Vestas Wind Systems: Navigating Offshore Wind's High Stakes for Long-Term Dominance

The global energy transition is accelerating, and offshore wind stands at its forefront. Vestas Wind Systems, the Danish turbine giant, is betting heavily on this sector, pouring resources into a manufacturing ramp-up that could redefine its long-term profitability. But is the near-term pain of margin compression worth the potential gain of market leadership in a high-growth industry?

Strategic Positioning in a High-Growth Sector

Vestas holds a 9.7 GW offshore market share globally, placing it second in 2023, behind Chinese rivals but ahead of Western peers like Siemens Gamesa and GE Vernova. Its V236-15.0 MW turbine, now in serial production, is a cornerstone of its strategy. This platform, designed for deep-water installations, targets markets where wind resources are strongest and land-based alternatives are impractical. With the offshore segment projected to grow at 20–25% annually until 2030, Vestas is positioning itself to capture a disproportionate share of this expansion.

The company's 2025 Q2 results underscore this focus. While the Power Solutions segment (encompassing onshore and offshore) reported a -0.4% EBIT margin, driven by offshore ramp-up costs, the onshore segment's improved performance—bolstered by reduced warranty costs and better project execution—offset some of the drag. Vestas' EUR 67.3 billion order backlog, with 80% in Power Solutions, suggests confidence in its ability to scale offshore operations while maintaining onshore profitability.

EBIT Margin Normalization: A Calculated Trade-Off

Vestas' current EBIT margin of 1.5% (Q2 2025) is far below its long-term target of 4–7% for 2025 and a 10% goal by the mid-2020s. The offshore segment, in particular, is a drag, with ramp-up costs peaking in Q4 2025. CEO Henrik Andersen has framed this as a “necessary investment,” emphasizing that the offshore market's structural growth will eventually justify the near-term margin dilution.

The math is compelling. Offshore wind's higher capacity factors and longer project lifespans make it a more attractive asset class than onshore. Vestas' EUR 384 MW order for Ukraine's Tyligulska project and its first APAC offshore deal in Japan highlight its global reach. Meanwhile, the Service segment—already a 25% EBIT margin generator—provides a stable cash flow buffer, allowing the company to absorb short-term losses.

Risks and Rewards

The primary risk lies in execution. Offshore wind projects are capital-intensive, with supply chain bottlenecks and permitting delays still prevalent. Chinese competitors like Goldwind and Mingyang are also expanding rapidly, capturing 65% of global wind capacity. However, Vestas' strength outside China—where it dominates 93% of Western OEM volumes—gives it a unique edge. Its partnerships with developers like Ørsted and ScottishPower Renewables further solidify its position in mature markets like the UK and Germany.

Another concern is geopolitical headwinds, particularly in the U.S., where tariffs and regulatory uncertainty could slow growth. Yet, Vestas' EUR 18–20 billion revenue guidance for 2025, coupled with its EUR 700 million Service segment EBIT target, suggests resilience. The company's focus on commercial discipline—streamlining supply chains and reducing new technology introductions—also mitigates overengineering risks.

Investment Implications

For investors, Vestas represents a classic growth-at-a-cost trade-off. The offshore ramp-up is dilutive today, but the sector's 20–25% CAGR through 2030 could justify the investment. If Vestas achieves its 10% EBIT margin target by the mid-2020s, its valuation could re-rate significantly. The Service segment's recurring revenue and the onshore business's stability add further appeal.

However, patience is key. The path to margin normalization is bumpy, with offshore costs expected to peak in Q4 2025. Investors should monitor the company's ability to secure long-term service contracts and maintain its order backlog. A would provide context on how the market has priced in these risks.

Conclusion

Vestas is betting its future on offshore wind, a sector poised to become a pillar of the global energy mix. While near-term margin pressures are real, the company's strategic investments in technology, global partnerships, and operational efficiency position it to capture market share in a high-growth arena. For long-term investors willing to stomach short-term volatility, Vestas offers a compelling case: a Western OEM with the scale, innovation, and financial discipline to lead the offshore wind revolution.

The question is not whether the costs are justified, but whether the world will need offshore wind at the scale Vestas envisions. Given current climate targets and energy demands, the answer appears to be a resounding yes.