and that dynamic profile isn't managed appropriately. We're talking about throttling.

And then from a rack density perspective, we highlighted this. We're at 140 kilowatts today on the frontier. We are quickly moving to 200 kilowatts and 240 kilowatts. We see 600 kilowatts on the horizon, and we are talking about racks that are over a megawatt. Whether that's a single-wide or a double-wide, whether you choose your kind of profile for a rack. The short answer is we are seeing density that is now approaching what I will call the physical and physics limits of delivering power into a space and delivering that amount of connectors, busbars, copper, wire capacity into a constrained physical space.

That density is happening to unlock performance. That performance needs to happen to enable tokens per second. And so this isn't -- we're driving density because it's fun, it's a unique challenge. We are driving the density to unlock that performance, and that has significant effect and implication for how the power system and the powertrain needs to be defined and designed.

I want to take a step back. Why is Vertiv winning in AI deployments for power today? Those dynamic and synchronous loads, I don't want to say snuck up on the industry, but maybe it wasn't well understood the dramatic effect that those dynamic and synchronous loads downstream have on performance as well as have on the upstream infrastructure.

Vertiv is solving for this challenge today in a relatively unique and robust way, something we call power smoothing. So our Trinergy UPS paired with lithium-ion batteries and our EnergyCore system, paired together acting as a system with its overload capability and with some patented control logic between the 2, can take that dynamic load profile. It can ensure that the equipment doesn't need to be oversized in order to meet that dynamic nature, and it smooths what the grid sees and what the inputs or the upstream input power sees in terms of that load profile.

It does it differently, and it enables with that UPS intelligence and that capability, the infrastructure to operate in a much more stable and much more coordinated and a much more effective way. It's subtle. It's not really well understood, but it's something that as we engage with our end customers, this is a significant problem that has existed in terms of enabling the optimum performance of GPUs without massively disrupting infrastructure or without having significant impact to the grid participants and to the upstream utility operator.

We have gotten tremendous feedback from our customer set as we're engaging in factory witness tests and performance validation and things of that nature. What I want to plant the seed here is that intelligence and that control at the UPS level is going to be very critical as we navigate some of the changes and some of the architecture shifts as we dive in.

The other piece of this that I think is more of a general trend that we should expect to see. Energy storage will proliferate throughout the data center. Energy storage used to be thought of as, okay, UPS needs 5 minutes of backup so that I can handle an outage so that I can transfer over to a generator in the result of something happening at the utility level.

Energy storage now is acting as much more of a shock absorber for the system. It's at the UPS level, but it's increasingly downstream at the rack level in order to handle some of the spikes and the fluctuations that happen with GPU performance. And it is happening much more upstream, connected to the utility in the form of battery energy storage systems that allow and unlock and enable grid participation, taking excess load or giving it back so that you don't have to disconnect, using it as a mechanism to replace traditional on-site backup generators and the like.

The important aspect of this is in order to understand and in order to solve for things like power smoothing and the dynamic nature of load profiles, those 3 elements of energy storage operate at different time scales. Very fast, rapid fluctuation on the right-hand side, very long duration 4 hours plus on the BESS side with the UPS in the middle.

The coordination across all 3 of those time scales and time domains is critically important to think about the powertrain as an entire system and unlocking some of that hidden level of performance capability when it comes to power smoothing, fault tolerance, grid interaction and enablement and also ensuring that the downstream load, the GPUs themselves don't have to throttle because I can't achieve overload or don't -- because I can't achieve the performance profile we're talking about.

So we come back to the traditional AC power architecture. I think a lot of folks are wondering where does this ultimately go? What is the influence? Okay. So what we just talked about, a lot of grid interaction and other things that need to happen, our opinion, Vertiv's view of this is there's an intermediate step here in order to unlock all of those grid challenges, grid enablements and tie that involves moving upstream to medium voltage.

The intelligence, the performance, the capability of a UPS moves upstream, tying to the medium voltage ring for better enablement and a shift of battery energy storage to that medium voltage level as opposed to tied in parallel at the utility level. And it brings with it an integration of larger block sizes tied to medium voltage, integration of battery energy storage, we see much more on-site power generation, which is inherently more sensitive in terms of load ramp and decrease than a traditional connection to a utility.

The logical move is in order to unlock and enable the grid interactivity as we see a lot of the capability of the traditional architecture, the traditional UPS and energy storage move upstream to the larger block sizes with MV AC UPS architecture. Now what does this ultimately look like? We're talking about 3 discrete systems that are all pulled together into the MV space. Vertiv is launching a new product category. I will call this the MV BESS UPS.

It is bringing together MV switchgear, battery energy storage, the intelligence and the capability of a UPS in a 3- to 4-megawatt block size. It allows us to scale more efficiently. It allows us to integrate those time domains across energy storage in a pretty dramatically improved fashion, and it allows us to do this more intelligently. Instead of 3 discrete systems and 3 discrete domains, we bring it together into 1 managed system.

It unlocks a different level of control and capability, and it truly allows the UPS to act at a grid level to better manage grid fluctuation, voltage ride through, fault tolerance, islanding and disconnect mode, economic engagement and dispatch to unlock and enable the data center to truly act as a grid-connected and grid-interactive asset.

Now this won't be for everyone. This won't be kind of the universal architecture that everyone rolls to, but this solves a significant challenge that the industry is facing in terms of how to make sure that data centers and especially large loads become better grid citizens and unlock a lot of the performance and capability we have been talking about in terms of more megawatts deployed to GPUs based on an architecture.

So we now have 2 kind of predominant source level AC architectures. You have your traditional with the UPS, which I will remind like does not go away. I don't believe this goes away. There will be a long tail and many customer types that will depend on this architecture and will rely on this architecture. For those that need the higher large load level and grid interactivity, we move to this MV architecture. The key piece of this is both of those architectures, feed low-voltage AC into the data center and both support the current load profile, white space profile of what needs to be deployed for AI data centers today.

So based on the questions I received last night, I think this is probably the flip that everyone has been waiting for as to what happens at the load side now. And this is a story of DC power in the rack, moving to DC power in the pod. We talked about the capacity and the density. We are approaching physical limits now. Once you achieve or arrive at about 350 to 400 kilowatts at a rack level, connector sizes, busbars, interconnect and the physical amount of power that needs to be deployed and delivered over the copper, we run out of space.

Further, we have been deploying rack-level power systems and power shelves that are taking up valuable use space in that rack. As we move to racks that are going from 72 GPUs in them to 576 taking up the entirety of that rack space, we physically don't have room for power in that shelf. So two things happen. Those racks move out -- the power shelves move out of the rack into a more stand-alone power center and the voltage increases.

We have aligned around 800-volt DC as well as plus/minus 400-volt DC to enable and unlock that higher level of voltage that will be tied to the IT to enable this densification to happen. The beauty of this approach is it allows all of the upstream AC infrastructure that we just talked about as vital and critical and evolving and changing to still be fed into the IT. It keeps this power discussion, which is inherently new, unique, requires discussion around compliance and serviceability and capability in a robust way. It keeps that power discussion contained to the IT in much the same way a power shelf is delivered with a current GPU generation rack. This sidecar approach or this power center approach enables the same thing. The power can be bundled with the IT rack itself up to 1 megawatt.

From a Vertiv perspective, maybe visually this helps. The power moves out of the rack, which can be 8U to 12U up to 16U of a 42U rack space, and frees that up for GPUs, it moves to an 800-volt power center that helps from 400 kilowatts up to 900 kilowatts and it ties directly to interconnect busbar throughput to the GPU rack itself. We free the space. We reduce the conversion. We enable this in a better fashion.

I think what is different for Vertiv is we've been in development for a long time. The picture on the right is a real lab level validation that we have going on right now with a customer with their intended GPU rack for this level of architecture that is going through not only customer validation, but the entire ecosystem validation for conversions, IT, the power distribution and treating it as a bundled system. We are well within and well through engineering validation, and we are ready to take this into scaling. Product will be ready end of this year. Commercialization will happen in the beginning of 2027.

And from a timing standpoint, we expect a steady ramp throughout 2027 as we think about scaling and we think about kind of the, I'll call it, the supply chain robustness and the build-out that needs to happen. The key point here is that this is really truly dependent on the IT. This isn't about pushing a power architecture in order to land and be ready. This is a bundling and a very direct tie to the GPUs themselves that will be natively operating at this voltage. That's where it makes sense to drive the transition. And from our readiness and enablement standpoint, we are trying to ensure that we are unlocking and enabling the power architecture so that this can land when those GPUs are ready.

All right. So now we have 2 AC power architectures. We have 2 loadside architectures. I think pardon the arrows and the interconnected and tangledness of this, but the key message here is that we have optionality, and we have flexibility. Traditional AC architecture works with current GPUs. And through this sidecar approach with 800-volt DC power, traditional AC power architecture works with the next level of GPUs that are coming.

The MV AC architecture that we talked about for better grid enablement and grid tie doesn't preclude you from powering current generation GPUs and is perfectly well suited delivering low-voltage AC power into a rack that converts to 800-volt DC and unlocks that next level of densification. There is optionality here, and there will be many instances and many flavors of this depending on the customer type and the business model we're talking about.

But the next logical step here is we talk about native 800-volt IT and silicon. The next step to this as we talk about centralizing and moving to a more centralized DC power architecture, is one in which the sidecar is no longer tied to the IT, but it comes across and extends across the entire facility. We see multiple paths to this. And I think there's a lot of discussion and a lot of debate in the industry as to what's the right thing and how do I optimize for the maximum amount of efficiency? How do I reduce the number of conversion points in our entire power architecture?

I will say for those that are looking for the maximum optimization, for those that are building AI factories that will have almost exclusively 800-volt native GPUs, which is not the entire market, it is going to be, to a certain extent, a specialized or a longer-term type of an architecture for folks that are building purpose-built AI factories. We see a couple of steps towards unlocking and enabling this architecture.

You can move a sidecar into a centralized pool of systems to enable more distribution rather than at a rack level, but at the pod level. But the more meaningful transition that we would drive towards is an MV-connected centralized DC architecture.

From our vantage point, there's 2 parallel paths in order to get to that centralized DC architecture. The first has a higher degree of technology readiness level. It has a higher degree of maturity in the supply chain, and that's what we would call an MV DC UPS. Really, it is a traditional transformer, paired to a rectifier that unlocks and enables the MV to DC conversion and distribution at an 800-volt level throughout the site. The parallel path to this, and it's not binary or one or the other, is investigating and driving towards solid-state transformer technology.

There is a maturity and a technical readiness that still needs to come along with this technology. And I think it's exciting for all of the right reasons. It promises better efficiency. It promises smaller footprint. It promises fewer reliability points based on conversion as opposed to kind of more static and manual mechanical devices. But the truth of the matter is there's a lot of technical maturity and readiness from a supply chain perspective that has to come along. We always like to joke that transformers have had a 100-year head start on solid-state conversion technology. And I think that is apropos in terms of the readiness and the maturity for this type of an architecture to be deployed in earnest.

The important takeaway here is Vertiv is developing both paths. And from a customer engagement perspective, what we are trying to do is unlock and enable the best TCO, the most reliable ,the most effective solution to navigate these paths for our customer types because there are a lot of different needs we are moving towards. This isn't a one-size-fits-all solution, and this isn't a singular approach that we will take in the market.

So now we have 6 architectures. The takeaway to the power story is, again, I know everyone wants this singular converged story, the world is not that simple. There are different business models. There are different archetypes. We're talking neocloud versus co-location. We're talking hyperscale versus an on-prem enterprise. There will be different flavors and different needs based on what is important to our customers. The generations of GPUs that they will have over the life of their 20-year facility. The purpose, whether it is inference or training, whether it intends to evolve over time, will ultimately dictate which of these architectures make the most sense to navigate to.

And the short answer for us is we want to unlock and enable all of these architectures in a way that allows us to altruistically and agnostically drive the right technology for our customers to solve the problems that are relevant to them as opposed to pushing a singular approach or a one technology narrative. I think that's the importance and the power of the portfolio, and that highlights the way in which we engage with customers differently when we talk and operate and act at a system level.

So that was the run through power. I want to shift gears towards thermal. And there's a similar story and a similar dialogue as we think about architectures and we think about evolution. I think there's a lot of maybe misunderstood or oversimplified views of the world, an extremely simplified view of what I would call the modern thermal chain. We have liquid cooling that happens at the AI loop level back to a CDU through the technical water loop or the secondary fluid network loop. We have both liquid cooling and air cooling that exist together in harmony. Both of those devices are connected on a primary loop out to heat rejection. Heat rejection, heat collection, heat collection.

There are 5 pretty significant challenges, disruptions, issues facing thermal designers and data center operators today. First and foremost, liquid cooling. I think we get this, but liquid cooling is mission-critical. I always like to compare a data center 5 years ago that was 100% air cooled. We never even used to put thermal equipment on UPS backup. There was enough thermal inertia in a facility for us to be able to ride through to switch over to gens. Liquid cooling has 1 to 2 seconds of thermal inertia to where if you are out of range or you're out of tolerance, you are throttling a GPU or you are shutting down. It is an incredibly higher degree of mission criticality on liquid cooling compared to air cooling.

We are driving towards higher operating temperatures. I think there's been a lot in the news around this push towards 45 degrees C to the GPUs and why we're doing that. We'll unpack that a little bit. But the short answer is we are driving to higher fluid temperatures to reduce the need for mechanical cooling, enable more free cooling for energy efficiency and performance. But most importantly, that reduction in mechanical cooling frees up some of those trapped megawatts from the site to deploy more power to the GPUs. We'll talk about how we're enabling that.

Air and liquid will coexist and will intermingle for the foreseeable future. I know Gio already claimed the air cooling was dead yesterday. Long live air cooling. We are in an environment now where it's probably 80% liquid, 20% air on the latest gen, highest-performing GPU and AI environments. Even in the most aggressive projections, that moves to 90%-10% or 95%-5%. When you do the math on 10% air cooling on a gigawatt campus, that's still a significant amount of air cooling that needs to be thought about and needs to be considered. And you pair that together with the temperature discussion we just had on rising temperatures to the liquid that can't necessarily be achieved or delivered when you have to consider air cooling as well, that creates complexity and further design challenges for us to consider and articulate in the data center environment.

The other piece of thermal that often gets lost in the discussion is it's location dependent. Your ambient conditions, your local weather, your local temperatures on where that site is going to be deployed. And whether that's Phoenix or the UAE or Jakarta or Columbus, Ohio, those are different performance requirements, different design requirements that need to be thought about and considered. Again, there is no one size fits all. There's a tremendous amount of complexity that comes into the heat rejection and the cooling story.

And you wrap that all up with our discussions now with customers, turning up, starting up and driving scope in thermal services is a critical part of that discussion. You can't turn up this amount of liquid cooling, without the service enablement, without the ability to start clean and stay clean, without the ability to get your loops right, without the ability to actually scale and mass for some of these sites, it becomes a critical part of the story on how not only will you support test turn up and commission, but how you will actually enable the life cycle of that offering.

I'll start with liquid cooling. We can talk about our CDUs. We can talk about the ability to have the secondary fluid network. But from a Vertiv perspective, I simply want to highlight that this isn't a discrete product. This needs to be thought about managed, controlled and operated as an entire system. The CDU has incredible performance around flow control, leak detection, performance parameters, operating set points, filtration and fluid chemistry that all inherently matter to the performance of that system.

We often talk about a human hair is about 100 microns, and we're talking about filtration in these fluid networks that is at 25 to 50 microns. Particles matter. The level of cleanliness, the level of efficiency and performance of your GPU system depends on the criticality of that loop. So a CDU is pumps, pipes and heat exchangers, but it is far more when you actually think about the system and how it ties together with the entire secondary fluid network. It moves into the chip and the server cooling loop.

Our acquisition of Strategic Thermal Labs is a critical enabler for us in terms of visibility into that cooling loop at the server level to understand where the performance is going, to understand what the requirements and the needs are and how that connects back to the full system, absolutely mission-critical. We pair that with PurgeRite and our Vertiv service capability around the liquid cooling and the technical loop to be able to piece those things together so that we start, we flush, we fill, we operate, we maintain the fluid in a consistent and a robust manner throughout the entire life cycle.

And you pair that together with our Vertiv Unify platform, something we internally call our intelligent secondary fluid network, to manage valve control and buffer tanks and discrete flow to individual racks. You have to think about this in terms of it is a system that is operating. And no one CDU, no one intelligent valve, no one piece of equipment throughout this chain can do that unless you were thinking about this and controlling and managing as a holistic loop. The takeaway here is this is mission-critical work. Now the criticality and the complexity is increasing. Vertiv is extremely well positioned to continue to evolve and innovate in this space around all of those pieces coming together.

This is the fluid temperature story. So again, why are we pushing towards higher GPU operating temperatures. When we talk about the efficiency gains and the performance we can unlock, when I consider a traditional chiller loop, for every degree Celsius of temperature, I increase that fluid loop, rough numbers, I get about a 3% efficiency gain. That's through less mechanical cooling, more free cooling, more enablement of not having to run compressors or the mechanical load of a thermal device.

One degree C gets me 3%. If I'm operating at 24, 27, 30 degrees C on a primary chiller loop today, and I can push that to 45, that is a significant, significant energy savings and a significant peak power reallocation from a data center site to the IT for better efficiency and unlocking some of those trapped megawatts we've talked about in terms of the tokens per watt and tokens per second.

So naturally, the industry says, okay, well, we're moving away from mechanical cooling, simple story, everything is going to be free cooling and dry coolers, and we're going to enable that performance, and we're going to unlock that capability for the industry. It's not so fast. There's a lot of challenges and other considerations that come into thermal design and site design that needs to practically be understood, unpacked and unraveled. Your site type, your footprint, your air to liquid mix, the ambient temperature, the local temperature that we are operating in, the GPU type and the fluid temperature it can maintain, customer preference, risk profile, all of these things factor into how do we unlock and think about the heat rejection strategy for a data center site given all of those different variables.

A dry cooler is an incredibly effective, efficient, by nature a free cooling approach to heat rejection. The problem is it doesn't work in every environment. And it works in a surprisingly few number of environments based on ASHRAE design locations.

So how do we handle this? If I'm at a 20 to 25 C ambient, hug the left-hand side of this chart, and I want to move my server fluid temperature up, I can move all the way up to 45 degrees C, and I'm operating in dry cooler land. The second that ambient temperature increases, and Minneapolis, Ohio, Northern states that you would think are kind of high-free cooling zones, all fall into the 35 to 40 C operating range on this chart, we end up in a dead zone on this chart. The gray hashed area is an area where modern chillers can't operate and perform at those elevated fluid temperatures that we would like to move to and a dry cooler doesn't have the capability to be able to operate in all of those ambient zones.

So what do we do? Vertiv has pioneered what I would call a new product category that effectively blends together the capability of a dry cooler with the performance, the assurance, the -- I'll call it, the backstop of a chiller and mechanical cooling together into a single package that fills in that gray space that allows us to push to 45 C operating temperatures to unlock and enable the efficiency of those GPUs, while still operating or enabling, I'll call it, chilled water mode or mechanical cooling mode for those days, weeks, months out of the year where we need that backstop.

It also enables different flexibility and different performance parameters for us to think about and articulate the entire thermal design of the site differently. We call it the Vertiv CoolLoop Trim Cooler. The best of a dry cooler, the best of a chiller blended together. What that does for us is it combines dry cooler efficiency. You can use that efficiency for increased capacity. You can use that efficiency for reduced footprint. You can deliver that increased capacity as peak power gains. It uses zero water and it's unlocking and enabling almost 134% more free cooling hours compared to standard designs that we've based around chilled water today. This is a game changer that allows us some flexibility and some better articulation as we go forward.

So this will be a lot to take in, but I want to give a practical example to how having all of the pieces, having flexibility between chilled water and dry coolers and trim coolers, having flexibility between air and liquid, and having a breadth of portfolio allows Vertiv to think about thermal challenges differently. We have what I would call the 2-temperature problem now. GPUs, I want to push to higher water temperatures, 41 degrees C, 45 degrees C to unlock that efficiency and performance gain. I still have air cooling on the site. They can't push past 30 degrees C without rendering it ineffective or inoperable.

So how do I manage those things? I have an inherent trade-off. I have an inherent optimization discussion I have to make. I can solve that problem as Vertiv by moving to 2 thermal loops. I have a chiller for my air cooling tied to an air cooling loop that operates at one temperature. I have a trim cooler or a dry cooler that operates for my liquid cooling loop. I've now prevented myself from having to make a difficult temperature trade-off and have gained some efficiency, but I've also introduced a significant amount of complexity in terms of dual loops and dual piping.

The right-hand side single-loop architecture that I can drive with a trim cooler that enables that higher water temperature, through innovation on the air cooling side by enabling water-cooled DX technology or trim capability within our air cooling portfolio, I can do that mechanical cooling just where I need it within the air cooling portfolio, run a single loop for improved complexity, have the higher elevated water temperatures that my GPUs want while giving and enabling the proper air cooling and air temperature for the remainder of the air that is needed.

Having the breadth of that portfolio can help us unlock 10%, 20% or more of efficiency for the same design compared to others that are pushing a single technology or a single approach to trying to solve these problems. Having the broad pieces matters tremendously. And when you actually stack up what our thermal portfolio looks like, those pieces become apparent. We are not pushing a technology. We are agnostically looking at a broad holistic portfolio to help unlock those technology challenges differently. It is air cooling. It is liquid cooling. It is single-phase direct-to-chip. It is two-phase ultimately, potentially where these things need to go. It is unlocking and enabling room to row at an air cooling level. And from a heat rejection perspective, you need all of these tools in the toolbox in order to unlock and solve those challenges in the way that we just talked about.

We heard yesterday from Chris Crosby, the innovation and the approach to intermingling and interconnecting hybrid air and liquid systems gives us a different palette to work from as we think about solving for the complexity challenges that are going to be facing data centers. It requires multi-technology. It requires a broad portfolio and discipline. I'm extremely excited about the opportunity we have in front of us to engage in solving these problems differently.

So I'll keep going. From an IT systems and an infrastructure solutions perspective, let's dive into the white space. How we think about white space and infrastructure in this day and age is fundamentally changing. Piece parts that would normally be assembled on site between busway and circuit protection, rack-level power, distribution architectures, cable drops, thermal management, secondary fluid networks. We are now thinking holistically as a system. We introduced SmartRun.

SmartRun is designed to work together. It is designed with the end GPU load or TPU load profile in mind. And it is designed to have a future-ready aspect to rack positions, power levels, flow rates to understand where the actual cluster and pod size is going and how we are best suited to put all of those pieces together.

When we go deeper into the white space, we've robustly built out our rack portfolio and rack capability. We are solving new and unique problems on density at the rack power distribution level and top of rack distribution level that enables and unlocks greater levels of density, whereas normally, we'd hit physics-based constraints and challenges. We build out and we are reinforcing our rack-level power portfolio, both on the 50 volts DC side as well as on the 800 to 50 volts DC side.

We enable row and rack-based cooling, rear door heat exchangers, in-rack CDUs, other capability that makes us a robust and compelling provider to system integrators, rack integrators, OEMs. And we bring that all together into integrated rack solutions that enable enterprise-level on-prem deployments for folks like Vertiv that are looking at and evaluating how do I enable AI on-site, how do I enable an AI in a hybrid cloud-based environment and deployment. It's those solutions that unlock and enable that capability.

For those that have the benefit of going to the tour, you will see some flavors of SmartRun. The primary GB200 architecture that we deployed in earnest and are deploying now at volume is a 1.2 to 1.5 megawatt 40-foot SmartRun that supports 115 to 140 kilowatts in a rack space on an average level. We start to move through what that SmartRun looks like as a product offering, and we evaluate and we elevate from 4 to 5 to 6 megawatts of contained infrastructure that enables us to be future-ready and to a certain extent, GPU and TPU agnostic to tailor these designs and release them as products regardless of the chip architecture, regardless of the chip type that we want to deploy into these spaces. It enables an incredible amount of flexibility, responsiveness and thoroughness as we think about kind of unlocking and enabling this multiple GPU generation ahead type of a discussion and an architecture.

And then we bring this all together at a site level. We've seen multiple iterations of OneCore. The beauty of OneCore from our perspective is it's designed as a system. It can be tailored to the right application, but we are releasing this and maintaining this as a product. We have a 10-megawatt OneCore that scales to 50 megawatts. And 125-megawatt OneCore that scales to 250 and a 250-megawatt building that I can scale out in a repeatable block size building block chunk style and fashion out to 1 gigawatt. Dramatically compresses the time, significantly reinforces kind of the throughput, the total cost of ownership and the enablement that we've talked about over the last 2 days. This is truly converged infrastructure at scale. And it unlocks a different level of performance and capability for the industry that checks the box and enables optimization across tokens per second, tokens per watt, tokens per dollar and critically time to first token.

So we talked a little bit about the wrapper that we are putting around this. I've gotten a lot of questions around our software, our digital enablement strategy. Vertiv Unify is a layer of controls that allows us to go from unit-level firmware on a CDU or a UPS to subsystems, an intelligent secondary fluid management capability, a chilled water manager that allows me to look at the entire control architecture and optimization between chiller to CDU to air handler to chip-level cooling. We can do this in a way that allows us to better maintain performance thresholds and performance tolerances to incorporate the power view into a dashboard.

We are trying to enable and unlock a better way of driving system control on things that are inherently not typically treated as systems. It's a critical and vitally important unlock for Vertiv that we are now pushing and enabling our customers to operate and actually engage with our systems as systems. And that is up to and including Vertiv Unify at a OneCore level.

So I'd be remiss if I didn't maybe bring this home with a discussion on services. The critical point, complexity and all of these architecture changes are driving further importance to our service portfolio. All of those changes we just talked about, medium voltage, 800-volt DC, mission criticality of the liquid cooling loop, the vital nature of starting with clean fluid and maintaining fluid management over the life cycle of the product, all of those things make the world more complex. They put more importance on to our service capability. They put more importance on to us getting the technology right for our service and scaling it in a dramatically, dramatically important fashion.

All of that makes our service content go up, and it makes that story resonates as vitally important with our customers as we go. We drive service and we focus on service as part of the product development and as part of the system solution, not only in terms of service enablement, but customer enablement in terms of how that capability and that competence needs to scale and be there to unlock the level at which we're trying to deploy data centers today.

From an engineering perspective, we have made tremendous investment in expanding the portfolio, but also the competence, the capability and the ability to test. Testing a medium voltage UPS at 4-megawatt level is a different level of lab validation. It's a different level of lab capability. We are driving significant investments across the globe throughout our thermal, our power labs, our system integration capability.

One example I want to highlight, we are months away now from turning on what I would believe to be the world's first infrastructure AI system validation lab, a 1.5-megawatt AI pod with up to 600-kilowatt TTVs, or thermal test vehicles, for us to simulate and drive at a system level, the entirety of how an AI pod performs in a real-world environment, for us to be able to drop in equipment and understand performance profiles, for us to be able to take and understand application-level failure mode analysis and technology behavior and performance profiles, not in a live environment, but in a controlled lab environment and allow us to test and benchmark against how things operate in the real world, a critical capability and a critical enabler that we are driving into the future and will become part of our normal course of business as we think about systems design and scaling.

From an investment profile, we are accelerating. So we have a great deal of pride in our end-to-end portfolio, in our competence and capability across our engineering and technology. We are making decided and deliberate investments to ensure that our end-to-end portfolio stays end-to-end throughout these architecture changes, that we are pushing the frontiers of advanced technology, Horizon 2 and Horizon 3 efforts associated with where the industry is going and where it ultimately needs to go.

We have a 20% annual increase in our plan around engineering in order to make sure that we take that lead and we stay ahead. We pair that with the ability to incorporate AI productivity improvements, throughput and efficiency into how we develop and how we go. The key piece is time to market. And it's not about being alone necessarily, but it is about being ahead and driving our time to market so that our product development cycles and our portfolio is inside of the development cycle of the rapid pace that GPUs are evolving is critical and core to our strategy, and it's how we continue to stay ahead.

I'll bring this all back by saying we have a tremendous amount of work and effort and build-out and scaling happening today. We intend to accelerate our development. We intend to accelerate our investment. We want to lead the industry. We want to shape the industry with where the architecture, the innovation and the evolution of data centers needs to go. We're going to extend and enhance the industry's broadest portfolio, and we're going to do this robustly through systems level design, engaging with customers differently and thinking about the end-to-end system and where we can unlock performance for this entire industry in new, unique and differentiated ways.

Incredibly excited to be in this space, incredibly excited to be in charge of leading the direction of this portfolio and appreciate you guys giving me the time to walk through where we see the technology ultimately evolving to and going. So thank you.

All right. So much exciting innovation underway. I know there will be a lot of questions. We'll open it up for Q&A. So please raise your hand.

Are there launch customers for your new products that you're rolling out?

Are there large customers for new...?

Launch customers, pilot/launch customers.

Yes. Not that I would be at liberty to disclose, but the vast majority of what we just talked about are specific or tied customer engagements that we are designing around, building around and preparing for launch.

Are they co-developed then? Or...

Co-developed is probably a strong word in terms of there's co-development and engagement on specifications, requirements, understanding the performance profiles and things of that nature. Typically, in these fashions, though, we go to great lengths to ensure that innovation within solving those problems remains kind of core to Vertiv.

Two questions. First, what is your thought process around cold plate? You did the Strategic Labs deal. I think that's more of a technology deal. But do you see a path to manufacturing there? Is that even interesting? I was wondering also if you could just maybe address the broader strategic landscape. And the nature of my question is, the message here was integrated solutions, kind of soup to nuts. There's a lot of companies out there that are sort of like the dog that caught the bus, right, and they have a product and they're on this growth curve. Do you see evidence of any sort of shakeout yet in that sort of mixture of companies? I could think of the 50-some-odd companies that say they have CDUs or have a picture on a website anyhow. So just kind of how that landscape is playing out in your view.

Okay. Appreciate that. And 2 parts. I guess, first, on the cold plates. Certainly, the competence, the capability, the technical wherewithal and kind of really the, I'll call it, the customer presence of Strategic Thermal Labs is really what attracted us to the company. And visibility to design profiles, customer access, understanding kind of the nature and the mechanics of the server cooling loops themselves is paramount. But having it in the portfolio and scaling it are probably 2 different discussions.

From our vantage point, we certainly are starting with kind of the, I'll call it, the system-level understanding and engagement, understanding how the cold plates fit in with the broader thermal design, as I talked about with the liquid loop. But certainly, as we look at specific customer engagement, in order to actually be relevant and have presence and engagement with customers, we have to look at this maybe discretely about how you actually scale to a level of manufacturing capability that allows that engagement. And that's maybe the way in which we're thinking about that.

The other part of your question was more along the lines of are we seeing a shakeout. The way in which I would frame that is, I'll go back to the mission criticality of what we've been talking about, and I'll go back to, as we are thinking about systems, services, the ability to scale, the ability to ramp is almost equally important to that, I'll call it, program-level engagement and discussion. And I do think we are seeing more and more specific questions around how do you intend to scale, how do you operate, which I don't want to I don't want to infer about what other companies' engagements with customers might look like or might be, but I know that's core to the discussions we have with customers.

Give me a credible story as to how do you ramp, how do you scale, how do you deliver it mass, how do you test and turn up and commission and all of these things. And while the innovation is still probably the leading piece of that story, the ability to scale and really support that infrastructure is probably equally as important. And so I do think that is having an effect on the industry that folks that can scale are going to be the first look or maybe more of the trusted partner as we think about how this ecosystem builds.

As you sort of described on the electrical side, you described this more traditional architecture, medium-voltage DC and sort of relies on more existing technology, UPS. And then you also described solid-state path. As you think about your customers, is there a preference as you have discussions? Is there -- if you put them in buckets, hyperscalers, colos, neoclouds, is there a preference at least marginally for one path or another? I guess the gist of the question, do your hyperscaler customers versus neoclouds, is there a fundamental difference in how they think about their paths, technology path over the next 2 to 4 years?

I think a lot of that is still emerging. But I will say, depending on the customer's business model, depending on what they're trying to accomplish, dramatically influences kind of the, I'll say, the optimization path that they want to go to. Like as an example, a wholesale data center builder, a co-location provider that may be building on behalf of a hyperscaler, they may be building a gigawatt campus in 100-megawatt or 250-megawatt buildings and chunks, where they don't necessarily know the GPU, the end-customer tenant, the person or the company that will be taking up that capacity. That has a dramatically different impact on the type of flexibility and optionality they would want to build into versus somebody that is driving towards a purpose-built latest generation AI-only large-scale cluster training facility.

And I think that -- maybe that nuance of business model and uncertainty and flexibility is underappreciated in how a lot of folks are looking at the market and the breadth of solutions and kind of the paths that these things will go down. Undoubtedly, some of the folks that are building at large scale will want to ultimately move towards that centralized, truly optimized, maximum efficiency type of an architecture, but I don't believe it will be everyone.

Julian Mitchell. Maybe a couple of questions.First off, when you think about dollar per megawatt between power versus cooling and you look at Vertiv's portfolio today, which one do you think offers the higher growth rate in the coming, say, 5 years in terms of where your dollar per megawatt can grow most quickly?

And then secondly, I wanted to understand in cooling more specifically, what do you think happens to the chiller? I think you made some comments around maybe only 10% of new data centers could be maybe the content would be air cooled in a few years. But I wondered -- I think maybe I misunderstood. So maybe just clarify that, please.

Sure. I appreciate that. I'll point back to maybe the way Gio answered the mix question yesterday in terms of power versus thermal, I think, is a good proxy based on kind of the Vertiv-at-a-glance profile we gave yesterday. In terms of growth rates, I think the architecture evolution I just walked through shows that there is more, and there is growth in both of those buckets, especially as these architectures change. And I think that's maybe the critical takeaway here is we are talking about incremental, and we're talking about expansion even if some of these architectures end up moving what I would consider traditional product.

I'm sorry, what was the second part of your question?

Just around in cooling specifically...

Yes, the air versus liquid. And maybe let me back up, what we're talking about is when you look at the entire site or you look at a data center pod, we're moving towards more and more liquid cooling, but the GPU rack itself is going to be 100% liquid cooled at some point. There are networking racks and support racks and other infrastructure and power equipment and other pieces of gear in that pod that still require and need air cooling.

And so what I was talking about was the ratio of the amount of equipment or the total power that is liquid cooled versus air cooled. The trajectory for highest density AI sites is more and more is moving towards liquid cooling and less of that proportion is air cooling. But the point I was making is I don't think we see a world in which that air cooling completely goes away in the foreseeable future in this planning cycle in this time horizon. And especially then as sites are getting bigger, even as that proportion of air to liquid reduces, air is still growing. And I think that's maybe a critical takeaway. It further increases the complexity of these sites and the way in which thermal needs to be designed around it.

And I think there was another part to the question. The last part was about chillers. And we should not necessarily associate chillers to air or liquid. I think it's more complex than that. And what we see in the future, Scott can, of course, be more way more eloquent about that, it is the entire kind of a spectrum of technologies in the heat rejection part of the portfolio to be alive and well for eternity that I say. And it will be a combination of the various parts.

I think that's a critical piece of it. Certainly, the performance and the capability of what I would call a traditional chiller even within the Vertiv portfolio needs to expand and evolve to meet and address these kind of new requirements.

Andy Kaplowitz, Citigroup. So just on the liquid cooling side, obviously, there's been explosive growth over the last few years. But it seems like only lately, you guys have made some bigger deals, when we talked a little bit about CDUs and what have you. But PurgeRite comes up a lot. And so is there like sort of an unlock that you've had with some deals lately that sort of accelerated your performance? Or revenue synergies are a hard thing to sort of calculate, but how do you sort of think about that as you go forward?

Yes. I think a lot of the -- maybe the unlock is more of we are moving into a stage of deployment in the industry where we tend to talk about lease capacity and order intake and other things. We're -- for the GB200s, GB300s, AMD TPUs, like we're moving into a phase now where we're into deployment. And that deployment is illuminating a lot of the inherent challenges of scaling of flush and fill of commissioning at this scale of managing fluid and turning up hundreds of CDUs on a site.

I think there's almost an unlock and an awareness of where some of the gaps are in capability within the industry that has enabled us to have more of a heightened level of like understanding of the relevance and the importance that a team and a capability like PurgeRite needs. And it's also highlighted, I kind of talked about it previously, like the ability to scale those things matters tremendously. And figuring out how to do the fluid management, the flush and fill on the primary side and the secondary side at a 250-megawatt site is not a walk in the park. And it's a critical enablement and a critical skill that is needed holistically across the data center. Maybe the level of importance of that is being highlighted by -- we're in the deployment stage now and we're seeing that really come to fruition.

All right. We'll take this as the last question.

That was an impressive presentation. So to Julian's earlier question, one of the high-growth stories here seems to be energy storage. I mean it's now going everywhere. It's going to the rack, you've got the BESS. And so the question is really how should we think about your differentiated value proposition in energy storage? How do we think about your priorities for development of the product suite? Because clearly, there's more content there, but how do you create products that have the margin profile that would be consistent with your targets when the lithium-ion cell that's not something you make, right? So just help us understand the priorities here.

Yes. I appreciate that question. And I think certainly, the system story applies here and mass. The capability that we are bringing, I guess, it's managed as discrete systems today. As I think about the battery energy storage market, as I think about that's more connected in parallel at the utility level, maybe the unlock that needs to happen with all of these discrete energy storage pieces is it needs to be brought together into an ability to actually properly manage data center requirements. And I think that's maybe an underappreciated lift in terms of understanding the capability, understanding how loads need to be managed, the interconnection orchestration and control of those devices across all 3 of those time domains as we talked about.

There is truly like a system-level orchestration and capability to where if you have one of those piece parts, you don't necessarily see how it needs to interact and behave across the board. So yes, it's probably more -- it's more integrated or third-party content as we think about cells not being part of our portfolio. But in much the way we have interacted and engaged with energy storage at scale like throughout our history, the critical capability and unlock of that system is the control logic, the battery algorithms, the orchestration layer, and that's where the intelligence that's inherent to a UPS today, I think, applies to the entire powertrain, which gives us a pretty strong confidence in terms of our trajectory, our profile, our content as this evolves.

Thank you. I appreciate all the great questions and certainly an exciting time to be part of the industry and an exciting conversation.

I'm going to turn it over to Gio Albertazzi for closing remarks.

Well, thank you, Scott. Thanks, everyone, for the 2 days. And I'll wrap it up very quickly. We are shaping the industry. We're the thought leader in the industry, and you've just seen thought leadership in action, and we are accelerating. We are accelerating. We're focused on creating value for our customers. We're focused on creating value for our shareholders.

We believe that the market is strong and will be strong long term. Our portfolio, our product, our system, our converged infrastructure, our services are augmenting that market opportunity. And we're invested in capacity. We are investing in R&D, innovation, inorganic growth when needed as we have the strength and the balance sheet. We'll stay focused on accurate execution. We'll execute diligently everything we do, and we have strong confidence in our long-term financial plan that we have shared with all of you.

With that, thank you very much, and thanks for being with us.

Hi. Hello, everyone, and welcome to Vertiv's 2026 Investor Conference. We have a full room here today in Greenville, South Carolina and many more on the webcast. So welcome, everyone.

First, let's take care of a quick housekeeping item. I would like to point out that during the course of this event, we will make forward-looking statements regarding future events, including the future financial and operating performance of Vertiv. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We refer you to the cautionary language included in today's presentation, and you can learn more about these risks in our annual and quarterly reports and other filings made with the SEC.

Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

During our conference, we will also present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in the investor presentation found on our website at investors.vertiv.com.

So let's take a quick look at the agenda that we have. Starting us off, Vertiv's CEO, Gio Albertazzi will be talking about how Vertiv is shaping the industry. Following his presentation, we'll have a quick 10-minute break. We'll come back and Vertiv's CFO, Craig Chamberlin will take the stage. We'll do Q&A after that. So we have a full afternoon of programming, but then we get to continue this to day-2. It's a two-day event. So tomorrow, Scott Armul, our Chief Product and Technology Officer, will take the stage with a presentation focused on how we are shaping the industry with our technology and innovation. So super excited about that. We'll have Q&A also following Scott's presentation tomorrow. All right.

So joining the stage momentarily will be Vertiv's CEO, Gio Albertazzi after a brief video. So again, welcome to Vertiv's 2026 Investor Conference.

[Presentation]

Welcome, everyone, remote and in person, thank you for being with us. It is a great being together again after what is 1.5 year exactly, from our last investor event in Atlanta and it's been a very eventful 1.5 years. A lot of things happening. The industry accelerating, the technology accelerating, a lot of growth for Vertiv, a lot of additional strength for Vertiv. We are shaping the industry. We are the thought leader in a central industry in a big growing market. We have the most complete portfolio and expanding that portfolio, and we are scaling rapidly and in a disciplined manner, to make sure that we enable the industry.

In these 18 months, we have delivered, indeed, over-delivered on our 2024 trajectory, the trajectory that we shared with you in Atlanta. We have achieved investment-grade. We have certainly expanded our valuation, and we are now in S&P 500, and we're accelerating further. We are leveraging our portfolio. You will hear me talk about the product, the portfolio, the system the converged infrastructure, the services layer. We're expanding our addressed market, and we are delivering for the AI factory, AI, data center of the future, and we are scaling at unprecedented speed. We are an industry leader and we deliver with consistency on or above our commitments, and we are poised to continue this growth.

When we look at the shareholder returns, we have created in the last few years, while that momentum and that delivery is certainly represented here. We had some bumps in the road, and there will continue to be some bumps in the road. That's the type of market we are in, but certainly quite pleased with where we are, not satisfied. You know my motto, but it's absolutely central here. We look at this as our starting point. Every day for us is a starting point. We know we can be better as a company. We know we can continue to expand our portfolio. We know that we can continue to change the game in the industry, and we will never relent. Of that, you can be sure.

It's 3.5 years, almost 4 years since we launched our five strategic priorities. Those five strategic priorities are behind the value creation that you've seen in the previous slide, but they are behind the value creation that we -- and the value that we deliver to our customer every day, it is a strategy. It is a set of priorities that are deliberately generic because they are guiding us in the right direction, and they are absolutely relevant for our future as they have created alignment and convergence of our action in the years -- in the last 3.5, 4 years. It is customer focus, creating value for our customers, absolutely central, creating value for our investor, absolutely central. And that's also through uncompromising financial strength. It's about centrality of innovation. And it's not just having a lot of new products with new technologies, how everything becomes a system and new ways of interpreting and driving the industry. It is continuing to work in operational excellence. It is delivering on what we say and continue to lift the bar for ourselves. And it's an environment, the culture of our high performance that drives us.

Now when I look at those strategic priorities, I say, well, we've done a lot, but more importantly, there is so much more opportunity out there. So this will continue to drive us as it has driven us in the last 3, 4 years.

Let's take a quick look at Vertiv, a snapshot. A snapshot of our mix in 2025. But let's start a little bit looking at this year. We are guiding $13.75 billion revenue, that's our guide certainly a lot of growth, a total 34% growth, and you see this growth represented in a number of employees in Field Services, importantly, Field Service employees in total employees. This is predominantly manufacturing service innovation that is being unfolded, fueling current and future growth. But then if we look at our portfolio, we continue to see Power and Thermal being the biggest parts of our business. Power Management, Thermal Management, we see Service -- it's a very important part of our mix, and you will hear us, we are very bullish in the direction in which Service will continue to grow, and certainly IT Systems. But it's important to talk about Infrastructure Solutions.

What you see here represented with the Infrastructure Solution, SmartRun, OneCore, is the added value, the value addition around prefabrication around manufacturing, everything that is pulled through from a service, Power Management, Thermal Management and IT Systems is represented under their various business. So don't be misled. Infrastructure Solutions is much bigger than you see here. So we're continuing to expand our leadership. The momentum is strong, and that's why we are pretty, pretty confident in our ability to continue to deliver on our trajectory that we shared with you in 2024, but even more than that. We have demonstrated ability to deliver. We have demonstrated the ability to exceed our financial framework, and that's what we will continue to do as we look into the next 5 years. But it is a multiyear executional strength.

I want to take a few moments to look back also in terms of our growth in top line, margin, cash and adjusted EPS. Top line, 24% CAGR in the last 5 years and accelerating as we have seen in '25 and '26. That, of course, has driven margin expansion. It doesn't just happen, by the way. It doesn't happen -- just happen. It's a lot of hard work in terms of value creation in terms of margin expansion, it is certainly also operating leverage. But certainly, it's nice to look at 32% margin expansion in the CAGR. That, of course, translates into EPS acceleration, 12x the EPS that we had in '22 circa, certainly a lot of strength. Generating $2.5 more-or-less-billion cash delta between the extremes, and it's something that fuels, of course, the strength of our balance sheet. And certainly, that enables us to make the right choices when it comes to capital allocation. So all this, of course, is a result of an absolutely focused team across Vertiv, but certainly within the leadership team.

So let me go through the leadership team at Vertiv. Some changes, certainly, since we were together in Atlanta in November 2024. Indeed, 6 roles that are different, some people from within Vertiv, Paul who is here today with us now leads our EMEA business and Scott that most of you know already is our Chief Product and Technology Officer. From the outside, Wei, now leading China. Of course, Craig who you know, I'm sure, pretty much in-person and everyone here, leading 6 months now in the job, as our CFO. More recently, Frieda, Mike sometimes mid-last year and 6 new names, or old names in new roles. I'm very pleased with the team. I'm very pleased with the strength of the team. Everyone in the team combines very strong strategic vision with an obsession of execution, an obsession of execution, and ability to really do two things, be ambidextrous in terms of the strategy and execution. And it's a team that is driving our strategy forward.

As we think about strategy, based on the vision of the team, the vision of the Board and the principles that I was sharing with you earlier, we continue to go back to what we believe is a very proven framework for value creation, proven but very, very future-ready as we go through our strategy as we look at the market, as we look at the technology and how it evolves, centered around continue to strengthen our leadership in a market that is favorable, continue strengthening and accelerating our role as an innovator in the industry, and continues to make sure that we have the most complete portfolio. And it's not static. You know it very well how many changes, how many evolutions this portfolio and indeed the technologies that we serve, the data center technology, the range of data center technology have expanded. And that's good news in many respects because that makes our portfolio net-net broader, not just different, much broader.

And that, let's say, bigger spectrum of technology makes the market more complex and complexity is our friend. Extremely important, this very dynamic market is the relationship with the ecosystem. And the ecosystem are key other players, the NVIDIA's of the world, partners but also our customers. The strength of the relationship and the long-standing relationship with our customers is absolutely key and something that we nurture every day.

And then there is the executional part, having a clear and -- continued to work and to continue our trajectory and a journey on a road map to operational excellence. It has continued to expand margin through operational leverage, but a lot of efficiency, as you will hear from Craig, and certainly a lot of commercial excellence. And that's generating the cash flow that then becomes a strength of the balance sheet that then becomes an ability to own our destiny in our own hands. So this is a very consistent framework, you'll kind of see this framework unfold as we go through my presentation.

But I want to start with going through again our -- again, because you've seen it before. And the beauty is that our competitive advantages, is something that we continue to reinforce. That value creation framework is exactly reinforcing this set of competitive advantage, is a uniquely deep application expertise. We know the data center space, like no other, and we have done that for a long, long while, but never believing that what is true today will be true tomorrow. We not only adapt but we shape the future of the industry. Customer collaboration, very, very deep. We are shaping the AI data center of the future, and that starts with very, very strong relationships.

Most complete portfolio. We will always drive that angle and relentless innovation, we will always strive for the best technology at point product level. I think about the densification. Think about also at larger scale, how we're rethinking the way the entire infrastructure can be deployed at speed, at scale entire infrastructure as one product, Vertiv OneCore.

Proven reliability and quality. Many aspects to that. One important -- an important one is the fact that we have a large, very large installed base. The amount of intelligence we get from that is installed base, enables and arms us for future technology development. All things that reinforce that accelerate the flywheel of our competitive advantages. We're truly global. We're truly global and operate as a global company, and we provide consistent experience across the world, and we are able to scale. We have proven to be able to scale. And certainly, last year, but not least is our -- the strength of our Services.

As the industry becomes more complex, significantly more complex, not just in the technology, but in the way the speed, the scale, the demands are evolving, services are central across the entire spectrum of our service portfolio. And you will see that spans from the initial phases of almost design of an infrastructure, all the way to the entire life cycle of that infrastructure. We actually enable our customers and enable the industry to navigate the current and the future challenges. With that strength in mind, with that strategic clarity, with the strength of the team with our proven track record, we are then reviewing our 5-year projections, and we are lifting our trajectory relative to what you saw 18 months ago.

We now think in terms of a top line growth in the 5 years on the 20% to 22% CAGR. So it is above market growth. We will go in the details of the market later on.

Continued data center leadership, very strong in the key customer segment, and we continue to see growth across all aspects of the market. We believe our market -- sorry, margin expansion has a rightful ambition on 27% and Craig will elaborate further on this. But again, it's operating leverage, it is efficiency. It's service acceleration and certainly strong commercial execution and continued enduring stronger cash generation, disciplined execution, improved profitability, driving stronger and stronger cash flow. So as we continue to expand, what are the forces behind this expansion? And I want to go back to the theme of shaping the industry and how are we shaping the industry and creating enduring value.

I like this picture with these concentric circles because really it represents how we look at the market as our offering. The market is favorable, but the favorability is not just about the net growth of the market, is the fact that the industry is changing rapidly. And as it changes, it creates, I'd like to think a fertile ground for our competitive advantages to really work extremely well and to create value. We create value at product-level. And that's the second circle at product level, product leadership, we will always strive for being the leader in any specific product line in which we operate. That means that we want to be at the top from a technology standpoint, and we want to make sure that also from a market in that specific part of the market, we continue to lead. You will hear me talk about system. You will hear me talk about converged infrastructure, but do not make the mistake to believe that we will not continue to win on a product-by-product basis. We will continue to lead and win at a product-by-product basis.

But then there is another layer that is the system excellence. There is so much more value in the seamlessness of a powertrain, a thermal chain of an IT solution when it's really define, design, thought-through together. And you know that that's something that we do a lot with our customers. We make sure that we sit with our customers early on in their process and make sure that we talk the entire system and the advantages. We want to make sure that our customers can benefit from our knowledge of the space, of the domain to optimize their infrastructure. Sometimes, they will buy the entire system. Sometimes, they will buy one piece at a time. And sometimes there will be a multi-vendor, it's okay. We want to make sure that they understand what we understand being excellence from an infrastructure standpoint. And sometimes, it will be an incumbent solution.

But then we move to the next level, that is the entire infrastructure. When it is the entire infrastructure, then things change further, then you really think about what are the various forces that we have to take care of, in the market. And I will go there, but for now, really think in terms of the whole infrastructure as one, coherent, rapidly deployed system-product. The entire infrastructure is one product. That's what OneCore is about. That's what SmartRun is about.

But then there is another layer, another ring around these concentric circles, that is a ring that embraces them all, almost sound like token here, but it is wondering that embraces them all that is Service. You can understand how complex, you can understand the speed, you can understand the technology. That technology speed and complexity need superior service capability. But let's start with the first of the various circles. And let's start with the market. And this market has certainly given us very interesting, and did I say, persistent signals. And certainly, one is compute growth.

I'm thinking -- we're talking about the next 5 year, '25, 2030 range. This signal continues to indicate strong compute growth. Now we're talking about predominantly in terms of the fastest-growing element here, we believe we see is around inference, almost at 40%. That's very good. That's very good. We see inference just like training and, let's say, traditional compute as areas where we can have -- create a lot, a lot of value for our customers and for our investors. We like it a lot. Data center CapEx is growing. When we think about the total power capacity added in the 5 years, we think -- not an exact, but it's a projection. But we believe that what was about a 100 gigawatt 1.5 years ago, it's looking more like 140 gigawatts. And remember, we are always quite balanced in these analysis. So we are not negating our personality, let's say, measured and balanced as we do this here.

And to think about increments that go from approximately 20 gigawatt in the first year to somewhere like 35 gigawatt directional. But again, is the appetite bigger than that in terms of growth? Yes, the appetite can be certainly bigger than that. But there are external forces. And the external forces we been -- some of the external forces we've been dealing with for quite some time, and those pacing items really are around power availability, permitting, and now even more so skilled labor, field capacity and complexity in field. All things that are pacing the industry. They're not stopping the industry. And we have seen that being true in the last almost 4 years now.

So if we look at the market, you will -- I'll start talking about our legacy served market. What does that mean? That's pretty much our 2025 portfolio. It's a $62 billion total market, growing 16% and 18%. The data center represents about $50 billion, growing 18%, 20%, more or less with the cloud and colocation being the fastest-growing part of that, about $30 billion, growing at 23%, 25%. Just to give you a sense, our growth in cloud and colocation last year was about around 45%. So again, outgrowing the market. But again, also enterprise and distributed IT is growing a little bit faster than we saw when we were in Atlanta. Don't be misled. This is really talking about enterprise and distributed IT on-prem. There is much more AI adoption in enterprise that happens on a cloud, certainly, but also on a colocation basis.

But then we are expanding our market. And we are increasing our TAM by about $13 billion. Think about a $75 billion, growing 16%, 18%. And those are all the technologies that we are adding and markets -- parts of the market that we are increasingly serving being those organic or inorganic. Think about Fluid Management, PurgeRite. Think about IT Solution expansion, again, acquisition. Think about all around converting infrastructure, that is changing the shape of the market. Think about the evolution of the powertrain that is driven among other things, by the DC power in data centers. Think about the chilled water and switch-gear technology that is being expanded globally and regionally. So market is expanding. But there are five forces that are intensifying that are driving this change.

Density, speed, speed at which you make capacity, compute capacity available, scale, constantly increasing, complexity, again, navigating all the various technology, all the various designs and certainly, more and more complex load design. Add to that, a lot of power generation happening, did I say, within the perimeter of the data center. So it's easy to understand that the traditional old way of designing data center, of delivering data center may not be optimized.

There are a lot of themes connecting all the parts that are suboptimized, if you think about a data center design and build one technology at a time, one piece at a time. So there is a lot of value, cost, profit opportunity time trapped in those themes. That's why more and more, we think that the industry can change and is evolving from the point of view of how data center develop, deployed. So what are the forces that are driving the data center of the future, the AI factory. We like to think in terms of -- and I'll just ask the industry increasingly so in maximizing tokens per second, per megawatt. The real scarce resource is power. So how do you maximize the power that you have available? How you make sure that all the electrons that you contract or all the electrons that you generate, if you are self-generating, are converted into compute and then from compute into tokens.

We like to talk in terms of overall throughput, in terms of second, tokens per watt efficiency, takes per dollar, how the capital is really returning of an AI factory or data center. And what is the time to first token. That's why you see a number of technologies that are really being developed, not just by Vertiv, but certainly, with a big role of Vertiv to address those elements.

That's why you see higher voltage power architecture as an example. That's why you see more hybrid liquid air, hybrid heat rejection structures, that's why a lot of modularization and convergence. But let's go back to Atlanta, real quick. And think about what happened since then, from an innovation standpoint. Innovation is central. We want to stay ahead of the industry. And we will go through 120 exact number, 120 innovations, be it products, be it controls, be it services, you name them, that we have taken to market in this 18 months. It is in Power Management. It is Power Converters that can best in industry, we believe handle the spiky loads of AI, dynamic loads of AI.

It is about Battery Energy Storage Systems, is a thermal continuing to expand, continuing to expand the portfolio in liquid cooling, in chillers, in air, new products, new launches. It is changing the game in Infrastructure Solutions. If you think about our Vertiv SmartRun at tremendous, tremendous success and change the game in the industry with OneCore. But IT System, expanding services, super important our Waylay acquisition really powered our ability to bring digital and AI into service execution with predictive maintenance. The acquisition of PurgeRite opens a new part of the business, I would say, to us, a new market.

And think about the innovation, some of you might have had a word with Ron already, think about near zero, a way to really do the commissioning of a data center, saving enormous amount, an enormous amount of water, very, very important. And soft with the layers that are system-level Vertiv Unify. I could go on for hours, us as you, but someone will go on for at least a good hour tomorrow. So with that innovation absolutely central to all we do.

And let me go back to my concentric circles. And again, I want to show this as layers of value. If you think -- if anyone thinks that it's enough having the product range, the portfolio and being a leader in each product, and we will be -- we'll continue. We're not being distracted there. That's not enough. It's great. It's absolutely necessary and great, but it's not enough. It's about starting at a layer of system and layer converged infrastructure and the service ring the rules them all. So with that, let's go straight into converged infrastructure. And let's hear directly from Asher Genoot, the CEO of Hut 8 that talks about the relationship, the ability to scale and the innovation and the importance of OneCore.

[Presentation]

Thank you. Thank you, Asher. I think the -- it is about innovation, about thinking about the entire supply chain differently, is changing the paradigm in the industry. Partnership and ability to scale and having a design that is fully optimized from day 1, avoiding all those points of connection that are tricky, especially when they happen on site is absolutely central. So if we think about OneCore, if we think about what you heard here is what we call converged infrastructure, is when the entire infrastructure is optimized.

Now let's not forget about the fact that it is multi-layered, the other slide, product system, converged infrastructure. That's fundamental. We play all the levels. We will never defocused from the day-to-day product by product, leadership, success and technology. But OneCore delivers elements that are absolutely fundamental, especially through the lens of the forces that we described earlier in the presentation. And it is up to 50% faster deployment time. It is really when you move field to factory, you can also increase the quality, the reliability, the speed also in that respect. So it's not only how fast you are in deploying, you think about how faster the commissioning of a very complex system is if it's done in de facto, in a factory.

Think about a reduction of footprint and optimization of tokens per dollar of an infrastructure that is fully designed and optimized as a whole single product. And when that happens, and it's not a big part of the market yet, we believe. But when that happens, then the ladder of value when it comes to building a data center shifts as we shift from field to factory. And clearly, at that stage, a Vertiv converged infrastructure delivers value to our even day 1 value, let alone during the life cycle, value for our customers and enables us to capture a bigger share of the overall spend for data center deployment. But again, you heard it also from Asher. It's not just what happens in when you build the data center and -- but it's also what happens during the life cycle of the data center. What happens before during the data center, building and commissioning and the life cycle is really the domain of services for us.

And Services is definitely one of Vertiv superpowers. And with that, I'll leave it to this video to elaborate further.

[Presentation]

Every phase of the customer journey and we are scaling our services very rapidly and convincingly. But you can't scale. If you do not have the critical mass, if you don't have the pre-existing strength of presence on the territory and if you do not have a proven network and well-working network of academies, training centers as we are. But it's the entire life cycle from the initial phases in consulting, in which we make our know-how available to a customer in helping them to optimize what they are designing, to the implementation phases, commissioning, it is a start-up.

Think about how complex a modern data center is, think about how many pieces need to come together. It's like tuning all the instruments of an orchestra. And that can be very complex and very time consuming, if not done very, very well and very, very professionally. So you have to be first-time-good because any delay means a delay on your returns on the capital that you're putting in the data center.

But then the life cycle of the infrastructure or the data center begin. That's where our customers really see the productivity of their assets. That's where it is the maintenance. It is a data center are becoming larger and larger in its on-site presence. It is where data set optimization and digital start to and life cycle start to blur because the technology creates next predictive technology gives us preventive, our network of operating centers help remotely monitoring. But also during the life cycle of a data center, a lot of things happen.

So there is a lot of readjusting, retuning constantly that instrument. If you think about the cycles of IT that go through a data center or a data center goes through. That requires every time to retune and it's the odd server swap in a liquid cooling, high density that creates possible imbalances that needs to be looked after. So all reasons -- that's the complexity I was talking about, and that's the complexity that makes us and our services so central.

Look at it an example, let's take a look at the thermal chain end-to-end. Of course, we consult, we consult on what the piping should look like. We have experience, a ton of experience there. We help what flows should be, the liquid flow should be, and that comes the commissioning. When you commission a thermal chain, the same is true for the powertrain, for all the parts, but I'm using the thermal chain as an example. You commission you have to make sure that all the CDUs, all the air units, all the chillers or heat rejection units outside are tuned exactly to work with the rest of the system.

And then you have to work on all the fluid management and balancing, extreme cleansiness, and the life cycle begins. And there are data centers of a size as such, that you have to have a permanent crew just to make sure that all the normal maintenance takes place on a regular basis. And that's why, again, if you have your entire thermal chain made of Vertiv equipment, you can deliver certainly some leverage there and then you constantly optimize. It's Vertiv traditional services is absolutely Fluid Management at its best, throughout the entire life cycle.

We create value for the customer. The installed base is growing. The installed base is becoming more complex. That creates a lot of recurrence because that is installed base that we capture. The more complex is the installed base, the higher the capture rates, and that certainly is a circle that we like a lot because we know that we create a lot of value for the customer, and we create a lot of value for our investors. The installed base creation is accelerating, and we're getting ready for that. And we keep expanding our Services capabilities.

Now put everything that, at a very high level, I shared with you in terms of where the technology is going, and that takes us to our current view of the TAM per megawatt, and just a couple of caveats here. One is this is a snapshot in time now. The other is, this is influenced by the mix in the market. It's clear that when we -- that when we talk about converged solution, if this is the spectrum, we are way north of the spectrum, but this is the weighted market that we represent here. And one thing is sure that we believe that going forward, the dynamics in the market, the dynamics in the technologies will drive further TAM expansion.

Now I was talking about our value creation framework, a lot of emphasis on the relationship in the industry. Clearly, relationship like the one with NVIDIA, absolutely central, absolutely central. And I think we help a lot the industry with that relationship with Dell, with Caterpillar, with Generate, it's not an industry where you can operate solo. You have to be a very structural part of the ecosystem, customer collaboration and full spectrum expertise. And when it talks -- when we talk about customer collaboration, I'd like to -- I like you all to hear directly from Chris Crosby, the CEO of Compass Data Center, what the relationship and what the mutual strength of the relationship looks like.

[Presentation]

Well, thank you, Chris and the entire Compass team for their partnership a really profound partnership here. And a partnership, of course, that is grounded on technology, on services on a different mutually continuous change of the way we look at things, how we can make the industry better, how we can change the paradigm. And that is so core for how we look at the business in general. But it's also based on the ability to scale and scaling we have -- and we have been scaling and we have done so in a disciplined but decisive manner. And we will continue to scale. It is about executing on the CapEx investments, is about implementing and leverage our operating system. There is a lot of productivity that has come to fruition. There is a lot more productivity that is there that we can extract from the system, and we will continue to expand with safety, on-time delivery, being focused on the new product development and introduction.

We're talking about the 120 innovations and certainly continue to evolve our AI utilization and manufacturing in general, advanced manufacturing. But again, let us go back to Atlanta, and let's see what has happened in the last 18 months, all the capacity that we have added. And again, the axes are more footprint, more technology and certainly a lot more efficiency, productivity from what we have. These are the accesses, the access that characterize our trajectory here, and it's a lot. It's a lot of also new capacity and expansion in South Carolina. We have 3 infrastructure solution, factory very near one to the other, we'll visit one of them. It is in Ohio. It is in Pennsylvania. It is in Europe. It is in India. It is in Asia, it is in Mexico. The entire range of capacity is being expanded. And this is only in the last 18 months, a lot of focus there and a lot of discipline. And by the way, we're not saying that we are doing things to perfection. We have so much we can improve across the board. This is true for everything. And certainly, there is a lot of leeway in our operational excellence trajectory.

But let's look at our -- go back to our 2030 projections. Certainly, margin expansion, top line growth, margin expansion, strong free cash flow, strength in our balance sheet, cash and an ability to continue to focus also organically and inorganically, also on M&A as a source of strength and of growth. You see -- you saw us in the last 5 years, made 9 acquisitions, certainly, an acceleration in the last -- less than a year with 6, different shapes and forms across all our businesses, Thermal Power, Infrastructure Solutions, IT, Service, I like Service a lot.

As you will hear -- I'm sure you will hear it from Craig. We like Service a lot. But again, it's -- sometimes is adding new pieces of business like net-net new capacity go-to-market, customer access, technology, like we've done with ENI, like we're doing with PurgeRite, like we are -- we have done in many respects with Great Lakes. Sometimes its entering a technology that at a very early stage, but it's the right time, the right technology and then we scale. We scale like we've done with CoolTera and everything liquid cooling, as an example. And that's modus operandi that we like a lot, but not the only one.

So when we think in terms of our playbook, we believe that our playbook is strong and getting stronger, both in terms of acquisition, but also in terms of integration. Our pipeline is robust and it's quite vibrant. The criteria behind our M&A action are pretty much what we've been sharing with you with for quite some time. It's either technology differentiation. It's either a market access. Sometimes it can be capacity. Sometimes, it can be adjacencies, the whole lot. What is important is that we create or have a potential to create above-market growth rate, gross margin accretion and certainly reinforce our value creation equation that then you have seen in the 5-year projection.

So feeling stronger and stronger in this respect. All what I have shared with you is really giving us the confidence in delivering on our long-term financial projections with above-market organic growth between 20% and 22%, an ambition, a margin ambition of 27-plus percent strong cash flow strong ability to deploy capital and certainly staying within our debt leverage framework and continue to deliver for our customers and for our investors.

And with that, thank you for your attention, 10-minute break, and then we're back with Craig. Thank you very much.

[Break]

All right. Welcome back everybody. Thank you. Joining us next on stage is Vertiv's CFO, Craig Chamberlin.

So welcome back, and -- thanks for the applause, and thanks for being here. We'll take a little bit of time to walk through the financial slides, and then I'll call up Gio and later will do some questions. So hopefully, I can get through this, so we can get back to the -- I know the money part, you guys want to do is ask us some questions. So we'll get through with that, when -- Gio has been talking about it and we've been thinking about it, we have 5 key areas for value creation. And Gio hit on a lot of them, but I just wanted to reiterate them.

The strong execution drives our financial performance. And we have a track record around this. You saw it from '22 up through '25, and then we were going to continue to be able to do that through '26 through 2030. And that really drives the meaningful upside that we see in the future here. Above-market organic growth, you see that whenever we're talking about, we see the market growing at 16% to 18%. We believe with our technology in our market, we'll be able to get that to 20% to 22%.

Adjusted operating margin expansion, I'll go into this in detail, but really, what that is going from the 23.3% to the 27%, that margin expansion we see along the time horizon, we really believe we can drive that. Again, I'll double-click that as we go through the individual slides.

The adjusted free cash flow conversion, Gio talked about it, and I'll continue to hit on it. The profit engine that drives the cash, but not just the profit engine that drives the cash, we like to also really focus on the operating mechanisms that drive the cash, whether that be operating cash flow through inventory and through payables all the way down through the customer cash cycle, driving milestone billing payments, so we stay ahead of cash and also on the side, just making sure we get the right collection status so we can continue the cash to flow. And that all encompasses itself with this flexible capital deployment.

We really want to be able to invest in the business going forward, whether it's in technology in Scott's space, whether it's an M&A to help us continue to grow, whether it's in all the capacity that you saw populate up through here. So we can continue to pick up the demand that our customers are giving us into our services business that you heard about with Chris and PurgeRite and all the great things we're doing there. So all of that flexible capital deployment gives us the money to fund the business and the growth going forward.

I get this question a lot, so I thought I would hit on it here. In your 6 months, what are you going to focus on, 6 months going forward, where do you really think that you want to put your fingerprints on the business. And I kind of laid it out in three different areas: one, strength in execution. We have the ability to lever as we go and grow on our fixed cost, one, we want to make sure that, that delivers margin expansion as we deliver out and that we continue to be able to be on time for our customers. Also within that is productivity gains, how do we make sure our factories are flowing. So we get that variable cost leverage, how we make sure that we're getting the best out of our material cost leverage. How are we ensuring that our shops are lean and they're automated. So we'll go into a little bit more on that, too, as we go through the pitch.

Growth services, I get this question a lot, and we talk about it a lot. You heard Chris Crosby up here. Services is a main portion for what our customers look to us to be able to do. And we have a massive installed base. We want to be able to mine that installed base. And that will help future growth for us, and it's a big future growth engine for us.

Recurring revenue. A lot of people think of that as just parts and break/fix. But as you heard, when Chris was talking about it, next predict, optimization, all the other underlying services businesses, the consulting, all of that is a flywheel. It's not just parts. It's not just fix. It's also optimization, it's also consulting. So all that creates a flywheel back to then you being the customer choice or the supplier of choice whenever they're trying to solve new problems on the OE side. So we love that flywheel.

And then generating cash. Cash, cash, cash really is the lifeblood of our business. Improving profitability, we talked about that. The first two will do that. Operating working capital, how do we stay focused, whenever we're delivering on making sure we have a very, very good operating cash cycle, meaning lean on inventory, still being able to deliver for our customers, but then having really good partnerships with our suppliers so that we have that flywheel going and we can generate cash out of that operations.

And then commercial, staying ahead of the cycle. We like our milestone billing payments. We like to be able to collect cash on time and ensuring that we stay ahead of the cash so that we have ample capital to be able to deploy. Gio hit a little bit on this, but the growth rates that we expect to see 20% to 22%, long-term organic growth is really fueled by our market expansions and technology leadership. We expect to stay price/cost positive through the cycle.

Of course, there's going to be inflation, and we expect to be able to price within that and get a little bit of margin expansion on that, and we'll show you what that looks like in a walk here in a second. And then the underlying portion of this also is we do expect a lot of pickup out of Services. We have Services in here at 20%-plus throughout the period. And it is. It's one of our superpowers, you heard Chris talk about it. You heard Gio talk about it. It's something I bring up all the time whenever we have conversations that either with analysts or on our earnings, this is the area where we have to continue to be strong when we go into the future.

I talked about our 27% adjusted operating margin leverage. And I broke it down into three different points here. Operating leverage, and we talked a little bit about that already, we maintain our strong leverage as we're able to produce and deliver for our customers. We do want to continue to invest. So that does take really good operations. If you're going to invest in technology and services and grow your underlying investment into the business through capacity, you've got to have productivity and you got to have flow of your business to make sure you can fund that and get the margin expansion on the leverage.

You'll see two points through that through the period that we expect to be able to get on volume while also doing those investments. Productivity, you've heard a lot about VOS, and I'll break it down and make it real for you here in another page. We'll talk about manufacturing productivity, and we'll also talk about material productivity. And I'll give you specific examples of how those will flow through, and why we're targeting where we're targeting to offset things like inflation and unexpected inefficiencies.

In the commercial execution, we do expect positive price cost through the cycle. We expect to be able to price for our technology. We also expect there to be inflation. We expect there to be unknowns. So we have it a little bit higher in here on a gross basis, but we've netted this down. We want to be prudent in the way that we have the outlook here. But those are our three major factors when you think of the walk from the 23.3% up to the 27%.

I said, I'd break it down a little bit more for you on the operational side. And I think of it in terms of two different buckets when I'm thinking of operational productivity. There's the manufacturing side, the manufacturing and labor productivity, which if you were to look out into 2030 for us would be about a $2.5 billion bucket of cost. And through us driving lean manufacturing activities through VOS, robotics, automation through our plants as we invest, using things in best cost country, leveraging our footprint efficiency, we believe that where we are targeting about upwards of 5% of productivity on that. Now that's gross productivity, and we're doing that to ensure that we can absorb inflation in labor, we can absorb inefficiencies in factories, we can absorb all the unknowns.

But as that drops through, it's a portion of that 1.5% that drops through. And we specifically put a big target out there. And I'm one of the major issues of driving this so that we can ensure that we do expand those margins. The other side of that coin is -- the material cost productivity, and this is everything we buy. And again, if you look out to 2030, it's a $10 billion bogey out there of cost. And what do you want to do to drive that cost out.

So you volume by leverage, right? You have all these suppliers that you're buying things off of how do you get leverage on that and get a couple points of productivity, make versus buy? There are things that we should be making, there's things that we should be buying. Where do we get the best cost out, should cost analysis. What should this cost me when I buy it from a supplier and go into them and getting them to bring their costs down for us.

And the supplier cost reduction ideas, enforcing this with your suppliers that if they want to be at you long term, they're going to bring to you ideas of how to make their individual products cheaper or for us to manufacture and design it cheaper. That $10 billion opportunity we have it again in here at a gross level of 2.5% productivity over the period, and that, again, would offset the inflation that we'd feel and it would help drop down through to that 1.5 points of expansion you see when we're talking to you about productivity.

Cash generation. Again, we're aiming in the period here to be between 95% and 100% conversion. A lot of that comes through on the profitability side. But the areas that we can control even further than that are our trade working capitals, right?

Operations. I talked about inventory turns, leveraging our flow-through and our manufacturing prowess to drive inventory at the right level, and also just ensuring that we have great partnerships with our suppliers so that we can drive the right payment terms. And then commercial, I talked about setting up our milestones, getting the down payment, staying on the positive side of the cash curve and collecting everything that's due to us.

CapEx and we've hit on it a little bit, this framework. We've always talked about a 2% to 3% investment in CapEx ramping to 3% and 4% this year. This framework has it in a 3% to 4%. Now that would be a little bit more closer to 4% as we ramp in these first couple of years, a little bit more down towards 3% in the out years. But it does support that 20% to 22% growth that we've seen. It also helps us do things like the technology advancements that you'll see from Scott.

It also helps us drive the productivity that I talked about on the other page. How do we put in things that are lean lines. How do we put in robotics and automation, all of that funds the underlying growth here. So we have it at a 3% to 4% net number over the course of the period.

As Gio mentioned, we are targeting 1x to 2x on leverage. And again, that's a target, it's a framework. We did the refi earlier this year and structured out our debt ladder and went out to 2026 with that, and we really like where that sits today. Again, the targeted net leverage of 1x to 2x, I would think of that as a framework. We're comfortably operating underneath that. We're also comfortably operating above that if and when there would be an opportunity to go out and do the right acquisition. Now we'd always want to stay back to the 1x to 2x, and get back to the 1x to 2x and that would be where we'd operate at, but it does have some flexibility in there. When you look at that, I just wanted to break it down to what does that mean from a cash availability for us.

So the $20 billion you see is the projected available cash that we would generate across the period. If you levered us at 1.5x, you would have $28 billion. Look on the right-hand side of the usage of cash, we have dividends and share repurchases in here as an estimated $4 billion. So that leaves you with a pot of $24 billion to go and utilize in terms of growing the business.

If you looked at a framework around how would you use that in an M&A space. We've spent about $3 billion to $4 billion over the last 4 years on acquisitions. So a typical run rate of our bolt-ons would be somewhere between $750 million to $1 billion. And that's probably a framework that you'd see us continue to think about as we did bolt-ons. The other side of this would be, if there was a strategic acquisition that we wanted to go after and had the right value for us, we have the leverage and we have the powder to be able to go do that. So thinking of the framework here is we will be doing some bolt-ons. We know that that's something that's in our framework, but we also have the opportunity to do things that would be more strategic as we go forward.

And then I'll just hit back on the points that Gio hammered home earlier and that we would think of is our total framework. Again, the 5-year CAGR of 20% to 22%, really underlying that is our strong technology, our strong market, our strong services portfolio outpacing the market by 4 percentage points. We feel very strong about that. Operating margin. I went through all the different levers, growing that 3.5 basis points over the period. Adjusted free cash flow, 95% to 100% throwing off lots of cash and then the flexible cash deployment. We have in here about $4 billion of use, $24 billion of openness, and that gives us a lot of flexibility when we go think of bolt-on acquisitions and also the potential to do other things, whether it be transformative M&A or think about other additional returns to shareholders.

That's what I had for the section. I think I'll call up Lynne and Gio.

All right. We are now going to open it up for Q&A, and we have a lot of time for Q&A. We do have a full house, so I imagine a lot of hands will go up quickly. [Operator Instructions]. The other thing, please remember, Scott Armul, our Chief Product and Technology Officer, has a technology presentation tomorrow, and we'll have Q&A after that as well. So technology-based questions, you may want to save for tomorrow's Q&A session.

So with that, we're going to have a lot of hands. We're going to have two mic runners. I would ask, wait until you get the mic handed to you before you ask a question, and we'll just go up and down the aisles. Julian?

Julian Mitchell at Barclays. Maybe just for Gio really, the dollar per megawatt number that you gave, so it's about $3.5 million at the midpoint, and that's today, as I understand it. Maybe help us understand kind of how does that split between, say, power and cooling perhaps? And when you're thinking about the outlook, what kind of growth should we expect in dollars per megawatt opportunity. When you're thinking about broad brush changes like 800-volt DC or liquid cooling, that type of thing?

Yes. We will not -- we are not -- Julian, just make sure, question around what is the trajectory, and what is the mix, if you will, in terms of TAM per megawatt. Trajectory is favorable. We're not more specific than that deliberately because a lot of things can happen. But if you really think about increasing density from a cooling standpoint, that increased density, and I just want to make sure, I don't steal Scott's thunder, that technology becomes more complex, more dense everything from service to the liquid cooling becomes more complex. If you think about the trajectory of how heat rejection will happen as the water temperatures will change, and I don't even dare going there because that would be painful, if I do it, it's fantastic when Scott does that.

But you see that even the -- everything that is heat rejection will be more complex. You'd look at the power part of the portfolio. Think about all the on-site power generation, the consequences, downstream from that power to the chip. Think about the AI loads and the dynamics there and how complex that powertrain is regardless if it is an AC power and medium voltage AC power or a full end-to-end DC power, think about the convergence that I was talking about, but even simpler level kind of a more partial integration, all elements that add.

So we're not specific, there are a lot of dynamics. It's not the technology, but also the mix of technologies as the converged part, the OneCore data centers, SmartRun data center as a product becomes a larger part of the market of the mix than the tamper megawatt will expand.

Now when it comes to the mix of that TAM, I think that's an accurate good way to take a snapshot to that is really, if you look at the mix that we have today. Now as I said, and I have a couple of questions in that mix, the thing that is a little bit over underrepresented is the infrastructure solution. When we talk about convergence, when we talk about SmartRun, when we talk about OneCore, that part is within Infrastructure Solutions. But that, what we capture in that slice of the semi donut, if you will, that slide is semi-donut, don't include everything power services, thermal, that goes actually inside. It's just to clearly keep things distinct. Otherwise, we would underrepresent our power thermal and the other parts of the business.

And just one more on just capital deployment. You said the pace of acquisitions has picked up. Some of your peers, their acquisition side has picked up as well. Kind of what's the probability of you doing a larger acquisition? Maybe help us understand any.

Yes. I will -- will talk in terms of -- I go back to what we said, our pipeline is vibrant. We feel confident in our ability to execute everything M&A from the acquisition itself to the integration. And certainly, as Craig explained, we have the wherewithal. And with that in mind, let's see what the future brings.

Just a question on bottlenecks. I think, Craig, you sort of addressed as one of your top priorities. As you get geared up for 800-volt, how should we think about potential bottlenecks? And specifically, can you get enough semiconductors for 800-volt architecture, can you get super capacitors? And then I would imagine commissioning would also become much more complex. How would you deal with potential labor bottlenecks?

Do you want to go?

I mean I think we have to wet the supply chain. We have to understand where the supply chain sits today. I think we've been partnering with our -- when we went through the designs with Scott and the team, I think we're starting to look at what does it take to deploy at that level and understanding what we need to be able to pull in to deliver the product. So I think we go through a rigorous process of doing that design that development and understanding what suppliers that we'd be able to have and when we'll be able to get that product and be able to deliver on that product. So I think that, that is part of the stage gates that we would go through before we deliver the end solution and Scott will walk you through it, but there's several different ways that you would deploy that 800-volt.

And depending on which way you deploy those, you would have some of those architectures or some of those pieces of outputs that you'd have and some of those you may have in other different solutions. So I think what we would be thinking of is not just the holistic 800-volt, but once and the way it's going to be deployed so that we can ensure that with the customer, we have all the right products, we have the right design, we have the right production schedule because I think it's going to come in different ways and shapes and forms. I don't know, Gio if you had to...

Yes. A couple of points. Thank you. I will add to the very tail of your question about commissioning and services capability. We feel very good about that not only because of presence and a very well trained and have the ability to continue to train, but because we also have today a very strong very strong, especially in North America where it all will begin. A very strong commissioning and services team that is doing medium voltage today, and it's a large organization that is ready to be deployed. Again, another aspect is to keep in mind, Andrew, is we should not think about something snaps and all of a sudden, from the traditional, Scott will elaborate on that. From the traditional infrastructure, -- boom new infrastructure. Remember when air cooling was dead, 3 years ago? It's not.

So it is, that transition will happen. That transition will happen at IT stack, that transition will happen as one of the possible configurations, it will be gradual. And we feel pretty good about our ability and the relationship with the suppliers to drive them with us.

Just a question on maybe just integrated solutions OneCore broadly and just, I guess, maybe a multipart question. First, at this point, maybe how broadly are you attempting to sell that into the market? Do you have the ability to deploy it at scale yourself if the customer interest is there.

And then I'm also just curious in terms of getting the customer to take more of what you offer, how you bridge across that. I think, for example, I think Compass historically has only been a thermal customer. I think maybe they still are -- like how do you get them to as much as they seem to love you, right, get them to buy into the powertrain and other related products?

Well, that is 2 aspects to that, Jeff. Thank you for the question. Let's go to the first part of the question is OneCore, how much can that be really the main product. I go back to my multiple layers. We don't think that will be the only product. It's another layer of value. Not all customers will have that type of business model, some will have. And for those that really value the engineering light their end, all things that very established data center players may have just as their legacy, their way to do business, some others don't.

And so different type of customers will have different type of needs, and some needs will be addressed exactly by OneCore. And then the speed that is common to all. So we expect a gradual pickup in terms of adoption. But there are other elements in the converged story that instead are just ubiquitous in terms across the entire spectrum. Again, SmartRun is a way to deploy and fit out wide space that reduces months into weeks, single digit and single digit. So that is really gaining traction pretty much across the board. But then again, just like what we were saying, it's never binary. So you see a lot of adoption of infrastructure solutions of integration across the spectrum of the construction philosophy, design philosophy. Power modules and prefabricated powertrains are becoming more and more frequent.

So think about the spectrum. And when it comes to capacity, we have pretty much a global footprint when it comes to infrastructure solutions and kind of the tip of the spear being OneCore, and that has been expanded pretty much globally. And you will see 1 of the 3 factories we have in South Carolina here for that. So we are building capacity as we see the demand coming.

A question on mix. Just in broad strokes, how think about mix playing into the margin expansion walk that you provided. You clearly identified services acceleration, converged infrastructure. I'm sure we're going to hear more from Scott tomorrow. But maybe you could talk a little bit about expected margin profile on some of the higher growth areas that you see?

I mean the services does have a higher margin, but just the way that it would mix, it wouldn't overly mix in terms of out years to be, I'd say, significant in terms of adding to the margin walk. So it stays right about the same path that the OE side is growing as well. So you don't really see a marginally different mix whenever you're going up through the path. It is growing and it's growing faster than it is today, but it's not in our model overtaking it significantly where you'd see a margin expansion on that. When you talked about the different products, and we mentioned this a few times on the converged infrastructure.

The converged infrastructure or the OneCore and SmartRun, all the different pieces carry their own margin, right? And so they have -- if there's different levels of those and they come together, they don't really dilute or accrete based on what we'd sell them externally. The glue or what you'd say, the other portion of the converged infrastructure, we get it about what we'd say our normal margin rate is. So we kind of hold that at our normal margin rate. So that in and of itself doesn't dilute us at all. If anything, it slightly accretes us.

So I want to stick on service. I also have a question around service. Have you guys seen a measurable increase in attachment rates over the past several years? What is the expectation for that trajectory of service attachment rates in the 5-year plan? And I guess what is the true recurring revenue opportunity if you had to size it as, I don't know, like a percentage of revenue or versus what that is today?

Let me take a stab at it. Thank you, Nicole. So we were not specific about the attach rate as we have mentioned in some occasions, but we are explicit about the fact that we really like the direction in which our installed base is going in terms of complexity. Complexity and attach rate are strongly correlated, strongly correlated, and we have seen that happen. So in general, yes, our attach rates are strengthening. When it comes to the longer term, where that exactly is going, I think, clearly, we have our plans, we have our targets, we have our actions, but it's not something that we would disclose.

When it comes to the recurrent part of our Services business, it was somewhere in the slide, I didn't dwell on it, but in the important statement, there is a 25%, 75% in our Services mix. That 75% is the life cycle. Broadly speaking, the life cycle, the recurrence of that life cycle is certainly very, very high.

And I would say there's other portions of our portfolio that are recurring revenue. You could call them recurring revenue. We've never put a number on it. But when you have a long-term agreement with a customer that buys the same product over and over and over again, we would think of that as a recurring revenue if they had a contract with us. We've never put our arms around and stated that, that is a number that we have published, but we believe that, that relationship that we built with the customer in terms of the buy-through and the flow is something that we would think of as a recurring revenue.

Talk a little bit about digital. I mean how much of it is table stakes versus kind of something you actually get paid for? And can you put your digital on other people's stuff? Just a little color there.

I mean, I think, again, I would start with the fact that it's a little bit of both. It's a little bit of table stakes and It's a little bit of something you can get paid for depending on how you deploy it in your customer. I always look at the digital portfolio, as you talked about -- you saw Chris up here. He said I'm not even thinking of buying a piece of equipment without Next Predict. That's where you want it. You want it to be at a point where it is not -- it becomes the stickiness. It becomes the reason why you come to Vertiv. It becomes the reason why you want to have an attachment and you want to re-up your service contract because you are assured of performance, you're assured of serviceability, you're assured of a customer that's going to be there and help you build your optimization plan behind that.

So in the way that I say it's table stakes, it's table stakes in getting the customer to, I'd say, get with you in a relationship environment. And then above and beyond that is where you, I think, add on to the services life cycle on the back end that's going to grow the optimization portion of it, that's going to grow, what I'd say, like the recurring revenue portion of it. And then also the fix before fail, right? We would think the condition-based maintenance on the back of that. So really helping your customers solve by them never coming down, optimizing their equipment, that's where you're kind of sharing the mutual benefit. So I don't know if you think of it any differently.

No, I don't think any different than that. And yes, we have a price tag, if you will, to the capability of the Next Predict example. But it needs to be viewed as more holistic. It's like the preference is the total value that we deliver to the customer. So the answer is really both, can't just isolate it on and off. It's -- we believe that what we offer is pretty advanced, and it is making a further difference to our delivery of service to the reason why people choose Vertiv. And it's not just the individual product, it could be the entire system and the ability to optimize and start to derive behavior at system level and infer from this system level if there is optimization or even risk that you don't just look at the individual piece of a powertrain thermal chain, but you look at it holistically.

We were talking about optimizing the use of every electron. And during the life cycle of the system, a lot of electrons can start to go to waste simply because the system is not fine-tuned like it's fine tuned day 1, if you will. And that's what a digital Next Predict and optimization drive. There was another angle to your question, and it's the third party. We like to service our technology. That's the primary reason. Our technology from a service and monitoring standpoint is quite potent. But in this moment, we stay very much focused on our installed base, but it's very potent.

I know you don't want to talk about take rates, but I have to ask, what kind of penetration do you have with Next Predict?

We launched it in January this year. So we are seeing good traction with Next Predict. But it's still early stage. But clearly, good traction, especially everything new installed base.

Thank you for doing the investor event. You talked about capital allocation. I think even after accounting for tuck-in M&A, dividends and buyback, there'd be about $20 billion left that's available for deployment. You said you could consider transformative M&A. Can you share a bit more on criteria larger acquisitions might need to meet in order for them to be something that Vertiv may execute on?

Yes. I mean I think we look at it in terms of value creation for the company and that's where it starts. And that's even the bolt-on M&As. We will go in and look at all different sizes and shapes and say, do we really believe that there's true value added either on the technology side, on the market side, on the growth side, that we wouldn't be able to internally fund and be able to grow. I mean when you think of it investing in Scott and investing in capacity, I say Scott, but technology, he's the [ nomenclature ] of technology firm. But investing in those spaces, the returns are faster and the returns can be higher. But if I can get there through an M&A faster or they can get me there in the neighborhood that would be a higher return, by all means, it's something we're going to consider and take into the portfolio and look. I mean we're looking for value. And that's kind of the baseline understanding of it.

We look at value in terms of what do they have that we may not be able to produce. And if that's something we need to get today and it's the speed at which we can get to the market faster, of course, it's something that we want to do. And why we have done a lot of the smaller ones as we see true value in those in terms of scalability. And the scalability of those and all the ones that we have done on that page, you can see the true scale on them and what they've created in terms of value for all the shareholders. So it's really a delicate balance. There's not like a thou must be this or thou must be that. It is a value creation equation that we put down and we look at and we evaluate in a couple of different ways.

Yes, the other point, we're talking about transformation. We got to be careful with the way we characterize that. We like Vertiv as it is. We like the direction in which we operate in. We like the space. So it is size-wise can be kind of a [ departure ] if and when a good and the right opportunity presents itself. We will not be timid provided that we see the full value creation. So no transformation, but continued evolution and continue to deliver on our promise to be absolutely leading the space.

Gio, just like 1.5 years ago, I think you said you want to be prudent with your guide. But if I look versus 1.5 years ago, like maybe just frame the headwinds that you talk about now versus then? Are things better or worse, would you say in sort of the global supply chain? Like how do you think about that when you came out with your guide for the 5-year CAGR?

Well, for example, a year ago, 1.5 years ago, the question mark about power and power availability, though we were looking already in terms of there's not been a ceiling, there's been a pacing item, were not as crisp and clear like they are today. Now what we started to see happening is definitely happening at scale, so especially in the American market, a lot of self-generation or hybrid ways of powering. So I think almost verbatim, I was saying, a problem, we see a lot of capital. We see a lot of ingenuity being deployed.

Now we see that this ingenuity is starting to hit road in terms of power being made available. A big problem right now is capacity in field for traditional construction. That is a big constraint. But then, yes, supply chain. Supply chain is never easy. I mean growing at the speed the industry is growing is no walk in the park. So it is continuously working the supply chain. Do you think that there is a plateau somewhere that we hit or ceiling? No. We would have represented that, of course, in our trajectory. But it doesn't mean that, okay, we go out and we find all the components, be it that kind of our power electronics, as the question Andrew was specifically asking. But in general, that requires a lot of work and a lot of partnership with suppliers. I talked about a partnership with the ecosystem, with our customers, but there is a lot of partnership with the supplier. And there will be hiccups just -- but bumps, various bumps in the road, but the trajectory is a trajectory. I really believe in that trajectory.

Maybe just a similar question on the waterfall margin chart versus 1.5 years ago, like I look commercial execution a little lower, productivity a little higher. Like I assume pricing power is not changing. I mean you guys tell me, I would assume it might even be getting better. So it's really just about inflation and then you kind of offset that with productivity.

Yes. We say in the charts that it's a prudent guide. And it's a prudent guide because we do like our position in the market and being able to commercially execute. We also know it's an inflationary environment and tariffs change on us as we've seen even throughout as early as this year. And our reaction to that is always something we want to make sure that we stay ahead of.

So I would say it's a guide that we've looked at prudently, and we understand what it means, and we understand what we're able to do from a pricing perspective. We also know that we really want to drive productivity to ensure that if something does happen in the pricing environment, we have the margin expansion that we expect.

I'd be interested to understand some of the differences between training and inference data centers, particularly around your opportunity, how they compare between the 2 and how some of your different technologies around modular and OneCore play into that.

Very often is hard to separate and know exactly if the infrastructure that we provide or other provide will be utilized for training or for inference. Now there are cases in which there is an absolutely clear mandate for training. In reality, when you build an infrastructure, you build an infrastructure probably with a life cycle of 15, 20 years. It's hard to know now that you will need that for training for 20 years.

So what we are seeing now probably already for a couple of years is a tendency to build fungible infrastructure in that respect. That can do both. But when we think in terms of an inference infrastructure, then it's an infrastructure that will have degrees of redundancy in general higher than training, if you will, in many respects, a richer infrastructure. And hence, a little bit more on the -- yes, the right side of the TAM spectrum that I was mentioning.

Some people may be tempted to associate inference to more edge small data centers, not necessarily the case. That will drive some, but edge happens a lot in large, very -- or very, very large data centers. So hard to distinguish. Fungibility is central. We like inference in terms of what it means for Vertiv. When it comes to the portfolio, I would say that is less about inference or training, it's more about the size, the type of deployment.

Clearly, if and when and as we see some more edge data centers, you shouldn't think about edge data center as a small data center. You're probably talking about 50, 100, 150 megawatts, so very large by all means. But now we are custom to think in terms of gigawatts like gigawatts. So -- but that type of infrastructure is very -- everything OneCore and fully, let's say, integrated converged infrastructure. You will see it increments of 25 to 50 megawatts, as Scott will explain today that is well suited to that type of applications, but that can scale much bigger. So again, we like the direction in which the industry is heading.

Deane Dray with RBC. And I've honestly lost count of how many times services has been focused today and the superpowers and so forth. But it certainly begs the question about the challenges in scaling services. It's obviously labor-intensive. I've seen references to the number of training academies that you have. There was -- you called out 320 service centers. What are the challenges today in building out services, both from the labor side but also on your systems to be able to enhance productivity?

I would say that scale itself is a challenge for all, but we've been pretty successful in delivering the growth so far that you've seen in the numbers. I don't remember exactly, but probably were 4,600 or thereabout 18 months ago. So the growth that we are delivering in terms of headcount in the field is big. But technology matters. Technology matters a lot. If you think about, for example, we're adopting AI for optimization of our field schedule and everything life cycle deployment, and that is generating net availability increase for our engineers. So there is a recouping capacity, latent capacity, thanks to technology.

We inject a lot of technologies in the tools that we give our engineers to make sure that they have the right technical information at the tip of their finger when they are operating. And that is, again, enhancing the ability to rapidly bring people up to speed. So it's a combination of things. But again, I think an interesting story, and you heard it from [ Chris Croby ] said, hey, PurgeRite, PurgeRite is a story of now scaling it at national level in the U.S., it is exactly leveraging the various already existing and quite mature services locations that we have presence, that offices that we have across the country.

So the footprint that we have today is one that is very let's say, conducive to growth. So if we didn't have it, it would not just be about the academies or training people or having the right technology. If you don't have the local supervisors, the local managers, et cetera, it's very difficult to scale. Having said that, you have to find the right people, and you have to train them from the beginning. We're accelerating that, never easy. I think we're doing a good job there.

I think it also -- and just to add on, I think it also comes back to the flywheel when you think of optimization and digitization of Next Predict. What that does to help you scale is when you can do condition-based maintenance, you don't have to have somebody on call all the time ready to go. You do have to have some people. But if you know that you're going to be doing regular running maintenance, you know that you're going to be able to be having certain checks and walks and it does that all for you in the digital background, it simplifies the way that you go to service market and the way that you think about servicing the data center.

So I think that underlying and underpinning portion is being a lot discounted when you think of what you have to do to go deploy. When you get that in a data center and it understands and it can read how the products are actually -- or how the equipment is actually operating, and you can fluctuate it up, fluctuate it down, you keep the heats in the right levels, you keep the fluids in the right levels, you can take out a lot of what I would call the running maintenance of it and potentially stop failures from happening. And all of that helps you scale. It also helps your customer be more efficient. It also helps you unlock different ways to create revenue.

All right. Great presentation. Two questions from me. First is on the point regarding the TAM, the $75 billion. If I put it all together in the last 4 quarters, we saw 25 gigawatts leased in the United States alone. If I take your $3 million per megawatt, obviously, 3, 25, I'm no math guy, but that gets me to $75 billion. That assumes that no data center is leased international or nothing is self-built. From your perspective, is this just being conservative? Or is there something that you're trying to imply in the TAM math? That's the first question.

And then the second one, as you think about the re-rating of data center demand, we saw the unlock using natural gas on site. Lead times are extending there. Have you thought about extending either down further into the data center or up to the power generation lane just given how much demand there is for on-site gen? Those are my two questions.

Sure. Well, we certainly can go more into the details of the market model. We think that, that $75 billion, given, again, our current portfolio plus the extension because we're including that extension and considering the mix -- and again, it's the entire range. It's not exactly the 3.5 point. But if you think about the entire range, we are not too far away.

And yes, clearly, the U.S. and the North America is by far the biggest market. You probably -- your assessment of total gigawatt actually installed is a little bit higher than us. We are conservative. We are prudent in many respects. And if it will be more, as you say, the more, the happier. So -- and absolutely, we'll not shy away from that.

When it comes to expansion, we certainly like everything that is power management. We're not in the power generation. We're not in the power generation. We partner a lot with the power generation people. And that partnership, you saw Caterpillar in one of the charts, is an important partnership for us.

And those partnerships of course, influence a lot, the way we design. We have reference infrastructure -- sorry, reference designs to make sure that the infrastructure can be rapidly deployed around that. But when it comes going kind of absolutely owning everything in the data center space downstream from power generation or downstream from the, let's say, grid, well, that's in our space, and we'll continue to be obsessive about owning that space.

And I think when you think of power generation, it's also a different market than what we think of in terms of a pure play for a data center. Power generation does drive power into a data center, but it does a lot of other things as well, and it's a different market and it's a different technology. And when I say even just a different industry in the way you go about it, thinking of once that power gets past the point where it's going to a data center, we love that because we know everything about that. We know all the infrastructure, the physics around that. Power generation for that is a small portion of what power generation does for the whole world. So it's a bit of a different market when you think of it that way. And you're kind of, I would say, in that world, really mixing 2 spaces for us.

I just had a question on the converged infrastructure concept. So I'm wondering if that moves the industry more towards like standard designs and away from customization? Or am I just thinking about that the wrong way? And I guess, in the concept of every data center being a snowflake and you guys addressing inefficiencies at the seams, was that something over time that maybe suppliers benefited from in some way?

Sorry, can you say again, the second part?

So just the idea of every data center being a snowflake and this helping to address inefficiencies at the seams you talked about. I'm just wondering if that over time, maybe suppliers benefited from those inefficiencies in a way?

Sure. So let me -- I think that requires a little bit of a double click, and the complexity of the industry behind different players in the industry have different business models. So if you take the big players, be them hyperscalers in self-built or the large colocators, it's not true that each data center is a snowflake. They are very strong professional operators that have cycles of data center [ products ] that are being deployed. These are people that have know-how, expertise, engineering and that optimize to their exact business. Now that part is increasingly being prefabricated, made in factory. So that's a trend that is common to all.

But then there is a part of the industry where -- and that's particularly true for the AI factory that, let's say, is ideally optimized on a certain type of silicon. Well, that optimization and that standardization can be done regardless of who then the deployer and the owner will be. That's when the standardization comes to play, then where the, let's say, hyper optimization of the data center is happening.

And yes, we're going back to the stack that I was -- value stack that I was showing. That's when the design around a certain type of silicon will be optimized, and hence, deployed at scale and at speed across a number of different customers and players. There will always be the nuances of the individual customer and their business. But when I look at the data center space, I see kind of a multifaceted space where increasing, let's say, convergence and increasing fabrication in factory manufacturing is going to increase.

Different players will have different business models, will have different type of needs. Everyone in their own way is driving towards the elimination of snowflakes. Snowflakes are costly, and snowflakes are a lot of waste. Will other players benefit from this standardization, if you will, or optimization, extreme optimization? Possibly, and that's okay. It's not about being unique. It's about being ahead. It's about being ahead. Sometimes, not being alone is an advantage.

Maybe a quick follow-up for Craig. On the investments, did you guys talk about the investments that you're targeting annually? I think last Investor Day, you talked about a number.

In terms of M&A or in terms of...

In the bridge for fixed investments for capacity, for R&D, et cetera.

Well, for -- I'd say for our CapEx, we have a 3% to 4% item on that for the period. So every year, 3% to 4%, probably heavier, closer to 4% in the front of it. Back end, closer to probably 3%. If you're thinking of R&D, it probably sits right around 4% from a revenue perspective is where we like to be on R&D.

Okay. So I have two questions. So for the first question, regarding the operating margin. So 27%, are we also considering the next architecture, for example, [ Freemans ], et cetera, with more -- higher density? Is this any correlation from this with the operating margin? So this is the first question.

And second question is about -- we do have more than $20 billion capital that might be able to deploy for the M&A. If we are focusing on the future M&A, are we focusing on the upcoming technologies like 800-volt DC SST? Or we can just simply invest on some of the company that might be developing the new technology for the company? Are we necessarily 100% on this company? Yes.

And correct me if I'm wrong, but I think your first question was around mix and how mix would potentially impact the operating margin. Is that correct on just by product line mix? That's what I understood it to be.

Yes.

When we think of the actual framework and the growth of the framework, we don't necessarily see a massive mix perspective hitting us in terms of growth. We would say everything kind of moves together, and we don't imply that there's going to be a mix up or a mix down from a margin perspective.

Now we do expect services to grow close to the 20% CAGR, but we also expect OE to grow in that same kind of framework as well. So we're not really partaking or saying that mix is going to drive any of that margin rate growth. We would rather -- if that happened, it would be a good thing. And if it didn't, we would offset it is the way we would think about it. We really want operational items that are going to drive that.

And so on your second question on the $20 billion of capital deployment that we potentially have available to us. When we're looking at different sets of assets that we want to go purchase -- and I can also ask Gio to -- we come back to that value equation. We like the portfolio where it is today. We like the expansiveness nature. You saw all the different items that we have to offer and all the pieces of equipment that we were able to bring to market.

So it truly is can we invest internally and get something to the market that we believe is growable and we believe is scalable? Or do we want to go get that asset externally and grow it as fast as we can? And that's why you'll see us invest in things as small as a couple of million dollars up to $1 billion because all of those have different levels of what we think is value return for us. And that continues to go through the entire state of if there's something that's even bigger than $1 billion, we would look at that as well in the same lens.

So it's not about we need a particular technology today. It's about where in the portfolio do we see value that we know we could go get and that we could grow and that we could scale and would add to our overall value return. I don't really think we circle an area and say, absolutely have to go buy something here. We'll circle an area and say, can we develop a technology for that? Should we go inorganic for that? Should we think about it's not a space that we want to play in? We do that, for sure. But it's not a this has to be inorganic right now.

Toby Okwara from Morgan Stanley. I wanted to ask some more about the content opportunity and how -- you mentioned that Vertiv's portfolio content is higher than that 3.5 range. Could you give a sense of how it differs from like the industry average? And then is there any difference with the current AC architecture and how that content would be in the DC architecture for data center?

Yes. I think it's hard to talk about industry average. Our peers not always have the same type of portfolio, so it will be hard for me. Portfolio is really -- let's say, that range is really characteristic of our portfolio, of our portfolio evolution and our mix and our geography mix and market mix. So I would struggle going down that path. What was the second part of your question, sorry?

Any difference in content for the current AC versus DC?

I think we -- sorry about that. I think we will hear tomorrow about that in technical terms, but I'm sure that technical aspect will be very illustrative in terms of the degree of complexity that the current and future parallel evolutions of the technologies will bring. Fact is that running those loads is not getting any simpler. If anything, it's becoming more complex. And that complexity is driving the multiple ways in which that power will be delivered.

And again, the obsession here behind is how can you maximize -- of a given contracted power, how can you maximize the number of electrons that go to the GPU. So complexity drives opportunity for us in service, in TAM. And we firmly believe that DC in the rack, 800 volt in the rack or all the entire infrastructure are certainly not contradicting that complexity drive value for Vertiv.

I just had one question, given how you've talked about Europe sort of turning a corner in the last couple of quarters. When we think about your long-term guidance, how is Europe sort of either overly influencing the market growth and also the margin expansion in the next few years?

And you're talking Europe specifically or any region?

No, just -- yes, EMEA as a whole.

EMEA as a whole. Okay. We like where EMEA is going. In terms of what we're projecting here, we don't break it out by region. What I will say is going back to what we talked about in the end of the first quarter is we've seen a strong tailwind there from a perspective of what we're seeing in the pipelines, what we're seeing in the activity in the market and what we're seeing execute.

So it right now has a great growth opportunity for us, and we see that continuing to happen specifically in the second half of this year, bouncing back. And we would expect that to continue to go out in the future years, especially with the activity in the pipeline that we're seeing. So we expect EMEA to be a good growth engine for us, not just going into next year, but beyond that as well.

Donald Porter, Winslow. The ability to take share and grow above market, can you just sort of dig into that? Is it -- do you attribute that to more of the modular integrated approach? Do you -- are there other reasons? What would -- what it kind of explains or drives the share gain opportunity?

I think it's the value creation, the value creation for our customers. And anyway, a very strong presence. And again, I don't want to -- I want to make sure that, that value creation happens at individual product level, at system level, at entire infrastructure level. It is across the board.

Let's take the example of the dynamic nature of the AI loads and take the example of our power converters. Our power converters are extremely, extremely good at that job. Extremely good at that job. That's no converged solution. That is the product. Dare I say, a very beautiful, but still a box. Extremely...

Nice box.

Still a box. So -- but the technology in that, which is, of course, I'm being silly now. We're almost -- it's almost cocktail time, can I say that? But the fact is that the technology that we put in our products' systems is a winner and our ability to scale and our service presence. I almost go back to my competitive advantage slide.

I mean, I think you also look at his concentric circles that he had up there, right? Every layer of that is another layer of value for us, but also for our customers. When you think of buying a point solution, the point solution is efficient. And the point solution is efficient for the job that it does. When you buy a system, it is efficient for the entire system.

So back to his point of an orchestra, right? You have the best violinist in the world. You don't want him to play violin the entire time. You want him to play violin when he plays violin the right way, and you want the pianist to play piano when he plays in the right way. And when they all come together, it's a great symphony.

But if you just have one piece operating at its most efficient point, you don't get system-level optimization. You get point-level optimization, and the end customer is not going to feel that. They're going to feel really good about one spot, but not about their entire system. So if the goal is to get the most out of the chip, that means the system has to be optimized, not just every individual point.

So that's how we're -- again, when we're thinking about it that way, that goes back to those concentric circles, all the way to services. And whenever you're packaging a Next Predict on that or an optimization on top of that, that's making that whole symphony -- that's the, dare I say, the orchestra leader saying that's making sure everything is working together. So that's how you get it when you're thinking of value add for a customer.

And just a follow-up on capacity. You've added a lot of capacity in a lot of areas. Where do you need it most? Like maybe you have a lot of projects going on, but if you were to bucket it, what are the biggest capacity additions you're adding?

Honestly, I think it's across the board where we see strength in all the different product lines. We see it in converged infrastructure, power and thermal. We have adds across the product line. So I'd say even in the regions, we see it across the regions.

Most of the deployment is probably still Americas right now, but that doesn't mean it's all centered to America. We are bringing on a new factory in Asia. We are doing some of the capacity expansions in EMEA. And of course, in Americas, we definitely have seen capacity expansion. I wouldn't trigger point as saying it's one individual area. It's -- we see growth in all the areas, and it is backed up from what we've been able to put online.

It's Andrew Buscaglia with BNP Paribas. Over the next 1 to, call it, 3 years, the amount of volume potential you have, it's hard not to see incremental margins really hitting more like a 35-plus percentage. Which would imply by 2030, you're doing probably -- to get to your 27% target would mean you're probably doing below.

Dave is laughing because he keeps...

You shouldn't listen.

No. So I just mean by 2030, if we're doing 27% margins, that means that later this decade, your incrementals are dipping below 30%, which seems also unlikely. So can you talk about the linearity or the pace of that incremental margin through the end of the decade?

Yes, it's pretty linear. And again, I point to the fact that when we think of the pricing out in the future and we think of some of the delivery on the productivity, we would say it's prudent and it's offsetting the unknowns that we don't know today. We didn't know that tariffs are going to change on us this year. We didn't know necessarily that the inflation was going to go up or that the war was going to happen. So for all of us, it's making sure that we can offset any potential unknown that we don't see in the future.

Now if all that stuff doesn't happen and we produce everything, by all means, I'm right with you. But I want to ensure that we have a level of not just goal, but push for anything that could happen and that we are protecting ourselves so we can show the margin growth. So that's the way that we're thinking about it and the way we're driving it. But Dave is with you. I know he yells at me about it a lot.

Sure. So the majority of the increase in the market growth rate was in cloud and colo. And it didn't go unnoticed in your 10-K, there was a new customer segment, which is weird. Brand-new customer segment in a very established industry, and it's neoclouds. What portion of those 8 points faster CAGR in cloud and colo is directly attributable to new players, neoclouds, new entrants to this that aren't AWS, Microsoft, et cetera?

Well, I think we go into the details of the model that I would not be prepared to disclose or go into the exact details. But let me stay generic. When we talk about colo cloud, we talk hyperscale, we talk colocation, we talk colocation for enterprise, we talk neocloud. We think when we talk about those players that there are exact kind of boundaries. Gray areas are absolutely predominant. You see neoclouds that are serving enterprise. Sometimes they are serving some hyperscalers that are -- it's really blurred.

Fungible.

And -- but the good thing is that we see quite a strong demand across the board. So I'm not sure I can help you in those exact details, but maybe someone can. Maybe.

All right. Just wanted to ask on the converged solutions and how the growth rate for converged solutions compares to your overall business right now and how you anticipate that evolving as you move forward here? And then just curious, is there a notable difference in terms of the backlog conversion for a traditional order versus converged solutions such as OneCore?

Well, that's -- there are different dynamics in different parts of our, let's say, pipeline and conversion -- commercial conversion dynamics. I wouldn't be going into details. We like the type of conversions and commercial conversions that we see with this type of offering.

But again, it's not for all. So that means that you have to be targeted to the part of the market that understands that, where we see that need and address it specifically. But again, no converged solutions -- no two converged solutions are created equal. OneCore value proposition, and let's say, spread of dissemination in the installed base is different from the SmartRun.

So it's hard to -- and probably I wouldn't, even if it were easy -- give you an exact answer, but we like the conversion trajectory. But we like also the conversion trajectory on our traditional -- more traditional business. For tech, that will go to market very, very carefully.

I mean, the easiest probably way to answer it in terms of just -- not even numerical, but a way to look at it trend-wise is, of course, we saw an uptick in pipeline and things towards the end of the year. As you saw in our orders at the end of the year, they spiked up. And some of that was from an uplift in infrastructure solutions. And what I would say there is the pipeline and growth is kind of in line with the deployment being something that's happening more often now because of more complexity in the field and because of the need for it.

So does that mean it's going to continue that trend? We hope. We like it. We think that's a really good way for the customer to get better outcomes and a quicker time to token. But again, we don't have a crystal ball in the way that people are going to deploy either.

So we're prudent in it. We like our solution. We like our point solutions, but we think system levels and converged infrastructures are ways of the future, and we're investing in that.

All right. We'll take this as the last question.

Oh man. Pressure.

Brian Drab with William Blair. So you talked about in the slides, 20 to 35 gigawatts expected coming online annually. I think every call that I do on Vertiv or any stock that has exposure to this data center theme, people are trying to figure out when is it all going to decelerate. You used the word accelerate many times today. How do you view that in the model? And what's the source for that? Is that a management estimate, the 20 to 35 gigawatts? Because I don't -- I see a subscript 5, but I don't see -- at the bottom of the slide, I don't see what the 5 is referencing, by the way.

That's just strange. There should be a reference if there is a number. But anyway, we'll check that.

Well, how does it ramp? Or...

Well, when we say 20 to 35, it's never an exact science. It's certainly never an exact science. But think about 20, let's say, today and 35 towards the back end. We have estimates. We have market analysis. We compound that with our assessment, with the conversation with our customers, with the industry in general. So of course, the further out, the harder to have the exact projection. We think that we are pretty reliable and accurate, but who knows? I mean, so many things can happen.

When it comes to -- is there a normalization somewhere? Maybe sometimes, normalization. Whatever normalization will mean in a market where the demand for AI compute capacity is huge, and the whole industry is just at its very infancy. Don't forget that to date, the majority of the use of AI is AI-to-human, let alone machine-to-machine, machine to physical AI. So the hunger for capacity today and in the future, I think, it's pretty convincing. What the long, long-term future will mean, we don't know, but the demand and the intensity of use of AI and the data traffic, it's not going to abate.

All right. Thanks, everybody. Very robust Q&A. Super excited. Lots of exciting things going on here at Vertiv. I would ask folks in the room, stay put for a minute. We will be closing off the webcast.

Good morning. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to Vertiv's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded.

I would now like to turn the program over to your host for today's conference call, Lynne Maxeiner, Vice President of Investor Relations.

Great. Thank you, [ Jeanie ]. Good morning, and welcome to Vertiv's First Quarter 2026 Earnings Conference Call. Joining me today are Vertiv's Executive Chairman, Dave Cote; Chief Executive Officer, Gio Albertazzi; and Chief Financial Officer, Craig Chamberlain. We have 1 hour for the call today. During the Q&A portion of the call, please be mindful of others in the queue and limit yourself to one question. And if you have a follow-up question, please rejoin the queue.

Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of Vertiv. These forward-looking statements are subject to material risks and uncertainties, that could cause actual results to differ materially from those in the forward-looking statements. We refer to the cautionary language included in today's earnings release, and you can learn more about these risks in our annual and quarterly reports, and other filings made with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

During this call, we'll also present both GAAP and non-GAAP financial measures. Our GAAP results to non-GAAP reconciliations can be found in our earnings press release and in the investor slide deck found on our website at investors.vertiv.com.

With that, I'll turn the call over to Executive Chairman, Dave Cote.

I'm very pleased with how we started the year. The momentum we're seeing across the business is strong. It's translating into the kind of performance that gives us confidence to [indiscernible] our outlook for the full year.

What we're seeing in customer conversations is different than 6 months ago. The urgency has increased. The scale deployment is larger, and the technical complexity is creating opportunities for companies that can solve [indiscernible], which is exactly where we excel. We're seeing broad-based strength, and that tells you something about the depth of demand and our ability to capture it. I like what we're seeing in the industry and the continued evolution of Vertiv.

We're still in the early stage of the infrastructure build out for AI. Our competitive advantages are compounding. If you can deliver product systems, integrated solutions and services that scale, you become even more important to your customers' technology road map. We're also managing the challenge as well. Tariffs, supply chain, complexity, labor constraints. These are real. But they're manageable. And additionally, they raised the bar in ways that favors established players like us. Gio and the team are executing very well in this rapid growth environment, balancing aggressive growth and share gain with operational discipline. We're expecting a strong year ahead and strong years in the future.

So with that, let me turn it over to Gio to discuss it further. Gio?

Thank you very much, Dave. Let us go to Slide 3. Well, I'm quite pleased with how we started 2026. Q1 was very strong with organic sales up 23% year-on-year. We reported growth of 30% when we include M&A and FX. From a regional perspective, America was the primary engine with 44% organic growth. APAC was up 12% organically, while EMEA was down 29% organically. In the few slides, you will hear us elaborate on some of the [ encouraging ] dynamics we are seeing in EMEA.

Adjusted operating margin came in at 20.8%, up 430 basis points year-on-year, and 180 basis points above our guidance. Margin performance and strong top line growth drove adjusted operating profit of $551 million, up 64% year-on-year. Adjusted diluted EPS of [ $1.17 ] were up 83% versus Q1, '25 and exceeded our guidance by $0.19. Adjusted free cash flow of $653 million was up $147 million versus the prior year, driven by higher operating profit and continued working capital improvement. We are raising our full year guidance, and we now expect adjusted diluted EPS of $6.35, up 51% from 2025. This is supported by raising our adjusted operating profit guidance to $3.2 billion, up 53% from 2025. Adjusted operating margin is now expected to be 23.3% to 190 basis points higher than 2025.

And let's go to Slide 4. Let me start with the market environment. Our pipeline momentum continues to be strong. Our pipeline generation is robust and we're still expecting another year of strong orders performance in 2026. We anticipate orders to be up year-over-year, which reflects the sustained demand environment we are seeing across our markets. Americas continues to show remarkable strength. The market momentum is broad-based and robust. Our pipeline in the region continues to expand as we convert opportunities.

In EMEA, the spring continues to uncoil. We're seeing improving market sentiment throughout the quarter with momentum building. I know we do not disclose orders but we are very pleased with EMEA's Q1 bookings. We feel good about EMEA returning to year-over-year sales growth in the second half, which you see embedded in our guidance. When it comes to APAC, we see positive market dynamics across the region. Rest of Asia and India are showing convincingly strong pipelines and dynamics with robust momentum building. China is also showing encouraging pipeline movement, and this positions us well as we move through the year.

On pricing, we continue to see favorable dynamics. We expect positive price costs in '26, including the impact of tariffs and tariff countermeasures. From a manufacturing and supply chain perspective, we're expanding while continuing to strengthen our resilience. Our regionalized footprint and multi-sourcing strategies are maintaining stability despite evolving dynamic trade dynamics and tensions in the Middle East. We are accelerating our strategic capacity investments to meet the demand we are seeing. We're expanding our global manufacturing service footprint while unlocking latent capacity with VOS driven productivity gains. Our cost management remains disciplined. We expect these investments to position us very well for the current and future demand environment.

We manage commodities and components proactively. This, combined with our multisource model and supplier diversification provides a critical buffer in what remains an inflationary environment. Through various countermeasures, we are actively working to mitigate tariff exposures, including recent changes under Section 122 and 232. In this very dynamic environment, growth-wise, geopolitically, et cetera, we stay focused on supply chain resilience, growth, capacity expansion and navigating the tariff environment. A lot going on. But we are focused on execution.

And let's go now to Slide 5. We continue to see very robust growth in demand for data centers. And as a result, we are focusing investments on capacity expansion, supply chain and engineering capabilities. We are committed to continue to grow capacity, supporting our customer demand, and we continue to deliver above market growth. Our CapEx in Q1, sustainably higher than in the same quarter last year is a testament to that commitment. We are making significant investments in capacity expansion across both manufacturing and services.

On the manufacturing side, we're expanding capacity organically across multiple sites globally and particularly across the Americas, on which you see some details here. These investments are strategic and positions us to meet the accelerating demand. We do this for growth but also to bolster our overall operational resiliency. This capacity expansion is broad-based, power management, thermal management, infrastructure solutions and IT systems across all technologies.

We're doing the same with our services capability. Specifically, we are scaling our people and service capacity vigorously and [ convincingly ], across all service technologies and regions. In particular, the acquisition of [indiscernible] significantly strengthens our fluid management and liquid cooling capabilities, enhancing our system-level services offering. This is one of the most technically demanding and financially consequential aspects of modern data center operations.

With respect to our supply chain, we have prioritized multi-sourcing strategies to mitigate supplier risk. Strategic acquisitions are further strengthening our supply chain capabilities. And finally, we continue to prioritize investment in our engineering capabilities in multiple directions. Clearly, one is engineering labs, central to development of our technology portfolio. Customer witness test capabilities are another important area of investment. The complexity of data center technologies requires extensive test capacity at the beginning of a delivery. Growing customer test capacity with volume is a growth enabler. We will have an opportunity to continue to elaborate on what capacity expansion means during our upcoming Investor Day.

And with that, it's over to you, Craig.

Thanks [indiscernible] Let's start with the first quarter results on Slide 6. As you can see, we had an excellent start to the year. Adjusted diluted EPS was $1.17, up 83% year-over-year and $0.19 above our prior guidance. On the top line, net sales were $2.65 billion, up 30% versus prior year, with organic net sales up 23%, with acquisitions contributing 4% and favorable FX adding 3%. This organic growth was driven by Americas, up 44% and APAC up 12%, partially offset by EMEA down 29% organically.

Adjusted operating profit of $551 million increased 64% versus the prior year and came in $56 million higher than our guidance. Our adjusted operating margin of 20.8% expanded by 430 basis points versus last year, showing a great operating performance from the team. The main drivers were strong operational leverage on higher volumes, productivity gains and favorable price cost execution, which was partially offset by ongoing tariff headwinds.

On the cash side, we delivered $653 million of adjusted free cash flow. That's up 147% from the prior year first quarter. This was supported by higher operating profit and working capital efficiency, partially offset by higher cash tax and increased net CapEx, as we continue investing in capacity and ER&D to support business growth. We exited the quarter with net leverage of 0.2x, providing us with significant strategic flexibility.

Flipping to Slide 7. Let's look at segment performances by region. Americas delivered another outstanding quarter. Net sales were $1.81 billion, up 53%, with 44% organic growth. reflecting strong broad-based momentum across nearly all product lines. Adjusted operating profit was $490 million, with margins benefiting from operational leverage, disciplined execution and partial intensity.

Looking at APAC, net sales were $514 million, up 15%, 12% organically. Organic growth came in below quarterly guidance, primarily due to timing. Adjusted operating profit of $67 million was up approximately 48% year-on-year, mainly driven by volume leverage and operating discipline. Turning to EMEA. Net sales were $321 million, down 29% organically. We believe this is a temporary reflection of softer orders that we saw in Q2 and Q3 of 2025. However, we are seeing opportunity generation accelerating, reflecting improved customer demand and supporting a return to sales growth in the back half of 2026. We saw a step down in margins here year-over-year due to operating deleverage. However, our conviction has gotten stronger for a second half recovery in EMEA, which you see embedded in our EMEA full year guidance.

On Slide 8, let's discuss our second quarter guidance. We're projecting adjusted diluted EPS at the midpoint of $1.40, which is 47% higher than our second quarter 2025. Net sales at the midpoint are $3.35 billion, which reflects 27% net sales growth versus prior year. Adjusted operating profit at the midpoint of $710 million represents 45% growth versus second quarter 2025. This strong profit growth is supported by robust organic sales growth and continued operating leverage. Adjusted operating margins at the midpoint of 21.2% is up 270 basis points, supported by strong organic sales growth [indiscernible] cost leverage. Additionally, we expect to materially offset unfavorable margin impact from tariffs. This guide reflects our confidence in the strength of our market position and our ability to execute on the significant opportunities ahead of us.

Now on to Slide 9. Let's talk about our full year 2026 guidance. We continue to expect another strong year of strong performance across all key metrics. We are raising adjusted diluted EPS guidance by $0.33 to a midpoint of $6.35, which represents 51% growth versus prior year. For net sales, we're updating our guide to $13.75 billion at the midpoint, reflecting 34% net sales growth versus prior year. By region, we expect organic growth rates of high 30s in Americas, mid-20s in APAC, and flat in EMEA. The updated adjusted operating profit is now at a midpoint of $3.2 billion, representing 53% growth versus prior year, and $160 million higher than our prior guidance. This strong profit growth is driven by a combination of robust organic sales growth and continued operational leverage.

Finally, on margins, we're guiding to 23.3% adjusted operating margin at the midpoint, an expansion of 290 basis points from 2025, and 80 basis points [ tied ] in our prior guidance. This expansion is supported by 30% organic sales growth and continued operational leverage. We expect to be price/cost positive for the year, inclusive of tariff impact and the countermeasures. With fixed cost leverage, [indiscernible] in growth, ER&D and capacity. For adjusted free cash flow, we're maintaining our guidance $2.2 billion at the midpoint, up 17% versus prior year, primarily due to higher operating profit, partially offset by higher cash tax and net CapEx investments.

With that, I'll hand it back to you, Gio.

Well, thank you, Craig, and let us go to Slide 10. And before I wrap up, I once again want to invite all of you to tune in to our 2026 investor conference that will be held on the 19th and 20th of May in Greenville, South Carolina. This will be an excellent opportunity to gain first-hand insight into Vertiv's visions and strategy from our leadership team.

On the first day, the agenda includes a comprehensive market update, a detailed financial overview, and our updated multiyear outlook and Q&A sessions, of course, with the leadership team. The following day, we will have a technology session where you'll hear about how we continue to innovate and drive the industry. This will be followed by a tour of our Pelzer Infrastructure Solutions facility for those who will be joining us in person. It's going to be a great opportunity to see what we're building and where we are headed.

And now let's go to Slide 11. Our first quarter results were strong testaments to Vertiv's execution capabilities and the momentum continuing to build in our markets. The demand environment is robust and we are very well positioned to carry that forward. We have received -- we have recently announced two strategic acquisitions that are expected to strengthen our competitive position. [ Thermal Key ], which is anticipated to close in a few months, we'll expand our thermal management portfolio with great heat exchange know-how and a leading range of dry coolers, a capability for the globe, starting in EMEA. Heat rejection is becoming more complex for AI data centers and a portfolio comprising chillers, dry coolers, trim coolers, offers great flexibility and efficiency opportunities for our customers.

[ B, market ] structures, which brings custom engineers structural fabrication capabilities that accelerate our ability to deliver manufactured and converged infrastructure solutions at scale. Both are expected to provide capacity and capabilities to better serve our customers while expanding our technology base.

We have raised our 2026 guidance, reflecting our confidence in the trajectory of the business and opportunities ahead. EMEA is absolutely part of the AI story. And we're seeing that play out with customer projects like [ Ecodata Center ] in Sweden designed to support the most demanding AI workloads with NVIDIA's latest generation [indiscernible]. [ Vertiv 1 ] core was selected to deliver the full data center solution here, encompassing power, thermal IT white space and services.

We are excited about our collaboration with [ C Power Energy ]. Together, we are enabling U.S. data centers to turn their on-site energy assets into grid resources, accelerating speed to power, improving resilience and reducing cost for data centers and their communities. This is the kind of end-to-end thinking that sets Vertiv apart. Our long-standing customer relationships, combined with our partnerships create a significant competitive advantage that is very difficult to replicate. We continue to move further and the market is recognizing it. Achieving investment-grade credit ratings and inclusion in the S&P 500 are meaningful milestones. They reflect the strength of this business, the execution prowess of this team, and the confidence the market has placed in our trajectory.

I do not take that lightly. Neither does the rest of the Vertiv team, we hold ourselves to a high standard and will continue to raise the bar. We had a strong quarter. We expect to build on it and we will.

And with that, we can begin the Q&A.

[Operator Instructions] And your first question comes from the line of Scott Davis with Melius Research.

Can you talk about the prefab market, like how important this market is? Or is there any way to think about a TAM? You seem to have a lot of content in prefab. I'm just trying to get a sense of how the customers view the importance of that content?

Thank you for the question, Scott. Multiple dimensions to this. One is we know that speed, or time to token is absolutely essential in the market. Clearly, prefabrication alleviate challenges on site -- the construction site is always a complex system to manage. There is a scarcity of talent trade resources we see, and we certainly are stimulating, if you will, an increasing adoption of prefabrication. But there is way more to it than that.

For us, prefabrication is not just prefabrication. It's convergence of our solution into a system like [ one core ], not only [ one core ], but [ one core ] SmartRun. It's systems that are designed, converged and optimized already from the beginning on a given set of [ Lowe's ] and silicon. But -- and it is also a way to make the whole system more efficient and more dense in many respects. So there are multiple reasons why this is being adopted. And there are multiple reasons why we believe we are ahead of the pack here because we're not just an integrator. We provide technology. You were also asking about the TAM for us. Clearly, that is a concentrator of opportunity for us because the prefabrication is, for us, an old Vertiv technology solution. So that help us to capture more of the TAM.

That's helpful, Gio. Excuse my voice, the allergies are [ killing me since ] the last couple of days. You mentioned capacity adds with productivity and I'm kind of intrigued. What kind of productivity levels can you run when you try -- I mean, you're adding capacity, obviously, quickly, you're trying to get a lot of stuff out the door. What kind of levels of productivity can you actually run at just kind of leave it at that?

Well, my productivity comment was really kind of the manufacturing systems in a factory vis-a-vis having kind of a piece-by-piece assembly going on, on site, that is the traditional way in which the data center business is run. I wouldn't go down the path of exactly comparing. But when we prefabricate them, certainly, we will have an opportunity to have a direct conversation when we look the floor in Pelzer. But we definitely achieved manufacturing productivity levels when we manufacture the systems.

Your next question comes from the line of Amit Daryanani with Evercore.

Perfect. I'll try to stick to Lynne's ask for one question. Maybe it's a multipart though. Gio, the calendar '26 guide that you folks have right now, sort of, implies 30% organic growth for the full year, versus I think we've done like 22%, 23% growth in the first half of the year. Can you just help us understand what are the levers that you're seeing? And maybe you can quantify some of these levers that you're seeing that enabled the step-up in growth in the back half versus the first half? Assume EMEA and maybe more capacity in [ Rubin ] are all parts of the story. But I would love to just understand what do you see that gives you confidence that growth can accelerate organically in H2 versus H1?

Okay. I will start. Certainly Craig will also complement here. But -- but I'd say that it's really 2 things, if you really think about it at a high level. One is capacity. We are adding capacity, we're constantly adding capacity. But you could see from our CapEx profile, and what we mentioned about Q1, we're very, very focused on adding capacity and a lot of that capacity start to hit us in the second half.

But the other thing is if you think about our Q4 orders, there certainly is a good load of backlog in that part of the year. If you think about the customer requests lead times that we've been talking quite extensively. So there's more to it, but I would say those are two important element to the equation.

Yes. And Amit, I'll just -- I'll double-click on that a little bit. You're right in terms of APAC and EMEA. When you think of them in terms of the first half versus the second half, there is an accelerated growth in the second half in both of those regions. And we've talked extensively about that in terms of what we look like from -- and what we expect the coil to the uncoiling of EMEA to happen. And how we're seeing that come through. And that's the way it is in the guide as well.

Your next question comes from the line of Jeff Sprague with Vertical Research Partners.

I want to come around to service. Obviously, a very clear acceleration in the last several quarters and actually service growth kind of couplings of product growth in the Americas. We've been waiting for this backlog growth to really come through strongly. It looks like it's happening at this point.

But could you maybe just address kind of the field organization, the ability for service to grow at this pace. How the margin complexion of service may or may not be changing, and just how to think about that outlook over the balance of the year?

Yes. There's certainly multiple angles here, Jeff. And again, I'm sure we'll have an opportunity to further elaborate in May. But at a high level, [indiscernible] satisfied with the trajectory of services, and that's true for both the project services and the life cycle services.

To your question about what is our structural organization. We're very, very present in the territory, very, very local. But at the same time, we understand that those -- the big projects that are out today are also sometimes concentrated. So we have developed the ability to move people and have teams of people that are dedicated to addressing the big data center deployment when it comes to project services. But we remain and we continue to nurture and strengthen and grow a very good on the territory type of services presence.

We mentioned a couple of times that we are investing heavily. I mentioned it in my script, we are growing our services population, and we will have details in May. And of course, here our strength and tradition and experience in training, e-commerce is absolutely essential, combined with increasingly strong tools that are at the tip of the finger of our engineers. So absolutely multi-faceted. What we like when we talk in general about services is the fact that the installed base that is being created is very, very conducive to our life cycle capture and business over time.

Yes. And Jeff, I'll just double click on that a little bit, too. In terms of on a reported basis, yes, products and services are equal. If you look at organic, you're seeing the feeling or you're feeling the impact to [indiscernible] right there as well. So I just wanted to get to be sure that you kind of understood that. [ Pelzer ] is a big impact for us, but so we like that.

Yes, I did see that. I wonder, though, if you could also just, maybe, a little bit more color on how to think about margins. I guess the nature of my question is right, labor-related services. We don't think about operating leverage, right? It's man hours or people hours, but there's kind of other more sophisticated services that come into play. So just how should we think about operating leverage in that business as it grows?

No. I mean I think you would probably -- you point to the fact of what we're seeing from our own overall incremental margins when you think about that. So overall incremental margins were always in the neighborhood of 30% to 35%. I would say that would kind of be similar in terms of the way that we would expect services to pull through as well.

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

Just maybe we can talk about the evolution of behind the meter has become a lot more prominent over the past 4, 6 months. What technology avenues does it open to Vertiv? And I'm sort of thinking controls, best controls, sort of UPS transition as part of direct current architecture. But also maybe different chiller technology things like absorption chillers. I'm sure you've thought about the road map over the next 2, 3 years, and I know you'll talk about at the Analyst Day, but seems to be evolving fairly rapidly, how are you positioned?

Well, I think you've guided pretty much right, Andrew. In terms of -- certainly bring your own power is something that is here to stay, and we see it very, very clearly. We talked about partnerships today. Remember the partnership we have with [ Caterpillar ], with Oklo. So in various shapes and forms, bring your own power is a very important part of the data center equation, especially in the U.S. certainly, we play a role in everything micro-grids [indiscernible] storage systems interfacing and making sure that the entire powertrain be it direct or alternate are consistent and designed for a bring your own power solution.

But -- as we -- multiple times -- and we keep saying the data center needs to be looked at as one system. So you're right when you say, hey, this is the implications might have implications also on the thermal side of things, so exactly absorption is one of -- one of the things. Then naturally, people and we think about. So we will have more details in May. But rest assured that we see bring your own power being an integral part of how we design and think a data center. So it is an opportunity for us ultimately because it makes the system more complex and with more -- possibly with more content for us.

Your next question comes from the line of Nicole DeBlase with Deutsche Bank.

Can we just double click a little bit on what you're seeing in EMEA. It seems like from the commentary at the beginning of the call that you're gaining conviction in the second half ramp. So could you just talk a little bit more about what you're seeing and hearing from customers there that's driving that higher confidence?

Well, we see -- well, you're right, exactly as I said, we're very pleased with our Q4 orders. We are very pleased with the Q1 orders and pleased by the -- what we see in the pipeline. So we see the market moving. We see a pipeline acceleration increasing. That is really a signal and to proof of a service [indiscernible] market and a demand that is there, which was natural. That's why we were talking about a coiled spring because there is a shortage of data center capacity, significant shortage of data center capacity, and even more profound shortage of AI-capable data centers in EMEA and in Europe, in particular.

So hence, the dynamics that you see. And of course, we are very well positioned in Europe because of historically our strong presence but also because a lot of the players are players here and are players in Europe. So there is a very encouraging opportunity there.

Your next question comes from the line of Patrick Baumann with JPMorgan.

Just had a quick one on margins. Just wanted to see if you could give some color on the sequential expectations. So from first quarter reported to the second quarter guidance, looks like the incremental margin is kind of in the low [ 20s ]. And I'm just wondering if you could unpack the moving parts on that, whether it's capacity investments, or tariffs or whatever. Just any color you can give on that.

Yes. And Patrick, I would say, again, when we look at it sequentially or year-over-year, year-over-year, it's in the low 30s, which is what we are expecting in terms of our guide. Quarter-over-quarter, there is a little bit of a headwind as we bring on capacity. This is probably one of our bigger ramps in terms of capacity in the second quarter. So there would be a little bit of a, I'd say, a change in that when you look at it for the first quarter to second quarter. But if you look across the full year, we're still guiding to that between that 30% to 35% for the overall sequential margin.

So I'd say it's a bit of a bump from 1Q to 2Q in terms of when we're bringing on capacity and working through all the different various actions that we have to do, offsetting all the tariffs and working through that, the [ 232s ] have now changed. So there's a little bit of a dip there, but I'd say, overall, still feel very strong about the year being in the 30% to 35% range that we've given.

Just a quick follow-up on that. The tariffs, I think you said to materially offset it, you thought that would be at the end of first quarter. Is that kind of slipped out to second quarter now because of the changes? Or are you kind of already there at the end of the first quarter?

I'd say we're already there at the end of the first quarter. As 232s have changed, we're continuing to do, I'd say, actions and countermeasures around those. And if you look at it for the year, we feel confident that we'll continue to materially offset those.

Your next question comes from the line of Andrew Kaplowitz Citi.

Obviously, you've talked about the Americas continue to be strong, but maybe you could talk about how much of the business is still being driven by hyperscalers in colo versus enterprise. I assume it's still heavily weighted towards the forum. But enterprise markets seem to be picking up a bit given AI needs and usage. When could that impact Vertiv? Is it something you see accelerating in 2027 or not, sort of yet?

Clearly, we continue to see hyperscale colo, new cloud being the biggest driver of certainly is true in the Americas, but globally pretty much. Certainly, there is -- there is an element of enterprise here. A lot of enterprise will continue to happen through cloud. So not always easy to separate. But we see enterprise started to adopt AI when that will be visible in terms of growth above the levels that we shared with you in the past, that's something that we will certainly elaborate in May, but it's probably a little bit still far away as independent. There is a lot happening at colo level, if that helps.

Your next question comes from the line of Chris Snyder with Morgan Stanley.

I wanted to ask about the transition to 800-volt architecture. There's a lot of moving parts, but just wondering what does this mean for Vertiv content? And when does the company expect to start shipping to these 800-volt design facilities. And just specifically interested in liquid cooling and wondering if there could be some TAM expansion with applications beyond just cooling the chips as they're [indiscernible] a higher level of heat presumably running through the facility?

Chris, thank you for your question. Clearly, we've seen early as a transition -- a wholesale transition to 800 volt. Clearly, 800 volts going to be an important portion of the total market as we go into 2027 and beyond. We are on our on time with our programs. We were talking about second half this year launches of portfolio. We are pleased with where we are in terms of the customer feedback with the prototypes and validation activities that we have ongoing. Shipping will be a little bit further away, but I think it's a little bit premature to elaborate too much where we see it as a 2027, I think this one.

When it comes to liquid cooling the influence of 800 volt. I would say that there will be a correlation, [indiscernible] necessarily simply because 800 volt DC is applied for very high density compute. That very high-density compute will see not just liquid cooling for the chip, but for a much bigger array of electronics across the entire IT stack. And of course, that has then influenced the entire powertrain, thermal chain. So we see that as an opportunity for us. We're very excited very excited about -- very pleased with where we are with the 800-volt DC programs, and we're getting ready for it.

Your next question comes from the line of Amit Mehrotra with UBS Financial.

I just wanted to ask a question about the pipeline. I think what was so interesting last quarter is, obviously, you had a big, big order number, but I believe the pipeline also grew double digits sequentially. Maybe you can just talk about the pipeline as it kind of evolved in the first quarter, momentum and quoting activity funnel. Anything you can give within the confines of not talking about orders?

Yes. Well, thanks for -- thank you for the question. Clearly, we were very vocal about the strength of the pipeline before. And we are as vocal about the strength of the pipeline in -- at the end of Q1. And with that, the pipeline duration, that to us is exactly what you defined as the activity volume of commercial volume of commercial activity. And this growth and this dynamism is broad-based. It's broad-based across our technology range and it's broad-based across our regions. So very pleased and very encouraged, and hence our comment about our overall year orders.

Anything to call out in duration? I know you said most of it is within 12 months, maybe some leading it to 18 months. Any change in complexion on the orders as you come into the first quarter or second quarter in terms of duration or not?

You're talking pipeline or you're talking orders, just to be clear?

Talking about orders. I'm talking about what's in the backlog right now, the growth?

What's in the backlog? Could you think about a backlog shape that is, if anything, a little bit more elongated, but not something dramatic to the point that the shape of the backlog is totally different. So there is no distortion of backlog. If anything, it's a backlog, that is a little bit more elongated. That, of course, gives us visibility, good visibility in 2020 -- in 2027.

As we said, a lot of the projects in the industry are large projects where customers asked for, call it, [indiscernible] sorry, 12 to 18 month delivery windows. We have seen some occasions the very requested delivery window shorten a little bit. We, of course -- maybe on that 9 to 12 months window. Our average delivery time of which we're capable are shorter than that. But again, you can't really say different product lines. Different dynamics, different dynamics, supply and demand. But in general, despite the fact that, of course, it's everything very dynamic, pretty too much I go back to what I was saying. A backlog that is not dramatically different, if anything, a little bit more elevated.

Your next question comes from the line of Julian Mitchell with Barclays.

Maybe just to switch tack a little bit to the sort of cash flow and balance sheet. I suppose, just trying to understand the free cash flow dollar guide is unchanged, and I can see the sort of bigger working cap outflow dialed in, but I would think you'd get good customer advances from orders and your working cap was a nice tailwind in Q1. So maybe just talk us through sort of the thinking there and the balance sheet allied to that, extremely unlevered as a result of that good Q1 cash flow? Any highlights you'd give us on sort of capital deployment from here?

And I'll start off and I can pass it to Gio. But I would say in terms of just looking at the working capital over the course of the year, kind of two points on that. One is, yes, we are investing in terms of the ramp. So you see a little bit of a drag from that from an inventory perspective. And when we look at our order book and forecast out the way that we look at customer down payments, or customer advancements, we are a little bit prudent in the way that we look at that in the way that we forecast that. So both of those come into consideration when we look at the guide, Julian. So again, you're feeling a little bit of that and we're we basically would say the same thing is, one, there's a little bit of a ramp in terms of inventory. And two, just some prudence in the way that we look at our order book and the down payments we expect.

On number two, on the capital deployment when you think of the [ 0.2 ] leverage, I think we go back to what we've said all along is there's two spaces where we love to invest in on a regular basis, and that's R&D book and the capacity book. And you can see on the flow-through of our cash statement that we're following with that -- that drumbeat that's what we like to do, and that's where you see continue to invest heavily. The other portions of that are capital deployment in terms of M&A, or stock buyback, or increased dividends. I think the biggest area that we had used cash there and that we always look to have some dry powder would be the M&A space. We've done some this quarter, as you saw. I think we'd continue to keep that open and that optionality available for us.

Yes. No, absolutely. Maybe [indiscernible] comments on the M&A side, you see us having a very dynamic posture in that respect. When we say -- it said and continue to say that our pipeline is -- M&A pipeline is very active. You have seen us do acquisitions that are also on predominantly technologized. We love technology. And our pipeline is well structured and quite convincing. So we'll continue to be focused on this area of capital deployment.

Your next question comes from the line of Deane Dray with RBC Capital Markets.

I wanted to ask about the standard modular liquid cooling products. Just very interested in the level of customer take on this? And what role will this product line play in the rollout to more of the colos and enterprise customers?

Can you help me a little bit, Deane, because we have a very robust portfolio. I'd say, probably -- without probably, we believe the most robust. Can you help me exactly when you say standard liquid cooling product?

Yes, these were the ones that were talked about and displayed at the last super compute. So you're seeing -- you've heard in references [ lid cooling ] in a box. And it's just for the customer, the colos and enterprise who may not need such a customized system that Vertiv is now has this line, and as are some of your competitors on more of a standard modular design.

Yes. Let me elaborate on that. And thank you, Deane, for your question. When it comes to the liquid cooling portfolio, we have certainly an ability to provide very optimized liquid cooling solutions on specific [ second ] types, so absolutely optimized. We have a total ability to customize to customer needs when that is required. So it is both an ability to talk to our customers and say, hey, this is what you really need for this type of silicon, but also it is an opportunity for our customers to have exactly their design, depending on very specific in some cases, requirements.

But if we go to super compute, the center stage was our smart run solution, which is the entire white space infrastructure comprising everything, white space data hold, power distribution, liquid cooling. So I would say that the integration and the convergence of that solution across multiple technology areas that normally happens on site with great consumption of time and cost is something that we have changed dramatically with a SmartRun. So SmartRun is extremely successful, and I think we have done our part again to change the way the industry works.

Are you expecting more regulation in liquid cooling. There's been a lot of discussion about that and what would the implications be?

Not necessarily. I think there is a -- the -- this part of the industry is maturing. So there are some of the let's say, way things are done are maturing and stabilizing a little bit in terms of water temperature, et cetera. But that, too, evolves over time as we know.

Your next question comes from the line of Nigel Coe with Wolfe Research.

So I want to go back to the strength in free cash flow in 1Q and obviously, you had another very strong quarter of deferred income customer deposit bookings. And I'm just thinking, is this a way to think about backlog growth in the quarter? And I guess my question is, do we typically book the cash from the deposits in the same core as the orders? Or is this a reflection of the strength we saw last quarter? What I'm just waiting to say, is that a way to think about the backlog growth?

I mean I think it depends on the customer, Nigel, in terms of what we get from an advanced payment perspective, or will we get from a downs -- a down payment perspective. And their payment terms in terms of when the actual cash would come in. So again, some of that strength in the first quarter is going to come from payments that were from orders in the fourth quarter. Some of it's going to come from orders that were in the first quarter. And that will continue out through the year.

And as I was just mentioning to Julian, as we look at our working capital across the year, we are a little bit prudent in terms of how those payments will come in and when they will actually execute. And how much we would get from a percentage perspective when we look at the order book as well. So it's a combination of all those things. But again, it is a way to look at backlog, but it's not entirely our read through.

Your next question comes from the line of Mark Delaney with Goldman Sachs.

I want to better understand what the mix shift over time towards solutions like SmartRun and [ One Core ] means for your margins? And if there's a meaningful difference in what investors expect for incremental margins as those become a bigger piece of your overall sales mix?

Yes. I mean I don't think in terms of -- as you mix more towards those, you're going to see a margin dilution from a mix perspective. I would say we'd be able to hold relatively on a product basis, margins kind of in line with what we'd expect historically as you mix towards those product lines. So I don't expect a major mix headwind from that. As we look at it becoming a bigger portion of our sales and our outcomes. I would say, again, there's multiple products in there, and there's multiple mixes that we would go across all the different business units. So I wouldn't say it's a significant headwind that we're looking and we're adjusting for.

Your next question comes from the line of Noah Kaye with Oppenheimer & Co.

I guess just one related question to that. Because Gio, you talked at the start about the convergence, right, of different disciplines, power, cooling, IT. Historically, we saw a lot of procurement of the different components based off of best point solutions. If that's shifting, can you talk a little bit about how it's shifting the conversations? Who you're having conversations? With who's making the decisions among your customers and how that's impacting your sales cycle?

Well, certainly, convergence is very important. And as I was saying, it's not just prefabrication, but it's an optimized system. That's why having an optimized system with Vertiv technology is a winner. But we shouldn't think about this as replacing the point-to-point, let's say, the product point type of activity. It is a gradual and partial shift.

And it really different players have different degrees of adoption. So if you think about power modules. Those are pretty much becoming a standard in the industry. So you'll see that people will start to buy power modules instead of necessarily going into each and every component inside. It's never black and white, but that's a direction. When it comes to the entire converged system, the entire manufacturing system, SmartRun, well, the interfaces might be slightly different. But again, it's not a totally different breed of players, or people you discussed the engineering, or the transaction.

But there is also a [indiscernible] different category of people in the industry that might not have, historically, that type of procurement, or engineering -- or engineering staff and experience. Nor do they need it when someone is capable of providing an already fully optimize pre-engineered converged system and solution. So the market is taking multiple going in multiple direction. Some are partially overlapping. Some are different. So we are very happy about our point products and -- to point product, let's say, type of business. As well as we see integration and convergence becoming a bigger part of the market that we serve.

Your next question comes from the line of Andrew Buscaglia with BNP Paribas. .

I wanted to touch on -- you made some -- a couple of deals in the quarter, [indiscernible] Any way of framing the size of those or what you paid? And then our deals going forward more like kind of like the smaller bolt-ons, or we see more along the lines of like a purge rate if you were to move forward this year with more acquisitions?

Yes. First off, just to answer the question on side. We didn't disclose any of the size of the businesses. So again, we probably wouldn't refer back to that. I mean, in terms of materiality, we did do some press releases on them, but we didn't give any of the sizes, but if they were materially impactful to us, we would have had [indiscernible]

Can you repeat the question around [indiscernible] I'm not sure I heard you.

Just more so, you guys indicated interest in M&A deploying capital towards that this year. Will we see more deals along the lines of like a [indiscernible] right spending-wise or more of these like smaller bolt-on niche kind of acquisition?

Well, exactly. We -- as you saw us with [indiscernible], when -- it's really about what the value of the asset that we have in front of us. So we have now the reticence in cutting bigger checks when that's needed and what's opportune, let's say, as we have demonstrated. And our balance sheet is certainly very, very strong. And when we see value, we offer value. And value is not just per se, there's value in the context of our long-term strategy and our technology and market growth strategy. So rest assured that we have no -- how can I say, no fixed [indiscernible].

This concludes our question-and-answer session. I would like to turn the conference back over to Gio Albertazzi for any closing remarks.

Well, thank you, [ Jeannie ]. Thank you very much. And thank you all for your questions and the conversation today. I'm quite pleased with what we have accomplished in the first quarter and how we are positioned as we move through 2026.

The entire Vertiv team has executed well, and I'm grateful for the strong partnership we have with our customers, suppliers and partners in general. We are making real progress. But as you've come to know, we have never content with where we are. I am pleased, but I'm certainly never satisfied. We'll continue investing ahead of the market, maintaining our leadership in technology and innovation, and executing with our speed and precision our customers expect from us.

I'm confident ever about where Vertiv is headed. The trajectory is strong. The opportunities are significant, and we are well positioned to capture them. Thank you all, and I hope you have a wonderful rest of the day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

All right. We'll kick off day 3 here at the JPMorgan Industrials Conference. We're very happy to have Craig Chamberlin as well as Gio Albertazzi from Vertiv. I think Gio is fresh off a flight back from GTC.

So before getting into that, maybe just starting every fireside this conference with a bit of an overview on just maybe your -- the Middle Eastern situation and how we should look at that in the context of Vertiv.

Well, of course, the situation will unfold in the next few days or weeks for us. Certainly, an area in which we operate in terms of markets we serve with some manufacturing capacity there. We feel pretty good in terms of the supply chain resilience that we have built over the years. In terms of the market is a subpart of our EMEA market. So it would be probably premature to think about what the actual impact is, but we see good resilience across the spectrum. But time will tell. It's a little bit premature still.

Yes. But you haven't heard any of any of the -- I know there was some activity that was ramping there that's probably a bit deferred, but you haven't really heard any news about any of those projects that are not really moving through.

No news, no news at this stage.

And GTC, I mean, I've been at this conference, didn't have a chance to listen into what the CEO of NVIDIA had to say in depth. But maybe what are your couple of takeaways from GTC and how that would -- maybe has evolved for Vertiv?

Well, certainly, in our confirmation of the huge amount of demand that NVIDIA see and that's the demand that, of course, we also see. So our view of the market -- the views of the market align quite a lot. Two other things that are important is the continuous evolution of the silicon, but not just the silicon as a system because I'd say NVIDIA is past the silicon in and of itself, of course, the silicon GPUs are central, but it's the entire IT system -- the entire, let's say, part that have been developed.

So continuous evolution more and more productive silicon and systems, which means that you drive more tokens per megawatt, which makes the whole AI more -- every token more cost efficient. And with that cost efficiency, of course, comes even more adoption of AI. So that was encouraging. And we were part and we also announced our partnership being part of the DSX, Omniverse type of infrastructure, again, aimed at optimizing the design of data centers or dare I say, should I say, AI factories, but also enabling a fast deployment and an optimization during the life cycle of the infrastructure at the IT factory. So we are participating in that effort. We are an important player in that effort with products like our Vertiv OneCore. So everything going in the direction of an acceleration in the industry and acceleration towards faster deployment and better utilization.

And the more efficient these chips get, the more tokens, I guess, come out, the price comes down of those tokens, but the net -- it's still net very positive for your customer from an ROI.

Very much so. Very much so. Yes, very much so. And we like this evolution of the technology because that technology becomes more dense, more demanding from an infrastructure standpoint. So that's exactly what creates value for us in terms of the market that we serve, but also leverages our unique capabilities. So very encouraged also by the incredible buzz around everything, GTC, also Vertiv in that perspective, very excited.

Right. I think there was more buzz here, though, at the JPMorgan Industrials Conference. That was the second most important event of the week for sure. From a content per megawatt perspective, you guys kind of bumped it up to 3, 3.5 -- as we move into more prefab and complex systems, where do you see that going over time? What's the influence there?

Well, yes, I think we will have an opportunity when in a couple of months plus at our Investor Day to further elaborate or elaborate in more details on this aspect of our business. But in general, we see fabrication, and we like to talk about this integrated and converged infrastructure. It's not just the integration, but it's a system that is designed as a converged infrastructure. But we see that, that helps us add more value and capture more value. So it's something that drives towards an increase in megawatt -- sorry, dollars per megawatt.

And when you think about those kind of prefabs, a lot of that -- how much of that -- of those prefabs is your equipment versus kind of a third-party content?

It is a lot of Vertiv equipment. That's a lot of Vertiv equipment. If you think about our portfolio as stretching all the entire range of power and thermal. So the majority is our equipment.

Yes. Okay. Unlike some others who may be packaging a lot of stuff that don't have...

One thing is being an integrator -- and there is value in integration. But another thing is to deliver a system that is thought of as one system that is tailored example on, say, Vera Rubin. And it's kind of -- how can I say, crazily optimized around that application. And that has a lot of value for our partners and for our customers.

Okay. Before getting into the technology, maybe just on the overall cycle, what inning do you think we're in here? It's always hard to tell. We're definitely out of pre-game warmups, but my view is we're still not quite middle innings. I'm not putting words in your mouth, but what do you think inning we're in, in this whole cycle?

Look, we are still at the beginning. We're really at the beginning. Now we see tremendous traction in terms of adoption of AI, but it's so the beginning. So we see a long, long trajectory. So I agree 100% with what you saying.

And when you think about any risks, what are you hearing from your customers as far as bottlenecks? We had a panel on Monday, and they basically talked about some of the power bottlenecks being relieved, but then something else pops up. But they seem much more, I guess, constructive on the ability to fulfill orders. So what do you think maybe bottlenecks and then risks that you watch out?

Yes, let's start with bottlenecks. If we go back a couple of years, maybe 1.5 years when everyone say, hey, the world will stop as we run out of power and say, no, power is a pacing item. Power, of course, with an industry that grows at this speed, there's always something that you have to work on and to remove as a bottleneck. That doesn't mean that power is not something that continues to be worked on and optimized. But I say, hey, the demand is there. Demand is real.

Capital ingenuity are being thrown at the power problem. The power problem will be, I wouldn't say eliminated, but managed for the growth that the industry needs. The same is true for other possible challenges, permitting. But of course, it depends on the country in which you operate. So I'd say, yes, this is an industry that is growing very fast. There will always be something, but there will always be an answer to the challenge at hand.

So when you look at it today and you kind of rank those, what are the top 2 bottlenecks you think the industry is facing?

I would say continue to be power as a pacing item. The other is I go back to what I always say, this is a construction industry in many respects. So construction ability -- sorry, labor and complexity on site is something that is being addressed. And we were talking about prefabrication. It's exactly the way in which this has been alleviated. So there will be other things in the future. There will be other solutions in the future.

And any risks you see out there today that make you nervous that we could have an air pocket or hiccup or anything like that?

We don't see that. We don't see that. We see strong demand continuing. And yes, no air pockets.

Yes. I'm not going to ask about orders, but you said you would talk about pipeline. Pipeline is still doing pretty well.

Well, we go back to what was it mid of February -- so I'll go back to what we're saying there.

Okay. And then EMEA, it seems like there's a bit more optimism from your tone on EMEA. What are you -- what's going on there? And I know it was -- it's going to be down here in the near term, but how do we see the trajectory in EMEA?

Sorry, we go back to the...

Putting Middle East aside, of course.

Yes, of course. I go back to our earnings call in February. We see the spring uncoiling as we coined, I think you coined that way of putting it 6 months ago, so when we were to get. That is definitely happening and pretty optimistic about that.

From a customer perspective, you -- there's a lot of different players now in the market. How do you guys make sure that you're -- you can't -- I mean, you do serve everyone, but how do you make sure you kind of choose the right projects, the guys that are going to be there 5, 10 years from now? Or is that not really a concern right now just because of all the funding and the capital that's coming in? So go ahead.

No, I think -- one, we are selective in certain regions and understanding what we have to do from a long-term perspective of winning. But for us, it is a quick cycle to cash. So we do want to deploy and get our installed base out there. I think where you're going, Steve, what I think about a lot is who's going to be operating that data center 5, 10 years from now so that I can get intimacy with that customer and drive what I call the services model on the back end.

So I want to ensure they have stability there so that I can ensure that they're continuing to go and I can wrap my arms around it.

I think on the OE side, the quick to cash helps us out a lot because we end up getting our -- I'd say, our items deployed, our equipment deployed and we get it out there and we get our cash in the door. The back end of the cycle is what I always want to make sure that I understand what the customer is going to be and how long they're going to be there so I can continue to drive revenue on that piece of product that I put out in the market.

And then when it comes to the different types of technologies, whether it's ASICs or GPUs, do you -- I mean, is one more content-rich than the other? How do you think about that split?

Well, in general, when we with that part of the market, the ASICs, anyway, advanced silicon, pretty logic kind of all live in the right side of the spectrum that we gave you and that we will further elaborate on in our Investor Day. But clearly, if you take the Vera Rubin or even future, then it's the kind of right most end of that spectrum. As we said a few times already, NVIDIA defines the envelope, and the rest falls inside the envelope. But again, when we talk about AI silicon, it all sits on the right side of the dollars per megawatt spectrum.

Got it. Got it. So it's not -- obviously, NVIDIA is over here, you're doing their kind of cutting edge, but the ASIC is still right within that.

Absolutely. Absolutely. Take TPUs and you take an example of very, very high densities -- very high densities. That are good for us.

From a -- just getting into the technology a little bit here, the 800-volt architectures that are coming out, where are we in this journey? And how do you see it playing out from an architecture and then also a penetration perspective as we move into the next few years?

Well, we are progressing well with the plans that we shared with you with investors being kind of second half of this week -- sorry, this week. Second half of this year. Still jet lag -- a little bit jet lag. It was a short kind of red-eye.

Weeks feel like years...

Exactly. So that plan continues to be executed upon, and we are happy about the pace. When it comes to the architectures, we shouldn't think about it as a black and white. One day, someone will flip a switch and everything will become an 800-volt ECO plus/minus 400 volt depending on the type of silicon and let's say, application. But we will see multiple powertrain configurations from, let's say, full medium voltage to more traditional -- from more traditional type of powertrains. And when there is an 800-volt DC silicon at the end of it, you will have conversion, an 800-volt DC done at row level to fully, let's say, medium-volt DC native powertrains.

It's a big spectrum. And I -- we do not see a day when everything will flip. We see a coexistence at least for the foreseeable future of multiple architectures, which is something that we like. We're very confident on our medium voltage or 800-voltage DC technology, and we see the fact that all the technologies will coexist in the market.

What are some of the moving parts within that? Is there anything that's pretty clear right now that will happen within the architecture that will change?

You will see -- if I understand the question, you will see...

Just thinking about the traditional architecture where it's transformer to switch gear to UPS to what a power shelf like just thinking about that train. I've not seen the NVIDIA white paper. Maybe that's it. I don't know, but I'm sure there's like 1,000 other variations.

There are a lot of variations...

And I'm curious where we are today, like what's the most -- what's seemingly kind of the most definitive thing you can say?

Look, today, we still see the majority in the traditional powertrain designs. We are working a lot on everything, battery energy storage system plus medium voltage UPS as an area that is very, very important for the future.

And as far as the content there, I know -- I think you have a partnership with LS Electric, but I'm not -- is that related to this 800 volt? Or do you have what you need in-house to manufacture...

It's pretty much Vertiv thing. Of course we have a good relationship with LS. But this 800-volt and anyway, DC portfolio expansion is very much a Vertiv in-house thing.

And solid-state transformer, is that something that you guys will be -- or is that too far outside the Vertiv envelope?

Well, I think it would be a little bit premature to say. But as usual, when technologies become important for the industry, we are very early in that space.

Okay. And just lastly, this adoption trend, you're going to start to sprinkle it in second half '26. How does that ramp look? Like what percentage of installs could it be in '28 or '29?

No, I think it's still premature. I think it's still premature also for the market in general and just for Vertiv. And you'll see different type of operators, different type of data centers adopting different types of technologies. So I think talking about mix and volume speed of acceleration is a little bit premature. But we have a good understanding of, let's say, of range of outcomes. And of course, preparing not just from a technology, but also from a capacity standpoint.

Right. And there are still, I would assume, some hurdles from a safety perspective, and this is a pretty robust change?

This is an important change. It's an important change that goes in the direction of making our services and our services capabilities also in the medium to high voltage more important from a customer relations standpoint and ability to serve a complicated infrastructure.

Shifting to the cooling infrastructure. How do you see that evolving? Obviously, liquid cooling did go from 0 to 80% of capacity or whatever now. Anything on that front? And how do you see the -- I guess, when I also ask kind of the role of the chiller going forward because you guys are a systems provider, so you're may be in a good spot to kind of understand.

No, absolutely. So first of all, of course, liquid cooling is ubiquitous. So -- and will continue to be. There is no turning back. There are some customer players that continue to be focused on air, but the majority. The majority is going to liquid with, of course, a portion of air as well because they are in the data center loads that continue to be air cooled. But let's go to the system. When we think about the thermal chain is really as a system, the heat rejection, so where a chiller sits is becoming a more and more important element of the system.

As liquid temperature are increasing or can increase with some of the newer chips. And going back to what Jensen Huang mentioned, what was it, a month -- a couple of months back. Then you see that the ability to use a smaller amount of mechanical cooling, that becomes a real opportunity. Is an opportunity, of course, it depends on the geography. It depends on the climate in which you operate. But it means that your heat rejection system or system of heat rejection equipment becomes from one size fits all to you can modulate chillers, dry coolers, trim coolers in our case, our portfolio.

So a product that is in between that can depending on the condition of the locality, depending on the type of climate, depending on where -- when you are in the year, you can modulate the amount of mechanical versus free cooling, generating a lot of efficiency, but also needing much less electricity and power that can be converted to generating tokens. So the whole system becomes more efficient, effective, but also more complex to deliver and to orchestrate. That's something I would like.

So if we look at the kind of growth rates of liquid versus air, I think the liquid cooling TAM has to be significantly bigger than anybody would have thought 1.5 years, 2 years ago, obviously, just because of the megawattage, nobody predicted that. How do we -- is the air cooling market still like a really solid double-digit market? Or is there -- is liquid just taking over that TAM?

Yes, there is not a taking over, if you will. Clearly, the speed of growth of air cooling is much smaller than liquid. I would say that probably in -- I don't know, but soon, we will see those 2 TAM growth started to align because the mix shift will probably be completed in a year or 2.

Right, right, right, because you're currently penetrating dramatically and...

We're still in a phase of a partial substitution and that will stabilize with both, of course, but at the -- let's say, steady-state mix between air and water.

And from a growth rate perspective and just looking at your current long-term growth rate. The cooling market and the power market are those pretty -- is one growing faster than the other in that the 12% to 14% that I think you still have out there as your...

I would say that we should look at the market as synchronous -- pretty much synchronous in terms of growth rates.

Okay. Got it. How are you just pivoting back to the customers here. How are you seeing the funding environment evolve there? There was a super interesting deal you guys did with Hut 8, I believe. That seemed like it was a pretty -- not creative, but like a pretty innovative deal. Are you seeing more of those out there from a financing perspective and funding perspective for the customers?

I think we go back to the comments where they say, what are the pacing items for the industry? Well, when you have a pacing item and the demand is very, very strong, than the market becomes a very good at finding solutions to problems. So that's what we see, very, very strong solutions and very convincing solutions, and that's what we're seeing.

From an end market perspective, obviously, the colo is growing really fast. What are you seeing in the enterprise?

Still behind, of course, everything colo, hyperscale in self-build or new cloud. But we start to see an increasing interest in enterprise for, let's say, enterprise sovereign or private data and private AI. So we're still early stages. We're seeing, again, going back to GTC, NVIDIA starting to have systems that are silicon and systems that are designed specifically for Edge enterprise applications. And the market is there. And the market is there. And I think it is early stage still, but encouraged by the dynamics and by the direction of travel.

Is it growing? Is enterprise growing today?

It is growing. It is growing. I believe there will be an acceleration. And I think we will have an opportunity in 1.5 months when we have -- 2 months when we have our Investor Day.

And then telecom, any signs of light there?

Well, that sector is still growing relatively slow. I think we go back to what we're saying low mid-single digits.

Okay. And then just lastly on the business and the top line, talk about services and where you are today on that initiative. Is -- I would assume with all these liquid cooling installations and the risk-averse customer around that new architecture that there is a real opportunity for you guys here?

There is, and we are capturing that opportunity very, very, very well. And it's not just a risk aversion and certainly, the risk aversion is a fundamentally important survival trait in our customer base, but it's really the sheer complexity of the infrastructure of the building. When you have a liquid cool infrastructure, I go back to talking about thermal, the same is true for power with more complicated heat rejection systems, you have to have a very, very skilled, very, very reliable and very, very knowledgeable partners with you such as we are.

But again, this increased level of complexity creates new opportunities. If you go back to our PurgeRite acquisition, 2 years ago, nobody would have thought that the fluid management space would be so important as it is today. So the complexity of the system, the sensitivity to perfect calibration at commissioning and during life cycle of the primary and the secondary fluid networks are creating beautiful opportunities for services.

I know it's a relatively smaller part of your business. You guys include installation and commissioning and things like that in the service number. But are you getting any visibility on maybe the multiple or the content per megawatt installed that you could get over the lifetime of the product. I mean these things haven't -- these haven't been installed for more than like a year. Any visibility on that kind of business model, how we should think about that?

Yes. I would say that we would not be specific here. Of course, we have our models and our -- I say good understanding, of course, of the trajectory. When we talk about complexity being favorable in terms of wear in the 3 to 3.5 megawatt -- million dollars per megawatt, well, then service is clearly also pushing that to the right. And the services on complex system is certainly very favorable in terms of content.

How fast can that kind of core service business, so not the install-related stuff?

Yeah, yeah, what we call life cycle.

How fast can that grow? Is that -- if your revenue grows 20% this year, whatever, high 20s, how fast is that business growing? Or should we think about that?

We're -- it's growing right now in double digits. You just don't see it because it's not growing as fast as the OE. And I think that's the -- what ends up happening is a lot of that OE equipment stays on warranty for a couple of years. And then as it comes off, we attach and we try to attach for the, let's say, the extended services and extended warranty period. So in my mind, it's more of a steady growth, but I like it to be a steady growth as -- and what we've talked about, Steve, is at some point, the OE party is going to slow.

And as it slows, I want to keep that backbone growing at the low double-digit kind of growth because it's going to continue to give me the -- I'd say, the mix that I want and the outcome that I want and the revenue that I want. So Gio and I are pretty maniacal about ensuring that we wrap our arms around every piece of equipment we have out there and ensuring that we have the installed base service because as you said, it's early innings. We don't even know what that revenue model looks like yet because some of the stuff has just been deployed for year.

Another comment here. When you think about, if you will, almost a chasm between commissioning and life cycle services kicking in contract. Well, that is closing very quickly in, for example, liquid cooling or systems that are complex because it's not about being covered against things that you are cover anyway during warranty. It's about you need to balance the system.

You need to have reliability built in and very often a crew of Vertiv service people on site day 1. It's not about, oh, yes, I'll see you in 2 years. It's day 1. It's critical day 1. So maybe the content is a little bit smaller because there will be part of the activity that is covered through warranty, but it's really kind of the monitoring, the present, the service level guarantee on site that play a very big role. And we like a lot the direction of travel.

And that's what Next Predict is really all about, right? Next Predict is getting in there and ensuring the stickiness. Like -- again, Steve, you've been around industrial is kind of where I've been around. The ultimate end game at any industrial build-out is to be there when the services start paying off. I think we're lucky enough to be part of the build-out and you can grab that OE, but really the end market and the future staying is going to be how much you can grab of that services market and staying in it for the long term because that's the real 10-, 20-year kind of revenue stream that you want.

Right. And that incremental cost, obviously, to protect what the $1 trillion of CapEx you just spent is relatively small in the event that something goes wrong.

Yes, yes. Just on the margin front, the margins last year impacted by tariffs a little bit this year. We had always thought about you guys as a 35% incremental margin company. You're a little bit below that this year, below gross margin. So maybe just talk about how you're kind of metering your productivity efforts against demanding customers and the investments you have to make. What is the -- what's the biggest walk down from your gross margin to kind of the low 30s incremental? And is low 30s incremental the right run rate to think about longer term?

And I think longer term, we'll come back at Investor Day and kind of give the same framework. I mean we've always talked about 30% to 35% is kind of the space we want to be in, and we want to grow towards that. So I think we'll get more of a framework around it as we talk in Investor Day. But to walk down to this year, it's one, the bounce back, right? We're bouncing back from the tariffs. So we're ensuring that we get that back. But then you -- we did have a heavy investment. As you know, we're going from 2% to 3% to 3% to 4%. So bringing on that additional capacity, you do have a little bit of a headwind from that, that we'll work our way through here in the first half and into the second half.

And I think we'll exit the year. We'll begin the year like probably high 20s, 28%, 29%, and we'll work our way up into the 30s and then we'll exit at that rate. So I think that's kind of what we're expecting, and we'll put a more bow around it as we get into the Investor Day, but that's really the big walk down for us is bringing that capacity on effectively, not rushing through it.

Any movement in recent movement in raw materials that we have to keep an eye on? Or are you guys pretty -- managing it pretty well with price.

I think we keep an eye on it regularly. We've increased our pace in the terms of how we look at it and how we go back to the market in terms of pricing, we regularly understand what that input cost looks like and try to ensure that we're pricing for it and pricing for it -- and pricing for end margin. So for us, it's a pretty regular drumbeat. We look at it almost on a daily basis and understand what it looks like, what does our pricing look like, ensure our quotes are updated for it and update not just for the one that's going to be delivered, but look at when it's going to be delivered and how we expect that input cost to change.

And do you target margin -- just remind us, do you target margin neutral, margin accretive, dollar neutral? How do you think about?

We look at it at a minimum.

Price cost -- on a price cost basis.

At a minimum margin neutral.

Got it. And then just lastly, on the margins, restructuring. Are we at the tail end of any restructuring? Or is there always stuff to do? And how do we think about the targeted efforts there?

I mean I think we look at it by region, by what we see from in terms of what the market looks like and these markets change dynamically. So you'll know that we've done some in the past, and I think it's always based on what we see the end market looking like. We don't want to sit and wait if there is an action that needs to take. We want to be out in front of it and understand what that means. So I don't say it's completely gone. We're still working through a couple of them. If we see the market change on this, of course, we're going to go out and take the cost out because we don't want to be sitting with unused cost. So that's kind of the way we think about it.

Exactly. I know it's a state of mind of permanent optimization -- permanent optimization of cost. It's not that something that happens every now and again. You constantly think about you optimize the company.

Yes. Any color on the segment margins and how we should think about which ones have the most opportunity over the intermediate term?

I mean I think when you're looking at segment margins, again, we feel like Americas always has the tailwind of volume behind it right now. EMEA is bouncing back. And I would say it's bouncing back because you felt this first half of the year, it was the dip on sales. So they get a little bit of headwind from that, but they'll bounce back in the second half. And I think we see a steady trajectory in APAC of continuing to grow and optimize there. So that's kind of the way I look at it is ride the volume in Americas, bounce back in EMEA and the steady growth in the APAC region.

And then just one more for you. What the heck are you guys going to do with all this cash? I mean it's pretty abundant, and you guys are at, I don't know, 0.5x...

I mean, we like our balance sheet. So I'm not going to apologize for having a strong balance sheet. It's what got us investment grade. So I'll stand behind it 100% of the time. But that doesn't mean we're not going to look at things that will strategically fit in the portfolio. For us, it don't spend money to spend money, spend money smartly and spend money where we can actually get a large return on that money. So it's -- we've done it in the past in terms of the add-ons and the bolt-ons that we've gotten. We always look at them at what is the growth potential behind them and what's it going to return to us.

And for us, it's not a, hey, we got to go play in the inorganic market. We really like the portfolio. Now if something is missing or we think there's a spot where we can really jump in and grow it, we'll go do that. We're a little lighter when it comes to stock buyback or dividend. And we like to keep the powder dry in case there is something that pops up and we want to go. But the best place for us to spend our money is R&D and CapEx because that's an immediate return. I know what it is. It's tangible. We spend the money that's going to be spent there, and then we start looking at how do we deploy. I don't know if you have anything else.

No, I think it's absolutely as it is.

And I know there have been a couple of deals, but you're still -- are you still cold plate agnostic, if you will? Or is that an evolving area enough so that, that may be something you guys would be interested in either developing or.

In our industry, you have to be server agnostic. You do not know what server or what cold plate your thermal infrastructure will serve. And indeed, the 2 things are disconnected. So you know what type of loads, but you do not know what the cold plate that you will indeed serve is. So clearly, agnosticism versus relative to the server is a very important part of our strategy.

Okay. Sorry, one more point. I just wanted to clarify this, which I should have before -- because I'm getting this question all the time. On 800 volt, as you see it today, that is within the -- your content window that you've talked about, whatever the architecture that you've seen, that is within the content window.

Yes. Not only that, but we believe, again, it's on the right side...

On the right side...

On the right side of the window.

Well, thanks a lot. We had Dave Cote here on Monday, and he was singing your praises as he reflected on his career. So congrats on a great run and -- keep it up. And congrats.

Thanks.

Great. Well, thanks, everyone, for being here for the second session this morning. It's my pleasure to have Vertiv. We've got sort of 2 sides of it today to go through Craig Chamberlin, CFO; and Scott Armul, CTO. So both sort of recent appointments. So congratulations, both of you, Craig and Scott.

Maybe we'll start off around a sort of more financial question and then go into more of the technology stuff. So there's one thing that's exercised a lot of investor questions is around margins? And how do these companies with a lot of data center exposure like Vertiv manage very high production growth, capacity additions and still kind of generate decent operating margins and high incrementals and so forth. So maybe just start there, the confidence around that. It was a good end or second half in the Americas for Vertiv last year, but kind of how do we see the year ahead on incrementals.

Yes. I mean I think we talked about a little bit in the earnings call. We're still guiding here to 28% in the first quarter, ending up 29% for the year. With that path of the expected incrementals being somewhere in that low 30s, 30% to 35% long term. And you asked a question of how do we get there? What do we drive? I think it's a couple of things. One, it's a price cost equation. We drive price to offset our cost inputs to make sure we stay margin neutral and the game price where we can, especially on the back of technology and on the back of offerings that we really think are stand out in the environment and in the space. So I think it's a big driver for us.

I would also say we get a lot of operating leverage in terms of how we use our footprint and efficiently use it. You'd mentioned or asked a little bit on bringing on capacity. I would say this year, we are feeling a little bit of inefficiencies by bringing on some brownfield capacity and greenfield capacity. You'll see it a little bit in the first quarter. That's why it's kind of the low point. We're bringing a greenfield on in Asia and some brownfield expansions in America. But as those sites get up to full capacity and full run rate, you would see that pull through. So that's what brings the incrementals up as we exit the year.

So I mean, I think, again, we go back to productivity in the shops, that's a major thing for us ensuring that our price/cost equation is positive and then pricing for technology and what I'd call a differentiated advantage in the market. So those things are where we feel really strong about. We feel like that, that would be our margin play going forward. So that's kind of where I lean into.

Great. And when you're thinking about the, I suppose, working capital side of things, it was interesting that you had those the deferred revenue and a big source of cash coming from that as the orders picked up last year. Is that something that's become a lot more relevant as the size of project and order wins has got larger because I guess, historically, it wasn't a feature of the landscape for electrical equipment.

It wasn't. I think as you get more to what I'd call project-based or system-based offerings, where you're offering a larger scale and scope, we want to make sure that we drive towards cash neutral to cash positive across the life cycle of that project. So if we start ordering and we know we're going to deliver over 12 to 18 months, how do we stay in front of that cash curve so that we're not funding the project basically. And that's what we look like -- look at for a milestone progression and understanding how that works. I think it's something the market has accepted, especially given the fact that a lot of the spaces people are wanting to move as fast as they possibly can to get equipment in.

So for us, it helps us assure our balance sheet, it helps us assure our cash position. It also helps us assure the deal is -- a deal that's going to go forward and that we feel very positive about the financial standing of that deal. So it kind of solves 3 problems for us. And we really like the position that it's gotten us into. And I think what you saw in the fourth quarter was because of the order ramp and we saw a lot of orders closed there. It did pop our cash up. So it was a little bit above what we would normally run in terms of free cash flow conversion and we'll probably see that settle back down a little bit next year. But we still feel like we're positive working capital, and a lot of that is driven from strong management of inventory, strong management of payables, but you do get an uplift as you see the order intake and what we call advanced payments or milestone payments.

Great. And then on sort of orders and backlog. I know Lynne had asked me to ask you a lot of questions about orders, guidance and so on. But if I stay away from that for a second, the backlog composition, it seems like a lot of longer-dated orders have been placed by data center customers. But at the same time, the sort of profile of your backlog, I think you described as being similar. So help us understand how to think about those 2 things.

And this is the way that I think about it, and I think you described it pretty normal. If you think of the backlog is like a square and how you fill it in is like the front, you fill into the earliest orders and it goes down. What we're starting to see is the back half of that filling up more. So the back half of the 12 to 18 months filling up more in terms of orders that we're getting to elongate that what we call fill up of the backlog. So when we say the orders that we saw in the fourth quarter, especially in December, are filling in that back half of the backlog. That's what we're really truly seeing it progress towards. So historically, you've seen a run rate across the quarter that was much more flat.

This year, in 2025, we saw that spike in the fourth quarter. Now Julian, that could have happened, those orders in December could have moved to January. And we wouldn't be having this conversation because it would have looked normal. But we were glad that they closed in December. And that is where we say its reference is that back half of that backlog tail, it doesn't change the shape of it, it just fills it in a different way.

Got it. And so the sort of execution profile of it is not that different.

Yes, it's not that different still -- we always say between 12 and 18 months is where we feel like our backlog is going to be executed through, I would say, historically, what you've seen is we fill up the front and then it starts to fill up the back. I think this time in December kind of filled up that back end a little bit helped us shore up that whole backlog profile. And that's where you see kind of the dance between if you get an order in December, is it delivery in December '26 or into '27 and that's some of the dynamics you saw with the math doesn't work exactly right because of the phasing.

And this is something, I think, for both Craig and also Scott this question around the extent of that order flow, I think, surprised many people versus other electricals and realize your orders and theirs are also very lumpy. But is there a shift in customer behavior around looking to buy more from a systems supplier because I think when people think of hyperscaler customers and the larger colos, very sophisticated so they can go best of breed. They don't necessarily need the external party to kind of tell them what to do. But it seemed like maybe there was some shift towards systems purchasing approach? Are you seeing that or not necessarily, it's just project to project can differ.

Well, I can start and I can pass it on to Scott. I think there's a couple of things that you're seeing. One, the system-level approach is there. And it's there because of reference design and it's there because of the, I would say, the partnership, not necessarily that we're going and telling somebody what to do, but we're going in and listening and understanding what they need and helping them develop the solution that's best for the system that's best to serve as the duty cycle and what they're trying to solve. And we think in the system level thinking is stacking, right? You buy a CDU, then what can we stack on that in the thermal chain that would then continue to add value to the broader portfolio? The same thing on the powertrain side, how do you continue to stack out from there.

And when you're in there having a conversation about what the duty cycle of that data center is going to be or what the ultimate solution they're trying to provide, it's easy to have conversations about how to add to that architecture and if you're partnering with them and you add to the architecture the right way, you kind of get the reference design of your equipment that would be able to service that need. And so we're seeing a little bit of that. So that's point one. Point 2, again, we kind of highlighted this as some of the prefabricated solutions is solving an issue that we see in the market today, being just the lack of available what we call labor force in the industry. And when you can do some prefabricated work, either it be plumbing or electrical or whatever in the shop in a controlled environment and you provide a SmartRun or OneCore where you have some of that already done. It takes a little bit of a pressure off of the actual builder. So I'll pass it on to Scott. I'm sure you have thoughts.

Yes. And I think related to how that dovetails into orders and the composition of the backlog. I think I wouldn't describe it as a material change, but we are seeing maybe a lot of the new entrants into the space, the neo clouds, if you will, a lot of the folks that maybe have land and power and are starting to build data centers are getting into that build cycle now where we've been through planning, we've been through some of the engineering design together. And I think that pairs very well with exactly what Craig just talked about, maybe some customers and customer profiles that don't have huge, robust development teams or huge robust engineering teams that would lean on a partner like Vertiv on reference designs and architectures and how the system fits together, and then you dovetail that very quickly into prefabricated solutions.

A lot of companies obviously are trying to go fast and move kind of faster time to market, faster token to -- or time to token and token to revenue and things of that nature, prefabricated solutions that help kind of define the data center for AI as more of a unit of compute is more of a purpose-built design specifically for that workload that can then pivot very quickly into prefab solutions that are more factory oriented more factory-built, quality controlled and then deployed on site so that we can eliminate some of the labor hours on site. You can kind of smooth out some of the overlapping contractors, mechanicals, trades, all working at the same time. I think the neo clouds as well as even some of the mature hyperscalers that see that are all pivoting towards this concept of maybe further embracing prefabricated and more purpose-built solutions in order to go faster and scale at the level that we're talking about here.

Great. And when you're thinking beyond the very near term, and this one more for Scott, perhaps, when you look at overall kind of data center equipment where Vertiv plays in the data center physical infrastructure, across the sort of full suite of products, whether power or thermal management, which ones do you think offer medium-term sort of higher versus lower end of the growth spectrum.

It's interesting. I'm not sure I could pick a particular product category because we are seeing a huge influx of just demand for greenfield data centers, especially as we're still kind of in the build-out of training models. We're seeing kind of the -- a real push behind human usage of AI and inference deployments and things of that nature. We're looking at turnkey data centers, and end-to-end data center. So it's heavy interest in powertrain. Obviously, the thermal part of it and especially kind of maybe the growth of liquid cooling is the answer that probably a lot of folks are looking for, but we're seeing a heavy interest in that and heavy demand across the board. Typically, when you get into data center planning, you kind of start with power and you start with power architecture, and that very quickly kind of moves into how do all of the block sizes align, what's the right structure for me to set up a pod or scale to a larger building block of a data center.

And from our perspective, we really see that design happening holistically. Generally speaking, you can still drive towards best-of-breed and piece parts and individual product solutions. But having a thought process behind. This is going to be a 100-megawatt building that scales to a 400-megawatt campus or 200-megawatt buildings that scale 2 gigawatt campuses. It's very hard to do that piecemeal and individually. Understanding how those blocks come together and how that entire design works for kind of GPU and TPU generations today and how that needs to evolve over the next couple of generations that are going to be coming in very short order becomes a very interesting engineering exercise and joint development exercise to make sure that we're planning in and driving towards flexibility.

So that's where we start to see it becomes more about kind of planning for that capacity and how this data center will evolve and less about maybe individual product lead times and individual product growth rates. So maybe a cheap answer, but we do kind of see it across the board. And it probably, I think, effectively goes back to our last question. We see a tremendous amount of interest and uptick in growth for Vertiv in the prefabricated and more of the infrastructure solutions. It's a prefabricated white space like our SmartRun product, prefabricated building blocks for power modules, service corridors, hydro modules, liquid cooling approach that can be scaled into a holistic data center like our OneCore solution saw tremendous growth, and I think that made up a significant portion of our order profile as Gio talked about on the earnings call. And we see that as a kind of a more of a secular trend here for data centers on an approach to build.

And on that point, market commentators sometimes bifurcate things between sort of gray versus white space. Do you see any difference in kind of relative growth rates between the two for Vertiv or the industry from here? And is Vertiv kind of leaning into one more than the other right now or it's pretty balanced?

It's interesting work we're across the board in kind of the outdoor environment, the gray space and the white space now. I think traditionally, folks would have thought of Vertiv is that kind of the heavy infrastructure, more of the gray space oriented, but we keep coming back to our SmartRun solution. When we think of prefabricated infrastructure that can help stand up and turn over a white space much faster, that SmartRun is hot aisle containment structure for racks, bus bar and power distribution. It's the secondary fluid network, all of the intelligence and control around it that we can move into a data center, put in place it's factory built. It's a single lift and it significantly accelerates how fast a customer can traditionally stand up white space.

And then it also enables us to have more of a view of, like I was talking about before, what are the generational changes and how do those blocks that stand up a GB-300 today pivot towards supporting a Vera Rubin or an accelerated TPU architecture 18 months from now or 24 months from now. So we have a lot more of a presence in the white space than we maybe have in the past or maybe would have been considered to have in the past. And then you add to that some of the capability we've added and bolstered in the recent months. Our acquisition of PurgeRite and services in the white space is becoming much more relevant in that standing up a liquid cooling network or a secondary fluid network is not a simple task. It's not for the faint of heart. It requires experience.

It requires an understanding of kind of how all of these things are supposed to work together. And then there's added content of flushing, filling, setting up, doing fluid management and making sure that kind of the network is ready to go and ready to have racks deployed. There's just a lot more content and focus from a critical infrastructure perspective in the white space. The gray space is just as critical. And I think we're starting to see much more maybe thoughtfulness around block size interconnectiveness, how medium voltage and low voltage switchgear interfaces to UPS is how we need to be thoughtful around kind of the mechanical yard and heat rejection, especially as data center sites are growing in massive scale.

Those become maybe more different or interesting problems to solve. And the fun part for us at Vertiv is we're looking at each of those pieces and how they're interconnected and trying to say, how can we do this faster, simpler, easier deployments, bigger scale, more effective cost so that we can manage kind of the capacity, the scale and the speed that's been coming at us.

And I suppose one trend that's been talked about a lot is higher voltages, I don't want to use the word high, but just, let's say, higher for now -- into the IT room. How is Vertiv positioned for that? There's a lot of questions around what types of power infrastructure may be less important versus some emerging ones like solid-state transformer could be more important. How is Vertiv positioned for that?

Yes. I think we're right in the center of this power architecture evolution. And to a great extent, we're happy and pleased to be able to kind of champion some of the transitions that are going to need to happen here to enable the high-density architectures in the super high density chip approaches that are going to be coming at us. From a DC power specific perspective, I think that's where a lot of the headlines and a lot of the discussion points have come around this concept of plus or minus 400-volt DC or 800-volt DC. We've been fairly public about our support and our investment in that area to enable kind of the Kyber racks and some of the things beyond Rubin Ultra and Feynman chips hat NVIDIA has declared. Timing is still maybe a little bit up in the air and iterative.

But I think there's an inherent physics challenge that is going to be coming at us and that's the reason behind maybe the pivot to higher voltage DC architectures, we physically run out of space for bus bar or rack power distribution to be able to effectively move the amount of power into 600-kilowatt, 800-kilowatt megawatt type of racks in multi-rack structures in a pod moving to a higher voltage DC architecture helps solve the power distribution problem. It helps with heat management, and it gives us an overall more balanced structure in moving to DC on how we manage energy storage, how we manage kind of energy sources.

Voltage ride-through and some of the other maybe more existential data center challenges that come when you have extremely volatile and extremely dynamic workloads operating at scale. It's one of those things that helps enable the architectures of the future in a way that doesn't require maybe a binary shift or a significant overhaul to the way in which we've done things. So from a Vertiv perspective, we're developing and we'll be launching a pretty comprehensive 800-volt DC portfolio that starts with what we'll call a sidecar type of a system that allows us to take traditional 480-volt AC infrastructure come to a device or a power conversion piece of equipment at the end of a road to convert to 800-volt DC that allows us some flexibility in generations.

If we have traditional AC architecture, we can still run that in. If we have 800-volt DC workloads, we can convert to that, and we can support it, and we can kind of manage that as the sites continue to mature and as the sites continue to evolve, we can work towards maybe more upstream some of the bigger picture and more purpose-built types of power solutions like integration of UPS functionality within medium voltage. The concept of large power converters or solid-state transformers, it allows us to explore those technologies and really drive that path forward without having to make a, I'll call it, a binary commitment to one architecture over another.

That's great. And then away from the power management side, maybe switching to thermal management for a second. A lot of discussion around kind of liquid cooling, how much will that outgrow traditional thermal management products like air handling units or chillers, what kind of Vertiv's perspective on that? And I don't know if you would hazard a view as to kind of how much of your thermal management business could be liquid cooling in a few years' time.

Yes. mix-wise and percentage-wise, I won't venture into that territory, but obviously, the momentum behind liquid cooling and all of the new generations of chips are kind of firmly in the wheelhouse of single phase direct-to chip liquid cooling. So that becomes almost the standard part of any good thermal chain or system design. I think the important thing to recognize and remember is that liquid cooling is deployed, the heat still has to manage its way through the data center, and it ultimately has to be either heat rejected or reused at the facility site. So chillers, heat rejection devices, heat exchangers in general, dry coolers like an entire portfolio and a comprehensive portfolio of heat rejection technology is required to get the heat out of liquid cooling. We actually see a pretty significant, I'll say, evolution and maturation in much the same way we're talking about power architectures evolving from a physics-based perspective with heat rejection, I know there's been a lot of discussion and maybe a lot of follow-up from some of NVIDIA's comments at CES around the concept that we don't need to chiller any longer.

We still need heat rejection. And I think 45 -- degrees C water delivered to GPUs and chips in the data center is a great ambition. And the reason behind that is, okay, if we can deliver warmer water to GPUs, we can heat reject without mechanical cooling. We can potentially lower the peak power draw of an entire data center site and move more of that peak power towards deploying more GPUs or increasing the cluster size. It's a great ambition, and we stand behind that ambition as well, but the practical reality of most data center locations and most data center environments is that heat rejecting for 45-degree C water is a pretty significant challenge.

So one of the things that we always like to talk about is a comprehensive heat rejection portfolio that is likely deployed in more of a hybrid scenario where you're going to have chillers and dry coolers or leverage a product like we have in the portfolio that we call our trim cooler that sort of gives you the best of both worlds, a very large dry cooler to manage free cooling and to reduce your peak power and increase your capacity while you have kind of the backup benefit of mechanical cooling and traditional chilling to use if and when you need it on hot days and in warmer environments, is the type of thought process we like to think about in terms of the overall heat rejection portfolio because it has to go and locks up with liquid cooling and it will continue to be relevant.

And I think one topic that is kind of top of mind for a lot of people is around the competitive landscape in liquid cooling, your traditional chiller business, there's half a dozen companies who are experts at it, a product in liquid cooling like CDU, maybe there's 100 expert companies in theory. So how confident are you in Vertiv's kind of technology edge or competitive position in liquid cooling versus, say, chillers. And allied to that, maybe a broader question for Craig around kind of pricing across Vertiv, you and a lot of competitors are adding matters of capacity. Demand is growing sure, but the supply is growing at speed as well. So do you start to worry at some point around -- is there any signs of price degradation in certain product categories?

Yes, I'll start and hand it to you. From a competitive perspective, especially within liquid cooling, we feel very good about our position. And I think now having a few years of experience at scale has really informed a couple of things. One is, we've talked extensively about the system view and a system perspective. So not only just the CDU box where it's critical to manage flow and pumps and heat exchanger rates and approach temperature like the core technology of a CDU does matter. But yes, you're right, there's probably a lot of focus here. There's a lot of new entrants. There's a lot of capability that's coming into the marketplace.

But how that CDU connects downstream to the secondary fluid network and how you're managing the intelligence and the control around that, how it connects upstream to chillers and heat rejection and how we're managing both of those things together. And then maybe most significantly and most importantly, when you go to deploy CDUs to scale and to actually deploy at a large site, we've now seen this firsthand and we've run through quite a bit of site deployments now where I'll just say it's not for the faint of heart and turning up that quantity and doing flush and fill and managing the liquid cooling turn-up for sites of that scale and of that magnitude is very significant, and there's a lot of maybe customer leaning on expertise and customers leaning on service content and other things that makes that sale and makes that project much more than simply a supplier of a CDU.

So we feel very confident that our customers see the value in more of the system approach to the design as well as kind of the scaling approach and maybe the boots and expertise on the ground that's required to stand up liquid cooling at scale and at speed. So I think we'll continue to leverage those areas as our value and our differentiation in that story. And I think that's led to a fairly robust price position and capabilities.

And I would say, again, I look at it in 2 ways, Julian. One is exactly what Scott said, which is what you're seeing kind of unfold in Americas is a lot of the system-level thinking, especially with the deployment of AI data centers. And that is where the system level, I think, helps us hold our price, helps us get premiums there because the customers really see value and not just the technology that we provide, but the partnership and the solution-based outcomes that we are driving there. So there's a little bit more of what I would want to call opportunity there to hold price or to get technology get priced for technology.

If you start thinking places in the Asia space, where there's more competition on some of these levels and maybe it's not liquid cooling, but it's other spaces. You might see some pricing pressure there. And what we try to do there is be selective as we can to how we win and build those partnerships so that we can continue to drive that pricing for technology. So I think we feel really good about our pricing position. We've been able to offset our input costs as they've come in through pricing. We've been able to gain some margin there. So I feel like right now, the strategy around the system level deployment and technology evolution to be ahead of kind of where our peers are and the proven track record of our solutions being something that you go to or our systems being something that you go to, I think, is allowing us to have a pretty good position there.

Great. And then lastly, maybe there's a focus from Scott, around organic investments, but there's an inorganic element, and there was obviously a large transaction announced in November for a liquid cooling asset. So I just wondered sort of what's the appetite at Vertiv for M&A deal of size in the data center realm. And any sort of financial gating factors or framework we should bear in mind?

Framework remains consistent with what we've looked at before. And the framework would be first and foremost, we look at investments in ourselves, which is R&D, if we can build it ourselves, we like building ourselves great returns there. And we also like to invest in CapEx because we know that, that gives us a delivery and a faster turnaround. Then in the M&A space, it's very strategic bolt-ons that we really like to look at. Can we fill holes in the portfolio? Can we get faster to market? Can we go to a space or a geography that we're not in and get a foothold and build out from there.

And that's kind of the game plan and the strategic look that we give is understanding where are the spaces that maybe the portfolio could enhance to this -- to what Scott was saying is like as you get into the white space, are there spots there that we may or may not have technology that we want to be able to stack on as I keep talking about stacking onto the thermal chain, on to the powertrain. Is there spots there that we could be advantageous on. And we like the ones where we can take them and build them and grow them and scale them because I want to be able to pay for something that I put value into not pay a multiple and something that may be cannibalistic to what I already have. So it's a strategic look in that framework. And I don't know, Scott, if you...

Yes. And maybe just from the technology lens, we're looking at it as -- we feel very comfortable with our portfolio and our positioning. But obviously, everything we just talked about in terms of the evolution of architectures and where things are going. Looking at those technology paths forward and where we can use that to either bolster parts of the portfolio or in many instances, accelerate or complement our organic plans that are already in place is really kind of the focus area for us.

Fantastic. Well, now we'll switch to audience response questions, please. So the first question is around sort of current ownership of Vertiv.

So still a lot of room for persuasion. Secondly is around kind of current general attitudes to the stock. So very positive on the whole. Third is around kind of through cycle EPS growth. I think we can probably have an educated guess here, but let's see. So yes, above peers. Fourth is around uses of excess cash and we were just talking about M&A. So generally bolt-ons. Next question is on valuation and what the warranted year 1 PE should be. So in the 20s. And last question is sort of any gating factors why there's still 60% who don't own it?

Great. So execution on the product ramp. So with that, thanks so much, Scott and also Craig for being here. Thank you. Thanks a lot.

Session started. My name is John Thornton, I'm Citi's Industrials Specialist. And it's my pleasure to be joined with the team here from Vertiv. We have both the CFO, Craig Chamberlin; and the Chief Product and Technology Officer, Scott Armul.

I got a bunch of questions here. We will open it up to the floor a couple of times to let people jump in where they feel best. But I'll get it started and maybe in about 10 minutes or so, we'll open it up as well.

So Scott, maybe we'll start with you. As Vertiv's Chief Technology Officer, I think we have to start with how do you stay ahead on technology in such a fast-paced changing technology world serving data center customers? You've talked about your one-stop shop in the past in terms of your ability to offer thermal and power management as well as global service offerings that allows you to offer an infrastructure solution that starts with design and ends with service. So could you update us on the one-stop shop ability and how is this manifesting itself in the market today? And then where are you pressing NPI most to stay ahead of competitors?

Yes. Rich question. And thanks for the opportunity. From a Vertiv perspective, we've always prided ourselves on being very close to the customers and the technology partners that are really driving the industry.

Obviously, we've been very vocal about our closeness and our partnership with NVIDIA, but also data center customers, hyperscalers, wholesale builders, on kind of what the needs are and where things need to go, and working on joint developments, joint architecture discussions, kind of debating around the needs for densification. Where does the portfolio need to go? What are the right architectures within the data center space for us to really unlock and enable kind of the performance and the optimization of today's and tomorrow's GPUs and next-generation chips?

So that customer closeness and that customer intimacy and kind of organizing ourselves to be able to have technology folks kind of outbound and working within the space and within the industry, I think, has been very powerful for us.

I think a lot about, from a Vertiv perspective, we focused a lot on evolution from kind of point products and point solutions to one of system-level thinking and a solutions orientation, both in how we think about the interoperability of our products and technologies as well as kind of how we think about delivering them.

So our Infrastructure business unit -- Infrastructure Solutions business unit is really oriented around deploying white space solutions, thinking through turnkey data center solutions, like our Vertiv OneCore product. That gives us an interesting lens of seeing how all of the pieces need to fit together in the portfolio, which is helpful for us to then take the customer context, take the customer data points.

And then we're also kind of a designer and builder of a turnkey data center solution. It informs what the point products really need to look like. It better informs and outlines kind of what the interconnects and what the sizing of the blocks and the stripes for a data center to work optimally really need to look like.

And then ultimately, it points to where the physics challenges are going to be. Where do we run out of capacity in a busbar? Where are the connector problems? Where is the physical limit of a single-phase, direct-to-chip type of a deployment in a next-gen GPU architecture? And then how do we work backwards and more proactively on our own investments in our own technology cycles to make sure that we're looking kind of then customer-in and technology-out for where we need to take our portfolio and where we need to evolve and fill in some of the white space in order to make sure that our complete portfolio kind of stays a complete portfolio as architecture continues to evolve?

We don't want to front-run the Investor Day, but obviously there's a lot of questions on whether Vertiv's opportunity is increasing in high-density compute versus the $2.75 million to $3.5 million megawatt combined opportunity you updated us at your last Investor Day, especially in light of 4Q's orders. So maybe the best way to ask the question could be, go over what has changed versus your expectations from November of '24. It would seem like high-density compute has moved faster to proliferate, and given increasing complexity of systems, redundancy in power and thermal is even more of a requirement than first thought.

And then Vertiv hasn't sat still either, padding, adding PurgeRite and Great Lakes, for example. So when you're getting orders, is it at least safe to say that you tend to be at the high end of that prior range? Or maybe is it even higher? I think the more color -- maybe some more color of what you're seeing there.

Do you want to start or do you want me start?

Sure, I can start. Generally speaking, like we are at the higher end of that range the more share of wallet we have. And when we're delivering turnkey solutions, like I just talked about, whether it's a SmartRun within the white space or a OneCore type of a solution, we tend to be at the higher end of the range just in terms of share of wallet and total content.

I think you rightfully pointed out areas of the portfolio where we're continuing to expand. And obviously, from 1.5 years or 2 years ago, liquid cooling was in some of our orders. Now liquid cooling is kind of part and parcel to most of our reference designs and most of our customer engagement when it relates to AI deployments and AI data centers.

And then you pair that all together with kind of the increasing scope of some of the acquisitions and the portfolio expansion that we have done, whether it was Waylay kind of on the controls and the service perspective, whether it's PurgeRite on kind of looking at secondary fluid network and a higher degree of commissioning services, or even Great Lakes within a rack environment, improving out maybe the position of that portfolio helps to kind of expand the share of wallet, and I think is informing a lot of maybe deeper and greater content as we deploy orders for some of these larger sites.

But Craig, I'd...

No, and I think we'll probably dive a little bit deeper into it at the Investor Day, but Scott brings up a good point. And it ties back a lot to the original question, is the system-level architecture discussion that we see going on, and not even going on but starting to manifest itself in orders, naturally gives you the opportunity to get more share of wallet.

And we like that. We like complexity. We like when customers come to us with problems. We like to develop solutions for them. And that all starts with that system-level thought.

And when we talk about point-level products, that's where you start. You start it being able to do one point-level product. But then we like to stack on top of that. So when a customer comes in, they're like, "We need a power solution," well, we want to be able to sell them the whole powertrain. And when you introduce that whole powertrain, you introduce a higher ability to get into the share of wallet.

So while it still moves around and, on average, it's in that neighborhood, as we get more orders coming to us and they go through the pipeline and we're able to make them more of a system-level order, we will see that push to the right. And that's something we like, and we believe it's a competitive advantage for us.

You mentioned orders, that actually works well for the next question. Obviously, Vertiv just moved away from reporting quarterly orders. And we understand you don't want to talk too much about quarterly orders expectations. But I think the issues that Q4 orders were just so much higher than we have seen in the past, and the questions we have been getting from investors is, why didn't we see this coming? I know Gio said Vertiv's orders should grow again in '26, which I think means more than $18 billion, which was approximately your '25 orders.

But could you give us a little bit more perspective on how Vertiv thinks about the market, given your pipeline, as said, was much more than filled despite Q4 orders? Do you see the order cycle still continuing to grow for several years to come? Is it fair to say we could see more quarters like Q4 or even bigger than Q4 going forward?

I'll break that up into a couple of sections and then I'll pass it over to Scott for some more context. But one, we really enjoyed the outcome in the fourth quarter. Of course, we did. Everybody saw it. And it was a manifestation of what we saw during the year of opportunities building. And it was these system-level opportunities that we were shepherding along. While in the background, you also saw other opportunities come in.

So while the pipeline did execute and executed well in the fourth quarter, you all saw it kind of refill it back in, in the spaces in which we executed those orders. So when I take a look and take a step back and I say, "All right, where do I see this going in the future?" I'm not going to comment on '25 or '26 -- or '26 to '27. In '26, yes, we see that there's opportunity to continue to grow our order book, and that's from the pipelines that we see in the triangulation of what we hear out in the space of people spending CapEx.

We know that CapEx is coming online. We see it in pipelines and opportunities. And we believe that will be executed without -- within 2026. If that happens, obviously, we would see an order book that was very strong.

The size of the $8 billion quarter, a lot of that is phasing. I mean some of that came within December and it could have easily fell over to January. Do I think every quarter from here on out, it's $8 billion? Probably not. I mean I know I'd love to be able to say that, but no, it's not. Going to be -- there's always going to be shifts and movements.

And that's why getting away from the quarterly order reporting and forecasting where it's going is important to us. Because it is a very dynamic situation out there and you kind of got to be at least somewhat fungible to moving around a little bit.

I mean last year in EMEA, the second and third quarter were very low in orders, but the pipeline was strong. And so you heard Gio say a lot of times, "It's a coiling spring, it's a coiling, it's a coiling spring." Well, we can see that because we saw the pipeline. Everybody else just saw the orders being down. But then in December, spring became a little uncoiled by the execution of the orders were very well. We're very strong in the fourth quarter in EMEA.

And that influences when we talk about next year's revenue growth. The second half of next year's revenue growth is really driven by what we saw in the fourth quarter. But we also saw another robust pipeline. So thinking of it that way, what we see in front of us and the opportunities, I would say we feel very good about where we sit today. And we feel very good about the triangulation of what we're hearing in the market of what people want to be able to go and deploy.

I don't know, Scott, do you have any...

I think we're good.

Maybe, I guess, along the lines of the topic there, can you give us a little more color maybe on demand by region? I would assume the $8 billion in orders in Q4 were still majority U.S., but I think you were trying to get some more perspective maybe on EMEA. You mentioned the coiled spring.

Yes. Strong Americas, as we've seen and everyone hears the deployments in Americas and the ongoing outbuild of the data center market there and the appetite for AI. So we feel that that was a very strong quarter for us in fourth quarter. And we see it -- the pipeline very strong for 2026.

EMEA was a little bit of a proof point for us. Fourth quarter was a jump in orders. Felt very good. The pipeline continues to be strong. And we think the line of sight there is that it's been a bit of a pent-up demand, almost a delay in the reaction to the market that we feel like is snapping back a bit. We expect to see that pipeline convert in 2027 -- or 2026. And we'll see how that plays out. But again, the fourth quarter was a pretty good proof point there.

APAC, rest of Asia, India, very strong pipelines, very strong execution. China is kind of a unique bird. We don't -- we see a pipeline, we don't see it executing very well. It's a little bit slower than we would have expected. You felt that in kind of the fourth quarter in terms of some delay in orders. And we're kind of still feeling that one through. But every -- I'd say India and rest of Asia, we feel very strong about those 2 spaces.

Maybe you could just talk a little bit more maybe what you're seeing on the legislating, permitting standpoint as well as what you're hearing from your main customers as they think about the infrastructure build-out. I guess you kind of addressed some of that as it relates to EMEA, but I don't know if there's anything further legislative lines that you wanted to touch on?

Yes. I think from a data center perspective, and a lot of global focus on, one, power availability, obviously, dominates conversations. Time to get to interconnect. What are the requirements to actually connect to a grid? What are the requirements for take rate and other things?

But we're also starting to see, with some of the emerging requirements and regulations at a grid level from what has happened like with ERCOT in Texas or some of the data center activity happening in Spain, maybe more scrutiny on what larger AI data centers, what their impact to the grid and how they behave in terms of grid interoperability, is creating some new and renewed focus on power architectures and data center designs.

A lot more renewed focus on, especially in the U.S., what does on-site power generation or the concept of bring-your-own-power really look like in the concept of either accelerating a grid interconnect time, enabling a bridge power type of solution, and how do you pair that together with inherently what are higher-density, more dynamic, more synchronous types of loads from AI data centers? It creates maybe a fertile ecosystem for new architectures to be thought through. New product solutions, new portfolio, solutions that can help customers solve those types of problems.

Introduction of battery energy storage systems, introduction of different types of power control and power algorithms within our portfolio and our product set to help unlock even some of the economic use of the data center power capacity and potentially energy storage capability as a way to not only work around regulations and maybe some of the things that would delay data centers being turned on, but become a better grid partner and a better grid citizen so that data centers and utilities, whether that's in the U.S. or globally, are working more symbiotically and working more in concert.

A lot of our focus from a portfolio and a development and a capability perspective on what we're trying to build out is almost an enablement of that ecosystem, to act as the infrastructure glue and some of the control intelligence to enable customers to think about on-site power generation, to think about overcoming some of these regulations in a way that makes it less of a burden and more of a kind of a national asset.

I think Scott brings up a really good point there in terms of when the regulation is something that becomes a solvable solution from a system standpoint, we love that. It's a complication that we like to be able to design with the customer in terms of an outcome and a solution.

When you're a point provider and you're providing one piece of equipment, you're allowing the infrastructure build-out to happen around your part. And it's good because you can deliver that part. But when you're a reference architecture and you're a reference designer, you're now creating this symbiotic relationship that you are developing the solution that is to come to whenever that regulation or that hurdle arises.

So it's back to this, I'd say, strategy and proof point that we've put out a lot of, if you start to think about the system-level architecture, you're going to be kind of the design driver and the technology driver. And that's where we want to be. And that's kind of what we believe would be our differentiation when you look at the space.

Okay. That's kind of heading where I was going next, was products and the road map kind of going forward. So maybe, Scott, let's start talking on the power side first. The upcoming shift to 800-volt architecture has drawn a lot of attention. Vertiv has stayed at the forefront and is planning on releasing its 800-volt portfolio in the second half of '26.

Can you walk us through what's fundamentally driving the industry towards that standard? And not just the incremental efficiency gains from moving to DC, but also whether it's hitting practical physical limits with traditional AC power distribution as rack densities continue to increase.

Yes. I think that's the name of the game, is as densification increases, as chip power and heat levels continue to rise, as we move, in NVIDIA nomenclature, from Blackwell into Rubin, to Rubin Ultra and beyond, we start to hit some practical physical limits of how much copper, how much busbar, how much distribution you can put into a single or a double-rack space.

In a traditional kind of 50-volt-at-the-rack-level architecture, you run into limits and space constraints and challenges with heat that, by moving to an architecture like 800 volts DC, you solve for a lot of that. You get the inherent improvement in efficiency, you get some improvements in reliability. But you bring with it an architecture change.

And from a data center space that is typically grounded in tradition and comfort in certain types of designs and you have your reference architectures, a shift of that magnitude is significant. But we've been pretty vocal in trying to lead the charge and help shepherd a lot of the ecosystem participants that this is something that we can unlock and enable from a safety, from a compliance, from a power delivery and a power architecture perspective, to help truly optimize and enable performance at a GPU level, especially when GPUs start to move towards native 800-volt DC.

And we want to do it in a thoughtful way. So we've been working on a portfolio. We want to make sure that we enable an end-to-end offering so that it isn't just we're depending on multiple piece parts. But we also understand it's not going to be a binary shift, from traditional 480-volt AC architecture in the U.S. to, all of a sudden, all data centers are going to be 800-volt DC, period, full stop.

This will be kind of a hybrid, evolving, flexible type of an architecture and an ecosystem where we fully expect to see data center sites that are built based on a 480-volt AC architecture. We deploy 800-volt DC in more of a contained or sidecar type of a deployment to enable and unlock some flexibility.

If we have a GPU that is going to run natively off of 800 volts DC, we can provide that power conversion -- that distribution through an 800-volt conversion box. If you have traditional or legacy loads that are in that same data center, you can leverage the traditional 800-volt DC architecture. And then down the road, you may have a deployment that needs to happen now that we want to be ready for 800 volts DC where we can still leverage kind of in-rack 800-volt to 50-volt conversion boxes that potentially then go away longer term.

All of that to say, I think it's going to be an evolutionary progression. But we want to make sure that from a product portfolio perspective and an enablement perspective, we're unlocking the ability to power chips at this level because we think, in working with some of our partners at a chip level, that is the key to unlocking new thresholds of performance that unlocks new capability and usefulness of the AI models and the training and the inference that come along with these progressive generations of GPUs. And we want to ensure that we're not kind of -- not only are we not the bottleneck, but we are the enabler of being able to switch on those types of deployments and architectures.

And then I guess maybe within the 800-volt architecture, obviously, backup power is still needed. How does the role of UPS change and how is Vertiv positioned?

Yes, and I touched on that a little bit as we talked about kind of the evolution of power infrastructure moving more upstream to enable on-site power generation and other things. But generally speaking, maybe I'll tackle that question in 2 parts.

A traditional centralized UPS serves a lot of functions. It's a power conditioner. It's a switch to backup power. It's autonomous and battery to ride through issues that may happen with power quality. It helps preserve and insulate upstream noise and harmonics and other distortion from being created downstream. And it helps form a very good, high-quality power downstream to the devices itself.

GPUs and AI data centers in general, very simplistically, they're dynamic loads that operate in sync. And that creates very interesting challenges for upstream power infrastructure and battery autonomy. Energy storage will start to move closer to the white space, whether that's CBUs or BBUs, battery backup units or capacitor backup units, to help with power smoothing, to help with kind of buffering some of those load volatility and load fluctuations.

At the same time, based on everything I just talked about relative to kind of site-level grid interaction, we see a lot more of an interest and a desire for energy storage upstream more at a utility level to prevent -- or enable low-voltage drive-through to prevent sites from islanding or having to disconnect, to have a source where excess load -- or grid capacity can be put into a data center without having to disconnect.

All of those things kind of move in a barbell fashion maybe where the role and where the capability and intelligence of a UPS may sit. We're going to see it move closer to the white space and we're going to see it move closer upstream towards medium voltage in the substation.

While the role in terms of managing energy sources and filtering and conditioning power, and maybe most importantly, driving control schemes and control mechanisms that enable power smoothing between the upstream and the downstream in an intelligent fashion to unlock better performance to turn the data center assets into things that can be used to unlock economic benefit, the role of UPS, I think, is more important than ever. It's just potentially moving into different parts of the power chain, both upstream and downstream.

I got one more and then I'll open it up to the audience for any questions. Shifting over to the thermal management side, maybe we can start by addressing some of the discussions post-CES that pointed to Rubin being able to use warmer water instead of needing water chillers. From your viewpoint and discussions with customers, what are you seeing? Is this a material design change? Or is this more on the lines of next-gen chips bring about some efficiency gains, but hybrid thermal chain infrastructure remains?

I love this question, the 45-degree C water question. And the world kind of went nuts for Jensen's comments at CES.

From our perspective, interestingly enough, that's not necessarily a new comment from NVIDIA. And even the 2 prior generations of NVIDIA chips have been able to and have been kind of encouraged to run at warmer water temperatures, up to 45 degrees C, from the CDU delivered to the chip.

The reason behind that push to higher water temperatures, very simplistically, is the higher water delivered to the chip means you can do more free cooling with dry coolers and heat rejection in a data center environment. If you are eliminating more mechanical cooling, you are inherently freeing up more peak power or more power availability from the site to be redeployed back to GPUs, because you don't have to account for it on kind of the thermal management and the heat rejection side. So it's an admirable and advantageous push to kind of try to drive in that direction.

That being said, in order to actually reject heat effectively 24/7, 365 in a dry cooler or a mechanical-free type of a heat rejection environment, there aren't that many locales or locations that can enable that and can handle that, when you think of like ASHRAE design conditions and you think about the environment.

So typically, like the push for that is to maximize kind of power availability for GPUs. But in practical applications, if you want to run at colder temperatures, or if you want to deploy in areas that aren't generally kind of more Arctic and northern climates, the heat rejection still needs to happen and still needs to go somewhere. So if it's a dry cooler, that still fits within Vertiv's portfolio.

But maybe more importantly, there are going to be peak times throughout the year. There will be ambient environments where mechanical cooling is still needed in order to keep those operating conditions, or mechanical cooling will be needed and necessary if you want to run at lower water temperatures.

So from our perspective, one of the products we developed and launched last year is the Vertiv Trim Cooler, where we think it's actually the best of both worlds, to tackle exactly this problem. You have effectively a very large dry cooler paired with a smaller mechanical chiller in one package. It allows you to run at much higher capacities in a much smaller footprint.

You can run in free cooling and you can take all of the benefits of running with that warmer water. And then for those limited times throughout the year where you need to trim or you need to run mechanical cooling, you can turn it on and you have it available. So you can kind of exercise both sides of that, where you're getting the benefit of warmer water without maybe the full commitment, and you're enabling yourself to have a data center design that's more flexible if you want to deploy multiple GPU generations or you want to run a cooler water for a variety of reasons that somebody might want to do that.

So I think it just -- it further complicates what is already a fairly complicated story on kind of data center heat rejection. And from our perspective, as Craig said, like we kind of love the complexity because we envision forward data centers as hybrid environments of chillers and dry coolers and other heat reuse and other technologies that will all be blended together to optimize for what our customers are trying to solve for in the end.

I think maybe I'll take a moment here, Paul, to see if there's any questions from the audience.

I just wanted to ask, on the conference call recently, Gio mentioned that the installed base is a big opportunity for service. I just wanted to get your understanding of like, with PurgeRite and the other acquisitions that you've done, what do you see as the yearly dollar amount you could access in terms of service per installed megawatt you have? Is that like on the order of tens of thousands of dollars, hundreds of thousands of dollars?

How much does it cost to refill and clean a loop that PurgeRite does, depending on the size of the data center? You guys have one of the largest service networks in the industry, I think it's 4,400 technicians. You, I'm sure, could get a lot of value out of that. And how are you looking to monetize that?

I'd start by saying, we don't put a reference point out there of how much dollar per megawatt-hour we get on the services basis. There's a couple of different reasons why. But we're always trying to, I'd say, wrap our arms around our installed base and grow that services market. What we've seen over the last 3 years is steady growth in the services market and the services output and revenues, which we feel is a very strong proof point of us being a provider of choice when it comes to services.

So the goal is to continue to grow that and grow that through different levels of services, one being our typical model, which is a services model for life cycle where we're at the data center providing, running maintenance and services, break model, fix. And then you have the PurgeRite, which is a specialty solution. And then it goes on even furthering on that with like Next Predict, where you're involving the way that you operate the data center and looking at it for more of an optimization standpoint. So for us, it's continuing to see that services, what I'm going to call, revenue and recurring revenue, grow on a regular basis.

Now if you look at the face of our financials, it's hard to tease that out because the OE side is growing so fast. What I can say with pretty good conviction is we do see a very strong growth in our services market. And what the goal would be and the strategy would be, is to continue to outpace where everybody is in the market for that services portfolio. Because at some point, as the OE slows down and as the OE becomes more restrictive, you want to be the person that's growing services faster because that's going to be your growth engine.

So right now, we're deploying a massive amount of installed base, and we want to be the first to market to be able to service that. And we feel like we have a pretty good stranglehold on that. Now again, PurgeRite is an add-on there, Next Predict's an add-on there. And that's what we want to keep continuing to do. And ultimately, the goal would be to see that continue to grow and then become a larger portion of your reported revenues. But that's not going to happen in this environment we're in today, or at least not for the next foreseeable future, because the OE is growing so fast.

I just had one quick more question, was we've seen that ABB recently invested in DG Matrix. Eaton acquired Resilient Power recently as well. I feel like the industry -- and Delta as well is moving towards this idea that solid-state transformers will be essential when we eventually move to 800-volt DC architecture. I know that you guys, as far as I'm aware, currently don't have an offering. I just wanted to understand like where you sit on that and what you think you will need to add to the portfolio to have that comprehensive offering. Is it something that you could develop internally?

I'll jump on that. Certainly, as I kind of alluded to maybe some of the capability of the UPS moving upstream, integrating medium voltage and best capability together, I think there's a multitude of different possibilities as far as where the architecture settles and what's the right thing, whether it's an 800-volt output or whether we move to a 1,500 volt output. I think there's a lot of things up in the air and a lot of architectures still to be debated.

That being said, I think one of the things that we are seeing from a market perspective is there's interest in seeing that move towards kind of power conversion from a solid-state transformer perspective.

And I think that the term solid-state transformer often gets maybe misused or there's various different meanings for the same terminology in the marketplace. But I think that can be both an organic pathway, using and leveraging our kind of core competence and capability in just general power conversion, both at the high-voltage and low-voltage level, as well as kind of we're coming from an 800-volt DC heritage where we're not starting into the DC power space inherently or without some capability that goes back many years, obviously, leveraging our capability in telecom and leveraging our long-standing history in the DC power space. It's a business unit and a line of business at Vertiv and Emerson that I used to run at one point, so it's very near and dear to my heart.

So seeing how all of these pieces start to triangulate and the fact that we're talking back to DC and the data center is an encouraging development to me. But maybe a long-winded way of saying, to come back and say, like, certainly, we look at technology pieces in the portfolio and what could help us from an external market perspective. But it's absolutely something that we're thinking about and considering in terms of our organic technology development and pathways as well.

Wondering just in terms of your conversations with clients, I'm curious as to where they stand in terms of prioritizing power storage versus backup power generation, and which is like more effective, more available, more efficient? How do those conversations go? I'm curious.

Yes. Generally speaking, we try to stay out of the debate of should you buy gen sets or deploy with gen sets or batteries or all of those other things. But I do think from a regulatory perspective, from a, I'll call it, NIMBYism or not-in-my-backyard perspective, there's a lot of pressure just on leveraging of gen sets in particular. You contrast that with now we're talking about on-site power generation and reciprocating engines and natural gas turbines potentially being deployed on site. So there's kind of a weighing of both sides there.

But I think deployment of larger-scale energy storage has some inherent advantages, like I just talked about, beyond just backup and battery autonomy, beyond just ability to switch over and kind of ride through issues. It unlocks and enables some of the economic use, time of use, peak shaving, other types of things for the data center asset, yet enables maybe a higher degree of control and coordination and responsiveness that generators can't handle on their own. And so I think a lot of the reasons we're seeing energy storage become more of a prominent part of the conversation is because of those multiple variables and those multiple potential uses for battery energy storage systems as opposed to just standby power.

Okay. Maybe spend a moment talking about competition. Liquid cooling is expanding -- it's expected to continue scaling globally at an extremely fast pace. Dell'Oro has talked about the market reaching $3 billion in revenues in 2025 and surpassing $8 billion in 2030. This has caused a rise of new entrants, particularly in APAC, where we are still -- where we still hear some investors' concerns that smaller suppliers could drive pricing pressure. Vertiv has obviously expanded its liquid cooling footprint quite significantly since the CoolTera acquisition, and more recently with the improved service capabilities from the PurgeRite acquisition.

How do you see Vertiv's competitive differentiation in liquid cooling as more suppliers enter the market? And could you update us on whether you still are expanding liquid cooling capacity after the 40x expansion that you've had over the last couple of years?

You want to start?

Sure. Maybe I'll start with the last part. Yes, kind of investing and still thinking about capacity for liquid cooling. It's becoming more and more a prominent part of the discussion.

From my vantage point, as I think about the competitive landscape, yes, it's attracting a ton of attention, yes, it's going to continue to attract a ton of new entrants. And I think a market that's growing like this and that is already this big, we would fully expect that to be the case.

From a differentiation perspective, I'll lean back and point back to more of the system-level design and thinking. Integrating a CDU with a piece of infrastructure like a Vertiv SmartRun, where you're incorporating the secondary fluid network, you're able to add intelligence and a certain aspect of control to manage pressure and valve control and other things, I think helps to differentiate the CDU as a core part of a bigger offering as opposed to just a device that can move fluid.

The other part of kind of how we view the competitive landscape is you can buy a CDU from anywhere, but scale matters and experience matters. And maybe it seems a little funny talking about experience just given how kind of new and nascent the market still inherently is.

But when you're talking about a 100-megawatt site that's going to be liquid cooled, you have to be able to operate at a significant scale, you have to have capability and technical expertise and know-how to be able to, from a services perspective, help flush, fill, turn up, set up and orient the product itself and the secondary fluid network, you have to be able to troubleshoot and you have to be able to help customers get comfortable with that scale and that size of infrastructure, where, candidly, like a new entrant to the CDU space or somebody that doesn't have that breadth or that capability or that ability to meet the customer where they are in that scale is going to struggle tremendously.

So the product has to be good, and it has to perform and we want to have the best-in-class product. But it very quickly turns to a capacity and experience and an expertise discussion with our customers as we start to talk about ramping up liquid cooling. And that's where I think we can have a different conversation than some of our competitors.

I think you asked a question about how it's evolved for us. I think it's evolved for us exactly that way, where CoolTera was an entrance for us into liquid cooling, and we scaled it. And I think we learned a lot and we started to become more integrated in how we thought about that as a system level again. And then, how would we address that from a design perspective, a services level perspective and an outcome perspective for our customers?

That evolution, point providers still haven't went through. And I think the point providers are people that you're seeing in some of those regional spaces, that they do win on price. But you can only win on price for so long. At some point, the proof is going to be back to how are you delivering for your customers. And I think that's where we lean on our competitive advantage there.

I'm going to jump to talk some incrementals. Craig, I think you were pretty clear that 30% incremental margin is the right framework to think about in '26 and maybe '27 as well as partially giving you what to fund growth investments. But the old mantra at Vertiv used to be to maintain fixed cost and then scale the business, which you're obviously doing. And you also suggested you would remain in the green in terms of price versus cost, especially given potentially easier tariff comparisons as '26 evolves. So why would -- or why couldn't there be some potential tailwind behind the incremental margins if Vertiv executes well?

I think the execution well is something that we point to, is we want to be sure that we execute well. The space that we're working our way through, again, price/cost looks like it's going to be neutral, maybe positive for us going into next year, we feel really good about fixed cost leverage.

But when I come back to fixed cost leverage, one, we're scaling for capacity to be able to be out and win in the commercial market, be out to support the technology development that we need to be able to be out there in front of, which is a little bit more than we typically have had in the background. We are growing in that space.

But then there's also just the coming on of the brownfield space that we're expanding out and the greenfield that we're putting in Asia and some other spaces. So that inefficiency naturally, as you ramp up, if you can squeeze that inefficiency down, you would see typically your margins continue to march up. Now ours will go up again this year. We ended this year at 28%. We're kind of facing 29% to 30% next year. And that's what we feel good in. Now we're starting first quarter at 28%.

So I think it's just being diligent around what we have to be able to go and deliver. We're very proud of where we've been able to push margins, but we're not going to stop here. If you look at our long-term framework, we have a plan to continue to grow that. And I think we'll give more thoughts on that as we come back in our Investor Day. But there is not an intention on our side to stop at any point in time. We believe that we're going to continue to execute and continue to drive there. This is what we see right now based on '26 being a little bit of a different year from a ramp perspective, but it's still margin accretive for us.

We got time for one last one, so I'm going to sneak in here, that we're asking everybody, is what are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? And are there any emerging industry trends that are perhaps being overlooked in the current discourse? We covered a lot, you got 20 seconds.

I was going to say, we covered a lot of that. For me, very personally with Vertiv, just the pace of technology change and keeping up with it is probably the thing I'm most focused on. When we're on a kind of a 12-month GPU development and deployment cycle, just the rate of change of this industry and keeping pace and how we can articulate kind of keeping infrastructure 2 GPU generations ahead is the thing that we're trying to maybe change the foundation of our engineering approach, our technology approach and the way in which we're engaging customers, to ensure that we're unlocking and enabling that. But that's kind of what keeps me up at night and what keeps me smiling at work.

And I'll just add on that, I mentioned it a lot during this conversation, and it's probably because my background is in heavy industrial and I lived and died by services, but the potential we have in services, the installed base that we've built, the technology advantage we have and continuing to stack equipment out there that's in service and use, building on that advantage of wrapping your arms around it and it being yours and having the entitlement to service it, and having the entitlement for a long-term recurring revenue base, is a differentiator for us. And we've got to take advantage of that. I think that's the space where I'm laser-focused on making sure we execute on that, because that's the future of the company.

Scott, Craig, thanks for joining us here in Miami.

Thank you.

Good morning. My name is Nadia, and I'll be your conference operator today. At this time, I would like to welcome everyone to Vertiv's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded.

I would now like to hand the program over to your host for today's conference call, Lynne Maxeiner, Vice President of Investor Relations.

Right. Thank you, Nadia. Good morning, and welcome to Vertiv's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today are Vertiv's Executive Chairman, Dave Cote; Chief Executive Officer, Gio Albertazzi; and Chief Financial Officer, Craig Chamberlin. We have 1 hour for the call today. [Operator Instructions]

Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of Vertiv. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We refer you to the cautionary language included in today's earnings release, and you can learn more about these risks in our annual and quarterly reports and other filings made with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

During this call, we will also present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release, and in the investor slide deck found on our website at investors.vertiv.com.

With that, I'll turn the call over to Executive Chairman, Dave Cote.

Well, I am extremely pleased with how we executed in the fourth quarter and for the full year of 2025. We delivered strong results across key metrics, and we've got tremendous momentum heading into '26 and beyond.

What you're seeing is the payoff from years of strategic investments and disciplined execution. Our focus on engineering innovation, capacity expansion and deep customer partnerships is translating directly into results. Gio and his team are doing an outstanding job executing our strategy, and I'm impressed with how they are navigating both opportunities and challenges.

The AI-driven infrastructure build-out is accelerating, and data centers are at the center of it all. We're still in the early innings of this secular growth trend. Vertiv's position in this market keeps getting stronger. Our technology leadership and global scale, along with our service and operational capabilities aren't easily replicated, and we keep widening that gap. We've established a strong record. We commit to ambitious goals and we deliver.

Now here's what excites me the most. Vertiv isn't choosing between today and tomorrow. We are winning now and winning later, positioning us to create value both now and well into the future. Said more simply, we aren't done yet.

With that, I'll turn it over to Gio, our leader and architect of this most excellent day.

Well, thank you. Thank you very much, Dave, and welcome, everyone. We go to Slide 3. And I'm certainly quite pleased with how we closed '25, another very strong quarter and a very strong year.

Organically, fourth quarter orders were up 152% year-over-year and up 117% sequentially. Very strong, all regions or markets. Trailing 12-month organic orders growth was 81% and would be even higher if we included our recent acquisitions. Our book-to-bill ratio was 2.9x. Our backlog stands at $15 billion, more than double last year's. Q4 organic net sales were up 19%, primarily driven by remarkable strength in the Americas, which grew 46% organically. APAC was down 9% and EMEA down 14%. Q4 adjusted operating margin was 23.2%, up 170 bps from Q4, '24. Adjusted operating profit was $668 million, and was up 33% from prior year.

Our fourth quarter adjusted diluted EPS was $1.36, up 37% from Q4, '24. Adjusted free cash flow for the full year was circa $1.9 billion with an adjusted free cash flow conversion of 115%. For '26, we are projecting adjusted diluted EPS of $6.02 on organic sales growth of 28% with adjusted operating margin of 22.5%. But let me give you some color on what we see regionally and for that, we go to Slide 4.

Let's start with the Americas. Americas continues to be the primary engine of our growth. Sales in '25 were strong and broad-based across products and customer segments. The market is accelerating. Even after the large Q4 order intake, our pipeline continues to grow. Our guidance assumes sales growth in the high [ 30s ]. Americas led acceleration and that momentum continues.

If we go to EMEA, well, we can say that the coiled spring is uncoiling. The market sentiment has significantly improved. Pipeline growth has accelerated. We saw strong orders in Q4, and we expect that to continue in '26. We expect to return to sales growth in the second half of the year.

When it comes to APAC, well, that is accelerating. Despite China remaining muted, we saw strong Q4 order growth, and we expect China's soft growth rate to persist in '26. But India and rest of Asia are robustly accelerating, and we are well positioned to capture that growth.

Now let's go to Slide 5 where I want to start with customer demand on the left of the slide. And just to say, Vertiv's momentum is quite remarkable. Trailing 12-month organic orders grew 81%. Fourth quarter orders were up more than 250%. Book-to-bill almost 3x as strong performance, and we did see some large orders coming in during the quarter. These large orders reflect our customers' increasing trust in Vertiv's ability to deliver at scale and their confidence in their market.

Our $15 billion backlog is more than double last year's and up 57% sequentially, strong. Worth noting, the shape of our backlog is not very different from what we saw a year ago, yet it is more elongated into the 12- to 18-month window. This is very consistent with a very strong Q4 order intake. We're seeing robust pipeline growth across all regions and all product technologies. This is a testament to the health of demand and of our visibility of the market. We have confidence in capturing a significant portion of this pipeline.

Orders are getting bigger. Over time, we have been vocal about the lumpy nature of orders. This lumpiness can generate unnecessary volatility. The dynamics of the market also makes orders very difficult to predict. Consistent with what we said during '25, we have been reflecting on our orders disclosure. We believe that currently, the best approach is to no longer report actual orders, orders forecast or backlog with quarterly earnings. It just seems to lead to excessive volatility that is not representative of the sustained performance of the company and is not beneficial to our investors.

We will continue to provide our full year historical disclosure regarding sales and backlog in our Form 10-K. We will provide our view of the market in our quarterly earnings call. We feel very good about the strength of our pipelines, our ability to win and our prospects for growth and to lead the industry. We had an extremely strong year in orders and we do believe we will grow further in '26.

Pricing continues to be favorable. 2025 pricing exceeded inflation, and we expect the same in '26. Right side of the slide now to talk about how we are managing the current environment and positioning full growth. We are mitigating material inflation pressure through our pricing mechanisms and focus cooperation with our suppliers. On capital, we are stepping up to 3%, 4% of sales in '26, from high historical 2% to 3%. We continue to adopt a very disciplined and forward-looking approach to enabling our growth trajectory. Our suppliers are extensions of our operations, and we are working hand in hand to ensure they're scaling with us. This combination positions us very well to capture the growth ahead while projecting our margins -- while protecting our margins, which you see embedded in our guidance.

And let's now go to Slide 6. You know how passionate we are about driving rapid technological evolution. This is where Vertiv strengths really come into play. Our traditional expertise in great space is seamlessly been augmented by and interwoven with white space infrastructure expertise. With hundreds of kilowatts per rack the mechanical, the electrical infrastructure and the IT stack are so intimately connected that they need to be thought of as one system. Here are two of our converged prefabricated solutions that perfectly aligned to this vision.

Let's start with [ One Core ], an end-to-end full data center solution that dramatically simplifies and accelerates the customer journey, significantly reducing time to take. [ Vertiv's One Core ] can scale 2 gigawatts in 12.5 megawatts built in blocks. One Core is a complete, converged, entire data center infrastructure. It's engineered and scale to deliver for the industry with speed, simplicity and repeatability. It's engineered [indiscernible] an industry leader with a complete portfolio. Our collaboration with [indiscernible] demonstrate this [indiscernible].

Let's now continue with the Vertiv SmartRun, a converged and prefabricated white space infrastructure solution that massively accelerates data hall fit-out and readiness. Also here, it delivers simplicity and time to token for our customers. SmartRun is flexible and scalable across multiple generations of silicon. It is being deployed across several large customers at scale, and now work with [ compass ] data centers passively shows those capabilities. Vertiv SmartRun can be stand-alone or part of One Core. We continue to actively define the market with solutions like One Core and SmartRun.

Let's go now to Slide 7. Our service portfolio is a critical competitive advantage and a robust source of recurring revenue. Our life cycle services orders growth was north of 25% year-on-year. I'm very pleased to see that. I'm not satisfied as you may imagine. The increasing complexity and technical challenges that characterize the market are an opportunity to demonstrate our unique service capabilities and to deepen our customer relationships. Our service business is designed to deliver customer value across every phase of the infrastructure journey.

The [indiscernible] acquisition fits exactly within Vertiv's service paradigm. It significantly strengthens our fluid management capabilities end-to-end, both the primary and the secondary fluid networks. These are very critical systems in chilled water and liquid-cooled AI data centers. Fluid Management is one of the most technically demanding and financially consequential aspects of running a modern data center and AI factory. With [indiscernible], Vertiv now offers one of the most comprehensive fluid management capabilities in the industry, from initial design to commissioning, and then throughout decades of operational life of the data center.

We optimize flow at startup and maintain balance, ultra cleanliness, fluid performance across the life cycle of the site. Every rack gets exactly the cooling it needs with the highest levels of reliability and resilience as the environment evolves. For customers, this means fewer thermal throttles, higher compute throughput, efficiency improvement and a dramatically reduced downtime risk on hardware worth millions of dollars per rack. We expect [indiscernible] specialize the expertise to scale global through our existing services network, creating the differentiated capability that addresses a growing critical customer need.

With that, over to you, Craig. But first, I'm very glad to introduce our new CFO, Craig Chamberlin, to the earnings audience. Craig, calling you new sounds quite strange actually. I'm extremely pleased with the speed at which you're getting a strong handle on the business. We work really well together. It feels like we've been working together way more than hardly 3 months or so. [indiscernible]. So now truly, truly over to you.

Thank, Gio. And just to start, I'd like to say I'm very excited to be here as Vertiv's new CFO. In my 2-plus decades in the industrial industry, I worked with many great companies. However, what's happening here at Vertiv really stands out to me. The strength of our market position, the quality of our technology and the caliber of this team makes me very excited about where we're headed. While Vertiv has built the competitive advantage, customer relationships and operational capabilities as a result of disciplined execution and strategic vision. I'm honored to join at this inflection point, and I look forward to working with all of you as we continue to drive shareholder value. Now let's walk through our financial results.

Turning to Slide 8. We can walk through our strong fourth quarter performance. Starting with adjusted diluted EPS of $1.36, up 37% year-over-year, and $0.10 above our prior guidance, the primary driver is strong operational performance, particularly in Americas where we saw exceptional volume growth. Organic net sales were up 19%, with strong momentum continuing in Americas, up 46%, offset by APAC, down 9% and EMEA down 14%. Our adjusted operating profit of $668 million was up 33% versus the prior quarter, and $29 million higher than prior guidance. Adjusted operating margin of 23.2% grew by 170 basis points versus last year. This margin expansion was driven by strong operational leverage on higher volumes, productivity gains and favorable price/cost execution. As well, we saw our incremental margins year-over-year continue on a positive trend as they came in at 31% for the quarter.

To wrap up the fourth quarter discussion, let's hit on cash. We delivered $910 million of adjusted free cash flow, up 151% from prior year fourth quarter driven by higher operating profit and working capital efficiency, which was partially offset by an increase in higher cash tax. The larger orders in the quarter came with corresponding larger advanced payments, which benefited our Q4 cash flow. We exited the quarter with net leverage of 0.5x, giving a significant strategic flexibility.

Moving on to Slide 9. Let's take a look at segment performance, which further highlights some of the dynamics Gio mentioned earlier in the pitch. In Americas, the team delivered another strong performance. Sales were up 50% with 46% organic growth. This growth was driven by broad-based strength across products and customer segments, strong end market demand, combined with our ability to deliver. Adjusted operating profit was $568 million, up 77%, and margin expanded by 450 basis points. The results were the outcome of strong operational leverage, positive price cost and continued productivity.

Moving to the right, APAC sales were down 10%, 9% organically, primarily due to macroeconomic conditions in China. However, the rest of Asia remains strong. Adjusted operating profit of $49 million resulted in adjusted operating margin of 9.9%, which was down 270 basis points versus prior year, pressured primarily by volume deleverage. In EMEA, sales were down 8%, 14% organically due to continued softness in the market. However, as Gio highlighted, we are seeing signs of recovery from strong fourth quarter orders performance. We continue to expect EMEA to return to sales growth in the second half of 2026.

Fourth quarter adjusted operating profit of $111 million with adjusted operating margin of 22.1%. This is a decline from prior year's 26.6%, which was expected given the 14% organic sales decline. The margin pressure reflects lower operating leverage, and we expect this margin trend to continue into 1Q.

Flipping to Slide 10. Here, we're highlighting our [ 4 year ] 2025 results in which the team delivered another outstanding performance. We saw improvements across all key financial metrics. Adjusted diluted EPS of $4.20 was up 47% and exceeded guidance by $0.10. Net sales of $10.2 billion delivered 26% organic growth and exceeded guidance by $30 million. We saw a strong growth in Americas, up 41% and APAC up 18%, with a partial offset of EMEA being down 2%. Adjusted operating profit of $2.1 billion was up 35% and $30 million above guidance. Operating margin expanded 100 basis points to 20.4%. The full year margin expansion was driven primarily by productivity and positive price cost.

To close out the margin discussion, I'd like to highlight that we are delivering margin expansion while investing in growth and managing inflationary headwinds. Adjusted free cash flow was another strong performance. We generated approximately $1.9 billion in adjusted free cash flow, up 66%, mainly driven by higher operating profit and positive working capital, including increased advanced payments from the significant order delivery in the quarter. Our cash performance gives us flexibility to invest in growth, pursue strategic M&A and return capital to shareholders. These results demonstrate both our excellent execution and industry leadership.

Now let's turn to Page 11 and go through our full year 2026 guidance. We believe this outlook underscores our confidence in the market growth and our ability to continue to drive excellent performance. We're projecting adjusted diluted EPS of $6.02, representing 43% growth at the midpoint. This improvement continues to show strong profit growth from prior year. As we move to net sales guidance, we're projecting $13.5 billion at the midpoint, which represents 28% organic growth, with projected sales growth to be driven by continued strength in Americas at high 30% growth, with APAC at mid-20% growth and EMEA flat to down mid-single digits. On EMEA, as we mentioned earlier in the presentation, we expect a reacceleration in the market in the second half of 2026.

Moving on, we expect adjusted operating profit of $3.04 billion and 22.5% margin at the midpoint, which translates to 210 basis points of expansion. This margin expansion is expected to largely driven by continued operating leverage and positive price cost, while we also expect to continue to invest in capacity and technology advancement. Finally, for the year, adjusted free cash flow is expected to be $2.2 billion, representing 17% growth reflecting anticipated strong profit growth and working capital improvements, offset by higher tax and increased CapEx to support growth. As you can see from the metrics on the page, we are confident in our ability to deliver another strong year in 2026.

Flipping to Slide 12, we can round out with a look at 1Q 2026. For 1Q 2026, we're projecting adjusted diluted EPS of $0.98, which represents 53% growth at the midpoint. For net sales, we expect to deliver $2.6 billion, or 22% organic growth at the midpoint. This guide anticipates growth in Americas of high 30s percent, and growth in APAC of low 20% with anticipated offset of EMEA being down in the mid-20% range. We expect adjusted operating profit of $495 million, up 47% at the midpoint and margin rate of 19% translates to 250 basis points of expansion at the midpoint. Just as a note on tariffs, we expect on an exit rate basis, to have materially offset unfavorable margin impact from tariffs as of the first quarter of this year. As you can see from the metrics, we're expecting to deliver a strong start in 2026.

With that, I'll send it back to you, Gio.

Well, thank you, Craig. And let's wrap up. And for that, we go to Slide 13. And again, Q4 and full year '25 exceeded guidance across all metrics. Orders backlog were very robust, evidenced by impressive book-to-bill circa 3x. The momentum is certainly very strong. We continue to strengthen our position as an industry thought leader. This is highlighted by our product technology offering, full system approach and our services strength. At this, and all this is strengthened by our acquisitions, of which [indiscernible] is a great example. Our 2026 guidance shows a step-up in all key metrics.

I've never been more excited about Virtu's future. We're leading the industry in orders. We are scaling. We are very well positioned to expand our market leadership and drive the industry [ forward ]. I'm very much looking forward to see you as many of you as possible at our investor conference in May.

And with that, Back to you, Nadia, and let's start the Q&A.

[Operator Instructions] The first question goes to Steve Tusa of JPMorgan.

Yes, you're your ERP must have been busy this quarter. Probably requires a bit -- a few more data centers just to handle that. So just on the dollar value of the of the orders. Is there -- you guys have talked about the $3 million to $3.5 million per megawatt. There's obviously a lot of like megawatts coming on and being ordered. But is there any creep in that content to the upside that's bolstering these orders? Or should we still think about that as the right framework for the dollar per megawatt TAM?

I would say that currently, it continues that as a framework. Clearly, we've been vocal and other occasions and certainly is all the more reason true as the technology evolves that the complexity of the technology and the technology trajectory, if anything, is good from a TAM per megawatt standpoint. So they would be premature at this stage. We like what we see. I think that is -- 3 months from now, we'll be together and certainly, this will be an important theme.

And then just quickly following up on the CapEx number. How should we think about -- for every like $100 million of incremental CapEx from what we've seen, whether it's [ Eaton ] or some of your other peers, it's a pretty high multiple of sales growth on that CapEx. Like what $100 million can -- what the output of that could mean. Is there some sort of multiple like, I don't know, 15, 20x on that extra $100 million that we can think about as being able to support revenue run rate for the future? Just trying to understand how you can deliver on this and what it will take to execute on this backlog?

I will give it a go and Craig, if you want to, kind of, chip in. But I'd say that -- I think the best way of looking at it is to look at 2% to 3% CapEx as a percent of sales move into 3% to 4%, call it 3.5%. That is you can certainly correlate that to our growth in our trajectory. And yes, going back to how we make it happen, as I mentioned a few minutes ago, it's about being gradual. It's about being ahead.

But again, CapEx expansion -- capacity expansion doesn't happen in big steps, at least not the way we do it. We like many steps that are meaningful, but -- but again, I think the correlation between growth and our percent CapEx is an interesting and important element.

The next question goes to Scott Davis of Melius Research.

Welcome, Craig. Congrats on an unbelievable year. Guys, I'm just kind of curious [indiscernible] -- I'm just trying to picture these orders coming in 4Q were just massive, and I know that was the crux of Steve's question as well. But is there any -- you talked about lumpiness, but were there any particularly large projects, or anything unusual in the quarter? Is there any incentive perhaps for folks to make an order before the end of the year in '25, or price or otherwise are getting ahead in the Q.? I'm just trying to get my arms around these numbers are just absolutely massive.

Well, the answer in terms of something that is unusual, let's say, from the normal course of business in terms of price and whatever else, the answer is no, very, very, very simply. I'd say that certainly is a reflection of the demand that we see in the market. Certainly, as I said, is a reflection of the belief and demonstrated ability to scale, combined with our awesome technology.

But the fact is, yes, there were quite a few large orders. Again, quite a few. We shouldn't look at this as something dramatically strange. This is something that has been happening in the market and orders are becoming larger and larger. So this is really orders where customers know that they need our systems, our solutions and they know where and when. So it's not kind of a -- no big anomalies here, but orders can be lumpy and sometimes they happen all in 1 quarter. More in 1 quarter and the other, et cetera. So the sequencing is something that is lumpy. And that's what we've been saying for quite some time. And that's why the decisions that we have made on orders guidance and actuals. But nothing unnatural.

I would think it continues to...

Sorry, go ahead, Craig.

It continues to underscore what we've talked about before, which is the system-level thinking, and I think the system-level thinking is starting to play out on a larger scale, Scott, which is making these orders bigger than what they have been in the past.

The next question goes to Amit Daryanani of Evercore.

Congrats on my side as well for some very impressive orders over here. If I look at the order and the backlog number that you folks have, you've clearly set up for some very strong performance. I imagine not just in '26, but even in '27 and beyond. So I'm wondering Gio, if you can just kind of walk through, what are the key operational steps, the key bottlenecks you think you have to solve for to convert this backlog into revenues and EPS over time? Just maybe help us understand like what are you focused on? What needs to go right to convert these orders into sales and EPS in '26 and '27.

Yes. We are -- well, thank you. Thank you, Amit. The -- we're really working, and we have been working. So it's not like something new. We have been working and we continue to work. We're accelerating our capacity expansion. Capacity expansion always happens in two ways. One is CapEx, so call it, footprint generally speaking, not only there is also increase of our productivity. But the other is really obtaining more output from the existing -- from the existing footprint. So the 2-pronged approach that we talked about several times is what continues to happen.

But as we speak, we are -- factory is being expanded. We have a capital new location coming live, and we're working very, very actively with our supply chain. So it is really diligently, and in a very focused manner, execute on this backlog. I think we're in a good shape. We've been diligent about making capacity available gradually, but rapidly for the last couple of years, and we're accelerating, as our numbers [indiscernible] said, both on CapEx and on the top line.

And Amit, I think you could look at just the fourth quarter, the acceleration in CapEx is in the financial numbers, and you'll also see that in the guide that the acceleration in CapEx is there as well, which underscores what we're doing. Most of that is in flight, meaning that we're already doing the build-outs, and we understand what we need to do to deliver the capacity for the guide that we put out there for sales.

The next question goes to Jeff Sprague of Vertical Research.

Congrats on the shock and awe numbers here. Maybe we could just sit on Europe and Asia briefly from my standpoint.

First, on Europe, things really changed on the ground in terms of the permitting bottlenecks and the like. Obviously, you said the orders are a bit better, but a slow start to the year. And I'm also just curious on China specifically, if you could address that. Clearly, reach economically and industrially, but I wouldn't think China would want to fall behind in the AI race. I just wonder if the weakness there is maybe some indication that Western players are not being embedded to play to the same degree as they were historically, just the competitive state of things on the ground in China? I'll leave it there.

Yes. Well, thanks, Jeff. But as such with EMEA to start with EMEA in general. I think it's certainly a combination of an acceleration of investment basically. So it's not that somebody will do magic wand and everything kind of permit wise became easy in EMEA. That would be too simplistic. But I think the focus and the realization that a lot more infrastructure is needed is now palpable. And pipelines that have been there for quite a while. Remember I've been vocal about that have been, and are expanding, and the sales cycle of the various elements in the pipelines are accelerating. And then we have areas that are specifically moving well.

So you take the Nordics as an example, not solely, but that's an example where that is happening. You've heard me probably talk about a couple of times about the fact that with all that is happening in North America, some of the decision makers were so concentrated in North America -- while still are concentrated in North America now, I think the realization that things need to happen beyond North America is there. And that's, I think, or at least what we see happening as a matter of fact. So quite optimistic there. So kind of a [indiscernible] in the market that I haven't seen for quite some time.

When it comes to Asia, I wouldn't attribute that to kind of a Western players type of dynamics. The market demand is not very strong in this moment. So clearly, there is -- it's an important AI market with its own characteristics. But again, what we see is more attributable to a general market situation than a particular kind of player, right? I mean we are a [indiscernible] player in China. We are silicon agnostic. So yes. But again, very happy with everything outside of China, but also very, very proud of what we're doing in China as a team, so.

The next question goes to Chris Snyder of Morgan Stanley.

Gio, you talked about the company's deep relationship with the data center industry leaders. So I guess my question is, how much visibility do these relationships afford Vertiv into the future workflow, or architecture of these data centers? Because I have to imagine that you guys need to have the solutions developed before the customers are ready for it. So also interested in how far in advance, does the company start the R&D, or engineering process to bring some of these future solutions to market?

Sure. Thank you, Chris. I think a couple of dimensions to that. We've been always vocal about the strength of our relationship with customers, but also the other players in the ecosystem. Super important. Super important because exactly as you were saying, our technology needs to land ahead of -- well ahead of the most advanced silicon. But that to be the case, of course, with the NVIDIA or other silicon, let's say, technology providers, then it's about looking out 2, 3 years, sometimes in terms of -- or beyond at a higher level of, let's say, more R&D, but being 2, 3 years out in the way we work together. So our road map certainly extent.

But the role that -- an aspect that I'm very proud of, and it's very important for our and especially for our customer success. So for the -- [ our ] customers success is the work that we do with many of them really kind of a technology partnership. Looking out 1, 2, sometimes 3 years and say, hey, with all that's happening from a technology standpoint, given your business model, customer, what is really the technology the best suits your strategy? And it's not being told but it's architecting together and giving them an understanding of the possibilities that they have from a technology standpoint. I think we have a uniquely strong role in the industry in this respect. So it's working out quite well.

The next question goes to Nigel Coe of Wolfe Research.

So I guess we're not seeing too much impact yet from [ distant ] space. That's good news. So I want to go back to the backlog. And...

Got it. Sorry, I couldn't hear you. There was a little bit of a blip in the line. Okay. Go ahead Nigel.

Yes. Sorry, let me go -- can you hear me now?

Yes.

Yes. Great. So I want to go back to the backlog. And I think, Craig, you mentioned more system-level orders. So obviously, you've been highlighting the SmartRun product. Maybe just talk about where you're seeing that success and the sort of the word share you're gaining with the data centers?

And maybe Gio, could you just maybe touch on the backlog agent? It seems -- the guidance implies roughly 15 months of conversion of the backlog. Typically, you do 9 months. So maybe just talk about are we seeing longer decoration orders in that backlog?

Well, so I will start with the [ aging ] so that we can address that. We are -- we've been already vocal quite a lot already that our customers requested lead time pretty much ranges from 12 to 18 months, especially when we talk about the bigger orders. It's never exact. It's always range. But I would say that [ 12 to 18 ] is a good approximation of where the large orders demand the deliveries to be. And typically, it's not even just on bulk, if it is really a large order.

But having said that, if you think about the structure of our order intake this year -- sorry, last year, 2025, with a very, very strong second half, relative anyway to a very strong year altogether, but particularly strong in the second half and a [ particularly ] strong in the last quarter. Then they see that the 12 to 18 months, let's push things into 2027, while we have -- we are very happy with how 2026 is covered. So again, as I said in my comments earlier, the shape of the backlog is not something different. It's just a consequence of the phasing of the orders when we receive that. So no big differences in the way the market asks and demands, or expect our deliveries.

When it comes to the system question, we clearly see an acceleration. When we talk about [ One Core ] or we talk about SmartRun, we talk about systems and solutions that start to be quite broadly adopted. And certainly, that helps the dynamics of our order intake and our backlog. But when we talk system, we don't just talk about integration. Systems for us is having the entire powertrain, the entire thermal chain, certainly, when we deliver prefabricated solution or a converged solution, considering all the pieces that are really designed to work together. But again, if we go back to the previous question, my answer was it's about sitting together with a customer and having an entire portfolio, and having a good and just a very profound understanding of the system level and all data center level technology, and being able to talk systems with our customers.

The next question goes to Andrew Obin of Bank of America.

So the question I have is on services. It seems that the feedback we're getting is that the big differentiator for Vertiv is your ability not only to deliver the product, but actually service it in the field and wrap all the sort of additional value-added stuff around that. Last quarter, you shared with us the increase in service headcount.

Would you update us on what the head count looks like as you're increasing backlog rapidly? And maybe preview where the service organization is going? Sure you're going to talk about at your Analyst Day, but just give us a preview of what's happening there.

Well, thank you, Andrew. One of my favorite subjects. So -- and [ I have ] many. But this is certainly one of my very subjects. So -- and I agree, it's a big differentiation. And as you see, a big differentiator that we continue to fuel. So absolutely not static in our view.

Well, we talked about headcount. I think we are approaching it very, very rapidly the 5,000 field people right now and really think in terms of our field capacity following very similar trajectories to the delivery capacity. Now, of course, is a function of the installed base, but the installed base is growing. Our services are growing. Certainly, the commissioning, the startup, a very important event in the life cycle of a data center, and we'll make sure we're there with the capacity locally to serve our customers, but also evolving our technology, not only in the -- to me, a great example of [indiscernible], but also [indiscernible] that we are injecting into our services business.

I mean, I would add on that I'm just as excited as Gio is on our services portfolio coming from heavy industrial companies that lived and died on services. I think this is a super power that we're going to continue to build out and especially when you're starting to look at what we can do with the installed base that's out there.

The next question comes from Nicole DeBlase of Deutsche Bank.

Congrats on a great quarter. Just to start with the backlog. I guess, obviously, a really nice stop up in backlog sequentially and year-on-year in the fourth quarter. Gio, when you kind of look out over the next 12 months and with what you see in pipeline, do you expect that we will see another year-on-year increase in backlog in 2026?

And then just a small follow-up on CapEx. Are we going to kind of be in this 3% to 4% CapEx to sales [indiscernible] for the foreseeable future, given how fast the industry is growing?

Well, I wouldn't go all the way to guiding orders, which I would do if I were to answer with many details. But if you go back -- if we go back to what we shared already, if you think about our directional indication that we believe our orders will be up. You probably have done the math about our orders in '25 right now, of our sales. So probably the answer is straightforward. We believe we'll continue to build backlog directionally. So that's certainly the case.

And I think on your question, Nicole -- yes. On the CapEx, I think, again, we always want to look at a normalization around the 2% to 3%. As we add -- as [indiscernible] had mentioned before prudently, so we think this year might be a little bit higher than normal, but we would always want to continue to be right around that 2% to 3% on a normalized basis. So I think that would be our answer right now.

We wouldn't really put a number out there for '27 yet until we see what the market is going to look like from an orders perspective. But the guide this year is continue to look at that as we go forward.

And again, we really hope to see you at our Investor Day. And certainly, that will be an opportunity to further elaborate on that and the long-term trajectory of the business.

The next question goes to [ Julian Mitchell ] of Barclays.

I just wanted to look at the orders and the sort of composition of the backlog maybe from the standpoint of cash? Because I suppose it was interesting that you had a large working capital cash inflow in 2025, whereas I think we've heard from some other companies that the high growth is one reason for a bad cash flow conversion, but for you, it's the opposite, and a lot of that is because of your deferred revenue inflows in the fourth quarter.

So related to that, I wanted to understand, is it the type of orders you got in Q4 that generated some disproportionate amount of deferred revenue inflow? And also, when we look at Slide 11, you're guiding for working capital [ and other ] to be a small use of cash in '26. But if orders are growing and all the rest of it, is it not more likely we'd see another deferred revenue inflow helping working capital be a source of cash in 2026?

And -- yes, [ Julien ], let me clarify the slide first off, and then we'll get into a little bit more. But the slide says $80 million down year-over-year. And I believe it's down year-over-year, still be a working capital improvement.

It should be a working capital -- outcome that will be positive. So it would be just less positive than it would be year-over-year.

Got it. And is that -- are these deferred revenue balances, are they swelling because of specific very large orders? Or you think about them being proportionate suggest the aggregate kind of volume of orders that you're getting? Just trying to understand it because traditionally in low and medium voltage electrical equipment, you don't have these large prepayments.

Yes. And I would say it depends on the type of order and the mix of orders. Again, I think that we do always try to push to get some down payments and progress payments in there. But the mix would impact that a little bit, and it could be an influence in what drove up fourth quarter versus third quarter. But I wouldn't say it's marginally different than what we've seen historically.

The next question goes to Mark Delaney of Goldman Sachs.

Congratulations on the strong results and very strong orders. I was hoping to get Vertiv's view on how it's cooling product mix and business opportunity may evolve. And I ask because post CES, there was some discussion that [indiscernible] raised racks, may not need chillers and conversely post super compute last fall. Others are from a competitor about stainless [indiscernible] chillers maybe displacing CDU. So some moving parts there. And I would love to get your opinion on how Vertiv's [indiscernible] business opportunity evolving and what this might all mean for your content per megawatt and market share?

Let's are start from the bottom. So I go back to what we're saying. We believe the technology evolution is certainly central to that statement is favorable from a content standpoint, it is no exception. So clearly, there is an opportunity to run some GPUs at a higher temperature than historically done. But this is pretty much what has been true for many of the more recent chips of NVIDIA. [indiscernible] advantage is helpful.

Let's all remember that, that doesn't rule out heat rejection. Heat rejection will continue to exist, continue to be there. Let's not forget that there are loads that can be cooled at higher temperatures. There are loads with the same data centers that require lower temperatures. So if anything, whereas the overall efficiency of the system indeed improves, we're thinking more and more about a hybrid cooling and thermal chain infrastructure.

Now clearly, the ability to reduce the number of chillers, but not the number -- net number of heat rejection technologies, depends on the specific climate situation, depends on the type of loads. It depends on the resiliency to -- various types of non-GPU, or different GPU loads that the data center is designed for. When we look at this space, we are very, very encouraged by what we see in terms of a product that is now catalog, and that is very, very important for us that what we call [ TRIM ] cooler. So a chiller that is really optimized to operate high temperatures, but also with the flexibility for lower temperatures that again, coexist in systems. It's a solution that maximizes free cooling, and it's certainly very, very central to the future of the industry.

So all in all, we see that design continues to be mixed. If anything, this complicates the thermal chain and this complexity is something that we like as someone who has got the entire portfolio, we certainly are perfectly positioned to support our customers. And again, going back to what we're saying enable the right choice for our customers.

Cooling chips directly in other ways than through CDU in this moment is not something that we see. Simply because it would -- in most of the cases, it will be niche applications probably, but in most of the cases, that would be too dangerous. Blast radius is a little bit too big, et cetera. So we're pretty sure that CDUs in various shapes and forms are long-term elements of the thermal chain.

The next question goes to Andy Kaplowitz of Citigroup.

If I look at core incrementals that you're modeling, I think you've got pretty close to 30 [ percentile ] is kind of the low end of your long-term range for Q1 and '26, but I would guess the scale of some of these contracts could be your friend, because they should maximize your ability to leverage your sales. So is it possible to generate higher incrementals given potential operating leverage? Or do we need to be a bit more conservative regarding supply chain? And do you just need a higher level of growth investment to fund all of your revenue growth?

Andy, I'll start off by saying you're exactly right. There is a higher level of investment. We are still guiding at that lower end of the 30% to 35% that we've said in the past. I think as we get through the year and the investment that we are putting into place, we can continue to see those go up in our longer-term guidance, and we'll reiterate that in the Investor Day of what we see as that goes forward. But I think you're exactly spot on. Some of the investments that we're doing and the -- I'd say, the ramp-up of those has a little bit of pressure on us as we drive those incremental margins.

Yes, I would say that the long-term trajectory is absolutely unchanged. So we feel good about it.

The next question goes to Michael Elias of TD Cowen.

Congrats on the order [indiscernible] Great to see you guys capturing the market share out there. Gio, a question for you. I'm sure you came out of [ PTC ] with a similar sense that demand is rocking and rolling. As we think about going forward, could you just give us an update on the utilization of your existing production capacity? And maybe as part of that, the evolution that you're seeing on the product lead time front for things like switch gear, how they may have evolved over the last 3 months given the demand strength?

Yes. Certainly, demand is there and in very rude health, as one would say, and we're very happy how we capture that. Again, utilization and capacity, clearly, we're pretty satisfied. In general, I always talked about having a weaker room in the way we lowered our capacity in our factories. This is still to. So we are using this bigger room to if needed sometimes to accelerate growth. But again, we like to continue to design our capacity with that [indiscernible] room that is [ 2025, 20% 25% ]. So the same way of looking at the long-term capacity applies here. And that's how we decide on capacity increments as reflected in our in our CapEx numbers.

When it comes to lead times, yes, there has been some expansion a little bit in some product lines. But again, pretty much on customer and market lead time in general across the majority of our products. So again, quite happy. Quite happy with our evolution in this respect. We like the growth, we like the capacity utilization.

The last question is from Amit Mehrotra of UBS.

Maybe just adding clean up here a little bit. So I wanted to ask about pipeline because obviously, pipeline leads orders. I would imagine if you're more than doubling your orders sequentially from 3Q to 4Q, your pipeline is depleted. It doesn't seem that's the case based on how you talk about the pipeline. So just talk about that.

And then the last, just a clarification. Just remind us, what has to happen, what hurdles do you have to pass for an order to make it into your backlog from a deposits or delivery certainty visibility perspective? If you can just remind us on that, that would be great.

Okay. So the pipeline has not depleted. If anything, despite certainly the very strong order intake in the last quarter, we are seeing the pipeline to grow quarter-to-quarter. So again, very satisfied about that. It's not just a market, is our visibility of the market. So I just want to reiterate it, it has not depleted.

When it comes to what makes an opportunity backlog? It is a binding purchase order. Everything backlog at Vertiv is a binding purchase order. Majority of [indiscernible] often with advanced payment, but it is the nature of the PO binding, legally binding purchase order.

This concludes our question-and-answer session. I would now like to turn the conference back over to Gio Albertazzi for any closing remarks.

Well, thank you very much. Thank you all for the questions, and thank you for your time today. Of course, I'm very pleased with what we delivered in '25 and very pleased how we're positioned entering '26. Certainly very proud of the job that the entire Vertiv team has done and I'm super grateful for the collaboration with our customers and partners. We're pleased with our progress. You know me by now. We're certainly never satisfied. I am certainly never satisfied.

We continue and we will continue to invest ahead of the curve, maintain our technology leadership and execute with speed and precision. I'm more confident today that I absolutely have been about Vertiv's trajectory. Very encouraged. And I want to thank you all and wish you all a great rest of your day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Awesome. Hi, everybody. Mike Halloran here, and we are pleased to welcome Vertiv with us. Gio Albertazzi, CEO, is going to give some really brief prepared remarks, and then we're going to dive into Q&A.

As you all know, I don't cover the company. I've got a lot of good questions. However, if there's anything you want to talk about, raise your hand. I'll call on you. Most people won't do that anymore. So send an e-mail to the card in front of you, and I will make sure to incorporate the questions into the conversation to make sure we cover what everybody wants to cover today.

With that, Gio, the floor is yours for a couple of minutes.

Well, thank you very much. Good day, everyone. I'm very glad to being here. Most of you, I'm sure, know Vertiv, a global leader in digital critical infrastructure. 80% of what we do is data center, certainly a sector that is increasingly of interest, very strong market growth, growth that we believe will be strong and long-term, and a very strong position in this market with a truly complete portfolio that stretches from the entire powertrain, thermal chain, white space, a very strong service organization that is one of our superpowers and a lot of prefabrication.

You might have seen, if I haven't, I recommend you do, we launched a fully prefabricated data center core Vertiv OneCore, basically reference design around GB300 and soon to come Rubin and future NVIDIA chip designs. That is, let's say, the tip of the spear, the representation of all Vertiv capabilities, the entire data center infrastructure. This capability and the breadth of our range make us a pretty vigilant [ lockster ] for the -- on the one side, NVIDIA and the other is the large colo, the hyperscalers to really define what the long-term strategy deployment is.

And that, of course, gives us not only a sit at the design table, but certainly a preferential understanding of where the industry is going. And that translates into quite some strong performance. As you have probably seen from our earnings call a couple of weeks back in terms of actual growth and expectation for the rest of the year. So very proud of what we're doing and certainly very happy about the visibility that comes from the strength in an increasingly visible industry.

With that, let's go into [indiscernible].

I think that's a perfect segue. So why don't we talk about that visibility? I know on the recent call; you've talked about good visibility into '26. Maybe why do you have that conviction short term? And then when you think a little bit longer term, 3, 5-plus years, what gives you confidence that there's durability to the cycle? If you go back historically, this could be 1, 2 years on, 1, 2 years off. This feels like it's got more legs. So maybe take those 2 different time horizon and talk to the [ different ]?

Yes. Yes, absolutely. But far from, of course, talking about '26 necessarily. But if you look at our position today with strong Q3 orders, both trailing 12 and very strong year-on-year, combine that with a 30% backlog growth. We've been vocal about the fact that the shape of that backlog very much resembles the shape that we had before in terms of the time horizon.

So it's a backlog growth, not by virtue of a natural elongation, but by virtue of true and good growth of backlog, combine that with the strong pipelines that continue to be strong and growing, that is certainly injecting a lot of short and medium-term and long-term confidence because our pipelines are or call them funnels the way you want, but everything that is commercial activity, and we are pretty maniacal about managing it in a rigorous way, so that it becomes a leading indicator for us. And they're all pointing in the right direction for the immediate and medium future.

If we go for kind of a longer term, then what corroborates everything we say and the fact that this is going to be kind of a long durable growth in the industry comes very much from what we see happening in the conversations with our customers. And we have a lot of visibility in the industry across hyperscalers and colocation and enterprise.

And there is a lot of investment coming. We see that coming from the silicon side, the hyperscale side. We see a lot of growth on the NeoCloud side of the spectrum. Let's not forget that the bulk of the growth that we're seeing today in the market in general, it's true also for Vertiv is North America, U.S. based. There are a lot of other parts of the world that are still to be seriously developed in terms of AI capacity.

And that is something that is really not negotiable. I mean there is a lot of -- there are a lot of sovereign data reasons for which this capacity needs to grow if you want to do inference in a jurisdiction or territory, you have to have capacity locally. So this growth will continue and expand beyond North America.

But one thing that we like always to keep a very sharp eye on is the trajectory of AI-driven monetization and business growth for our customers. And if you look at our -- if you look at the hyperscalers, most recent earnings calls, you see that growth rate of their AI-driven business is really robust. So all things that converge and that make us very, very optimistic and continue to believe in the market for a long, long term.

So how does that play out then the revenue for you guys or even orders, right? You did a gigawatt scale announcement for a campus, right? When does that start mattering for you? How much visibility in advance do you get to what your win entitlement of that is and just kind of translate it?

Sure. The announcements that we all hear typically are done in bulk and then the deployment is done in stages. And those stages may cover 1, 2 or more years depending on the size of the announcement. And that's all very, very normal. But if you think about, let's say, a gigawatt, which is, by the way, mindbuggledly big, if you look at through the lens of 5 years ago. Now we are all got a customer to kind of 1-gigawatt is, of course, but there's a lot of power being deployed. So what we see is really encouraging.

But that, for example, can be deployed in 200-megawatt chunks. And each 200-megawatt chunks probably goes through a cycle of order to deployment of between 9 and 15 months for us and the whole construction will probably a little bit longer than that. And that, of course, the sequence of, let's say, phases follow. So that deployment can stretch over a couple of years, 3 years, a little bit less. It really depends on the project. But this is the order of magnitude.

Yes. And so when you think about that opportunity and the competitive set there, One, maybe just talk about the competitive dynamics in the marketplace and maybe what your win rate looks like now versus history, however you want to phrase it. But then the secondary piece of it is, how do you think about double ordering in the industry, risk profile associated with that, how you manage it?

So clearly, the industry is of interest, and we hear a lot of people talk about kind of a play in the space. But when you really look carefully, you will see a number of players that are consolidating the industry. We all have heard about a few acquisitions lately, and I'm talking necessarily last week or the last few weeks, but over the last few months. So from our perspective, the industry is not dramatically different than it was before.

So take liquid cooling. Liquid cooling, clearly a new technology a couple of years back. And certainly, from a technology standpoint, still pretty early stage, something that has been deployed in the last couple of years. But again, we saw some start-ups, some new players, those new players being consolidated. The industry is consolidating back to a number of rational players, you pick the names, rational players that are addressing the market. This is not a bad place to be. Actually, it's a place that we like.

You see some players replicating or trying to play the same role that we play in the industry, so the entire portfolio. Two things. That is testament that our value proposition is winning. The second is we do not mind an industry that is built by a number of players that have a good value proposition and our rationale is something that certainly is good for everyone. It's good for customers. It's certainly good for us.

What was the second part of the question you were saying?

Double ordering.

Double ordering. I do not see double ordering in the industry. Basically, everything that's been done is done against a project, a deployment. It's not just placing orders out in the vacuum hoping that they will stick. Whenever there is an order, that is in our case. We have terms and conditions that make very painful to walk away from the order. And we typically call an order a PO that's legally binding. We typically know the shipping address and everything else. So it's pretty firm. The industry and the cancellation frequency is absolutely negligible and nothing different than we have seen historically in this industry.

So how are you managing your own capacity in the context of this? I know you like to stay ahead of the curve, but this is a curve that has a lot of legs. So how are you thinking about what your capacity needs are and how quickly you can or can't ramp demand? So...

It is a constant expansion of capacity. So we've been vocal in 2 weeks ago when we had our earnings call about the fact that, if anything, we are accelerating the speed of capacity expansion. But we have been expanding capacity quite clearly and constantly over the last years. Capacity comes from a net footprint increase. It comes from efficiency and productivity, something that also you see in our profit growth.

But again, guiding 27% for 2025 growth, that needs capacity. So there is capacity that is at play today and will continue and will continue to expand. So we feel very good. Capacity expansion for us always leaves wiggle room in a sense that this is a project business. So you can't expect everything to be exactly linear. So we have capacity to absorb some fluctuations in demand, but think about long-term capacity constantly going up.

So there's a handful of questions here kind of asking a similar thing, but what are the constraints from your perspective on data center growth? Are there choke points from a supply chain? Do zoning become a problem getting these things moving in? I mean, any constraints you think about in terms of that growth profile, assuming the demand curve that people are saying is actually there.

So first of all, the demand is there. And what we see is all the points are leading -- indicating that demand is there. I do not think in terms of cliffs of -- or ceilings that limit the ability for the industry to grow.

2 years ago, a year ago, when we had our Investor Days, we were saying, hey, we think about, for example, the hyperscale, colo sector growing 15%, 17%. Now we certainly are in the upper part of this. But again, it's not kind of an infinitely steep growth as, if you will, the appetite may indicate.

We've always been vocal about the fact that power is a pacing factor, power generation and power availability, that permitting is a pacing item and that this is a construction work. So access to skilled labor are pacing items. All are being addressed.

So I continue to see growth in the industry and take power. A lot is food in terms of behind-the-meter power generation. So the industry is very vibrant. There is a lot of capital and a lot of ingenuity at play. So we see that these pacing items being addressed.

But again, take the power, behind-the-meter power generation, we see it in turbine guys have certainly seen their backlog moving in the right direction and a lot. But if you look at it from our perspective, that now makes our powertrain from power generation all to the chip more -- more complex. So we see that as an opportunity. So everything that we see in terms of ways to address the pacing items in the industry turn, we believe, into opportunities for us.

So white space -- white space within the data center, how much of an opportunity is it for Vertiv and similar companies to address that? And then how do you capitalize on that?

Yes. When -- I've been in the industry for more than 2 decades or so. And it was up until not a long time ago, white space was not an attractive space for us. Yes, we were present with racks, with some in rack power distribution. But basically, the IT stack in the white space was not challenging. When you have a 3, 5, 10-kilowatt rack, yes, there is business you can have in that space, but it's not phenomenally attractive.

Now we see that with a high density, 100, 200, 600-gigawatt rack, then the physical coexistence of IT power and thermal is such that the challenges from a power and cooling standpoint as such that, that space is extremely interesting for us. Hence, the acquisitions, for example, of Great Lakes.

If you really think about liquid cooling, liquid cooling happens in the white space. If you think about high-voltage DC, we all heard about the gradual moving towards 800-volt DC for power distribution, high-density racks, that makes power distribution within the white space way more complex and way more demanding also from a health and safety standpoint.

So all technology that goes into the white space, making the white space an area where we can thrive as opposed to an area where, well, yes, we are present, we have racks and we have a couple of technologies.

Some of you may have -- may remember from our Investor Call in July, we were talking about SmartRun as a white space fit out, prefabricate fit-out, prefabricated solution, it's a technology that really incorporates all the Vertiv technologies and can reduce the fit-out time by an order of magnitude. That means that if you're a data center owner, the moment your data center is ready is when you start to fit out the white space. If that takes you 3 months, 4 months, 6 months, those 6 months are what separates you from having started to have an asset to the moment you start to generate revenues in that asset. So the ability to shrink that while you deliver technology, phenomenal.

Phenomenon. You referenced there the prefabrication capability set. How important is that broadly? How differentiated of an approach can that bring to the table? And what can that help solve for you?

Sure. Sure. So I always like to do, let's say, layers of things. First of all, we're very strong in individual technologies. And we'll continue to be focused on making sure that at the individual technology level, I don't know, liquid cooling, the UPS, the switchgear, the chiller, we have kind of a top-of-the-range technology. Then we talk about system, the powertrain, the thermal chain, the white space. It's not a layer where the system is optimized from a management standpoint, from an interoperability standpoint.

Then the next level is the ability to deliver all that on a prefabricated fashion. And that prefabrication really solves 2 problems. One is time to market for our customers because you can really shrink the time it takes to deploy capacity for a data center owner. And the other is you address one of the pacing items we were saying, that is on-site construction skilled labor, of which there is certainly constraints. So all things that are addressed. So it's a multilayered approach, but certainly, technology is what drives it all.

So how do you think about service in the context of all of this, both in terms of your capability set how much you want to lean into it, how you handle it from capacity expansion? Just holistically go through that thought process.

I'll start from the last point, service and capacity expansion. When people talk about capacity, and we were seeing the same, people naturally think about how many square feet, how many factories do you have? Well, for us, is exactly the combination of factory, supply chain and service. What we are seeing in terms of densification of the data center requires more and more service. The infrastructure is becoming more critical.

We have north of 4,500 field engineers and growing and counting. And we're really know for 5 services is a superpower for us. So the ability to support our customers, not only with technology, but also commissioning and life cycle, absolutely important.

So you'll see service as really central to our value proposition to our growth strategy, but also technology evolution. We made an acquisition that is small but very critical in terms of predictive maintenance capabilities and system and data center performance optimization, Waylay, we announced it in July, if I remember correctly, but anyway, there are. So again, we see technology capacity all coming together at service level.

That makes sense. And then maybe before we go back to some of the other hardware stuff, just the margin thought process, mid-20s by the end of the decade here. What gets you there? Is service part of the equation? Does that come in higher margin, lower margin? But more importantly, what's that path? And how do you see yourself evolving towards that range?

Well, as we said in a couple of occasions, our model is very much intact, and we continue to drive in that direction. And I think that our Q3 is a testament to that.

Certainly, service is accretive to us. And it is not just accretive, it's also underlying and supporting our entire value proposition. So we like it a lot. Service, clearly, in a period of steep growth of everything product, let's say, as opposed to service is lagging, but it's normal. We're building installed base, and the installed base has been harvested. So it's absolutely normal, but we see an acceleration in services.

More in general, I think 2 components. There certainly is price cost that continues to be positive going forward. There is an efficiency play. The biggest lever, the biggest contributor is operational leverage. And we've been delivering operational leverage -- margin growth through operational leverage in the last -- quite consistently in the last 3 years.

A couple of questions here. Balance sheet, how do you look at the balance sheet deployment from here, ability internally to meet the demands and then what the optionality looks like from an M&A perspective?

Yes. I think we have -- we have a strong balance sheet. And of course, that balance sheet is fundamental to continue to invest in capacity expansion. We are investing a lot in technology. I always like to say that the portfolio that we have today is very important, but it's worth nothing if the portfolio that we have tomorrow is not even stronger. And in times of big dynamics in terms of technology, focusing on the future portfolio is absolutely of the [indiscernible].

So 20% plus growth in engineering and R&D, that will continue. But you have seen us a parallel path, organic and inorganic technology investment. So technology, portfolio augmentation and being ready through M&A for future technology is a parallel path.

When you have a new technology coming up, you can't just rely on your organic. You have to spread, if you will, your bets and have partners that work for you on with you in future technologies. And that often, as we have demonstrated, can turn into an acquisition or not, depending on the path.

So certainly, technology bolt-ons from an M&A standpoint will continue to be an important path for us. But again, we would not shy away from something that adds simply capacity, go-to-market and market share on parts of the technology that we own already as long as it's rational and it's not crazy from a valuation standpoint. So we'll always be rational in how we allocate capital.

So we clearly have also still a lot of wiggle room from a repurchase standpoint. But with the dynamics, as we said, we will be opportunistic in our repurchase decisions. We like the space. We like to grow in the space.

And then given how quickly the space is evolving, how do you think about collaborations with end users, customers, however you want to put it. The question that came through here is more NVIDIA, the 800-volt DC. Maybe use that as an example of the collaboration piece, and what that could do for you...

Sure.

What kind of adoption curve, however you want to go about it?

So clearly, we can look at the 800-volt DC just as a, let's say, a parallel to what has happened and still happening with the liquid cooling on the thermal side of a data center. So it's a future technology. A lot has yet to be written. You work -- we work with hyperscalers and certainly with NVIDIA and others in defining what that technology really will look like.

The likes of NVIDIA will work with us and very few others -- because they want to make sure that there are people out there that can pioneer the technology that then will support their future deployment.

So if Rubin is out late '26, early '27, we got to be out at the beginning of the second half of '26. And that's what we have committed to with 800-volt DC. So that means that the powertrain, as we call it, will evolve gradually to an 800-volt DC, but you will see that it will not be kind of a clear cut, there will be a lot of the current technology continue to be there, the future technology, the 800-volt DC, hybrid solutions.

So we are there to manage this transition, just like we are managing the transition and the coexistence, the juxtaposition that I say, between air and liquid cooling. The same will happen here. And having a partnership like the one we have with NVIDIA gives us kind of a first mover or very early mover advantage that enables us to shape the way the industry thinks about high voltage.

And last one and the minute we have left here, hyperscale and colo is driving the North America, Americas growth here. Do you think there's an opportunity for enterprise to start being additive? And how would you think about that going?